G.R. No.

L-5486

August 17, 1910

JOSE DE LA PEA Y DE RAMON, plaintiff-appellant,

vs.
FEDERICO HIDALGO, defendant-appellant.
TORRES, J.:
On May 23, 1906, Jose dela Pea y de Ramon, and
Vicenta de Ramon, in her own behalf and as the legal
guardian of her son Roberto de la Pea, filed in the
Court of First Instance of Manila a written complaint
against of Federico Hidalgo, Antonio Hidalgo, and
Francisco Hidalgo, and, after the said complaint,
already amended, had been answered by the
defendants Antonio and Francisco Hidalgo, and the
other defendant, Federico Hidalgo, had moved for the
dismissal of this complaint, the plaintiff, Jose de la Pea
y de Ramon, as the judicial administrator of the estate
of the deceased Jose de la Pea y Gomiz, with the
consent of the court filed a second amended
complaint prosecuting his action solely against
Federico Hidalgo, who answered the same in writing on
the 21st of may and at the same time filed a
counterclaim, which was also answered by the
defendant.
On October 22, 1907, the case was brought up for
hearing and oral testimony was adduced by both
parties, the exhibits introduced being attached to the
record. In view of such testimony and of documentary
evidence, the court, on March 24, 1908, rendered
judgment in favor of the plaintiff-administrator for the
sum of P13,606.19 and legal interest from the date of
the filing of the complaint on May 24, 1906, and the
costs of the trial.
Both the plaintiff and the defendant filed notice of
appeal from this judgment and also asked for the
annulment of the same and for a new trial, on the
ground that the evidence did not justify the said
judgment and that the latter was contrary to law. The
defendant, on April 1, 1908, presented a written
motion for new hearing, alleging the discovery of new
evidence favorable to him and which would necessarily
influence the decision such evidence or to introduce it
at the trial of the case, notwithstanding the fact that he
had used all due diligence. His petition was
accompanied by affidavits from Attorney Eduardo
Gutierrez Repilde and Federico Hidalgo, and was
granted by order of the court of the 4th of April.
At this stage of the proceedings and on August 10,
1908, the plaintiff Pea y De Ramon filed a third
amended complaint, with the permission of the court,
alleging, among other things, as a first cause of action,
that during the period of time from November 12,
1887, to January 7, 1904, when Federico Hidalgo had
possession of and administered the following
properties, to wit; one house and lot at No. 48 Calle
San Luis; another house and lot at No. 6 Calle Cortada;
another house and lot at 56 Calle San Luis, and a
fenced lot on the same street, all of the district of
Ermita, and another house and lot at No. 81 Calle
Looban de Paco, belonging to his principal, Jose de la
Pea y Gomiz, according to the power of attorney
executed in his favor and exhibited with the complaint
under letter A, the defendant, as such agent, collected
the rents and income from the said properties,
amounting to P50,244, which sum, collected in partial

amounts and on different dates, he should have

deposited, in accordance with the verbal agreement
between the deceased and himself, the defendant, in
the general treasury of the Spanish Government at an
interest of 5 per cent per annum, which interest on
accrual was likewise to be deposited in order that it
also might bear interest; that the defendant did not
remit or pay to Jose de la Pea y Gomiz, during the
latter's lifetime, nor to nay representative of the said
De la Pea y Gomiz, the sum aforestated nor any part
thereof, with the sole exception of P1,289.03, nor has
he deposited the unpaid balance of the said sum in the
treasury, according to agreement, wherefore he has
become liable to his principal and to the defendantadministrator for the said sum, together with its
interest, which amounts to P72,548.24 and that,
whereas the defendant has not paid over all nor any
part of the last mentioned sum, he is liable for the
same, as well as for the interest thereon at 6 per cent
per annum from the time of the filing of the complaint,
and for the costs of the suit.
In the said amended complaint, the plaintiff alleged as
a second cause of action: That on December 9, 1887,
Gonzalo Tuason deposited in the general treasury of
the Spanish Government, to the credit of Pea y Gomiz,
the sum of 6,360 pesos, at 5 per cent interest per
annum, and on December 20, 1888, the defendant, as
the agent of Pea y Gomiz, withdrew the said amount
with its interest, that is, 6,751.60 pesos, and disposed
of the same for his own use and benefit, without
having paid all or any part of the said sum to Pea y
Gomiz, or to the plaintiff after the latter's death,
notwithstanding the demands made upon him:
wherefore the defendant now owes the said sum of
6,751.60 pesos, with interest at the rate of 5 per cent
per annum, compounded annually, from the 20th of
December, 1888, to the time of the filing of this
complaint, and from the latter date at 6 per cent, in
accordance with law.
The complaint recites as a third cause of action: that,
on or about November 25, 1887, defendant's principal,
Pea y Gomiz, on his voyage to Spain, remitted from
Singapore, one of the ports to call, to Father Ramon
Caviedas, a Franciscan friar residing in this city, the
sum of 6,000 pesos with the request to deliver the
same, which he did, to defendant, who, on receiving
this money, appropriated it to himself and converted it
to his own use and benefit, since he only remitted to
Pea y Gomiz in Sapin, by draft, 737.24 pesos, on
December 20, 1888; and, later, on December 21, 1889,
he likewise remitted by another draft 860 pesos,
without having returned or paid the balance of the said
sum, notwithstanding the demands made upon him so
to do: wherefore the defendant owes to the plaintiff, for
the third cause of action, the sum of P4,402.76, with
interest at the rate of 5 per cent per annum,
compounded yearly, to the time of the filing of the
complaint and with interest at 6 per cent from that
date, as provided by law.
As a fourth cause of action the plaintiff alleges that, on
or about January 23, 1904, on his arrival from Spain
and without having any knowledge or information of
the true condition of affairs relative to the property of
the deceased Pea y Gomiz and its administration, he
delivered and paid to the defendant at his request the
sum of P2,000, derived from the property of the
deceased, which sum the defendant has not returned
notwithstanding the demands made upon him so to do.

Wherefore the plaintiff petitions the court to render

judgment sentencing the defendant to pay, as first
cause of action, the sum of P72,548.24, with interest
thereon at the rate of 6 per cent per annum from May
24, 1906, the date of the filing of the complaint, and
the costs; as a second cause of action, the sum of
P15,774.19, with interest at the rate of 6 per cent per
annum from the said date of the filing of the complaint,
and costs; as a third cause of action, P9,811.13, with
interest from the aforesaid date, and costs; and, finally,
as a fourth cause of action, he prays that the
defendant be sentenced to refund the sum of P2,000,
with interest thereon at the rate of 6 per cent per
annum from the 23d of January, 1904, and to pay the
costs of trial.
The defendant, Federico Hidalgo, in his answer to the
third amended complaint, sets forth: That he admits
the second, third, and fourth allegations contained in
the first, second, third, and fourth causes of action, and
denies generally and specifically each one and all of
the allegations contained in the complaint, with the
exception of those expressly admitted in his answer;
that, as a special defense against the first cause of
action, he, the defendant, alleges that on November
18, 1887, by virtue of the powers conferred upon him
by Pea y Gomiz, he took charge of the administration
of the latter's property and administered the same until
December 31, 1893, when for reasons of health he
ceased to discharge the duties of said position; that
during the years 1889, 1890, 1891, and 1892, the
defendant continually by letter requested Pea y
Gomiz, his principal, to appoint a person to substitute
him in the administration of the latter's property,
inasmuch as the defendant, for reasons of health, was
unable to continue in his trust; that, on March 22,
1894, the defendant Federico Hidalgo, because of
serious illness, was absolutely obliged to leave these
Islands and embarked on the steamer Isla de Luzon for
Sapin, on which date the defendant notified his
principal that, for the reason aforestated, he had
renounced his powers and turned over the
administration of his property to Antonio Hidalgo, to
whom he should transmit a power of attorney for the
fulfillment, in due form, of the trust that the defendant
had been discharging since January 1, 1894, or else
execute a power of attorney in favor of such other
person as he might deem proper;
That prior to the said date of March 22, the defendant
came, rendered accounts to his principal, and on the
date when he embarked for Spain rendered the
accounts pertaining to the years 1892 and 1893, which
were those that yet remained to be forwarded, and
transmitted to him a general statement of accounts
embracing the period from November 18, 1887, to
December 31, 1893, with a balance of 6,774.50 pesos
in favor of Pea y Gomiz, which remained in the control
of the acting administrator, Antonio Hidalgo; that from
the 22nd of March, 1894, when the defendant left
these Islands, to the date of his answer to the said
complaint, he has not again intervened nor taken any
part directly or indirectly in the administration of the
property of Pea y Gomiz, the latter's administrator by
express authorization having been Antonio Hidalgo,
from January 1, 1894, to October, 1902, who, on this
latter date, delegated his powers to Francisco Hidalgo,
who in turn administered the said property until
January 7, 1904; that the defendant, notwithstanding
his having rendered, in 1894, all his accounts to Jose
Pea y Gomiz, again rendered to the plaintiff in 1904

those pertaining to the period from 1887 to December

31, 1893, which accounts the plaintiff approved
without any protest whatever and received to his entire
satisfaction the balance due and the vouchers and
documents and documents relating to the property of
the deceased Pea y Gomiz and issued to the
defendant the proper acquaintance therefor.
As a special defense to the second cause of action, the
defendant alleged that, on December 9, 1886, Jose de
la Pea y Gomiz himself deposited in the caja general
de depositos (General Deposit Bank) the sum of 6,000
pesos, at 6 per cent interest for the term of one year,
in two deposit receipts of 3,000 pesos each, which two
deposit receipts, with the interest accrued thereon,
amounted to 6,360 pesos, ad were collected by
Gonzalo Tuason, through indorsement by Pea y
Gomiz, on December 9, 1887, and on this same date
Tuason, in the name of Pea y Gomiz, again deposited
the said sum of 6,360 pesos in the General Deposit
Bank, at the same rate of interest, for the term of one
year and in two deposit receipts of 3,180 pesos each,
registered under Nos. 1336 and 1337; that, on
December 20, 1888, father Ramon Caviedas, a
Franciscan friar, delivered to the defendant, Federico
Hidalgo, by order of De la Pea y Gomiz, the said two
deposit receipts with the request to collect the interest
due thereon viz., 741.60 pesos an to remit it by draft
on London, drawn in favor of De la Pea y Gomiz, to
deposit again the 6,000 pesos in the said General
Deposit Bank, for one year, in a single deposit, and in
the latter's name, and to deliver to him, the said Father
Caviedas, the corresponding deposit receipt and the
draft on London for their transmittal to Pea y Gomiz:
all of which was performed by the defendant who
acquired the said draft in favor of De la Pea y Gomiz
from the Chartered Bank of India, Australia and China,
on December 20, 1888, and delivered the draft,
together with the receipt from the General Deposit
Bank, to Father Caviedas, and on the same date, by
letter, notified Pea y Gomiz of the transactions
executed; that on December 20, 1889, the said Father
Hidalgo, by order of Pea y Gomiz, the aforesaid
deposit receipt from the General Deposit Bank, with
the request to remit, in favor of his constituent, the
interest thereon, amounting to 360 pesos, besides 500
pesos of the capital, that is 860 pesos in all, and to
again deposit the rest, 5,500 pesos, in the General
Deposit Bank for another year in Pea y Gomiz's own
name, and to deliver to Father Caviedas the deposit
receipt and the draft on London, for their transmittal to
his constituent; all of which the defendant did; he
again deposited the rest of the capital, 5,500 pesos, in
the General Deposit Bank, in the name of Pea y
Gomiz, for one year at 5 per cent interest, under
registry number 3,320, and obtained from the house of
J. M. Tuason and Co. a draft on London for 860 pesos in
favor of Pea y Gomiz, on December 21, 1889, and
thereupon delivered the said receipt and draft to Father
Caviedas, of which acts, when performed, the
defendant advised Pea y Gomiz by letter of December
24, 1889' and that, on December 20, 1890, the said
Father Ramon Caviedas delivered to the defendant, by
order of Pea y Gomiz, the said deposit receipt for
5,500 pesos with the request that he withdraw from
the General Deposit Bank the capital and accrued
interest, which amounted all together to 5,775 pesos,
and that he deliver this amount to Father Caviedas,
which he did, in order that it might be remitted to Pea
y Gomiz.

The defendant denied each of the allegations

contained in the third cause of action, and avers that
they are all false and calumnious.
He likewise makes a general and specific denial of all
the allegations of the fourth cause of action.
As a counterclaim the defendant alleges that Jose Pea
y Gomiz owed and had not paid the defendant, up to
the date of his death, the sum of 4,000 pesos with
interest at 6 per cent per annum, and 3,600 pesos, and
on the plaintiff's being presented with the receipt
subscribed by his father, Pea y Gomiz, on the said
date of January 15th, and evidencing his debt, plaintiff
freely and voluntarily offered to exchange for the said
receipt another document executed by him, and
transcribed in the complaint. Defendant further alleges
that, up to the date of his counterclaim, the plaintiff
has not paid him the said sum, with the exception of
2,000 pesos. Wherefore the defendant prays the court
to render judgment absolving him from the complaint
with the costs against the plaintiff, and to adjudge that
the latter shall pay to the defendant the sum 9,000
pesos, which he still owes defendant, with legal
interest thereon from the date of the counterclaim, to
wit, May 21, 1907, and to grant such other and further
relief as may be just and equitable.
On the 25th of September, 1908, and subsequent
dates, the new trial was held; oral testimony was
adduced by both parties, and the documentary
evidence was attached to the record of the
proceedings, which show that the defendant objected
and took exception to the introduction of certain oral
and documentary evidence produced by the plaintiff.
On February 26, 1909, the court in deciding the case
found that the defendant, Federico Hidalgo, as
administrator of the estate of the deceased Pea y
Gomiz, actually owed by the plaintiff, on the date of
the filing of the complaint, the sum of P37,084.93; that
the plaintiff was not entitled to recover any sum
whatever from the defendant for the alleged second,
third, and fourth causes of action; that the plaintiff
actually owed the defendant, on the filing of the
complaint, the sum of P10,155, which the defendant
was entitled to deduct from the sum owing by him to
the plaintiff. Judgment was therefore entered against
the defendant, Federico Hidalgo, for the payment of
P26,629.93, with interest thereon at the rate of 6 per
cent per annum from May 23, 1906, and the costs of
the trial.
Both parties filed written exceptions to this judgment
and asked, separately, for its annulment and that a
new trial be ordered, on the grounds that the findings
of fact contained in the judgment were not supported
nor justified by the evidence produced, and because
the said judgment was contrary to law, the defendant
stating in writing that his exception and motion for a
new trial referred exclusively to that part of the
judgment that was condemnatory to him. By order of
the 10th of April, 1909, the motions made by both
parties were denied, to which they excepted and
announced their intention to file their respective bills of
exceptions.
By written motions of the 24th of March, 1909, the
plaintiff prayed for the execution of the said judgment,
and the defendant being informed thereof solicited a
suspension of the issuance of the corresponding writ of
execution until his motion for a new trial should be

decided or his bill of exceptions for the appeal be

approved, binding himself to give such bond as the
court might fix. The court, therefore, by order of the
25th of the same month, granted the suspension asked
for, conditioned upon the defendants giving a bond,
fixed at P34,000 by another order of the same date, to
guarantee compliance with the judgment rendered
should it be affirmed, or with any other decision that
might be rendered in the case by the Supreme Court.
This bond was furnished by the defendant on the 26th
of the same month.
On April 16 and May 4, 1909, the defendant and the
plaintiff filed their respective bills of exceptions, which
were certified to and approved by order of May 8th and
forwarded to the clerk of this court.
Before proceeding to examine the disputed facts to
make such legal findings as follows from a
consideration of the same and of the questions of law
to which such facts give rise, and for the purpose of
avoiding confusion and obtaining the greatest
clearness and an easy comprehension of this decision,
it is indispensable to premise: First, that as before
related, the original and first complaint filed by the
plaintiff was drawn against Federico Hidalgo, Antonio
Hidalgo, and Francisco Hidalgo, the three persons who
had successively administered the property of Jose de
la Pea y Gomiz, now deceased; but afterwards the
action was directed solely against Federico Hidalgo, to
the exclusion of the other defendants, Antonio and
Francisco Hidalgo, in the second and third amended
complaints, the latter of the date of August 10, 1908,
after the issuance by the court of the order of April 4th
of the same year, granting the new trial solicited by the
defendant on his being notified of the ruling of the 24th
of the previous month of March; second, that the
administration of the property mentioned, from the
time its owner left these Islands and returned to Spain,
lasted from November 18, 1887, to January 7, 1904;
and third that, the administration of the said Federico,
Antonio, and Francisco Hidalgo, having lasted so long,
it is necessary to divide it into three periods in order to
fix the time during which they respectively
administered De la Pea's property: During the first
period, from November 18, 1887, to December 31,
1893, the property of the absent Jose de la Pea y
Gomiz was administered by his agent, Federico
Hidalgo, under power of attorney; during the second
period, from January 1, 1894, to September, 1902,
Antonio Hidalgo administered the said property, and
during the third period, from October, 1902, to January
7, 1904, Francisco Hidalgo was its administrator.
Before Jose de la Pea y Gomiz embarked for Spain, on
November 12, 1887, he executed before a notary a
power of attorney in favor of Federico Hidalgo, Antonio
L. Rocha, Francisco Roxas and Isidro Llado, so that, as
his agents, they might represent him and administer,
in the order in which they were appointed, various
properties he owned and possessed in Manila. The first
agent, Federico Hidalgo, took charge of the
administration of the said property on the 18th of
November, 1887.
After Federico Hidalgo had occupied the position of
agent and administrator of De la Pea's property for
several years, the former wrote to the latter requesting
him to designate a person who might substitute him in
his said position in the event of his being obliged to
absent himself from these Islands, as one of those

appointed in the said power of attorney had died and

the others did not wish to take charge of the
administration of their principal's property. The
defendant, Hidalgo, stated that his constituent, Pea y
Gomiz, did not even answer his letters, to approve or
object to the former's accounts, and did not appoint or
designate another person who might substitute the
defendant in his administration of his constituent's
property. These statements were neither denied nor
proven to be the record show any evidence tending to
disapprove them, while it does show, attached to the
record and exhibited by the defendant himself, several
letters written by Hidalgo and addressed to Pea y
Gomiz, which prove the said statements, and also a
letter from the priest Pedro Gomiz, a relative of the
deceased Jose de la Pea y Gomiz, addressed to
Federico Hidalgo, telling the latter that the writer had
seen among the papers of the deceased several letters
from the agent, Federico Hidalgo, in which the latter
requested the designation of a substitute, because he
had to leave this country for Spain, and also asked for
the approval or disapproval of the accounts of his
administration which had been transmitted to his
constituent, Pea y Gomiz.
For reasons of health and by order of his physician,
Federico Hidalgo was obliged, on March 22, 1894, to
embark for Spain, and, on preparing for his departure,
he rendered the accounts of his administration
corresponding to the last quarters, up to December 31,
1893, not as yet transmitted, and forwarded them to
his constituent with a general statement of all the
partial balances, which amounted to the sum total of
6,774.50 pesos, by letter of the date of March 22,
1894, addressed to his principal, Pea y Gomiz. In this
letter the defendant informed the latter of the writer's
intended departure from this country and of his having
provisionally turned over the administration of the said
property to his cousin, Antonio Hidalgo, upon whom the
writer had conferred a general power of attorney, but
asking, in case that this was not sufficient, that Pea
send to Antonio Hidalgo a new power of attorney.
This notifications is of the greatest importance in the
decision of this case. The plaintiff avers that he found
no such letter among his father's papers after the
latter's death, for which reason he did not have it in his
possession, but on the introduction of a copy thereof
by the defendant at the trial, it was admitted without
objection by the plaintiff (p. 81 of the record);
wherefore, in spite of the denial of the plaintiff and of
his averment of his not having found that said original
among his father's papers, justice demands that it be
concluded that this letter of the 22d of March, 1894,
was sent to, and was received by Jose de la Pea y
Gomiz, during his lifetime, for its transmittal, with
inclosure of the last partial accounts of Federico
Hidalgo's administration and of the general resume of
balances, being affirmed by the defendant, the fact of
the plaintiff's having found among his deceased
father's paper's the said resume which he exhibited at
the trial, shows conclusively that it was received by the
deceased, as well as the letter of transmittal of the
22nd of March, 1894, one of the several letters written
by Hidalgo, which the said priest, Father Gomiz, affirms
that he saw among the papers of the deceased Pea,
the dates of which ran from 1890 to 1894; and it is also
shown by the record that the defendant Hidalgo
positively asserted that the said letter of March was the
only one that he wrote to Pea during the year 1894;
From all of which it is deduced that the constituent,

Pea y Gomiz, was informed of the departure of his

agent from these Islands for reasons of health and
because of the physician's advice, of the latter's having
turned over the administration of the property to
Antonio Hidalgo, and of his agent's the defendant's
petition that he send a new power of attorney to the
substitute.
The existence, amount the papers of the deceased, of
the aforementioned statement of all accounts
rendered, which comprise the whole period of the
administration of the property of the constituent by the
defendant, Federico Hidalgo, from November 18, 1887,
to December 31, 1893 a statement transmitted with
the last partial accounts which were a continuation of
those already previously received and the said letter
of March 22, 1894, fully prove that Jose de la Pea y
Gomiz also received the said letter, informed himself of
its contents, and had full knowledge that Antonio
Hidalgo commenced to administer his property from
January of that year. They likewise prove that he did no
see fit to execute a new power of attorney in the
letter's favor, nor to appoint or designate a new agent
to take charge of the administration of his property
that had been abandoned by the defendant, Federico
Hidalgo.
From the procedure followed by the agent, Federico
Hidalgo, it is logically inferred that he had definitely
renounced his agency was duly terminated, according
to the provisions of article 1732 of the Civil Code,
because, although in the said letter of March 22, 1894,
the word "renounce" was not employed in connection
with the agency or power of attorney executed in his
favor, yet when the agent informs his principal that for
reasons of health and by medical advice he is about to
depart from the place where he is exercising his trust
and where the property subject to his administration is
situated, abandons the property, turns it over a third
party, without stating when he may return to take
charge of the administration, renders accounts of its
revenues up to a certain date, December 31, 1893, and
transmits to his principal a general statement which
summarizes and embraces all the balances of his
accounts since he began to exercise his agency to the
date when he ceased to hold his trust, and asks that a
power of attorney in due form in due form be executed
and transmitted to another person who substituted him
and took charge of the administration of the principal's
property, it is then reasonable and just to conclude that
the said agent expressly and definitely renounced his
agency, and it may not be alleged that the designation
of Antonio Hidalgo to take charge of the said
administration was that of a mere proceed lasted for
more than fifteen years, for such an allegation would
be in conflict with the nature of the agency.
This renouncement was confirmed by the subsequent
procedure, as well as of the agent as of the principal,
until the latter died, on August 2, 1902, since the
principal Pea did not disapprove the designation of
Antonio Hidalgo, nor did he appoint another, nor send a
new power of attorney to the same, as he was
requested to by the previous administrator who
abandoned his charge; and the trial record certainly
contains no proof that the defendant, since he left
these Islands in March, 1894, until January, 1904, when
he returned to this city, took any part whatever,
directly or even indirectly, in the said administration of
the principal's property, while Antonio Hidalgo was the
only person who was in charge of the aforementioned

administration of De la Pea y Gomiz's property and

the one who was to represent the latter in his business
affairs, with his tacit consent. From all of which it is
perfectly concluded (unless here be proof to the
contrary, and none appears in the record), that Antonio
Hidalgo acted in the matter of the administration of the
property of Jose de la Pea y Gomiz by virtue of an
implied agency derived from the latter, in accordance
with the provisions of article 1710 of the Civil Code.
The proof of the tacit consent of the principal, Jose de
la Pea y Gomiz, the owner of the property
administered a consent embracing the essential
element of a legitimate agency, article 1710 before
cited consists in that Pea, knowing that on account
of the departure of Federico Hidalgo from the
Philippines for reasons of health, Antonio Hidalgo took
charge of the administration of his property, for which
Federico Hidalgo, his agent, who was giving up his
trust, requested him to send a new power of attorney
in favor of the said Antonio Hidalgo, nevertheless he,
Jose de la Pea y Gomiz, saw fit not to execute nor
transmit any power of attorney whatever to the new
administrator of his property and remained silent for
nearly nine years; and, in that the said principal, being
able to prohibit the party designated, Antonio Hidalgo,
from continuing in the exercise of his position as
administrator, and being able to appoint another
agent, did neither the one nor the other. Wherefore, in
permitting Antonio Hidalgo to administer his property
in this city during such a number of years, it is inferred,
from the procedure and silence of the owner thereof,
that he consented to have Antonio Hidalgo administer
his property, and in fact created in his favor an implied
agency, as the true and legitimate administrator.
Antonio Hidalgo administered the aforementioned
property of De la Pea y Gomiz, not in the character of
business manager, but as agent by virtue of an implied
agency vested in him by its owner who was not
unaware of the fact, who knew perfectly well that the
said Antonio Hidalgo took charge of the administration
of that property on account of the obligatory absence
of his previous agent for whom it was an impossibility
to continue in the discharge of his duties.
It is improper to compare the case where the owner of
the property is ignorant of the officious management of
the third party, with the case where he had perfect
knowledge of the management and administration of
the same, which administration and management, far
from being opposed by him was indeed consented to
by him for nearly nine years, as was done by Pea y
Gomiz. The administration and management, by virtue
of an implied agency, is essentially distinguished from
that management of another's business, in this
respect, that while the former originated from a
contract, the latter is derived only from a qausicontract.
The implied agency is founded on the lack of
contradiction
or
opposition,
which
constitutes
simultaneous agreement on the part of the presumed
principal to the execution of the contract, while in the
management of another's business there is no
simultaneous consent, either express or implied, but a
fiction or presumption of consent because of the
benefit received.
The distinction between an agency and a business
management
has
been
established
by
the

jurisprudence of the supreme court (of Spain) in its

noteworthy decision of the 7th of July, 1881, setting up
the following doctrine:
That laws 28 and 32, title 12 Partida 3, refer to
the expenses incurred in things not one's own
and without power of attorney from those to
whom they belong, and therefore the said laws
are not applicable to this suit where the
petition of the plaintiff is founded on the verbal
request made to him by the defendant or the
latter's employees to do some hauling, and
where, consequently, questions that arise from
a contract that produces reciprocal rights and
duties can not be governed by the said laws.
It being absolutely necessary for Federico Hidalgo to
leave this city and abandon the administration of the
property of his principal, Pea y Gomiz, for reasons of
health, he made delivery of the property and of his
administration to Antonio Hidalgo and gave notice of
what he had done to his constituent, Pea, in order
that the latter might send a new power of attorney to
Antonio Hidalgo, the person charged with the
administration of the property. Pea y Gomiz did not
send the power of attorney requested, did not oppose
or prohibit Antonio Hidalgo's containing to administer
his property, and consented to his doing so for nearly
nine years. Consequently the second administrator
must be considered as a legitimate agent of the said
principal, as a result of the tacit agreement on the
latter's part, and the previous agent, who necessarily
abandoned and ceased to hold his position, as
completely free and clear from the consequences and
results of the second administration, continued by a
third party and accepted by his principal; for it is a fact,
undenied nor even doubted, that the said first
administrator had to abandon this country and the
administration of Pea's property for reasons of health,
which made it possible for him to continue in the
discharge of his duties without serious detriment to
himself, his conduct being in accordance with the
provisions of article 1736 of the Civil Code.
In the power of attorney executed by Pea y Gomiz in
this city on November 12, 1887, in favor of, among
others, Federico Hidalgo, no authority was conferred
upon the latter by his principal to substitute the power
or agency in favor of another person; wherefore the
agent could not, by virtue of the said power of
attorney, appoint any person to substitute or relieve
him in the administration of the principal's property, for
the lack of a clause of substitution in the said
instrument authorizing him so to do.
The designation of Antonio Hidalgo was not made as a
result of substitution of the power of attorney executed
by Pea in favor of the defendant, but in order that the
principal's property should not be abandoned,
inasmuch as, for the purposes of the discharge of the
duties of administrator of the same, the agent, who
was about to absent himself from this city, requested
his principal to send to the party, provisionally
designated by the former, a new power of attorney, for
the reason that the general power of attorney which
Federico Hidalgo had left, executed in favor of his
cousin Antonio Hidalgo, was so executed in his own
name and for his own affairs, and not in the name of
Pea y Gomiz, as the latter had not authorized him to
take such action.

If the owner of the property provisionally administered

at the time by Antonio Hidalgo, saw fit to keep silent,
even after having received the aforesaid letter of
March 22, 1894, and during the lapse of nearly ten
years, without counter commanding or disapproving
the designation of the person who took charge of the
administration of his property, knowing perfectly well
that his previous agent was obliged, by sickness and
medical advice to leave this city where such property
was situated, he is not entitled afterwards to hold
amenable the agent who had to abandon this country
for good and valid reasons, inasmuch as the latter
immediately reported to his principal the action taken
by himself and informed him of the person who had
taken charge of the administration of his property,
which otherwise would have been left abandoned.
From the time of that notification the agent who, for
legitimate cause, ceased to exercise his trust, was free
and clear from the results and consequences of the
management of the person who substituted him with
the consent, even only a tacit one, of the principal,
inasmuch as the said owner of the property could have
objected to could have prohibited the continuance in
the administration thereof, of the party designated by
his agent, and could have opportunely appointed
another agent or mandatory of his own confidence to
look after his property and if he did not do so, he is
obliged to abide by the consequences of his negligence
and abandonment and has no right to claim damages
against his previous agent, who complied with his duty
and did all that he could and ought to have done, in
accordance with the law.
The defendant Federico Hidalgo, having ceased in his
administration of the property belonging to Pea y
Gomiz, on account of physical impossibility, which
cessation he duly reported to his principal and also
informed him of the person who relieved him as such
administrator, and for whom he had requested a new
power of attorney, is only liable for the results and
consequences of his administration during the period
when the said property was in his charge, and
therefore his liability can not extend beyond the period
of his management, as his agency terminated by the
tacit or implied approval of his principal, judging from
the latter's silence in neither objecting to nor in
anywise prohibiting Antonio Hidalgo's continuing to
administer his property, notwithstanding the lapse of
the many years since he learned by letter of the action
taken by his previous agent, Federico Hidalgo.
Moreover, this latter, in announcing the termination of
his agency, transmitted the last partial accounts that
he had not rendered, up to December 31, 1893,
together with a general statement of all the resulting
balances covering the period of his administration, and
Jose de la Pea y Gomiz remained silent and offered no
objection whatever to the said accounts and did not
manifest his disapproval of the same nor of the general
statement, which he must have received in April or
may, 1894, to the time he died, in August, 1902; and
when his son, the plaintiff, came to this city in
company with the defendant, Federico Hidalgo, they
traveled together from Spain and arrived in Manila
during one of the early days of January, 1904, the
former, for the purpose of taking charge of the estate
left by his father, and after the plaintiff had examined
the accounts kept by Federico Hidalgo, his deceased
father's first agent, he approved them and therefore
issued in favor of the defendant the document, Exhibit
5, found on page 936 of the second record of trial,

dated January 15, 1904, in which Jose de la Pea y de

Ramon acknowledged having received from his
deceased father's old agent the accounts, balances,
and vouchers to his entire satisfaction, and gave an
acquittance in full settlement of the administration that
had been commended to the defendant Hidalgo.
This document, written in the handwriting of the
plaintiff, Pea y de Ramon, appears to be executed in a
form considered to be sufficient by its author, and,
notwithstanding the allegations of the said plaintiff, the
record contains no proof of any kind of Federico
Hidalgo's having obtained it by coercion, intimidation,
deceit, or fraud; neither is its shown to have been duly
impugned as false, criminally or civilly, for the
statements therein made by the plaintiff are too
explicit and definite to allow, without proof of some
vice or defect leading to nullification, of its being
considered as void and without value or legal effect.
With respect to the responsibility contracted by the
defendant, as regards the payment of the balance
shown by the accounts rendered by him, it is not
enough that the agent should have satisfactorily
rendered the accounts pertaining to his trust, but it is
also indispensable that it be proved that he had paid to
his principal, or to the owner of the property
administered, the balance resulting from his accounts.
This balance, which was allowed in the judgment
appealed from, notwithstanding the allegations of the
plaintiff, which were not deemed as established,
amounts to P6,774.50, according to the proofs adduced
at the trial. It was the imperative duty of the
administrator, Federico Hidalgo, to transmit this sum to
his principal, Jose de la Pea y Gomiz, as the final
balance of the accounts of his administration, struck on
December 31, 1893, and by his failure so to do and
delivery of the said sum to his successor, Antonio
Hidalgo, he acted improperly, and must pay the same
to the plaintiff.
Antonio Hidalgo took charge of the administration of
Pea y Gomiz's property from January, 1894, to
September, 1902, that is, during the second period of
administration of the several properties that belonged
to the deceased Pea.
Although the plaintiff, in his original complaint, had
included the said Antonio Hidalgo as one of the
responsible defendants, yet he afterwards excluded
him, as well from the second as from the third
amended complaint, and consequently the liability that
might attach to Antonio Hidalgo was not discussed, nor
was it considered in the judgment of the lower court;
neither can it be in the decision, for the reason that the
said Antonio Hidalgo is not a party to this suit.
However, the said liability of Antonio Hidalgo is
imputed to Federico Hidalgo, and so it is that, in the
complain t, the claim is made solely against Federico
Hidalgo, in order that the latter might be adjudged to
pay the amounts which constitute the balance owing
from him who might be responsible, Antonio Hidalgo,
during the period of this latter's administration.
Federico Hidalgo, in our opinion, could not and can not
be responsible for the administration of the property
that belonged to the deceased Pea y Gomiz, which
was administered by Antonio Hidalgo during eight
years and some months, that is, during the second
period, because of the sole fact of his having turned
over to the latter the administration of the said

property on his departure from this city of Spain.

Neither law nor reason obliged Federico Hidalgo to
remain in this country at the cost of his health and
perhaps of his life, even though he were the
administrator of certain property belonged to Pea y
Gomiz, since the care of the property and interests of
another does not require sacrifice on the part of the
agent of his own life and interests. Federico Hidalgo
was obliged to deliver the said property belonging to
Pea y Gomiz to Antonio Hidalgo for good and valid
reasons, and reasons, and in proceeding in the manner
aforesaid he complied with the duty required of him by
law and justice and acted as a diligent agent. If the
principal, Jose de la Pea Gomiz, the owner of the
property mentioned, although informed opportunely of
what had occurred saw fit to keep silent, not to object
to the arrangements made, not to send the power of
attorney requested by Federico Hidalgo in favor of
Antonio Hidalgo, and took no action nor made any
inquiry whatever to ascertain how his property was
being administered by the second agent, although to
the time of his death more than eight years had
elapsed, the previous agent, who ceased in the
discharge of his duties, can in nowise be held liable for
the consequences of such abandonment, nor for the
results of the administration of property by Antonio
Hidalgo, for the reason that, since his departure from
this country, he has not had the least intervention nor
even indirect participation in the aforementioned
administration of the said Antonio Hidalgo who, under
the law, was the agent or administrator by virtue of an
implied agency, which is equivalent in its results to an
express agency, executed by the owner of the property.
Consequently, Federico Hidalgo is not required to
render accounts of the administration corresponding to
the second period mentioned, nor to pay the balance
that such accounts may show to be owing.
At the first trial of this cause, Federico Hidalgo, testified
under oath that his principal, Jose Pea y Gomiz, did
not agree to the appointment of Antonio Hidalgo,
chosen by the witness, not to such appointee's taking
charge of the administration of his property. Aside from
the fact that the trial record does not show honor on
what date Pea expressed such disagreement it is
certain that, in view of the theory of defense
maintained by the defendant Hidalgo could have said,
by means of a no, that his principal did not agree to
the appointment of the said Antonio Hidalgo, and the
intercalation of the word no in the statement quoted is
more inexplicable in that the attorney for the adverse
party moved that the said answer be stricken from the
record, as he objected to its appearing therein.
Were it true that the principal Jose de la Pea by
Gomiz, had neither agreed to the designation of
Antonio Hidalgo, nor to the latter's administering his
property, he would immediately have appointed
another agent and administrator, since he knew that
Federico Hidalgo had left the place where his property
was situated and that it would be abandoned, had he
not wished that Antonio Hidalgo should continue to
administer it. If the latter continued in the
administration of the property for so long a time,
nearly nine years, it was because the said Pea agreed
and gave his consent to the acts performed by his
outgoing agent, and for this reason the answer given
by Federico Hidalgo mistakenly, or not, that his
principal, Pea, did not agree to the appointment of
Antonio Hidalgo, is immaterial and does not affect the
terms of this decision.

If the defendant is not responsible for the results of the

administration of said property administered by
Antonio Hidalgo during the second period before
referred to, neither is he responsible for that performed
during the third period by Francisco Hidalgo, inasmuch
as the latter was not even chosen by the defendant
who, on October 1, 1902, when Francisco Hidalgo took
charge of Peas' property that had been turned over to
him by Antonio Hidalgo, was in Spain and had no
knowledge of nor intervention in such delivery;
wherefore the defendant can in no manner be obliged
to pay to the plaintiff any sum that may be found
owing by Francisco Hidalgo.
The trial judge taking into consideration that, by the
evidence adduced at the hearing, it was proved that
Francisco Hidalgo rendered accounts to the plaintiff of
the administration of the property in question during
the said third period, that is, for one year, three
months, and someday, and that he delivered to the
plaintiff the balance of 1,280.03 pesos, for which the
latter issued to the said third administrator the
document Exhibit 2, written in his own handwriting
under date of January 7, 1904, and the signature
which, affixed by himself, he admitted in his testimony
was authentic, on its being exhibited to him found
that the plaintiff, Pea y de Ramon, was not entitled to
recover any sum whatever for the rents pertaining to
the administration of his property by the said Francisco
Hidalgo.
All the reasons hereinbefore given relate to the first
cause of action, whereby claim is made against
Federico Hidalgo for the payment of the sum of
P72,548.24 and interest at the rate of 6 per cent per
centum, and they have decided some of the errors
assigned by the appellants in their briefs to the
judgment appealed from.
Two amounts are have claimed which have one and the
same origin, yet are based on two causes of action, the
second and the third alleged by the plaintiff; and
although the latter, afterwards convinced by the truth
and of the impropriety of his claim, had to waive the
said third cause of action during the second hearing of
this cause (pp. 57 and 42 of the record of the
evidence), the trial judge, on the grounds that the said
second and third causes of action refer to the same
certificates of deposit of the treasury of the Spanish
Government, found, in the judgment appealed from,
that the plaintiff was not entitled to recover anything
for the aforesaid second and third causes of action a
finding that is proper and just, although qualified as
erroneous by the plaintiff in his brief.
It appears, from the evidence taken in this cause, that
Jose de la Pea y Gomiz, according to the certificates
issued by the chief of the division his lifetime, after
having in 1882 withdrawn from the General Deposit
Bank of the Spanish Government a deposit of 17,000
pesos and its interest deposit any sum therein until
December 9, 1886, when he deposited two amounts of
3,000 pesos each, that is, 6,000 pesos in all, the two
deposit receipts for the same being afterwards
endorsed in favor of Gonzalo Tuason. The latter, on
December 9, 1887, withdrew the deposit and took out
the said two amounts, together with the interest due
thereon, and on the same date redeposited them in the
sum of 6,360 pesos at 5 per cent per annum in the
name of Jose de la Pea y Gomiz. On the 20th of
December of the following year, 1888, the defendant

Hidalgo received from his principal, Pea y Gomiz,

through Father Ramon Caviedas, the two said letters of
credit, in order that he might withdraw from the
General Deposit Bank the two amounts deposited,
together with the interest due thereon, amounting to
741 pesos, and with this interest purchase a draft on
London in favor of its owner and then redeposit the
original capital of 6,000 pesos. This, the defendant
Hidalgo did and then delivered the draft and the
deposit receipt to Father Caviedas, of all of which
transactions he informed his principal by letter of the
same date, transcribed on page 947 of the second trial
record.
In the following year, 1889, Father Ramon Caviedas
again delivered to the defendant Hidalgo the
aforementioned deposit receipt with the request to
withdraw from the General Deposit bank the sum
deposited and to purchase a draft of 860 pesos on
London in favor of their owner, Jose de la Pea y
Gomiz, and, after deducting the cost of the said draft
from the capital and interest withdrawn from deposit,
amounting to 6,360 pesos, to redeposit the remainder,
5,500 pesos, in the bank mentioned, in accordance
with the instructions from Pea y Gomiz: All of which
was done by the defendant Hidalgo, who delivered to
Father Caviedas the receipt for the new deposit of
5,500 pesos as accredited by the reply-letter,
transcribed on page 169 of the record, and by the
letter addressed by Hidalgo to Pea, of the date of
December 20 of that year and shown as an original
exhibit by the plaintiff himself on page 29 of the record
of the evidence.
Lastly, in December, 1890, Father Caviedas,
aforementioned, delivered to the defendant Hidalgo
the said deposit receipt for 5,500 pesos in order that
he might withdraw this amount from deposit and
deliver it with the interest thereon to the former for the
purpose of remitting it by draft to Jose de la Pea; this
Hidalgo did, according to a reply-letter from Father
Caviedas, the original of which appears on page 979 of
the file of exhibits and is copied on page 171 of the
trial record, and is apparently confirmed by the latter in
his sworn testimony.
So that the two amounts of 3,000 pesos each,
expressed in two deposit receipts received from De la
Pea y Gomiz by Father Ramon Caviedas and
afterwards delivered to Francisco Hidalgo for the
successive operations of remittance and redeposit in
the bank before mentioned, are the same and only
ones that were on deposit in the said bank in the name
of their owner, Pea y Gomiz. The defendant Hidalgo
made two remittances by drafts of London, one in 1888
for 741.60 pesos, through a draft purchased from the
Chartered Bank, and another in 1889 for 860 pesos,
through a draft purchased from the house of Tuason &
Co., and both in favor of Pea y Gomiz, who received
through Father Ramon Caviedas the remainder, 5,500
pesos, of the sums deposited. For these reasons, the
trial judge was of the opinion that the certificates of
deposit sent by Pea y Gomiz to Father Ramon
Caviedas and those received from the latter by the
defendant Hidalgo were identicals, as were likewise the
total amounts expressed by the said receipts or
certificates of deposit, from the sum of which were
deducted the amounts remitted to Pea y Gomiz and
the remainder deposited after each anual operation
until, finally, the sum of 5,500 pesos was remitted to its
owner, Pea y Gomiz, according to his instructions,

through the said Father Caviedas. The lower court, in

concluding its judgment, found that the plaintiff was
entitled to recover any sum whatever for the said
second and third causes of action, notwithstanding
that, as hereinbefore stated, the said plaintiff withdrew
the third cause of action. This finding of the court, with
respect to the collection of the amounts of the
aforementioned deposit receipts, is perfectly legal and
in accordance with justice, inasmuch as it is a
sustained by abundant and conclusive documentary
evidence, which proves in an incontrovertible manner
the unrighteousness of the claim made by the plaintiff
in twice seeking payment, by means of the said second
and third causes of action, of the said sum which, after
various operations of deposit and remittance during
three years, was finally returned with its interest to the
possession of its owner, Pea y Gomiz.
From the trial had in this case, it also appears
conclusively proved that Jose de la Pea y Gomiz owed,
during his lifetime, to Federico Hidalgo, 7,600 pesos,
4,000 pesos of which were to bear interest at the rate
of 6 per cent per annum, and the remainder without
any interest, and that, notwithstanding the lapse of the
period of three years, from November, 1887, within
which he bound himself to repay the amount borrowed,
and in spite of his creditor's demand of payment, made
by registered letter, the original copy of which is on
page 38 of the file of exhibits and a transcription
thereof on page 930 of the first and second record of
the evidence, the debt was not paid up to the time of
the debtor's death. For such reasons, the trial court, in
the judgment appealed from, found that there was a
preponderance of evidence to prove that this loan had
been made and that the plaintiff actually owed the
defendant the sum loaned, as well as the interest
thereon, after deducting therefrom the 2,000 pesos
which the defendant received from the plaintiff on
account of the credit, and that the former was entitled
to recover.
It appears from the pleadings and evidence at the trial
that in January, 1904, on the arrival in this city of
Federico de la Pea de Ramon, and on the occasion of
the latter's proceeding to examine the accounts
previously rendered, up to December 31, 1893, by the
defendant Hidalgo to the plaintiff's father, then
deceased, Hidalgo made demand upon the plaintiff,
Pea y de Ramon, for the payment of the said debt of
his father, although the creditor Hidalgo acceded to the
requests of the plaintiff to grant the latter an extension
of time until he should be able to sell one of the
properties of the estate. It was at that time, according
to the defendant, that the plaintiff Pea took up the
instrument of indebtedness, executed by his deceased
father during his lifetime, and delivered to the
defendant in exchange therefor the document of the
date of January 15, 1904, found on page 924 of the
second record of evidence, whereby the plaintiff, Jose
de la Pea, bound himself to pay his father's debt of
11,000 pesos, owing to the defendant Hidalgo, out of
the proceeds of the sale of some of the properties
specified in the said document, which was written and
signed by the plaintiff in his own handwriting.
The plaintiff not only executed the said document
acknowledging his father's debt and binding himself to
settle it, but also, several days after the sale of a lot
belonging to the estate, paid to the creditor on account
the sum of 2,000 pesos, according to the receipt issued

by the latter and exhibited on page 108 of the first

record of evidence.
The said document, expressive of the obligation
contracted by the plaintiff Pea y de Ramon that he
would pay to the defendant the debt of plaintiff's
deceased father, amounting to 11,000 pesos, out of
the proceeds from some of the properties of the estate,
has not been denied nor impugned as false; and not
withstanding the averment made by the plaintiff that
when he signed he lacked information and knowledge
of the true condition of the affairs concerning Hidalgo's
connection with the property that be absolutely no
proof whatever is shown in the trial record of the
creditor's having obtained the said document through
deceit or fraud circumstances in a certain manner
incompatible with the explicit statements contained
therein. For these reasons, the trial court, weighing the
whole of the evidence furnished by the record, found
that the loan of the said 7,600 pesos was truly and
positively made, and that the plaintiff must pay the
same to the defendant, with the interest thereon, and
that he was not entitled to recover the 2,000 pesos, as
an undue payment made by him to the defendant
creditor. For the foregoing reason the others errors
assigned by the plaintiff to the judgment appealed
from are dismissed.
With respect to the obligation to pay the interest due
on the amounts concerned in this decision, it must be
borne in mind that, as provided by article 1755 of the
Civil Code, interest shall only be owed when it has
been expressly stipulated, and that should the debtor,
who is obliged to pay a certain sum of money, be in
default and fail to fulfill the agreement made with his
creditor, he must pay, as indemnity for losses and
damages, the interest agreed upon, and should there
be no express stipulation, the legal interest (art. 1108
of the Civil Code); but, in order that the debtor may be
considered to be in default and obliged to pay the
indemnity, it is required, as a general rule, that his
creditor shall demand of such debtor the fulfillment of
his obligation, judicially or extrajudicially, except in
such cases as are limitedly specified in article 1100 of
the Civil Code.
It was not expressly stipulated that either the balance
of the last account rendered by the defendant Federico
Hidalgo in 1893, or the sum which the plaintiff bound
himself to pay to the defendant, in the instrument of
the 15th of January, 1904, should bear interest; nor is
there proof that a judicial or extrajudicial demand was
made, on the part of the respective creditors
concerned, until the date of complaint, on the part of
the plaintiff, and that of the counterclaim, on the part
of the defendant. Therefore no legal interest is owing
for the time prior to the respectives dates of the
complaint and counterclaim.
By virtue, then, of the reasons herein before set forth,
it is proper, in our opinion, to adjudge, as we do hereby
adjudge, that the defendant, Federico Hidalgo, shall
pay to the plaintiff, Jose de la Pea y de Ramon, as
administrator of the estate of the deceased Jose de la
Pea y Gomiz, the sum of P6,774.50, and the legal
interest thereon at the rate of 6 per cent per annum
from 23rd of May, 1906, the date of the filing of the
original complaint in this case; that we should and
hereby do declare that the said defendant Federico
Hidalgo, is not bound to gibe nor render accounts of
the administration of the property of the said deceased

Jose de la Pea y Gomiz administered, respectively, by

Antonio Hidalgo, from January, 1894, to September 30,
1902, and by Francisco Hidalgo, from October 1, 1902,
to January 7, 1904, and therefore the defendant,
Federico Hidalgo, not being responsible for the results
of the administration of the said property administered
by the said Antonio and Francisco Hidalgo, we do
absolve the said defendant from the complaint filed by
the plaintiff, in so far as it concerns the accounts
pertaining
to
the
aforesaid
two
periods
of
administration and relates to the payment of the
balances resulting from such accounts; and that we
should and hereby do absolve the defendant Hidalgo
from the complaint with respect to the demand for the
payment of the sums of P15,774.19 and P2,000, with
their respective interests, on account of the second
and the fourth cause of action, respectively, and
because the plaintiff renounced and withdrew his
complaint, with respect to the third cause of action;
and that we should and do likewise adjudge, that the
plaintiff, Jose de la Pea y de Ramon, shall pay to
Federico Hidalgo, by reason of the counterclaim, the
sum of P9,000 with legal interest thereon at the rate of
6 per cent per annum from 21st of may, 1907, the date
of the counterclaim.
The judgment appealed from, together with that part
thereof relative to the statement it contains concerning
the equivalence between the Philippine peso and the
Mexican peso, is affirmed in so far as it is in agreement
with the findings of this decision, and the said
judgment is reversed in so far as it is not in accordance
herewith. No special finding is made as to costs
assessed in either instance, and to the plaintiff is
reserved any right that he may be entitled to enforce
against Antonio Hidalgo.
G.R. No. 2962

February 27, 1907

B.
H.
MACKE,
ET
AL., plaintiffs-appellees,
vs.
JOSE CAMPS, defendant-appellant.
CARSON, J.:
The plaintiffs in this action, B. H. Macke and W. H.
Chandler, partners doing business under the firm name
of Macke, Chandler & Company, allege that during the
months of February and March, 1905, they sold to the
defendant and delivered at his place of business,
known as the "Washington Cafe," various bills of goods
amounting to P351.50; that the defendant has only
paid on account of said accounts the sum of P174; that
there is still due them on account of said goods the
sum of P177.50; that before instituting this action they
made demand for the payment thereof; and that
defendant had failed and refused to pay the said
balance or any part of it up to the time of the filing of
the complaint.
B. H. Macke, one of the plaintiffs, testified that on the
order of one Ricardo Flores, who represented himself to
be agent of the defendant, he shipped the said goods
to the defendants at the Washington Cafe; that Flores
later acknowledged the receipt of said goods and made
various payments thereon amounting in all to P174;
that on demand for payment of balance of the account
Flores informed him that he did not have the necessary
funds on hand, and that he would have to wait the
return of his principal, the defendant, who was at that

time
visiting
in
the
provinces;
that
Flores
acknowledged the bill for the goods furnished and the
credits being the amount set out in the complaint; that
when the goods were ordered they were ordered on the
credit of the defendant and that they were shipped by
the plaintiffs after inquiry which satisfied the witness as
to the credit of the defendant and as to the authority of
Flores to act as his agent; that the witness always
believed and still believes that Flores was the agent of
the defendant; and that when he went to the
Washington Cafe for the purpose of collecting his bill
he found Flores, in the absence of the defendant in the
provinces, apparently in charge of the business and
claiming to be the business manager of the defendant,
said business being that of a hotel with a bar and
restaurant annexed.

person in good faith and in the following

preassumptions or deductions, which the law expressly
directs to be made from particular facts, are deemed
conclusive:

A written contract dated May 25, 1904, was introduced

in evidence, from which it appears that one Galmes,
the former owner of the business now know as the
"Washington Cafe," subrented the building wherein the
business was conducted, to the defendant for a period
of one year, for the purpose of carrying on that
business, the defendant obligating himself not to
sublet or subrent the building or the business without
the consent of the said Galmes. This contract was
signed by the defendant and the name of Ricardo
Flores appears thereon as a witness, and attached
thereto is an inventory of the furniture and fittings
which also is signed by the defendant with the word
"sublessee" (subarrendatario) below the name, and at
the foot of this inventory the word "received" (recibo)
followed by the name "Ricardo Flores," with the words
"managing
agent"
(el
manejante
encargado)
immediately following his name.

That Flores, as managing agent of the Washington

Cafe, had authority to buy such reasonable quantities
of supplies as might from time to time be necessary in
carrying on the business of hotel bar may fairly be
presumed from the nature of the business, especially in
view of the fact that his principal appears to have left
him in charge during more or less prolonged periods of
absence; from an examination of the items of the
account attached to the complaint, we are of opinion
that he was acting within the scope of his authority in
ordering these goods are binding on his principal, and
in the absence of evidence to the contrary, furnish
satisfactory proof of their delivery as alleged in the
complaint.

Galmes was called to the stand and identified the

above- described document as the contract and
inventory delivered to him by the defendant, and
further stated that he could not tell whether Flores was
working for himself or for some one else that it to
say, whether Flores was managing the business as
agent or sublessee.
The defendant did not go on the stand nor call any
witnesses, and relies wholly on his contention that the
foregoing facts are not sufficient to establish the fact
that he received the goods for which payment is
demanded.

(1) "Whenever a party has, by his own declaration, act,

or omission, intentionally and deliberately led another
to believe a particular thing true, and to act upon such
belief, he can not, in any litigation arising out such
declaration, act, or omission, be permitted to falsify it"
(subsec. 1, sec. 333, Act no. 190); and unless the
contrary appears, the authority of an agent must be
presumed to include all the necessary and usual means
of carrying his agency into effect. (15 Conn., 347; 90 N.
C. 101; 15 La. Ann, 247; 43 Mich., 364; 93 N. Y., 495;
87 Ind., 187.)

The judgment of the trial court is affirmed with the

costs of his instance against the appellant. After
expiration of twenty days judgment will be rendered in
accordance herewith, and ten days thereafter the case
remanded to the lower court for proper action. So
ordered.

EN BANC
[G.R. No. 25593. November 15, 1967.]
HOME INSURANCE COMPANY, Plaintiff-Appellant,
v. UNITED STATES LINES CO., ET AL.,DefendantsAppellees.
SYLLABUS

In the absence of proof of the contrary we think that

this evidence is sufficient to sustain a finding that
Flores was the agent of the defendant in the
management of the bar of the Washington Cafe with
authority to bind the defendant, his principal, for the
payment of the goods mentioned in the complaint.
The contract introduced in evidence sufficiently
establishes the fact that the defendant was the owner
of business and of the bar, and the title of "managing
agent" attached to the signature of Flores which
appears on that contract, together with the fact that, at
the time the purchases in question were made, Flores
was apparently in charge of the business, performing
the duties usually entrusted to managing agent, leave
little room for doubt that he was there as authorized
agent of the defendant. One who clothes another
apparent authority as his agent, and holds him out to
the public as such, can not be permitted to deny the
authority of such person to act as his agent, to the
prejudice of innocent third parties dealing with such

1. ARRASTRE SERVICE; IMMUNITY OF GOVERNMENT

FROM SUIT. On grounds of public policy, the Republic
of the Philippines or its agencies may not be sued for
the performance of arrastre operations as a function
necessarily incidental to the governmental function of
taxation.
2. REMEDIAL LAW; PRE-TRIAL UNDER THE NEW RULES
DISTINGUISHED FROM THAT OF THE OLD. Section 1
of Rule 20 of the Revised Rules of Court, making pretrial mandatory partly provides that "in any action,
after the last pleading has been filed, the court shall
direct the parties and their attorneys to appear before
it for a conference." This is different from Section 1 of
Rule 25 of the old Rules of Court which provided that
"the court may in its discretion direct the attorneys for
the parties to appear before it for a conference."
Section 2, Rule 20 of the new Rules of Court says that
"a party who fails to appear at a pre-trial conference
may be non-suited or considered as in default." This
shows the purpose of the Rules to compel the parties
to appear personally before the Court to reach, if
possible, a compromise. Accordingly, the court is given

the discretion to dismiss the case, should plaintiff not

appear at the pre-trial.
3. ID.; COMPROMISE; REQUISITE THEREOF. The Rules
of Court require, for attorneys to compromise the
litigation of their clients, a "special authority" (Sec. 23,
Rule 138). And while the same does not state that the
special authority be in writing, the court has every
reason to expect that, if not in writing, the same be
duly established by evidence other than the selfserving assertion of counsel himself that such authority
was verbally given him.
4. ID.; ID.; AUTHORITY TO COMPROMISE NOT
PRESUMED. Authority to compromise a litigation
cannot be lightly presumed. If, with good reason, the
judge is not satisfied that said authority exists, as in
this case, dismissal of the suit for non-appearance of
plaintiff in pre-trial is sanctioned by the Rules of Court.

DECISION

BENGZON, J.P., J.:

Sometime in 1964, SS "Pioneer Moon" arrived in Manila

and discharged unto the custody of the Bureau of
Customs, as arrastre operator, two hundred (200)
cartons of carbonized adding machine rolls consigned
to Burroughs, Limited. When the cargo was delivered to
the consignee, however, several cartons were
damaged. The consignee claimed the P2,605.64 worth
of damage from the Bureau of Customs, the United
States Lines Company, owner of the vessel, and the
Home Insurance Company which had insured the
cargo. The latter paid the claim and demanded
reimbursement from either arrastre operator or the
carrier. When both rejected the claim, the Home
Insurance Company, as subrogee, filed on June 11,
1965 an action against the Republic of the Philippines,
the Bureau of Customs and the United States Lines, in
the alternative, for the recovery of P2,605.64, with
interest plus costs.chanroblesvirtuallawlibrary
Both defendants answered. The United States Lines
disclaimed liability on the ground that the damage was
incurred while the cargo was in the possession of its
co-defendants. The Republic of the Philippines and the
Bureau of Customs, after denial of their motion to
dismiss, answered and alleged among others, nonsuability and noncompliance with Act 3083, as
amended by Commonwealth Act 327 which requires
money claims to be filed with the Auditor General.
On December 7, 1965, the date set for pre-trial, only
the counsel for the plaintiff appeared, who upon being
asked for written authority to compromise, assured the
court that though he had no written authority, he had
such authority verbally given by the plaintiff. On the
same day, the court dismissed the case for failure of
the plaintiff to appear at the pre-trial conference.
Its motion for reconsideration having been denied,
plaintiff appealed to Us, claiming that the lower court
erred in dismissing the case for failure of the plaintiff to
appear.
As against the Republic of the Philippines and the
Bureau of Customs, the dismissal must be sustained in
the light of our decision in Mobil Philippines Exploration
v. Customs Arrastre Service and Bureau of Customs, L23139, December 17, 1966 and subsequent rulings, 1
where We held that on grounds of public policy, the
Republic of the Philippines or its agencies, may not be
sued for the performance of arrastre operations as a
function necessarily incidental to the governmental
function of taxation.
As regards the other defendant, Section 1 of Rule 20 of

the Revised Rules of Court, making pre-trial mandatory

partly provides: ". . . in any action, after the last
pleading has been filed, the court shall direct the
parties and their attorneys to appear before it for a
conference" (Emphasis supplied). This is different from
Section 1 of Rule 25 of the old Rules of Court which
provided that "the court may in its discretion direct the
attorneys for the parties to appear before it for a
conference. . ." (Emphasis supplied). Section 2, Rule 20
of the new Rules of Court says that "a party who fails to
appear at a pre-trial conference may be non-suited or
considered as in default." This shows the purpose of
the Rules to compel the parties to appear personally
before the court to reach, if possible, a compromise.
Accordingly, the court is given the discretion to dismiss
the case should plaintiff not appear at the pre-trial.
Taking into consideration said purpose and spirit of the
new Rules as well as the facts in the present case, We
find no reversible error committed by the court a quo in
dismissing the action for the reason that only plaintiffs
counsel appeared at the pre-trial (and not plaintiffs
official representative also). True, said counsel asserted
that he had verbal authority to compromise the case.
The Rules, however, require, for attorneys to
compromise the litigation of their clients, a "special
authority" (Section 23, Rule 138, Rules of Court). And
while the same does not state that the special
authority be in writing, the court has every reason to
expect that, if not in writing, the same be duly
established by evidence other than the self-serving
assertion of counsel himself that such authority was
verbally given him. The court below, therefore, did not
act erroneously in proceeding to dismiss the case in
spite of such manifestation of plaintiffs counsel. For,
authority to compromise cannot lightly be presumed.
And if, with good reason, the judge is not satisfied that
said authority exists, as in this case, dismissal of the
suit for non-appearance of plaintiff in pre-trial is
sanctioned by the Rules. The dismissal should therefore
be sustained in toto, with respect to all the
defendants.chanrobles.com:cralaw:nad
WHEREFORE, the appealed order of dismissal is
affirmed, without costs. So ordered.

G.R. No. L-22450

December 3, 1924

YU
CHUCK,
MACK
YUENG,
MOON, plaintiffs-appellees,
vs.
"KONG LI PO," defendant-appellant.

and

DING

OSTRAND, J.:
The defendant is a domestic corporation organized in
accordance with the laws of the Philippine Islands and
engaged in the publication of a Chinese newspaper
styled Kong Li Po. Its articles of incorporation and bylaws are in the usual form and provide for a board of
directors and for other officers among them a president
whose duty it is to "sign all contracts and other
instruments of writing." No special provision is made
for a business or general manager.
Some time during the year 1919 one C. C. Chen or T. C.
Chen was appointed general business manager of the
newspaper. During the month of December of that year
he entered into an agreement with the plaintiffs by
which the latter bound themselves to do the necessary
printing for the newspaper for the sum of P580 per
month as alleged in the complaint. Under this
agreement the plaintiffs worked for the defendant from
January 1, 1920, until January 31, 1921, when they
were discharged by the new manager, Tan Tian Hong,
who had been appointed in the meantime, C. C. Chen
having left for China. The letter of dismissal stated no
special reasons for the discharge of the plaintiffs.

The plaintiffs thereupon brought the present action

alleging, among other things, in the complaint that
their contract of employment was for a term of three
years from the first day of January, 1920; that in the
case of their discharge by the defendant without just
cause before the expiration of the term of the contract,
they were to receive full pay for the remaining portion
of the term; that they had been so discharged without
just cause and therefore asked judgment for damages
in the sum of P20,880.
In its amended answer the defendant denies generally
and specifically the allegations of the complaint and
sets up five special defenses and counterclaims. The
first of these is to the effect that C. C. Chen, the person
whose name appears to have been signed to the
contract of employment was not authorized by the
defendant to execute such a contract in its behalf. The
second special defense and counterclaim is to the
effect that during the month of January, 1921, the
plaintiffs
purposely
delayed
the
issuance
of
defendant's newspaper on three separate and distinct
occasions causing damage and injury to the defendant
in the amount of P300. Under the third special defense
and counterclaim it is alleged that the plaintiffs failed,
neglected, and refused to prepare extra pages for the
January 1, 1921, issue of the defendant's newspaper
and thus compelled the defendant to secure the
preparation of said extra pages by other persons at a
cost of P110. In the fourth special defense and
counterclaim the defendant alleged that the plaintiffs
neglected
and
failed
to
correct
errors
in
advertisements appearing in defendant's newspaper,
although their attention was specifically called to such
errors and they were requested to make the
corrections, as a result of which certain advertisers
withdrew their patronage from the paper and refused
to pay for the advertisements, thus causing a loss to
the defendant of P160.50. For its fifth special defense
and counterclaim the defendant alleged that the
plaintiffs neglected and refused to do certain job
printing such neglect and refusal causing injury and
damage to the defendant in the sum of P150.
At the trial of the case the plaintiffs presented in
evidence Exhibit A which purports to be a contract
between Chen and the plaintiffs and which provides
that in the event the plaintiffs should be discharged
without cause before the expirations of the term of
three years from January 1, 1920, they would be given
full pay for the unexpired portion of the term "even if
the said paper has to fall into bankruptcy." The contract
is signed by the plaintiffs and also bears the signature
"C. C. Chen, manager of Kong Li Po." The authenticity
of the latter signature is questioned by the defendant,
but the court below found that the evidence upon this
point preponderate in favor of the plaintiffs and there
appears to be no sufficient reason to disturb this
finding.
The trial court further found that the contract had been
impliedly ratified by the defendant and rendered
judgment in favor of the plaintiffs for the sum of
P13,340, with interest from the date of the filing of the
complaint and the costs. From this judgment the
defendant appeals to this court and makes eighteen
assignments of error. The fourth and seventeenth
assignments relate to defendant's special defense and
counterclaims; the sum and substance of the other
assignments is that the contract on which the action is
based was not signed by C. C. Chen; that, in any event,
C. C. Chen had no power or authority to bind the
defendant corporation by such contract; and that there
was no ratification of the contract by the corporation.
Before entering upon a discussion of the questions
raised by the assignments of error, we may draw
attention to a matter which as not been mentioned
either by counsel or by the court below, but which, to
prevent misunderstanding, should be briefly explained:

It is averred in the complaint that it is accompanied by

a copy of the contract between the parties (Exhibit A)
which copy, by the terms of the complaint, is made a
part thereof. The copy is not set forth in the bill of
exceptions and aside from said avernment, there is no
indication that the copy actually accompanied the
complaint, but an examination of the record of the case
in the Court of First Instance shows that a translation of
the contract was attached to the complaint and served
upon the defendant. As this translation may be
considered a copy and as the defendant failed to deny
its authenticity under oath, it will perhaps be said that
under section 103 of the Code of Civil Procedure the
omission to so deny it constitutes an admission of the
genuineness and due execution of the document as
well as of the agent's authority to bind the defendant.
(Merchant vs. International Banking Corporation, 6
Phil., 314.)
In ordinary circumstances that would be true. But this
case appears to have been tried upon the theory that
the rule did not apply; at least, it was wholly
overlooked or disregarded by both parties. The
plaintiffs at the beginning of the trial presented a
number of witnesses to prove the due execution of the
document as well as the agent's authority; no
objections were made to the defendant's evidence in
refutation and no exceptions taken; and the matter is
not mentioned in the decision of the trial court.
The object of the rule is "to relieve a party of the
trouble and expense of proving in the first instance an
alleged fact, the existence or nonexistence of which is
necessarily within the knowledge of the adverse party,
and of the necessity (to his opponent's case) of
establishing which such adverse party is notified by his
opponent's pleading." (Nery Lim-Chingco vs. Terariray,
5 Phil., at p. 124.)lawphi1.net
The plaintiff may, of course, waive the rule and that is
what he must be considered to have done in the
present case by introducing evidence as to the
execution of the document and failing to object to the
defendant's evidence in refutation; all this evidence is
now competent and the case must be decided
thereupon. Moreover, the question as to the
applicability of the rule is not even suggested in the
briefs and is not properly this court. In these
circumstances it would, indeed, be grossly unfair to the
defendant if this court should take up the question on
its own motion and make it decisive of the case, and
such is not the law. Nothing of what has here been said
is in conflict with former decisions of this court; it will
be found upon examination that in all cases where the
applicability of the rule has been sustained the party
invoking it has relied on it in the court below and
conducted his case accordingly.
The principal question presented by the assignments of
error is whether Chen had the power to bind the
corporation by a contract of the character indicated. It
is conceded that he had no express authority to do so,
but the evidence is conclusive that he, at the time the
contract was entered into, was in effect the general
business manager of the newspaper Kong Li Po and
that he, as such, had charge of the printing of the
paper, and the plaintiff maintain that he, as such
general business manager, had implied authority to
employ them on the terms stated and that the
defendant corporation is bound by his action. The
general rule is that the power to bind a corporation by
contract lies with its board of directors or trustees, but
this power may either expressly or impliedly be
delegated to other officers or agents of the
corporation, and it is well settled that except where the
authority of employing servants and agent is expressly
vested in the board of directors or trustees, an officer
or agent who has general control and management of
the corporation's business, or a specific part thereof,
may bind the corporation by the employment of such

agent and employees as are usual and necessary in

the conduct of such business. But the contracts of
employment must be reasonable. (14a C. J., 431.)
In regard to the length of the term of employment,
Corpus Juris says:
In the absence of express limitations, a
manager has authority to hire an employee for
such a period as is customary or proper under
the circumstances, such as for a year, for the
season, or for two season. But unless he is
either expressly authorized, or held out as
having such authority, he cannot make a
contract of employment for a long future
period, such as for three years, although the
contract is not rendered invalid by the mere
fact that the employment extends beyond the
term of the manager's own employment. . . .
(14a C. J., 431.)
From what has been said, there can be no doubt that
Chen, as general manager of the Kong Li Po, had
implied authority to bind the defendant corporation by
a reasonable and usual contract of employment with
the plaintiffs, but we do not think that the contract
here in question can be so considered. Not only is the
term of employment unusually long, but the conditions
are otherwise so onerous to the defendant that the
possibility of the corporation being thrown into
insolvency thereby is expressly contemplated in the
same contract. This fact in itself was, in our opinion,
sufficient to put the plaintiffs upon inquiry as to the
extent of the business manager's authority; they had
not the rights to presume that he or any other single
officer or employee of the corporation had implied
authority to enter into a contract of employment which
might bring about its ruin.
Neither do we think that the contention that the
corporation impliedly ratified the contract is supported
by the evidence. The contention is based principally on
the fact that Te Kim Hua, the president of the
corporation for the year 1920, admitted on the witness
stand that he saw the plaintiffs work as printers in the
office of the newspaper. He denied, however, any
knowledge of the existence of the contract and
asserted that it was never presented neither to him nor
to the board of directors. Before a contract can be
ratified knowledge of its existence must, of course, be
brought home to the parties who have authority to
ratify it or circumstances must be shown from which
such knowledge may be presumed. No such knowledge
or circumstances have been shown here. That the
president of the corporation saw the plaintiffs working
in its office is of little significance; there were other
printers working there at that time and as the
president had nothing to do with their employment, it
was hardly to be expected that be would inquire into
the terms of their contracts. Moreover, a ratification by
him would have been of no avail; in order to validate a
contract, a ratification by the board of directors was
necessary. The fact that the president was required by
the by-laws to sign the documents evidencing
contracts of the corporation, does not mean that he
had power to make the contracts.
In his decision his Honor, the learned judge of the court
below appears to have placed some weight on a notice
inserted in the January 14th issue of the Kong Li Po by
T. C. Chen and which, in translation, reads as follows:
To Whom It May Concern: Announcement is
hereby given that thereafter all contracts,
agreements and receipts are considered to be
null and void unless duly signed by T. C. Chen,
General Manager of this paper.

(Sgd.)
CHEN
YOU
General Manager of this paper

MAN

(The evidence shows that Chen You Man and T. C. Chen

is one and the same person.)
His Honor evidently overestimated the importance of
this notice. It was published nearly a month after the
contract in question is alleged to have been entered
into and can therefore not have been one of the
circumstances which led the plaintiffs to think that
Chen had authority to make the contract. It may
further be observed that the notice confers no special
powers, but is, in effect, only an assertion by Chen that
he would recognize no contracts, agreements, and
receipts not duty signed by him. It may be presumed
that the contracts, agreements, and receipts were such
as were ordinarily made in the course of the business
of managing the newspaper. There is no evidence to
show that the notice was ever brought to the attention
of the officers of the defendant corporation.
The defendant's counterclaims have
sufficiently established by the evidence.

not

been

The judgment appealed from is reversed and the

defendant corporation is absolved from the complaint.
No costs will be allowed. So ordered.
G.R. No. 4395

September 9, 1908

BEHN, MEYER & CO., LTD., plaintiffs-appellees,

vs.
EL BANCO ESPAOL-FILIPINO, defendant-appellant.
WILLARD, J.:
On the 3d of November, 1906, at Hongkong, Sander,
Wieler and Co., as agents for the German
steamship Hilary, chartered her to the interveners, Sin
Liong, and Co., of Manila. By the terms of the charter
party, she was to proceed to the port of Saigon Bay, to
load there or at Phu Yen Harbor as many head of cattle
as the steamer could safely, carry, and being loaded,
then to proceed to the port of Manila and so end the
voyage.
There is no competent evidence to show when the boat
arrived at Saigon, but being there, she loaded the rice
and then proceeded to Phu Yen Harbor, where she
arrived on the 18th day of November, in the afternoon.
The witness, Ullman, was there at the time, acting as
agent for Pujalte and Co., of Manila. The firm had made
a contract with the interveners for the transportation
from Phu Yen Harbor to Manila of 200 head of cattle.
Ullman had been notified of this contract and upon the
arrival of the ship there on the 18th of November, he
was all ready to proceed with the loading. He went on
board the vessel the afternoon of her arrival and told
the captain that he was prepared to load 202 head of
cattle. One hundred and fifty of those were cows and
52 carabaos. The captain told him that he might load
the cows, but that he could not load the carabaos. The
matter was discussed by them until half past 1 in the
morning, the captain still refusing to permit the
carabaos to come on board. Ullman then went on shore
and early in the morning went to the town of Sung Cau,
where he laid the matter before the governor, who
advise him to procure a notary and make a protest. He
procured the notary and returned with him to Phu Yen,
where she arrived at about 10 o'clock in the morning.
The whether was then very stormy and he did not
succeed in getting on board until half past 1 in the
afternoon. The captain then consented to receive the
carabaos on board. The whether, however, was so bad
that they could not be shipped, and it remained in this

condition from that time until the 27th, when the ship
sailed for Manila without the cattle. At no time during
this period was it possible to load them.
When the vessel arrived on the 18th, the whether was
fine and continued so until about 10 o'clock in the
morning of the 19th. During this time the cattle could
have been loaded, so far as the whether was
concerned, and some cattle belonging to Lichauco
were, in fact, taken on board during the time. If the
captain had permitted Ullman, when he first saw him,
to load the carabaos, they could all have been taken on
board on the 19th and the vessel could have left that
day for Manila.
The above facts in relation to what took place at Phu
Yen are clearly established by the evidence. Why the
captain at first refused to take the carabaos on board
does not appear. He was not a witness in the case. No
reason for this refusal appears anywhere in the record.
He, in fact, had at that time on board some carabaos
and there was plenty of room to take all that Ullman
wished to load; in fact the captain afterwards
consented to do so. The refusal aforesaid was not
justified and was a violation of the terms of the charter
party and was the immediate and proximate cause of
the failure to bring the cattle of Pujalte from Phu Yen to
Manila.
The captain cabled to the charterers on the 22d of
November stating that he could not ship the cattle on
account of bad weather and asking for instructions as
to how long he should remain. The interveners
answered that he should wait to load the cattle. On the
24th of November, he again cabled the interveners,
stating that he could not wait any longer than the 26th
of November; that he had not sufficient water for the
cattle then on board, and that Lopez, who was on
board as the agent of Lichauco, was getting impatient,
and that the weather continued very boisterous. On the
26th of November he made demand on Ullman for 30
tons of fresh water, saying that Ullman would not be
permitted to ship his cattle unless he brought with
them that amount. Ullman stated that he was unable
to do so, and on the 27th of November the captain
wrote a letter to Ullman telling him that he saw that it
was impossible for him to load the cattle or to bring the
water, and that he would leave that afternoon of
Manila, which he did.
The vessel arrived in Manila on the 3rd of December,
which was Sunday. The interveners, the charters,
desiring to unload part of the rice at Iloilo, as soon as
the boat arrived made a contract by cable with Sander,
Wieler and Co., in Hongkong, for a voyage to Iloilo,
agreeing to pay therefor 800 Hongkong dollars. As
soon as the boat arrived the captain applied to the
plaintiffs to act his agents and to attend to the
business while here. Before that time that plaintiffs had
never acted as the agents for the steamer.
By the terms of the charter party, the freight for the
voyage from Saigon to Manila, which was 9,250
Hongkong dollars, was to be paid on or before the
delivery of the cargo and cattle at Manila. The
charterers did not desire to make that payment until
the balance of the cargo had been unloaded at Iloilo.
Behn, Meyer and Co. would not allow the vessels to
leave for Iloilo until the freight and all claims for
demurrage had been paid or secured. Thereupon the
charterers deposited P13,000 with the defendant bank,
and it wrote the following letter to Behn, Meyer and Co:
MANILA, December 4, 1906.
Messrs. BEHN, MEYER AND CO., Present.
GENTLEMEN: Our clients, Messrs. Sin Liong and
CO., have advised us that it is to their best

interest
to
completely
unload
the
steamer Hilary, chartered to you, before paying
the amount of the freight and demurrage, and
inasmuch as you have required them to furnish
a guaranty by a bank, we now have the honor
to inform that we guarantee the said Siu Liong
and Co., in the sum of P12,00, during the
unloading of the said steamer; and if upon the
completion of the unloading, the price
stipulated in the agreement and the demurrage
is not paid by said parties, this bank binds itself
to make such payment.
We will be obliged if you will favor us with your
acknowledgment of this letter, and we remain,

Your obedient servants,

EL BANCO ESPANOL-FILIPINO,
PER

EUGENIO
DEL
Director in charge.

SAZ-OROZCO,

The vessel finished unloading here on the 5th of

December and then went to Iloilo. On the 10th of
December, Behn, Meyer and Co. presented to the
charterers, the interveners, an account amounting to
12,350 Hongkong dollars. The charterers refused to
pay it; application was then made by Behn, Meyer and
Co. to the defendant bank, and it refused to pay, and
thereafter, and on the 5th of March, 1907, this action
was commenced by Behn, Meyer and Co. against the
defendant bank. During the progress thereof, the
charterers, Siu Liong and Co., were permitted, against
the objection and exception of the plaintiffs, to
intervene in the action and to join with the bank in
opposing the complaint. In their answer they denied all
of the damages caused to them by the violation on the
part of the captain of the terms of the charter party in
refusing to receive the cattle on board at Phu Yen on
the 19th of November. The amount of the counterclaim
exceeded the claim of the plaintiffs by P13,673.33 and
they asked judgments against the plaintiffs for the
amount.
The court below did not sustain the counterclaim and
ordered judgment against the bank and the interveners
for the sum of P12,081, with interest and costs. From
that judgment the defendants have appealed.
Passing for the present the questions which are raised
relating to procedure, and coming to the merits of the
case, we think it very clear, as before stated, that the
captain violated the terms of the charter party in
refusing on the 18th day of November to receive on
board the carabaos which Ullman then had ready to
embark. The court below in its decision said that the
captain was not at fault in not receiving the carabaos,
because by the terms of the charter party the charters
were bound to furnish water and food for the cattle and
when, on the 26th of November the captain made a
demand on Ullman for 30 tons of water and Ullman
refused to furnish it, he was justified in sailing without
the cattle, and that his failure of the charterers to
comply with the terms of charter party in furnishing
water.
We do not think that the evidence supports this view of
the case. On the contrary, it clearly appears that if the
captain had agreed to take the carabaos on board
when he was first asked to, he would then left Phu Yen
on the 19th in the afternoon. The evidence shows that
the journey from Phu Yen to Manila is one of about four
days, and if he had left on the 19th he would have had
on board plenty of water for his trip to Manila.

Moreover, there was evidence undisputed that,

although by the terms of the charter party the
charterers were bound to pay for the water, yet it was
the universal custom for the captain to furnish the
water and discharge the charterers therefor.
The captain having violated the terms of the contract,
the next question is, what damages did the charterers
suffer by reason of his violation? It was proven that
they had made a contract with Pujalte and Co., by the
terms of which they had agreed to transport 200 head
of cattle from Phu Yen to Manila in this boat and were
to receive therefor P12 for each cow and P13 for each
carabao. Pujalte and Co. had ready for transportation
202 heads of cattle and the testimony was that,
although the contract mentioned 200, yet they had a
right thereunder to transport 200, or 202, or 204. This
freight, amounting to P2,476, the charterers have
never received from Phu Yen and Co., and of course
have no claim against them therefor. Their failure to
receive it was directly due and the violation of the
terms of the contract by the captain in his refusal to
take the cattle on board when they were ready to be
shipped, and that violation was the direct and
proximate cause of the loss to the charterers of this
P2,476.
It is suggested in the brief of the appellee that Ullman
might have loaded the cows and left the carabaos
there. There is nothing in this suggestion. The
testimony shows that Ullman himself intended to come
to the Hilary, and as he very well said, he was under no
obligation to leave a part of his stock there.
(Gould vs. Grafflin, 62 Fed. Rep., 605.)
The interveners claim damages also for the difference
between the value of their rice on the day on which it
arrived and its value on the day when it would have
arrived if the ship had left Phu Yen on the 19th of
November.
As has been stated, the interveners, on the 24th of
November, directed the captain to wait at Phu Yen. For
the delay after that time, the ship was not responsible.
There is no evidence to show what the price of the rice
was the day the ship would have arrived if she had
sailed on the 24th. The interveners are entitled
theretofore to recover nothing upon this item for their
claim.
They claim damages also for losses which Pujalte and
Lichauco suffered by reason of delay at Phu Yen. These
losses consisted of the death of the some of the cattle
and their depreciation in value at the time they arrived
in Manila.
The interveners have paid nothing to either Lichauco or
Pujalte and Co. an account thereof and neither one of
these persons has commenced any action against the
interveners for damages. Whether the interveners will
ever be compelled to pay anything to them can not
now be known. These damages are, in our opinion, too
remote to the subject of an adjudication of this case.
Moreover, as to the greater part of them, namely the
depreciation in the value of the stock, the same can be
said as was said in reference to the claim for the loss
upon the rice. The charterers were possible for the
delay from the 24th to the 27th of November, and
there is no evidence to fix the value of the stock or
what is condition would have been if the ship sailed
from Phu Yen on the 24th.
The charter party provided for nine lay days during
which the cargo should be taken on board and
discharged, and for five days of demurrage at the rate
of 250 Hongkong dollars a day. The plaintiffs make a
claim for demurrage for six days.

We do not think that this claim can be sustained. There

is nothing in the case to show how many lay days were
consumed in taking on cargo at Saigon and the most
that we can assume is that one day was so employed.
If the captain had complied with the contract and
loaded the cattle at Phu Yen when he should have done
so, not more than two days would have been used
there. The time employed at Iloilo does not appear and
in no event could that be considered, for that voyage
was the subject of a special contract. So that even if
the delay from the 24th of November to the 27th be
charged to the charterers, no more than nine days
were consumed, which was the time by the charter
party.
The interveners admitted at the trial that they owed
9,250 Hongkong dollars, the freight to Manila, and 800
dollars, to freight to Iloilo, and these are the only
amounts which, in our opinion, the plaintiffs are
entitled to recover. The evidence indicates that the
contract made by the bank was made after the
contract with reference to the voyage of Iloilo, and we
think that from all the evidence in the case that the
bank's contract covers 800 dollars freight to Iloilo.
Reduced to Philippine money at the rate found by the
court below the amounts to P10,753.50. From that
amount should be deducted the P2,476 abovementioned, leaving a balance of P8,277.50 as the
amount that the plaintiffs are entitled to recover.
Coming to the questions of procedure; the most
difficult one is that raised by the first assignment of
error, to the effect that the plaintiffs are not the real
parties in interest in this case, the claim of the
appellants being that the action should have been
brought in the name of the owners of the vessel, and
that Behn, Meyer and Co. were not the real parties in
interest, as that term is used in section 144 of the Code
of Civil Procedure. That section is in part as follows:
Every action must be prosecuted in the name
of the real party in interest. But in a case of
assignment of a right of action, an action by
the assignee shall be without prejudice to any
set-off or other defense existing at the time of
or before notice of the assignment; but this last
provision shall not apply to a negotiable
promissory note, or a draft or a bill of
exchange, transferred in good faith and upon
good consideration before maturity. And an
executor
or
administrator
or
legal
representative of a deceased person, or a
trustee of an express trust, or a person
expressly authorized by law so to do, or a
lawfully appointed guardian of a person of
unsound mind, or of a minor, may sue or be
sued without joining with him the person for
whose benefit the action is prosecuted or
defended.
Otherwise than as provided in this section, all
persons having an interest in the subject of the
action and in obtaining the relief demanded
shall be joined as plaintiffs.
The matter is further complicated by the title of the
case, which is as follows: "Behn, Meyer and Co., Ltd., in
representation
of
themselves
and
of
the
steamer Hilary, and of Messrs. Sander, Wieler and Co.,
owners of said steamer, plaintiffs," and by allegation in
the complaint that the contract made by the defendant
bank on the 4th of December was made with the
plaintiffs in their capacity as agents of the steamer and
of the said owners of the same.
If Behn, Meyer and Co. had brought this action upon
the charter party itself to recover the freight therein
mentioned, it is very clear that it could not be
maintained. They were not parties to that contract and
had no interest to the only parties are the defendant

bank and Behn, Meyer and Co. The defendant bank

contracted directly with Behn, Meyer and Co. and no
mention is made in the contract of owners of the
streamer.
After considerable hesitation, we have reached the
conclusion that the action can be maintained by Behn,
Meyer and Co. in their own names by virtue of article
246 of the Code of Commerce, which is as follows:
When the agent transacts business in his own
name, it shall not be necessary for him to state
who is the principal and he shall be directly
liable, as if the business were for his own
account, to the persons with whom he
transacts the same, said persons not having
any right of action against the principal, nor
the latter against the former, the liabilities of
the principal and of the agent to each other
always being reserved.
The evidence shows that Behn, Meyer and Co. were
agents of the capital and that the transaction to which
their agency relates was a mercantile one. Being such
agents, they made a contract in their own names with
the defendant bank. It appears from the testimony of
the manager of the bank that he was not notified and
never knew for whom Behn, Meyer and Co. where
acting. The document itself shows that he contracted
with them in their own names and there is no evidence
to show Behn, Meyer and Co. disclosed to the bank the
names of the persons for whom they were acting. The
manager of the bank never saw the charter party and
knew nothing about its contents. The provisions of
article 246 of the Code of Commerce are substantive
law and are not repealed or modified by section 114 of
the procedural law above referred to. (See Castle
Brothers, Wolfe and Sanz, vs. Go-Juno, 7 Phil. Rep.,
114;
Pastells vs. Hollman,
2
Phil.
Rep.,
235;
Herranz vs. Ker, 8, Phil. Rep., 162.)
The plaintiffs excepted to the order of the court below
permitting the charterers to intervene in this
proceeding, but they have not appeared from the
judgment. In any event, it seems very clear that, the
action being brought against a surety, the principal
debtor would have a right to intervene and join with
the defendant in opposing the claim under the
provisions of section 121 of the Code of Civil Procedure.
The principal debtor has a direct, legal interest in
defeating the claim against his surety.
The judgment of the court below is modified, and
judgment is ordered in favor of the plaintiffs and
against the defendants for the sum of P8,277.50, with
interest thereon at the rate of 6 per cent per annum
since the eight day of December, 1906, and for the
costs of the First Instance. No costs will be allowed to
either party in this court. So ordered.
[G.R. No. 126751. March 28, 2001]
SAFIC

ALCAN & CIE, petitioner, vs. IMPERIAL

VEGETABLE OIL CO., INC., respondent.

DECISION
YNARES-SANTIAGO, J.:
Petitioner Safic Alcan & Cie (hereinafter, Safic) is a
French corporation engaged in the international
purchase, sale and trading of coconut oil. It filed with
the Regional Trial Court of Manila, Branch XXV, a
complaint dated February 26, 1987 against private
respondent Imperial Vegetable Oil Co., Inc. (hereinafter,
IVO), docketed as Civil Case No. 87-39597. Petitioner
Safic alleged that on July 1, 1986 and September 25,

1986, it placed purchase orders with IVO for 2,000 long

tons of crude coconut oil, valued at US$222.50 per ton,
covered by Purchase Contract Nos. A601446 and
A601655, respectively, to be delivered within the
month of January 1987. Private respondent, however,
failed to deliver the said coconut oil and, instead,
offered a wash out settlement, whereby the coconut oil
subject of the purchase contracts were to be sold back
to IVO at the prevailing price in the international
market at the time of wash out. Thus, IVO bound itself
to pay to Safic the difference between the said
prevailing price and the contract price of the 2,000
long tons of crude coconut oil, which amounted to
US$293,500.00. IVO failed to pay this amount despite
repeated oral and written demands.
Under its second cause of action, Safic alleged
that on eight occasions between April 24, 1986 and
October 31, 1986, it placed purchase orders with IVO
for a total of 4,750 tons of crude coconut oil, covered
by Purchase Contract Nos. A601297A/B, A601384,
A601385, A601391, A601415, A601681, A601683 and
A601770A/B/C/. When IVO failed to honor its obligation
under the wash out settlement narrated above, Safic
demanded that IVO make marginal deposits within
forty-eight hours on the eight purchase contracts in
amounts equivalent to the difference between the
contract price and the market price of the coconut oil,
to compensate it for the damages it suffered when it
was forced to acquire coconut oil at a higher price. IVO
failed to make the prescribed marginal deposits on the
eight contracts, in the aggregate amount of
US$391,593.62, despite written demand therefor.
The demand for marginal deposits was based on
the customs of the trade, as governed by the
provisions of the standard N.I.O.P. Contract and the
FOSFA Contract, to wit:
N.I.O.P. Contract, Rule 54 If the financial condition of
either party to a contract subject to these rules
becomes so impaired as to create a reasonable doubt
as to the ability of such party to perform its obligations
under the contract, the other party may from time to
time demand marginal deposits to be made within
forty-eight (48) hours after receipt of such demand,
such deposits not to exceed the difference between the
contract price and the market price of the goods
covered by the contract on the day upon which such
demand is made, such deposit to bear interest at the
prime rate plus one percent (1%) per annum. Failure to
make such deposit within the time specified shall
constitute a breach of contract by the party upon
whom demand for deposit is made, and all losses and
expenses resulting from such breach shall be for the
account of the party upon whom such demand is
made. (Underscoring ours.)[1]
FOSFA Contract, Rule 54 BANKRUPTCY/INSOLVENCY: If
before the fulfillment of this contract either party shall
suspend payment, commit an act of bankruptcy, notify
any of his creditors that he is unable to meet his debts
or that he has suspended payment or that he is about
to suspend payment of his debts, convene, call or hold
a meeting either of his creditors or to pass a resolution
to go into liquidation (except for a voluntary winding up
of a solvent company for the purpose of reconstruction
or amalgamation) or shall apply for an official
moratorium, have a petition presented for winding up
or shall have a Receiver appointed, the contract shall
forthwith be closed, either at the market price then

current for similar goods or, at the option of the other

party at a price to be ascertained by repurchase or
resale and the difference between the contract price
and such closing-out price shall be the amount which
the other party shall be entitled to claim shall be liable
to account for under this contract (sic). Should either
party be dissatisfied with the price, the matter shall be
referred to arbitration. Where no such resale or
repurchase takes place, the closing-out price shall be
fixed by a Price Settlement Committee appointed by
the Federation. (Underscoring ours.)[2]
Hence, Safic prayed that IVO be ordered to pay
the sums of US$293,500.00 and US$391,593.62, plus
attorneys fees and litigation expenses. The complaint
also included an application for a writ of preliminary
attachment against the properties of IVO.
Upon Safics posting of the requisite bond, the trial
court
issued
a
writ
of
preliminary
attachment. Subsequently, the trial court ordered that
the assets of IVO be placed under receivership, in order
to ensure the preservation of the same.
In its answer, IVO raised the following special
affirmative defenses: Safic had no legal capacity to sue
because it was doing business in the Philippines
without the requisite license or authority; the subject
contracts were speculative contracts entered into by
IVOs then President, Dominador Monteverde, in
contravention of the prohibition by the Board of
Directors against engaging in speculative paper
trading, and despite IVOs lack of the necessary license
from Central Bank to engage in such kind of trading
activity; and that under Article 2018 of the Civil Code,
if a contract which purports to be for the delivery of
goods, securities or shares of stock is entered into with
the intention that the difference between the price
stipulated and the exchange or market price at the
time of the pretended delivery shall be paid by the
loser to the winner, the transaction is null and void.
IVO
set
up
counterclaims
anchored
on
harassment, paralyzation of business, financial losses,
rumor-mongering and oppressive action. Later, IVO
filed a supplemental counterclaim alleging that it was
unable to operate its business normally because of the
arrest of most of its physical assets; that its suppliers
were driven away; and that its major creditors have
inundated it with claims for immediate payment of its
debts, and China Banking Corporation had foreclosed
its chattel and real estate mortgages.
During the trial, the lower court found that in
1985, prior to the date of the contracts sued upon, the
parties had entered into and consummated a number
of contracts for the sale of crude coconut oil. In those
transactions, Safic placed several orders and IVO
faithfully filled up those orders by shipping out the
required crude coconut oil to Safic, totalling 3,500
metric tons. Anent the 1986 contracts being sued
upon, the trial court refused to declare the same as
gambling transactions, as defined in Article 2018 of the
Civil Code, although they involved some degree of
speculation.After all, the court noted, every business
enterprise carries with it a certain measure of
speculation or risk. However, the contracts performed
in 1985, on one hand, and the 1986 contracts subject
of this case, on the other hand, differed in that under
the 1985 contracts, deliveries were to be made within
two months. This, as alleged by Safic, was the time

needed
for
milling
and
building
up
oil
inventory. Meanwhile, the 1986 contracts stipulated
that the coconut oil were to be delivered within period
ranging from eight months to eleven to twelve months
after the placing of orders. The coconuts that were
supposed to be milled were in all likelihood not yet
growing when Dominador Monteverde sold the crude
coconut oil. As such, the 1986 contracts constituted
trading in futures or in mere expectations.
The lower court further held that the subject
contracts were ultra vires and were entered into by
Dominador Monteverde without authority from the
Board of Directors. It distinguished between the 1985
contracts, where Safic likewise dealt with Dominador
Monteverde, who was presumably authorized to bind
IVO, and the 1986 contracts, which were highly
speculative in character. Moreover, the 1985 contracts
were covered by letters of credit, while the 1986
contracts were payable by telegraphic transfers, which
were nothing more than mere promises to pay once
the shipments became ready. For these reasons, the
lower court held that Safic cannot invoke the 1985
contracts as an implied corporate sanction for the highrisk 1986 contracts, which were evidently entered into
by Monteverde for his personal benefit.
The trial court ruled that Safic failed to
substantiate its claim for actual damages. Likewise, it
rejected
IVOs
counterclaim
and
supplemental
counterclaim.
Thus, on August 28, 1992, the trial court rendered
judgment as follows:
WHEREFORE, judgment is hereby rendered dismissing
the complaint of plaintiff Safic Alcan & Cie, without
prejudice to any action it might subsequently institute
against Dominador Monteverde, the former President
of Imperial Vegetable Oil Co., Inc., arising from the
subject matter of this case. The counterclaim and
supplemental counterclaim of the latter defendant are
likewise hereby dismissed for lack of merit. No
pronouncement as to costs.
The writ of preliminary attachment issued in this case
as well as the order placing Imperial Vegetable Oil Co.,
Inc. under receivership are hereby dissolved and set
aside.[3]
Both IVO and Safic appealed to the Court of
Appeals, jointly docketed as CA-G.R. CV No. 40820.
IVO raised only one assignment of error, viz:
THE TRIAL COURT ERRED IN HOLDING THAT THE
ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT
WAS NOT THE MAIN CAUSE OF THE DAMAGES
SUFFERED BY DEFENDANT AND IN NOT AWARDING
DEFENDANT-APPELLANT SUCH DAMAGES.
For its part, Safic argued that:
THE TRIAL COURT ERRED IN HOLDING THAT IVOS
PRESIDENT, DOMINADOR MONTEVERDE, ENTERED
INTO CONTRACTS WHICH WERE ULTRA VIRES AND
WHICH DID NOT BIND OR MAKE IVO LIABLE.

THE TRIAL COURT ERRED IN HOLDING THAT SAFIC WAS

UNABLE TO PROVE THE DAMAGES SUFFERED BY IT AND
IN NOT AWARDING SUCH DAMAGES.
THE TRIAL COURT ERRED IN NOT HOLDING THAT IVO IS
LIABLE UNDER THE WASH OUT CONTRACTS.
On September 12, 1996, the Court of Appeals
rendered the assailed Decision dismissing the appeals
and affirming the judgment appealed from in toto.[4]
Hence, Safic filed the instant petition for review
with this Court, substantially reiterating the errors it
raised before the Court of Appeals and maintaining
that the Court of Appeals grievously erred when:
a. it declared that the 1986 forward contracts (i.e.,
Contracts Nos. A601446 and A60155 (sic) involving
2,000 long tons of crude coconut oil, and Contracts
Nos. A601297A/B, A601385, A601391, A601415,
A601681. A601683 and A601770A/B/C involving 4,500
tons of crude coconut oil) were unauthorized acts of
Dominador Monteverde which do not bind IVO in whose
name they were entered into. In this connection, the
Court of Appeals erred when (i) it ignored its own
finding that (a) Dominador Monteverde, as IVOs
President, had an implied authority to make any
contract necessary or appropriate to the contract of
the ordinary business of the company; and (b)
Dominador Monteverde had validly entered into similar
forward contracts for and on behalf of IVO in 1985; (ii)
it distinguished between the 1986 forward contracts
despite the fact that the Manila RTC has struck down
IVOs objection to the 1986 forward contracts (i.e. that
they were highly speculative paper trading which the
IVO Board of Directors had prohibited Dominador
Monteverde from engaging in because it is a form of
gambling where the parties do not intend actual
delivery of the coconut oil sold) and instead found that
the 1986 forward contracts were not gambling; (iii) it
relied on the testimony of Mr. Rodrigo Monteverde in
concluding that the IVO Board of Directors did not
authorize its President, Dominador Monteverde, to
enter into the 1986 forward contracts; and (iv) it did
not find IVO, in any case, estopped from denying
responsibility for, and liability under, the 1986 forward
contracts because IVO had recognized itself bound to
similar forward contracts which Dominador Monteverde
entered into (for and on behalf of IVO) with Safic in
1985 notwithstanding that Dominador Monteverde was
(like in the 1986 forward contracts) not expressly
authorized by the IVO Board of Directors to enter into
such forward contracts;
b. it declared that Safic was not able to prove damages
suffered by it, despite the fact that Safic had presented
not only testimonial, but also documentary, evidence
which proved the higher amount it had to pay for crude
coconut oil (vis--vis the contract price it was to pay to
IVO) when IVO refused to deliver the crude coconut oil
bought by Safic under the 1986 forward contracts; and
c. it failed to resolve the issue of whether or not IVO is
liable to Safic under the wash out contracts involving
Contracts Nos. A601446 and A60155 (sic), despite the
fact that Safic had properly raised the issue on its
appeal, and the evidence and the law support Safics
position that IVO is so liable to Safic.

In fine, Safic insists that the appellate court

grievously erred when it did not declare that IVOs
President, Dominador Monteverde, validly entered into
the 1986 contracts for and on behalf of IVO.
We disagree.
Article III, Section 3 [g] of the By-Laws [5] of IVO
provides, among others, that
Section 3. Powers and Duties of the President. The
President shall be elected by the Board of Directors
from their own number.
He shall have the following duties:
xxxxxxxxx
[g] Have direct and active management of the business
and operation of the corporation, conducting the same
according to the orders, resolutions and instruction of
the Board of Directors and according to his own
discretion whenever and wherever the same is not
expressly limited by such orders, resolutions and
instructions.
It can be clearly seen from the foregoing provision
of IVOs By-laws that Monteverde had no blanket
authority to bind IVO to any contract. He must act
according to the instructions of the Board of
Directors. Even in instances when he was authorized to
act according to his discretion, that discretion must not
conflict with prior Board orders, resolutions and
instructions. The evidence shows that the IVO Board
knew nothing of the 1986 contracts [6] and that it did
not authorize Monteverde to enter into speculative
contracts.[7] In fact, Monteverde had earlier proposed
that the company engage in such transactions but the
IVO Board rejected his proposal.[8] Since the 1986
contracts marked a sharp departure from past IVO
transactions, Safic should have obtained from
Monteverde the prior authorization of the IVO
Board. Safic can not rely on the doctrine of implied
agency because before the controversial 1986
contracts, IVO did not enter into identical contracts
with Safic. The basis for agency is representation and a
person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent.
[9]
In the case of Bacaltos Coal Mines v. Court of
Appeals,[10] we elucidated the rule on dealing with an
agent thus:
Every person dealing with an agent is put upon inquiry
and must discover upon his peril the authority of the
agent. If he does not make such inquiry, he is
chargeable with knowledge of the agents authority,
and his ignorance of that authority will not be any
excuse. Persons dealing with an assumed agent,
whether the assumed agency be a general or special
one, are bound at their peril, if they would hold the
principal, to ascertain not only the fact of the agency
but also the nature and extent of the authority, and in
case either is controverted, the burden of proof is upon
them to establish it.[11]
The most prudent thing petitioner should have
done was to ascertain the extent of the authority of
Dominador Monteverde. Being remiss in this regard,
petitioner can not seek relief on the basis of a
supposed agency.

Under Article 1898[12] of the Civil Code, the acts of

an agent beyond the scope of his authority do not bind
the principal unless the latter ratifies the same
expressly or impliedly. It also bears emphasizing that
when the third person knows that the agent was acting
beyond his power or authority, the principal can not be
held liable for the acts of the agent. If the said third
person is aware of such limits of authority, he is to
blame, and is not entitled to recover damages from the
agent, unless the latter undertook to secure the
principals ratification.[13]
There was no such ratification in this case. When
Monteverde entered into the speculative contracts with
Safic, he did not secure the Boards approval. [14] He also
did not submit the contracts to the Board after their
consummation so there was, in fact, no occasion at all
for ratification. The contracts were not reported in IVOs
export sales book and turn-out book.[15] Neither were
they reflected in other books and records of the
corporation.[16] It must be pointed out that the Board of
Directors, not Monteverde, exercises corporate power.
[17]
Clearly, Monteverdes speculative contracts with
Safic never bound IVO and Safic can not therefore
enforce those contracts against IVO.

engaged (sic) or to purely engaged (sic)in

physical trading.
Q. What do you mean by physical trading?
A. Physical Trading means we buy and sell copras
that are only available to us. We only have to
sell the available stocks in our inventory.
Q. And what is the other form of trading?
Atty. Fernando
No basis, your Honor.
Atty. Abad
Well, the witness said they are engaged in physical
trading and what I am saying [is] if there are
any other kind or form of trading.
Court
Witness may answer if he knows.

To bolster its cause, Safic raises the novel point

that the IVO Board of Directors did not set limitations
on the extent of Monteverdes authority to sell coconut
oil. It must be borne in mind in this regard that a
question that was never raised in the courts below can
not be allowed to be raised for the first time on appeal
without offending basic rules of fair play, justice and
due process.[18] Such an issue was not brought to the
fore either in the trial court or the appellate court, and
would have been disregarded by the latter tribunal for
the reasons previously stated. With more reason, the
same does not deserve consideration by this Court.

Witness

Be that as it may, Safics belated contention that

the IVO Board of Directors did not set limitations on
Monteverdes authority to sell coconut oil is belied by
what appears on the record. Rodrigo Monteverde, who
succeeded Dominador Monteverde as IVO President,
testified that the IVO Board had set down the policy of
engaging in purely physical trading thus:

A. The Board of Directors, sir.

Q. Now you said that IVO is engaged in trading.

With whom does it usually trade its oil?
A. I am not too familiar with trading because as of
March 1987, I was not yet an officer of the
corporation, although I was at the time already
a stockholder, I think IVO is engaged in trading
oil.
Q. As far as you know, what kind of trading was IVO
engaged with?
A. It was purely on physical trading.
Q. How did you know this?
A. As a stockholder, rather as member of [the]
Board of Directors, I frequently visited the plant
and from my observation, as I have to
supervise and monitor purchases of copras and
also the sale of the same, I observed that the
policy of the corporation is for the company to

A. Trading future[s] contracts wherein the trader

commits a price and to deliver coconut oil in
the future in which he is yet to acquire the
stocks in the future.
Atty. Abad
Q. Who established the so-called physical trading in
IVO?

Atty. Abad.
Q. How did you know that?
A. There was a meeting held in the office at the
factory and it was brought out and suggested
by
our
former
president,
Dominador
Monteverde, that the company should engaged
(sic) in future[s] contract[s] but it was rejected
by the Board of Directors. It was only Ador
Monteverde who then wanted to engaged (sic)
in this future[s] contract[s].
Q. Do you know where this meeting took place?
A. As far as I know it was sometime in 1985.
Q. Do you know why the Board of Directors rejected
the proposal of Dominador Monteverde that the
company should engaged (sic) in future[s]
contracts?
Atty. Fernando
Objection, your Honor, no basis.
Court

Why dont you lay the basis?

these future[s] contracts in the companys

books of accounts.

Atty. Abad
Atty. Abad
Q. Were you a member of the board at the time?
A. In 1975, I am already a stockholder and a
member.

Q. What do you mean by that the future[s]

contracts were not entered into the books of
accounts of the company?

Q. Then would [you] now answer my question?

Witness

Atty. Fernando

A. Those were not recorded at all in the books of

accounts of the company, sir.[20]

No basis, your Honor. What we are talking is about

1985.
Atty. Abad
Q. When you mentioned about the meeting in 1985
wherein the Board of Directors rejected the
future[s] contract[s], were you already a
member of the Board of Directors at that time?
A. Yes, sir.
Q. Do you know the reason why the said proposal of
Mr. Dominador Monteverde to engage in
future[s] contract[s] was rejected by the Board
of Directors?
A. Because this future[s] contract is too risky and it
partakes of gambling.
Q. Do you keep records of the Board meetings of
the company?
A. Yes, sir.
Q. Do you have a copy of the minutes of your
meeting in 1985?
A. Incidentally our Secretary of the Board of
Directors, Mr. Elfren Sarte, died in 1987 or
1988, and despite [the] request of our office for
us to be furnished a copy he was not able to
furnish us a copy.[19]
xxxxxxxxx
Atty. Abad
Q. You said the Board of Directors were against the
company engaging in future[s] contracts. As far
as you know, has this policy of the Board of
Directors been observed or followed?
Witness
A. Yes, sir.
Q. How far has this Dominador Monteverde been
using the name of I.V.O. in selling future
contracts without the proper authority and
consent of the companys Board of Directors?
A. Dominador Monteverde never records those
transactions he entered into in connection with

xxxxxxxxx
Q. What did you do when you discovered these
transactions?
A. There was again a meeting by the Board of
Directors of the corporation and that we agreed
to remove the president and then I was made
to replace him as president.
Q. What else?
A. And a resolution was passed disowning the illegal
activities of the former president.[21]
Petitioner next argues that there was actually no
difference between the 1985 physical contracts and
the 1986 futures contracts.
The contention is unpersuasive for, as aptly
pointed out by the trial court and sustained by the
appellate court
Rejecting IVOs position, SAFIC claims that there is no
distinction between the 1985 and 1986 contracts, both
of which groups of contracts were signed or authorized
by IVOs President, Dominador Monteverde. The 1986
contracts, SAFIC would bewail, were similarly with their
1985 predecessors, forward sales contracts in which
IVO had undertaken to deliver the crude coconut oil
months after such contracts were entered into. The
lead time between the closing of the deal and the
delivery of the oil supposedly allowed the seller to
accumulate enough copra to mill and to build up its
inventory and so meet its delivery commitment to its
foreign buyers. SAFIC concludes that the 1986
contracts were equally binding, as the 1985 contracts
were, on IVO.
Subjecting the evidence on both sides to close scrutiny,
the Court has found some remarkable distinctions
between the 1985 and 1986 contracts. x x x
1. The 1985 contracts were performed within an
average of two months from the date of the sale. On
the other hand, the 1986 contracts were to be
performed within an average of eight and a half
months from the dates of the sale. All the supposed
performances fell in 1987. Indeed, the contract covered
by Exhibit J was to be performed 11 to 12 months from
the execution of the contract. These pattern (sic) belies
plaintiffs contention that the lead time merely allowed
for milling and building up of oil inventory. It is evident
that the 1986 contracts constituted trading in futures
or in mere expectations. In all likelihood, the coconuts

that were supposed to be milled for oil were not yet on

their trees when Dominador Monteverde sold the crude
oil to SAFIC.
2. The mode of payment agreed on by the parties in
their 1985 contracts was uniformly thru the opening of
a letter of credit LC by SAFIC in favor of IVO. Since the
buyers letter of credit guarantees payment to the seller
as soon as the latter is able to present the shipping
documents covering the cargo, its opening usually
mark[s] the fact that the transaction would be
consummated. On the other hand, seven out of the ten
1986 contracts were to be paid by telegraphic transfer
upon presentation of the shipping documents. Unlike
the letter of credit, a mere promise to pay by
telegraphic transfer gives no assurance of [the] buyers
compliance with its contracts. This fact lends an
uncertain element in the 1986 contracts.
3. Apart from the above, it is not disputed that with
respect to the 1985 contracts, IVO faithfully complied
with Central Bank Circular No. 151 dated April 1, 1963,
requiring a coconut oil exporter to submit a Report of
Foreign Sales within twenty-four (24) hours after the
closing of the relative sales contract with a foreign
buyer of coconut oil. But with respect to the disputed
1986 contracts, the parties stipulated during the
hearing that none of these contracts were ever
reported to the Central Bank, in violation of its above
requirement. (See Stipulation of Facts dated June 13,
1990).The 1986 sales were, therefore suspect.
4. It is not disputed that, unlike the 1985 contacts, the
1986 contracts were never recorded either in the 1986
accounting books of IVO or in its annual financial
statement for 1986, a document that was prepared
prior to the controversy. (Exhibits 6 to 6-0 and 7 to 7I). Emelita Ortega, formerly an assistant of Dominador
Monteverde, testified that they were strange goings-on
about the 1986 contract. They were neither recorded in
the books nor reported to the Central Bank. What is
more, in those unreported cases where profits were
made, such profits were ordered remitted to unknown
accounts
in California, U.S.A., by Dominador
Monteverde.
xxxxxxxxx
Evidently, Dominador Monteverde made business for
himself, using the name of IVO but concealing from it
his speculative transactions.
Petitioner further contends that both the trial and
appellate courts erred in concluding that Safic was not
able to prove its claim for damages. Petitioner first
points out that its wash out agreements with
Monteverde where IVO allegedly agreed to pay
US$293,500.00 for some of the failed contracts was
proof enough and, second, that it presented purchases
of coconut oil it made from others during the period of
IVOs default.
We remain unconvinced. The so-called wash out
agreements are clearly ultra vires and not binding on
IVO. Furthermore, such agreements did not prove
Safics actual losses in the transactions in question. The
fact is that Safic did not pay for the coconut oil that it
supposedly
ordered
from
IVO
through
Monteverede. Safic only claims that, since it was ready
to pay when IVO was not ready to deliver, Safic

suffered damages to the extent that they had to buy

the same commodity from others at higher prices.
The foregoing claim of petitioner is not, however,
substantiated by the evidence and only raises several
questions, to wit: 1.] Did Safic commit to deliver the
quantity of oil covered by the 1986 contracts to its own
buyers? Who were these buyers? What were the terms
of those contracts with respect to quantity, price and
date of delivery? 2.] Did Safic pay damages to its
buyers? Where were the receipts? Did Safic have to
procure the equivalent oil from other sources? If so,
who were these sources? Where were their contracts
and what were the terms of these contracts as to
quantity, price and date of delivery?
The records disclose that during the course of the
proceedings in the trial court, IVO filed an amended
motion[22] for production and inspection of the following
documents: a.] contracts of resale of coconut oil that
Safic bought from IVO; b.] the records of the pooling
and sales contracts covering the oil from such pooling,
if the coconut oil has been pooled and sold as general
oil; c.] the contracts of the purchase of oil that,
according to Safic, it had to resort to in order to fill up
alleged undelivered commitments of IVO; d.] all other
contracts,
confirmations,
invoices,
wash
out
agreements and other documents of sale related to (a),
(b) and (c). This amended motion was opposed by
Safic.[23] The trial court, however, in its September 16,
1988 Order,[24] ruled that:
From the analysis of the parties respective positions,
conclusion can easily be drawn therefrom that there is
materiality in the defendants move: firstly, plaintiff
seeks to recover damages from the defendant and
these are intimately related to plaintiffs alleged losses
which it attributes to the default of the defendant in its
contractual commitments; secondly, the documents
are specified in the amended motion. As such, plaintiff
would entertain no confusion as to what, which
documents to locate and produce considering plaintiff
to be (without doubt) a reputable going concern in the
management of the affairs which is serviced by
competent, industrious, hardworking and diligent
personnel; thirdly, the desired production and
inspection of the documents was precipitated by the
testimony of plaintiffs witness (Donald OMeara) who
admitted, in open court, that they are available. If the
said witness represented that the documents, as
generally described, are available, reason there would
be none for the same witness to say later that they
could not be produced, even after they have been
clearly described.
Besides, if the Court may additionally dwell on the
issue of damages, the production and inspection of the
desired documents would be of tremendous help in the
ultimate resolution thereof. Plaintiff claims for the
award of liquidated or actual damages to the tune of
US$391,593.62 which, certainly, is a huge amount in
terms of pesos, and which defendant disputes. As the
defendant cannot be precluded in taking exceptions to
the correctness and validity of such claim which
plaintiffs witness (Donald OMeara) testified to, and as,
by this nature of the plaintiffs claim for damages, proof
thereof is a must which can be better served, if not
amply ascertained by examining the records of the
related sales admitted to be in plaintiffs possession,
the amended motion for production and inspection of
the defendant is in order.

The interest of justice will be served best, if there

would be a full disclosure by the parties on both sides
of all documents related to the transactions in
litigation.
Notwithstanding the foregoing ruling of the trial
court, Safic did not produce the required documents,
prompting the court a quo to assume that if produced,
the documents would have been adverse to Safics
cause. In its efforts to bolster its claim for damages it
purportedly sustained, Safic suggests a substitute
mode of computing its damages by getting the
average price it paid for certain quantities of coconut
oil that it allegedly bought in 1987 and deducting this
from the average price of the 1986 contracts. But this
mode of computation if flawed because: 1.] it is
conjectural since it rests on average prices not on
actual prices multiplied by the actual volume of
coconut oil per contract; and 2.] it is based on the
unproven assumption that the 1987 contracts of
purchase provided the coconut oil needed to make up
for the failed 1986 contracts. There is also no evidence
that Safic had contracted to supply third parties with
coconut oil from the 1986 contracts and that Safic had
to buy such oil from others to meet the requirement.
Along the same vein, it is worthy to note that the
quantities of oil covered by its 1987 contracts with
third parties do not match the quantities of oil provided
under the 1986 contracts. Had Safic produced the
documents that the trial court required, a substantially
correct determination of its actual damages would
have been possible. This, unfortunately, was not the
case. Suffice it to state in this regard that [T]he power
of the courts to grant damages and attorneys fees
demands factual, legal and equitable justification; its
basis cannot be left to speculation and conjecture. [25]
WHEREFORE, in view of all the foregoing, the
petition is DENIED for lack of merit.
SO ORDERED.

G.R. No. 167812

December 19, 2006

JESUS
M.
GOZUN, petitioner,
vs.
JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO
MERCADO, respondent.
DECISION

CARPIO MORALES, J.:

On challenge via petition for review on certiorari is the
Court of Appeals Decision of December 8, 2004 and
Resolution of April 14, 2005 in CA-G.R. CV No.
763091 reversing the trial courts decision 2 against Jose
Teofilo T. Mercado a.k.a. Don Pepito Mercado
(respondent) and accordingly dismissing the complaint
of Jesus M. Gozun (petitioner).
In the local elections of 1995, respondent vied for the
gubernatorial post in Pampanga. Upon respondents
request, petitioner, owner of JMG Publishing House, a
printing shop located in San Fernando, Pampanga,
submitted to respondent draft samples and price
quotation of campaign materials.

By petitioners claim, respondents wife had told him

that respondent already approved his price quotation
and that he could start printing the campaign
materials, hence, he did print campaign materials like
posters bearing respondents photograph,3 leaflets
containing the slate of party candidates, 4 sample
ballots,5 poll watcher identification cards,6 and stickers.
Given the urgency and limited time to do the job order,
petitioner availed of the services and facilities of Metro
Angeles Printing and of St. Joseph Printing Press, owned
by his daughter Jennifer Gozun and mother Epifania
Macalino Gozun, respectively.7
Petitioner delivered the campaign materials to
respondents headquarters along Gapan-Olongapo
Road in San Fernando, Pampanga.8
Meanwhile, on March 31, 1995, respondents sister-inlaw, Lilian Soriano (Lilian) obtained from petitioner
"cash advance" of P253,000 allegedly for the
allowances of poll watchers who were attending a
seminar and for other related expenses. Lilian
acknowledged on petitioners 1995 diary9 receipt of the
amount.10
Petitioner later sent respondent a Statement of
Account11 in the total amount of P2,177,906 itemized
as
follows:P640,310
for
JMG
Publishing
House; P837,696 for Metro Angeles Printing; P446,900
for St. Joseph Printing Press; and P253,000, the "cash
advance" obtained by Lilian.
On August 11, 1995, respondents wife partially
paid P1,000,000
to
petitioner
who
issued
a
receipt12 therefor.
Despite repeated demands and respondents promise
to pay, respondent failed to settle the balance of his
account to petitioner.
Petitioner and respondent being compadres, they
having been principal sponsors at the weddings of their
respective daughters, waited for more than three (3)
years for respondent to honor his promise but to no
avail, compelling petitioner to endorse the matter to
his counsel who sent respondent a demand
letter.13 Respondent, however, failed to heed the
demand.14
Petitioner thus filed with the Regional Trial Court of
Angeles
City
on
November
25,
1998
a
complaint15 against respondent to collect the remaining
amount of P1,177,906 plus "inflationary adjustment"
and attorneys fees.
In
his
Answer
with
Compulsory
Counterclaim,16 respondent denied having transacted
with petitioner or entering into any contract for the
printing of campaign materials. He alleged that the
various campaign materials delivered to him were
represented as donations from his family, friends and
political supporters. He added that all contracts
involving his personal expenses were coursed through
and signed by him to ensure compliance with pertinent
election laws.
On petitioners claim that Lilian, on his (respondents)
behalf, had obtained from him a cash advance
of P253,000, respondent denied having given her
authority to do so and having received the same.
At the witness stand, respondent, reiterating his
allegations in his Answer, claimed that petitioner was
his over-all coordinator in charge of the conduct of
seminars for volunteers and the monitoring of other
matters bearing on his candidacy; and that while his
campaign manager, Juanito "Johnny" Cabalu (Cabalu),

who was authorized to approve details with regard to

printing materials, presented him some campaign
materials, those were partly donated.17
When confronted with the official receipt issued to his
wife acknowledging her payment to JMG Publishing
House of the amount of P1,000,000, respondent
claimed that it was his first time to see the receipt,
albeit he belatedly came to know from his wife and
Cabalu
that
the P1,000,000
represented
"compensation [to petitioner] who helped a lot in the
campaign as a gesture of goodwill."18
Acknowledging that petitioner is engaged in the
printing business, respondent explained that he
sometimes discussed with petitioner strategies relating
to his candidacy, he (petitioner) having actively
volunteered to help in his campaign; that his wife was
not authorized to enter into a contract with petitioner
regarding campaign materials as she knew her
limitations;
that
he
no
longer
questioned
the P1,000,000 his wife gave petitioner as he thought
that it was just proper to compensate him for a job well
done; and that he came to know about petitioners
claim against him only after receiving a copy of the
complaint, which surprised him because he knew fully
well that the campaign materials were donations.19

authorized to prosecute the same in their behalf, held

that petitioner could not collect the amounts due them.
Finally, the appellate court, noting that respondents
wife had paid P1,000,000 to petitioner, the latters
claim ofP640,310 (after excluding the P253,000) had
already been settled.
Hence, the present petition, faulting the appellate
court to have erred:
1. . . . when it dismissed the complaint on the
ground that there is no evidence, other than
petitioners own testimony, to prove that Lilian
R. Soriano was authorized by the respondent to
receive the cash advance from the petitioner in
the amount of P253,000.00.
xxxx
2. . . . when it dismissed the complaint, with
respect to the amounts due to the Metro
Angeles Press and St. Joseph Printing Press on
the ground that the complaint was not brought
by the real party in interest.
x x x x25

Upon questioning by the trial court, respondent could

not, however, confirm if it was his understanding that
the campaign materials delivered by petitioner were
donations from third parties.20
Finally, respondent, disclaiming knowledge of the
Comelec rule that if a campaign material is donated, it
must be so stated on its face, acknowledged that
nothing of that sort was written on all the materials
made by petitioner.21
As adverted to earlier, the trial court rendered
judgment in favor of petitioner, the dispositive portion
of which reads:
WHEREFORE, the plaintiff having proven its
(sic) cause of action by preponderance of
evidence, the Court hereby renders a decision
in favor of the plaintiff ordering the defendant
as follows:
1. To pay the plaintiff the sum of P1,177,906.00
plus 12% interest per annum from the filing of
this complaint until fully paid;
2. To pay the sum of P50,000.00 as attorneys
fees and the costs of suit.
SO ORDERED.22
Also as earlier adverted to, the Court of Appeals
reversed the trial courts decision and dismissed the
complaint for lack of cause of action.
In reversing the trial courts decision, the Court of
Appeals held that other than petitioners testimony,
there was no evidence to support his claim that Lilian
was authorized by respondent to borrow money on his
behalf.
It
noted
that
the
acknowledgment
receipt23 signed by Lilian did not specify in what
capacity she received the money. Thus, applying Article
131724 of the Civil Code, it held that petitioners claim
for P253,000 is unenforceable.
On the accounts claimed to be due JMG Publishing
House P640,310, Metro Angeles Printing P837,696,
and St. Joseph Printing Press P446,900, the appellate
court, noting that since the owners of the last two
printing presses were not impleaded as parties to the
case and it was not shown that petitioner was

By the contract of agency a person binds himself to

render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter.26 Contracts entered
into in the name of another person by one who has
been given no authority or legal representation or who
has acted beyond his powers are classified as
unauthorized
contracts
and
are
declared
unenforceable, unless they are ratified.27
Generally, the agency may be oral, unless the law
requires a specific form.28 However, a special power of
attorney is necessary for an agent to, as in this case,
borrow money, unless it be urgent and indispensable
for the preservation of the things which are under
administration.29 Since nothing in this case involves the
preservation of things under administration, a
determination of whether Soriano had the special
authority to borrow money on behalf of respondent is
in order.
Lim Pin v. Liao Tian, et al.30 held that the requirement
of a special power of attorney refers to the nature of
the authorization and not to its form.
. . . The requirements are met if there is a clear
mandate from the principal specifically
authorizing the performance of the act. As
early as 1906, this Court in Strong v. GutierrezRepide (6 Phil. 680) stated that such a
mandate may be either oral or written. The one
thing vital being that it shall be express. And
more recently, We stated that, if the special
authority is not written, then it must be duly
established by evidence:
"the Rules require, for attorneys to
compromise the litigation of their clients, a
special authority. And while the same does not
state that the special authority be in writing
the Court has every reason to expect that, if
not in writing, the same be duly established by
evidence other than the self-serving assertion
of counsel himself that such authority was
verbally
given
him."31 (Emphasis
and
underscoring supplied)
Petitioner submits that his following testimony suffices
to establish that respondent had authorized Lilian to
obtain a loan from him, viz:

Q : Another caption appearing on Exhibit "A" is

cash advance, it states given on 3-31-95
received by Mrs. Lilian Soriano in behalf of
Mrs. Annie Mercado, amount P253,000.00,
will you kindly tell the Court and explain what
does that caption means?
A : It is the amount representing the
money borrowed
from
me
by
the
defendant when one morning they came
very early and talked to me and told me
that they were not able to go to the bank to get
money for the allowances of Poll Watchers who
were having a seminar at the headquarters
plus other election related expenses during
that day, sir.
Q : Considering that this is a substantial
amount which according to you was taken by
Lilian Soriano, did you happen to make her
acknowledge the amount at that time?

It bears noting that Lilian signed in the receipt in her

name alone, without indicating therein that she was
acting for and in behalf of respondent. She thus bound
herself in her personal capacity and not as an agent of
respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to
bind the principal by a mortgage on real property
executed by an agent, it must upon its face purport to
be made, signed and sealed in the name of the
principal, otherwise, it will bind the agent only. It is not
enough merely that the agent was in fact authorized to
make the mortgage, if he has not acted in the name of
the principal. x x x 36 (Emphasis and underscoring
supplied)
On the amount due him and the other two printing
presses, petitioner explains that he was the one who
personally and directly contracted with respondent and
he
merely
sub-contracted
the
two
printing
establishments in order to deliver on time the
campaign materials ordered by respondent.

A : Yes, sir.32 (Emphasis supplied)

Petitioners testimony failed to categorically state,
however, whether the loan was made on behalf of
respondent or of his wife. While petitioner claims that
Lilian was authorized by respondent, the statement of
account marked as Exhibit "A" states that the amount
was received by Lilian "in behalf of Mrs. Annie
Mercado."
Invoking Article 187333 of the Civil Code, petitioner
submits that respondent informed him that he had
authorized Lilian to obtain the loan, hence,
following Macke v. Camps34 which holds that one who
clothes another with apparent authority as his
agent, and holds him out to the public as such,
respondent cannot be permitted to deny the authority.
Petitioners submission does not persuade. As the
appellate court observed:
. . . Exhibit "B" [the receipt issued by
petitioner] presented by plaintiff-appellee to
support his claim unfortunately only indicates
the Two Hundred Fifty Three Thousand Pesos
(P253,0000.00) was received by one Lilian R.
Soriano on 31 March 1995, but without
specifying for what reason the said amount
was delivered and in what capacity did Lilian R.
Soriano received [sic] the money. The note
reads:
"3-31-95
261,120
ADVANCE
TRAINEE

MONEY

FOR

RECEIVED BY
RECEIVED FROM JMG THE AMOUNT OF
253,000 TWO HUNDRED FIFTY THREE
THOUSAND PESOS

Respondent counters that the claim of sub-contracting

is a change in petitioners theory of the case which is
not allowed on appeal.
In Oco v. Limbaring,37 this Court ruled:
The parties to a contract are the real parties in
interest in an action upon it, as consistently
held by the Court. Only the contracting parties
are bound by the stipulations in the contract;
they are the ones who would benefit from and
could violate it. Thus, one who is not a party to
a contract, and for whose benefit it was not
expressly made, cannot maintain an action on
it. One cannot do so, even if the contract
performed by the contracting parties would
incidentally
inure
to
one's
benefit.38 (Underscoring supplied)
In light thereof, petitioner is the real party in interest in
this case. The trial courts findings on the matter were
affirmed by the appellate court.39 It erred, however, in
not declaring petitioner as a real party in interest
insofar as recovery of the cost of campaign materials
made by petitioners mother and sister are concerned,
upon the wrong notion that they should have been, but
were not, impleaded as plaintiffs.
In sum, respondent has the obligation to pay the total
cost of printing his campaign materials delivered by
petitioner in the total of P1,924,906, less the partial
payment of P1,000,000, or P924,906.
WHEREFORE, the petition is GRANTED. The Decision
dated December 8, 2004 and the Resolution dated
April 14, 2005 of the Court of Appeals are
hereby REVERSED and SET ASIDE.
The April 10, 2002 Decision of the Regional Trial Court
of Angeles City, Branch 57, is REINSTATED mutatis
mutandis, in light of the foregoing discussions. The trial
courts decision is modified in that the amount payable
by respondent to petitioner is reduced to P924,906.

(SIGNED)
SO ORDERED.
LILIAN R. SORIANO
G.R. No. L-12579

July 27, 1918

3-31-95"
Nowhere in the note can it be inferred that
defendant-appellant was connected with the
said transaction. Under Article 1317 of the New
Civil Code, a person cannot be bound by
contracts he did not authorize to be entered
into his behalf.35 (Underscoring supplied)

GREGORIO
JIMENEZ, plaintiff-appellee,
vs.
PEDRO RABOT, NICOLASA JIMENEZ and her
husband
EMILIO
RODRIGUEZ, defendants.
PEDRO RABOT, appellant.

STREET, J.:
This action was instituted by the plaintiff, Gregorio
Jimenez, to recover from the defendant, Pedro Rabot, a
parcel of land situated in the municipality of Alaminos,
in the Province of Pangasinan, and described in the
complaint as follows:
Approximate area of three hectares; bounded
on the north and west with land of Pedro
Reynoso, on the south with land of Nicolasa
Jimenez, and on the east with land of Calixta
Apostol before, at present with that of Juan
Montemayor and Simon del Barrio. It is situated
in Dinmayat Tancaran, barrio of Alos of this
same municipality of Alaminos, Pangasinan.
From a judgment rendered in favor of the plaintiff,
Pedro Rabot has appealed; but his co-defendants,
Nicolasa Jimenez and her husband, who were cited by
the defendant for the purpose of holding her liable
upon her warranty in case of his eviction, have not
appealed.
It is admitted that the parcel of land in question,
together with two other parcels in the same locality
originally belonged of the heirs in the division of the
estate of his father. It is further appears that while
Gregorio was staying at Vigan, in the Province of Ilocos
Sur, during the year 1911, his property in Alaminos was
confided by him to the care of his elder sister Nicolasa
Jimenez. On February 7 of that year he wrote this sister
a letter from Vigan in which he informed her that he
was pressed for money and requested her to sell one of
his parcels of land and send him the money in order
that he might pay his debts. This letter contains no
description of the land to be sold other than is
indicated in the words "one of my parcels of land"
("uno de mis terrenos").
Acting upon this letter Nicolasa approached the
defendant Pedro Rabot, and the latter agreed to buy
the parcel in question for the sum of P500. Two
hundred and fifty peso were paid at once, with the
understanding that a deed of conveyance would be
executed when the balance should be paid. Nicolasa
admits having received this payment of P250 at the
time stated; but there is no evidence that she sent any
of it to her brother.
About one year later Gregorio came down to Alaminos
and demanded that his sister should surrender this
piece of land to him, it being then in her possession.
She refused upon some pretext or other to do so; and
as a result Gregorio, in conjunction with others of his
brothers and sisters, whose properties were also in the
hands of Nicolasa, instituted an action in the Court of
First Instance for the purpose of recovering their land
from her control. This action was decided favorably to
the plaintiffs upon August 12, 1913; and no appeal was
taken from the judgment.
Meanwhile, upon May 31, 1912, Nicolasa Jimenez
executed and delivered to Pedro Rabot a deed
purporting to convey to him the parcel of land which is
the subject of this controversy. The deed recites that
the sale was made in consideration of the sum of P500,
the payment of which is acknowledged. Pedro Rabot
went into possession, and the property was found in his
hands at the time when final judgment was entered in

favor of the plaintiffs in the action above mentioned. It

will thus be seen that Pedro Rabot acquired possession
under the deed from Nicolasa during the pendency of
the litigation appear that he was at the time cognizant
of that circumstance.
In considering the questions presented by this appeal
one or two preliminary observations may be made. The
first is that, as a matter of formality, a power of
attorney to convey real property ought to appear in a
public document, just as any other instrument intended
to transmit or convey an interest in such property
ought to appear in a public document. (Art. 1280, Civil
Code.) But inasmuch as it is an established doctrine
that a private document is competent to create,
transmit, modify, or extinguish a right in real property
(Thunga Chui vs. Que Bentec, 2 Phil. Rep., 561; Couto
Soriano vs. Cortes, 8 Phil. Rep., 459), it follows that a
power of attorney to convey such property, even
though in the form of a private document, will operate
with effect. Again, supposing that the letter contained
adequate authority for Nicolasa to sell the property in
question, her action in conveying the property in her
own name, without showing the capacity in which she
acted, was doubtless irregular. Nevertheless, such
deed would in any event operate to bind her brother,
the plaintiff in its character as a contract
(Lyon vs. Pollock, 99 U.S., 668; 25 L. ed., 265), and
supposing that the authority was sufficient, he could be
compelled by a proper judicial proceeding to execute a
document to carry such contract into effect. (Art. 1279,
Civil Code.)
The principal question for consideration therefore in
the end resolves itself into this, whether the authority
conferred on Nicolasa by the letter of February 7, 1911,
was sufficient to enable her to bind her brother. The
only provisions of law bearing on this point are
contained in article 1713 of the Civil Code and in
section 335 of the Code of Civil Procedure. Article 1713
of the Civil Code requires that the authority to alienate
land shall be contained in an express mandate; while
subsection 5 of section 335 of the Code of Civil
Procedure says that the authority of the agent must be
in writing and subscribed by the party to be charged.
We are of the opinion that the authority expressed in
the letter is a sufficient compliance with both
requirements.
It has been urged here that in order for the authority to
be sufficient under section 335 of the Code of Civil
Procedure the authorization must contain a particular
description of the property which the agent is to be
permitted to sell. There is no such requirement in
subsection 5 of section 335; and we do not believe that
it would be legitimate to read such a requirement into
it. The purpose in giving a power of attorney is to
substitute the mind and hand of the agent for the mind
and hand of the principal; and if the character and
extent of the power is so far defined as to leave no
doubt as to the limits within which the agent is
authorized to act, and he acts within those limits, the
principal cannot question the validity of his act. It is not
necessary that the particular act to be accomplished
should be predestinated by the language of the power.
The question to be answered always, after the power
has been exercised, is rather this: Was the act which
the agent performed within the scope of his authority?
In the case before us, if the question is asked whether
the act performed by Nicolasa Jimenez was within the

scope of the authority which had been conferred upon

her, the answer must be obviously in the affirmative.
It should not escape observation that the problem with
which we are here concerned relates to the sufficiency
of the power of attorney under subsection 5 of section
335 of the Code of Civil Procedure and not to the
sufficiency of the note or memorandum of the contract,
or agreement of sale, required by the same subsection,
in connection with the first paragraph of the same
section. It is well-settled in the jurisprudence of
England and the United States that when the owner, or
his agent, comes to make a contract to sell, or a
conveyance to effect a transfer, there must be a
description of the property which is the subject of the
sale or conveyance. This is necessary of course to
define the object of the contract. (Brockway vs. Frost,
40 Minn., 155; Carr vs. Passaic Land etc. Co., 19 N. J.
Eq., 424; Lippincott vs. Bridgewater, 55 N. J. Eq., 208;
Craig vs. Zelian, 137 Cal., 105; 20 Cyc., 271.)
The general rule here applicable is that the description
must be sufficiently definite to identify the land either
from the recitals of the contract or deed or from
external facts referred to in the document, thereby
enabling one to determine the identity of the land and
if the description is uncertain on its face or is shown to
be applicable with equal plausibility to more than one
tract, it is insufficient. The principle embodied in these
decisions is not, in our opinion, applicable to the
present case, which relates to the sufficiency of the
authorization, not to the sufficiency of the contract or
conveyance. It is unquestionable that the deed which
Nicolasa executed contains a proper description of the
property which she purported to convey.
There is ample authority to the effect that a person
may by a general power of attorney an agent to sell
"all" the land possessed by the principal, or all that he
possesses in a particular city, county, or state.
(Roper vs.McFadden, 48 Cal., 346; Rownd vs. Davidson,
113 La., 1047; Carson vs. Ray, 52 N. C., 609; 78 Am.
Dec., 267; 31 Cyc., 1229.) It is also held that where a
person authorizes an agent to sell a farm ("my farm")
in a certain county, this is sufficient, if it be shown that
such party has only one farm in that country.
(Marriner vs. Dennison,
78
Cal.,
202.)
In
Linton vs. Moorhead (209 Pa. St., 646), the power
authorized the agent to sell or convey "any or all
tracts, lots, or parcels" of land belonging to the
plaintiff. It was held that this was adequate. In
Lyon vs. Pollock (99 U.S., 668), the owner in effect
authorized an agent to sell everything he had in San
Antonio Texas. The authority was held sufficient. In
Linan vs. Puno (31 Phil. Rep., 259), the authority
granted was to the effect that the agent might
administer "the interests" possessed by the principal in
the municipality of Tarlac and to that end he was
authorized to purchase, sell, collect, and pay, etc. It
was held that this was a sufficient power.
In the present case the agent was given the power to
sell either of the parcels of land belonging to the
plaintiff. We can see no reason why the performance of
an act within the scope of this authority should not
bind the plaintiff to the same extent as if he had given
the agent authority to sell "any or all" and she had
conveyed only one.
From what have been said it is evident that the lower
court should have absolved the defendant Pedro Rabot

from the complaint. Judgment will accordingly be

reversed, without any express adjudication of costs this
instance. So ordered.
G.R. No. L-2246
JOVITO
vs.
WARNER,
appellant.

R.
BARNES

January 31, 1951

SALONGA, plaintiff-appellee,
AND

CO.,

LTD., defendant-

BAUTISTA ANGELO, J.:

This is an appeal from a decision of the Court of First
Instance of Manila ordering the defendant, as agent of
Westchester Fire Insurance Company of New York, to
pay to the plaintiff the sum of P727. 82 with legal
interest thereon from the filing of the complaint until
paid, and the costs. The case was taken to this court
because it involves only questions of law.
On August 28, 1946, Westchester Fire Insurance
Company of New York entered into a contract with Tina
J. Gamboa whereby said company insured one case of
rayon yardage which said Tina J. Gamboa shipped from
San Francisco, California, on steamer Clovis Victory, to
Manila, Philippines and consigned to Jovito Salonga,
plaintiff herein. According to the contract of insurance,
the insurance company undertook to pay to the sender
or her consignee the damages that may be caused to
the goods shipped subject to the condition that the
liability of the company will be limited to the actual
loss which the insured may suffer not to the exceed the
sum of (2,000. The ship arrived in Manila on September
10, 1946. On October 7, the shipment was examined
by C. B. Nelson and Co., marine surveyors, at the
request of the plaintiff, and in their examination the
surveyors found a shortage in the shipment in the
amount of P1,723,12. On October 9, plaintiff filed a
claim for damages in the amount of P1,723.12 against
the American President Lines, agents of the ship Clovis
Victory, demanding settlement, and when apparently
no action was taken on this claim, plaintiff demanded
payment thereof from Warner, Barnes and Co., Ltd., as
agent of the insurance company in the Philippines, and
this agent having refused to pay the claim, on April 17,
1947, plaintiff instituted the present action.
In the meantime, the American President Lines, in a
letter dated November 25, 1946, agreed to pay to the
plaintiff the amount of P476.17 under its liability in the
bill of lading, and when this offer was rejected, the
claim was finally settled in the amount of P1,021.25. As
a result, the amount claimed in the complaint as the
ultimate liability of the defendant under the insurance
contract was reduced to P717.82 only.
After trial, at which both parties presented their
respective evidence, the court rendered judgment as
stated in the early part of this decision. The motion for
reconsideration filed by the defendant having been
denied, the case was appealed to this court.
Appellant now assigns the following errors:
I
The trial court erred in finding that the loss or
damage of the case of rayon yardage
(Pilferage, as found by the marine surveyors)is

included in the risks insured against

enunciated in the insurance policy.

as

xxx

xxx

Every cause of action ex-contractu must be

founded upon a contract, oral or written, either
express or implied.

II
The trial court erred in holding that defendant,
as agent of Westchester Fire Insurance
Company of New York, United States of
America, is responsible upon the insurance
claim subject to the suit.
III
The trial court erred in denying defendant's
motion for new trial and to set aside the
decision. (Appellant's assignments of error).
We will begin by discussing the second error assigned
by appellant for the reason that if our view on the
question raised is in favor of the claim of appellant
there would be no need to proceed with the discussion
of the other errors assigned, for that would put an end
to the controversy.
As regards the second assignment of error, counsel
claims that the defendant cannot be made responsible
to pay the amount in litigation because (1) said
defendant has no contractual relation with either the
plaintiff or his consignor; (2) the defendant is not the
real party in interest against whom the suit should be
brought; and (3) a judgment for or against an agent in
no way binds the real party in interest.
1. We are of the opinion that the first point is well
taken. It is a well known rule that a contractual
obligation or liability, or an action ex-contractu, must
be founded upon a contract, oral or written, either
express or implied. This is axiomatic. If there is no
contract, there is no corresponding liability, and no
cause of action may arise therefrom. This is what is
provided for in article 1257 of the Civil Code. This
article provides that contracts are binding upon the
parties who make them and their heirs, excepting, with
respect to the latter, where the rights and obligations
are not transmissible, and when the contract contains
a stipulation in favor of a third person, he may demand
its fulfillment if he gives notice of his acceptance
before it is revoked. This is also the ruling laid down by
this court in the case of E. Macias and Co. vs. Warner,
Barnes and Co. (43 Phil. 155) wherein, among others,
the court said:
xxx

xxx

xxx

xxx

. . . There is no contract of any kind, either oral

or written, between the plaintiff and Warner,
Barnes and Company. Plaintiff's contracts are
with the insurance companies, and are in
writing, and the premiums were paid to the
insurance companies and the policies were
issued by, and in the name of, the insurance
companies, and on the face of the policy itself,
the plaintiff knew that the defendant was
acting as agent, for, and was representing, the
respective insurance companies in the
issuance and delivery of the policies. The
defendant company did not contract or agree
to do anything or to pay the plaintiff any
money at any time or on any condition, either
as agent or principal.

Warner, Barnes and Co., as principal or agent,

did not make any contract, either oral or
written, with the plaintiff. The contracts were
made between the respective insurance
companies and the insured, and were made by
the insurance companies, through Warner,
Barnes and Co., as their agent.
As in the case of a bank draft, it is not the
cashier of the bank who makes the contract to
pay the money evidenced by the draft, it is the
bank, acting through its cashier, that makes
the contract. So, in the instant case, it was the
insurance companies, acting through Warner,
Barnes and Co., as their agent, that made the
written contracts with the insured. (E. Macias
and Co. vs. Warner, Barnes and Co., 43 Phil.,
155, 161, 162.)
Bearing in mind the above rule, we find that the
defendant has not taken part, directly or indirectly, in
the contract in question. The evidence shows that the
defendant did not enter into any contract either with
the plaintiff or his consignor Tina J. Gamboa. The
contract of marine insurance, Exhibit C, was made and
executed only by and between the Westchester Fire
Insurance Company of New York and Tina J. Gamboa.
The contract was entered in New York. There is nothing
therein which may affect, in favor or adversely, the
defendant, the fulfillment of which may be demanded
by or against it. That contract is purely bilateral,
binding only upon Gamboa and the insurance
company. When the lower court, therefore, imposed
upon the defendant an obligation which it has never
assumed, either expressly or impliedly, or when it
extended to the defendant the effects of a contract
which was entered into exclusively by and between the
Westchester Fire Insurance Company of New York and
Tina J. Gamboa, the error it has committed is evident.
This is contrary to law.
We do not find any material variance between this case
and the case of E. Macias and Co. vs. Warner, Barnes
and Co., supra, as pointed out by counsel for appellee,
in so far as the principle we are considering is
concerned. Both cases involve similar facts which call
for the application of a similar ruling. In both cases the
issue is whether an agent, who acts within the scope of
his authority, can assume personal liability for a
contract entered into by him in behalf of his principal.
And in the Macias case we said that the agent did not
assume personal liability because the only party bound
was the principal. And in this case this principle
acquires added force and effect when we consider the
fact that the defendant did not sign the contract as
agent of the foreign insurance company as the
defendant did in the Macias case. The Macias case,
therefore, is on all fours with this case and is decisive
of the question under consideration.
2. Counsel next contends that Warner, Barnes and Co.,
Ltd., is not the real party in interest against whom the
suit should be brought. It is claimed that this action
should have been filed against its principal, the

Westchester Fire Insurance Company of New York. This

point is also well taken. Section 2, Rule 3 of the Rules
of Court requires that "every action must be
prosecuted in the name of the real party in interest." A
corollary proposition to this rule is that an action must
be brought against the real party in interest, or against
a party which may be bound by the judgment to be
rendered therein (Salmon and Pacific Commercial
Co. vs. Tan Cueco, 36 Phil., 556). The real party in
interest is the party who would be benefited or injured
by the judgment, or the "party entitled to the avails of
the suit" (1 Sutherland, Court Pleading Practice and
Forms, p. 11). And in the case at bar, the defendant
issued upon in its capacity as agent of Westchester Fire
Insurance Company of New York in spite of the fact that
the insurance contract has not been signed by it. As we
have said, the defendant did not assume any obligation
thereunder either as agent or as a principal. It cannot,
therefore, be made liable under said contract, and
hence it can be said that this case was filed against
one who is not the real party in interest.
We agree with counsel for the appellee that the
defendant is a settlement and adjustment agent of the
foreign insurance company and that as such agent it
has the authority to settle all the losses and claims that
may arise under the policies that may be issued by or
in behalf of said company in accordance with the
instructions it may receive from time to time from its
principal, but we disagree with counsel in his
contention that as such adjustment and settlement
agent, the defendant has assumed personal liability
under said policies, and, therefore, it can be sued in its
own right. An adjustment and settlement agent is no
different from any other agent from the point of view of
his responsibility, for he also acts in a representative
capacity. Whenever he adjusts or settles a claim, he
does it in behalf of his principal, and his action is
binding not upon himself but upon his principal. And
here again, the ordinary rule of agency applies. The
following authorities bear this out:
An insurance adjuster is ordinarily a special
agent for the person or company for whom he
acts,
and
his
authority
is prima
facie coextensive with the business intrusted to
him. . . .
An adjuster does not discharge functions of a
quasi-judicial nature, but represents his
employer, to whom he owes faithful service,
and for his acts, in the employer's interest, the
employer is responsible so long as the acts are
done while the agent is acting within the scope
of his employment. (45 C. J. S., 1338-1340.)
It, therefore, clearly appears that the scope and extent
of the functions of an adjustment and settlement agent
do not include personal liability. His functions are
merely to settle and adjusts claims in behalf of his
principal if those claims are proven and undisputed,
and if the claim is disputed or is disapproved by the
principal, like in the instant case, the agent does not
assume any personal liability. The recourse of the
insured is to press his claim against the principal.
3. This brings us to the consideration of the third point.
It is claimed that a judgment, for or against an agent,
in no way binds the real party in interest. In our opinion
this point is also well taken, for it is but a sequel to the
principle we have pointed out above. The reason is

obvious. An action is brought for a practical purpose,

nay to obtain actual and positive relief. If the party
sued upon is not the proper party, any decision that
may be rendered against him would be futile, for it
cannot be enforced or executed. The effort that may be
employed will be wasted. Such would be the result of
this case if it will be allowed to proceed against the
defendant, for even if a favorable judgment is obtained
against it, it cannot be enforced because the real party
is not involved. The defendant cannot be made to pay
for something it is not responsible. Thus, in the
following authorities it was held:
. . . Section 114 of the Code of Civil Procedure
requires an action to be brought in the name of
the real party in interest; and a corollary
proposition requires that an action shall be
brought against the persons or entities which
are to be bound by the judgment obtained
therein. An action upon a cause of action
pertaining to his principal cannot be brought by
an
attorney-in-fact
in
his
name
(Arroyo vs. Granada and Gentero, 18 Phil.,
484); nor can an action based upon a right of
action belonging to a principal be brought in
the
name
of
his
representative
(Lichauco vs. Limjuco and Gonzalo, 19 Phil.,
12). Actions must be brought by the real
parties in interest and against the persons who
are to be bound by the judgment obtained
therein. (Salmon and Pacific Commercial
Co. vs. Tan Cueco, 36 Phil., 557-558.)
xxx

xxx

xxx

An action to set aside an instrument of transfer

of land should be brought in the name of the
real party in interest. An apoderado or attorney
in fact is not a real party. He has no interest in
the litigation and has absolutely no right to
bring the defendant into court or to put him to
the expense of a suit, and there is no pro-vision
of law permitting action to be brought in such
manner.
A
judgment
for
or
against
the apoderadoin no way binds or affects the
real party, and a decision in the suit would be
utterly futile. It would touch no interest, adjust
no question, bind no one, and settle no
litigation. Courts should not be required to
spend their time solemnly considering and
deciding cases where no one could be bound
and no interest affected by such deliberation
and decision. (Arroyo vs. Granada and Gentero,
18 Phil., 484.)
If the case cannot be filed against the defendant as we
have pointed out, what then is the remedy of the
plaintiff under the circumstances? Is the case of the
plaintiff beyond remedy? We believe that the only way
by which the plaintiff can bring the principal into this
case or make it come under the courts in this
jurisdiction is to follow the procedure indicated in
section 14, Rule 7, of the Rules of Court concerning
litigations involving foreign corporations. This rule says
that if the defendant is a foreign corporation and it has
not designated an agent in the Philippines on whom
service may be made in case of litigation, such service
may be made on any agent it may have in the
Philippines. And in our opinion the Westchester Fire
Insurance Company of new York comes within the
import of this rule for even if it has not designated an

agent as required by law, it has however a settling

agent who may serve the purpose. In other words, an
action may be brought against said insurance company
in the Philippines and the process may be served on
the defendant to give our courts the necessary
jurisdiction. This is the way we have pointed out in the
case of General Corporation of the Philippines and
Mayon Investment Co. vs.Union Insurance Society of
Canton Ltd. et al., (87 Phil., 313).
In view of the foregoing, we are of the opinion and so
hold that the lower court erred in holding the
defendant responsible for the loss or damage claimed
in the complaint. And having arrived at this conclusion,
we do not deem it necessary to pass upon the other
errors assigned by the appellant.
Wherefore, the decision appealed from is hereby
reversed. The complaint is hereby dismissed, with
costs against the appellee.

Filipinas

Life

Assurance

Company

(Filipinas

Life). Pedroso claims Renato Valle was her insurance

agent since 1972 and Valle collected her monthly
premiums. In the first week of January 1977, Valle told
her that the Filipinas Life Escolta Office was holding a
promotional investment program for policyholders. It
was offering 8% prepaid interest a month for certain
amounts deposited on a monthly basis. Enticed, she
initially

invested

and

issued

a post-dated

check

dated January 7, 1977 for P10,000.[4] In return, Valle

issued Pedroso his personal check for P800 for the
8%[5] prepaid interest and a Filipinas Life Agents
Receipt No. 807838.[6]

Subsequently, she called the Escolta office and

talked

to

Francisco

Alcantara,

the

administrative

assistant, who referred her to the branch manager,

SECOND DIVISION

Angel Apetrior. Pedroso inquired about the promotional

FILIPINAS LIFE ASSURANCE COMPANY (now

AYALA LIFE ASSURANCE, INC.),
Petitioner,

- versus CLEMENTE N. PEDROSO,

TERESITA O. PEDROSO and JENNIFER N.
PALACIO
thru
her
Attorney-in-Fact
PONCIANO C. MARQUEZ,
Respondents.

G.R. No. 159489

investment and Apetrior confirmed that there was such
Present:

a promotion. She was even told she could push through

with the check she issued. From the records, the check,
QUISUMBING,
CARPIO,
with the endorsement of Alcantara at the back, was
CARPIO MORALES,
TINGA, anddeposited in the account of Filipinas Life with the
VELASCO, JR.,
Commercial Bank and Trust Company (CBTC), Escolta
Branch.
Promulgated:

February 4, 2008 Relying on the representations made by the

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - petitioners duly authorized representatives Apetrior and
---------------Alcantara, as well as having known agent Valle for quite
DECISION

some time, Pedroso waited for the maturity of her initial

investment. A month after, her investment of P10,000

QUISUMBING, J.:

was returned to her after she made a written request for

its refund. The formal written request, dated February 3,

This petition for review on certiorari seeks the

reversal

of

the

Resolution,

respectively, of the Court of Appeals in CA-G.R. CV No.

where Alcantara gave her the P10,000 in cash. After a

33568. The

the

second investment, she made 7 to 8 more investments

dated October 10, 1989 of the Regional Trial

in varying amounts, totaling P37,000 but at a lower rate

Court (RTC) of Manila, Branch 3, finding petitioner as

of 5%[8] prepaid interest a month. Upon maturity of

defendant and the co-defendants below jointly and

Pedrosos subsequent investments, Valle would take

severally

back from Pedroso the corresponding yellow-colored

Decision

appellate

liable

to

2002 and August

court

the

had

plaintiffs,

5,

of Filipinas Life prepared by Alcantara.[7] To collect the

amount, Pedroso personally went to the Escolta branch

[3]

29,

and

1977, was written on an inter-office memorandum form

2003,

[2]

dated November

Decision

[1]

affirmed

now

herein

respondents.

The antecedent facts are as follows:

agents receipt he issued to the latter.

Pedroso told respondent Jennifer N. Palacio,

also a Filipinas Life insurance policyholder, about the

Respondent Teresita O. Pedroso is a policyholder of a

20-year endowment life insurance issued by petitioner

investment plan. Palacio made a total investment

of P49,550[9] but at only 5% prepaid interest. However,

when Pedroso tried to withdraw her investment, Valle

respondents, were confirmed by its officers Apetrior

did

of

and Alcantara. Respondents assert they exercised all

it. Palacio also tried to withdraw hers, but Filipinas Life,

the diligence required of them in ascertaining the

despite demands, refused to return her money. With

authority of petitioners agents; and it is Filipinas Life

the assistance of their lawyer, they went to Filipinas

that failed in its duty to ensure that its agents act

Life

within the scope of their authority.

not

want

Escolta

to

return

Office

some P17,000

to

collect

their

worth

respective

investments, and to inquire why they had not seen

Valle for quite some time. But their attempts were

Considering the issue raised in the light of the

futile. Hence, respondents filed an action for the

submissions of the parties, we find that the petition

recovery of a sum of money.

lacks merit. The Court of Appeals committed no

reversible error nor abused gravely its discretion in

After trial, the RTC, Branch 3, Manila, held

rendering the assailed decision and resolution.

Filipinas Life and its co-defendants Valle, Apetrior and

Alcantara

jointly

and

solidarily

liable

to

It

the

appears

Pedroso

respondents.

and

indisputable

Palacio

had

that

respondents

invested P47,000

and P49,550, respectively. These were received by

On appeal, the Court of Appeals affirmed the

Valle and remitted to Filipinas Life, using Filipinas Lifes

trial courts ruling and subsequently denied the motion

official

receipts,

for reconsideration.

disputed. Valles

whose
authority

authenticity
to

solicit

were
and

not

receive

investments was also established by the parties. When

Petitioner now comes before us raising a single issue:

respondents sought confirmation, Alcantara, holding a

supervisory

WHETHER OR NOT THE COURT OF

APPEALS COMMITTED A REVERSIBLE
ERROR AND GRAVELY ABUSED ITS
DISCRETION
IN
AFFIRMING
THE
DECISION
OF
THE LOWER
COURT HOLDING FLAC [FILIPINAS LIFE]
TO BE JOINTLY AND SEVERALLY LIABLE
WITH ITS CO-DEFENDANTS ON THE
CLAIM OF RESPONDENTS INSTEAD OF
HOLDING ITS AGENT, RENATO VALLE,
SOLELY LIABLE TO THE RESPONDENTS .

position,

and

Apetrior,

the

branch

manager, confirmed that Valle had authority.While it is

true that a person dealing with an agent is put upon
inquiry and must discover at his own peril the agents
authority, in this case, respondents did exercise due
diligence in removing all doubts and in confirming the
validity of the representations made by Valle.

[10]

Filipinas Life, as the principal, is liable for

Simply put, did the Court of Appeals err in

obligations contracted by its agent Valle. By the

holding petitioner and its co-defendants jointly and

contract of agency, a person binds himself to render

severally liable to the herein respondents?

some service or to do something in representation or

on behalf of another, with the consent or authority of

Filipinas Life does not dispute that Valle was its

the latter.[12] The general rule is that the principal is

agent, but claims that it was only a life insurance

responsible for the acts of its agent done within the

company and was not engaged in the business of

scope of its authority, and should bear the damage

collecting investment money. It contends that the

caused to third persons.[13] When the agent exceeds his

investment scheme offered to respondents by Valle,

authority, the agent becomes personally liable for the

Apetrior and Alcantara was outside the scope of their

damage.[14] But even when the agent exceeds his

authority as agents of Filipinas Life such that, it cannot

authority, the principal is still solidarily liable together

be held liable to the respondents.

with the agent if the principal allowed the agent to act

[11]

as though the agent had full powers.[15] In other words,

On the other hand, respondents contend that
Filipinas Life authorized Valle to solicit investments
from them. In fact, Filipinas Lifes official documents
and

facilities

were

transactions. These

used

in

consummating

transactions,

according

the
to

the acts of an agent beyond the scope of his authority

do not bind the principal, unless the principal ratifies
them, expressly or impliedly.[16] Ratification in agency is
the adoption or confirmation by one person of an act

performed on his behalf by another without authority.

[17]

Filipinas Life cannot profess ignorance of Valles

acts. Even if Valles representations were beyond his
authority as a debit/insurance agent, Filipinas Life thru
Alcantara and Apetrior expressly and knowingly ratified
Valles acts. It cannot even be denied that Filipinas Life

The dispute stemmed from the following facts.

During their lifetime, spouses Pedro San Agustin and
Agatona Genil were able to acquire a 246-square meter
parcel of land situated in Barangay Anos, Los Baos,
Laguna and covered by Original Certificate of Title
(OCT) No. O-(1655) 0-15. 4 Agatona Genil died on
September 13, 1990 while Pedro San Agustin died on
September 14, 1991. Both died intestate, survived by
their eight (8) children: respondents Eufemia, Raul,
Ferdinand, Zenaida, Milagros, Minerva, Isabelita and
Virgilio.

benefited from the investments deposited by Valle in

the account of Filipinas Life. In our considered view,
Filipinas Life had clothed Valle with apparent authority;
hence,

it

is

authority. Innocent

now
third

estopped
persons

to

deny

should

said

not

be

prejudiced if the principal failed to adopt the needed

measures to prevent misrepresentation, much more so
if the principal ratified his agents acts beyond the

Sometime in 1992, Eufemia, Ferdinand and Raul

executed a Deed of Absolute Sale of Undivided
Shares5conveying in favor of petitioners (the Pahuds,
for brevity) their respective shares from the lot they
inherited
from
their
deceased
parents
for P525,000.00.6 Eufemia also signed the deed on
behalf of her four (4) other co-heirs, namely: Isabelita
on the basis of a special power of attorney executed on
September 28, 1991,7 and also for Milagros, Minerva,
and Zenaida but without their apparent written
authority.8 The deed of sale was also not notarized.9

latters authority. The act of the agent is considered

that of the principal itself. Qui per alium facit per
seipsum facere videtur. He who does a thing by an
agent is considered as doing it himself.[18]

WHEREFORE, the petition is DENIED for lack

of merit. The Decision and Resolution, dated November
29, 2002 and August 5, 2003, respectively, of the Court
of Appeals in CA-G.R. CV No. 33568 are AFFIRMED.

On July 21, 1992, the Pahuds paid P35,792.31 to the

Los Baos Rural Bank where the subject property was
mortgaged.10 The bank issued a release of mortgage
and turned over the owners copy of the OCT to the
Pahuds.11 Over the following months, the Pahuds made
more payments to Eufemia and her siblings totaling
toP350,000.00.12 They
agreed
to
use
the
remaining P87,500.0013 to defray the payment for
taxes and the expenses in transferring the title of the
property.14 When Eufemia and her co-heirs drafted an
extra-judicial settlement of estate to facilitate the
transfer of the title to the Pahuds, Virgilio refused to
sign it.15

Costs against the petitioner.

SO ORDERED.
G.R. No. 160346

August 25, 2009

PURITA PAHUD, SOLEDAD PAHUD, and IAN LEE

CASTILLA (represented by Mother and Attorneyin-Fact
VIRGINIA
CASTILLA), Petitioners,
vs.
COURT
OF
APPEALS,
SPOUSES
ISAGANI
BELARMINO and LETICIA OCAMPO, EUFEMIA SAN
AGUSTIN-MAGSINO, ZENAIDA SAN AGUSTINMcCRAE, MILAGROS SAN AGUSTIN-FORTMAN,
MINERVA SAN AGUSTIN-ATKINSON, FERDINAND
SAN AGUSTIN, RAUL SAN AGUSTIN, ISABELITA
SAN AGUSTIN-LUSTENBERGER and VIRGILIO SAN
AGUSTIN, Respondents.
DECISION
NACHURA, J.:
For our resolution is a petition for review on certiorari
assailing the April 23, 2003 Decision 1 and October 8,
2003 Resolution2 of the Court of Appeals (CA) in CAG.R. CV No. 59426. The appellate court, in the said
decision and resolution, reversed and set aside the
January 14, 1998 Decision3 of the Regional Trial Court
(RTC), which ruled in favor of petitioners.

On July 8, 1993, Virgilios co-heirs filed a complaint 16 for

judicial partition of the subject property before the RTC
of Calamba, Laguna. On November 28, 1994, in the
course of the proceedings for judicial partition, a
Compromise Agreement17 was signed with seven (7) of
the co-heirs agreeing to sell their undivided shares to
Virgilio for P700,000.00. The compromise agreement
was, however, not approved by the trial court because
Atty. Dimetrio Hilbero, lawyer for Eufemia and her six
(6) co-heirs, refused to sign the agreement because he
knew
of
the
previous
sale
made
to
the
Pahuds.18lawphil.net
On December 1, 1994, Eufemia acknowledged having
received P700,000.00 from Virgilio.19 Virgilio then sold
the entire property to spouses Isagani Belarmino and
Leticia Ocampo (Belarminos) sometime in 1994. The
Belarminos immediately constructed a building on the
subject property.
Alarmed and bewildered by the ongoing construction
on the lot they purchased, the Pahuds immediately
confronted Eufemia who confirmed to them that Virgilio
had sold the property to the Belarminos. 20 Aggrieved,
the Pahuds filed a complaint in intervention 21 in the
pending case for judicial partition.1avvphil
After trial, the RTC upheld the validity of the sale to
petitioners. The dispositive portion of the decision
reads:

WHEREFORE, the foregoing considered, the Court

orders:
1. the sale of the 7/8 portion of the property
covered by OCT No. O (1655) O-15 by the
plaintiffs as heirs of deceased Sps. Pedro San
Agustin and Agatona Genil in favor of the
Intervenors-Third Party plaintiffs as valid and
enforceable, but obligating the IntervenorsThird Party plaintiffs to complete the payment
of the purchase price of P437,500.00 by paying
the balance of P87,500.00 to defendant Fe (sic)
San Agustin Magsino. Upon receipt of the
balance, the plaintiff shall formalize the sale of
the 7/8 portion in favor of the Intervenor[s]Third Party plaintiffs;
2. declaring the document entitled "Salaysay
sa Pagsang-ayon sa Bilihan" (Exh. "2-a") signed
by plaintiff Eufemia San Agustin attached to
the unapproved Compromise Agreement (Exh.
"2") as not a valid sale in favor of defendant
Virgilio San Agustin;
3. declaring the sale (Exh. "4") made by
defendant Virgilio San Agustin of the property
covered by OCT No. O (1655)-O-15 registered
in the names of Spouses Pedro San Agustin and
Agatona Genil in favor of Third-party defendant
Spouses Isagani and Leticia Belarmino as not a
valid sale and as inexistent;
4. declaring the defendant Virgilio San Agustin
and the Third-Party defendants spouses Isagani
and Leticia Belarmino as in bad faith in buying
the portion of the property already sold by the
plaintiffs in favor of the Intervenors-Third Party
Plaintiffs and the Third-Party Defendant Sps.
Isagani and Leticia Belarmino in constructing
the two-[storey] building in (sic) the property
subject of this case; and
5. declaring the parties as not entitled to any
damages, with the parties shouldering their
respective
responsibilities
regarding
the
payment of attorney[]s fees to their respective
lawyers.
No pronouncement as to costs.
SO ORDERED.22
Not satisfied, respondents appealed the decision to the
CA arguing, in the main, that the sale made by Eufemia
for and on behalf of her other co-heirs to the Pahuds
should have been declared void and inexistent for want
of a written authority from her co-heirs. The CA yielded
and set aside the findings of the trial court. In
disposing the issue, the CA ruled:
WHEREFORE, in view of the foregoing, the Decision
dated January 14, 1998, rendered by the Regional Trial
Court of Calamba, Laguna, Branch 92 in Civil Case No.
2011-93-C for Judicial Partition is hereby REVERSED
and SET ASIDE, and a new one entered, as follows:
(1) The case for partition among the plaintiffsappellees and appellant Virgilio is now
considered closed and terminated;

(2) Ordering plaintiffs-appellees to return to

intervenors-appellees the total amount they
received from the latter, plus an interest of
12% per annum from the time the complaint
[in] intervention was filed on April 12, 1995
until actual payment of the same;
(3) Declaring the sale of appellant Virgilio San
Agustin to appellants spouses, Isagani and
Leticia Belarmino[,] as valid and binding;
(4) Declaring appellants-spouses as buyers in
good faith and for value and are the owners of
the subject property.
No pronouncement as to costs.
SO ORDERED.23
Petitioners now come to this Court raising the following
arguments:
I. The Court of Appeals committed grave and
reversible error when it did not apply the
second paragraph of Article 1317 of the New
Civil Code insofar as ratification is concerned to
the sale of the 4/8 portion of the subject
property executed by respondents San Agustin
in favor of petitioners;
II. The Court of Appeals committed grave and
reversible error in holding that respondents
spouses Belarminos are in good faith when
they bought the subject property from
respondent Virgilio San Agustin despite the
findings of fact by the court a quo that they
were in bad faith which clearly contravenes the
presence of long line of case laws upholding
the task of giving utmost weight and value to
the factual findings of the trial court during
appeals; [and]
III. The Court of Appeals committed grave and
reversible error in holding that respondents
spouses Belarminos have superior rights over
the property in question than petitioners
despite the fact that the latter were prior in
possession thereby misapplying the provisions
of Article 1544 of the New Civil Code. 24
The focal issue to be resolved is the status of the sale
of the subject property by Eufemia and her co-heirs to
the Pahuds. We find the transaction to be valid and
enforceable.
Article 1874 of the Civil Code plainly provides:
Art. 1874. When a sale of a piece of land or any
interest therein is through an agent, the authority of
the latter shall be in writing; otherwise, the sale shall
be void.
Also, under Article 1878,25 a special power of attorney
is necessary for an agent to enter into a contract by
which the ownership of an immovable property is
transmitted or acquired, either gratuitously or for a
valuable consideration. Such stringent statutory
requirement has been explained in Cosmic Lumber
Corporation v. Court of Appeals:26

[T]he authority of an agent to execute a contract [of]

sale of real estate must be conferred in writing and
must give him specific authority, either to conduct the
general business of the principal or to execute a
binding contract containing terms and conditions which
are in the contract he did execute. A special power of
attorney is necessary to enter into any contract by
which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable
consideration. The express mandate required by law to
enable an appointee of an agency (couched) in general
terms to sell must be one that expressly mentions a
sale or that includes a sale as a necessary ingredient of
the act mentioned. For the principal to confer the right
upon an agent to sell real estate, a power of attorney
must so express the powers of the agent in clear and
unmistakable language. When there is any reasonable
doubt that the language so used conveys such power,
no such construction shall be given the document. 27
In several cases, we have repeatedly held that the
absence of a written authority to sell a piece of land is,
ipso jure, void,28 precisely to protect the interest of an
unsuspecting owner from being prejudiced by the
unwarranted act of another.
Based on the foregoing, it is not difficult to conclude, in
principle, that the sale made by Eufemia, Isabelita and
her two brothers to the Pahuds sometime in 1992
should be valid only with respect to the 4/8 portion of
the subject property. The sale with respect to the 3/8
portion, representing the shares of Zenaida, Milagros,
and Minerva, is void because Eufemia could not
dispose of the interest of her co-heirs in the said lot
absent any written authority from the latter, as
explicitly required by law. This was, in fact, the ruling of
the CA.
Still, in their petition, the Pahuds argue that the sale
with respect to the 3/8 portion of the land should have
been deemed ratified when the three co-heirs, namely:
Milagros, Minerva, and Zenaida, executed their
respective special power of attorneys29 authorizing
Eufemia to represent them in the sale of their shares in
the subject property.30
While the sale with respect to the 3/8 portion is void by
express provision of law and not susceptible to
ratification,31 we nevertheless uphold its validity on the
basis of the common law principle of estoppel.
Article 1431 of the Civil Code provides:
Art. 1431. Through estoppel an admission or
representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as
against the person relying thereon.

True, at the time of the sale to the Pahuds, Eufemia

was not armed with the requisite special power of
attorney to dispose of the 3/8 portion of the property.
Initially, in their answer to the complaint in
intervention,32 Eufemia and her other co-heirs denied
having sold their shares to the Pahuds. During the pretrial conference, however, they admitted that they had
indeed sold 7/8 of the property to the Pahuds
sometime in 1992.33 Thus, the previous denial was
superseded, if not accordingly amended, by their
subsequent
admission.34 Moreover,
in
their
35
Comment, the said co-heirs again admitted the sale
made to petitioners.36
Interestingly, in no instance did the three (3) heirs
concerned assail the validity of the transaction made
by Eufemia to the Pahuds on the basis of want of
written authority to sell. They could have easily filed a
case for annulment of the sale of their respective
shares against Eufemia and the Pahuds. Instead, they
opted to remain silent and left the task of raising the
validity of the sale as an issue to their co-heir, Virgilio,
who is not privy to the said transaction. They cannot be
allowed to rely on Eufemia, their attorney-in-fact, to
impugn the validity of the first transaction because to
allow them to do so would be tantamount to giving
premium to their sisters dishonest and fraudulent
deed. Undeniably, therefore, the silence and passivity
of the three co-heirs on the issue bar them from
making a contrary claim.
It is a basic rule in the law of agency that a principal is
subject to liability for loss caused to another by the
latters reliance upon a deceitful representation by an
agent in the course of his employment (1) if the
representation is authorized; (2) if it is within the
implied authority of the agent to make for the
principal; or (3) if it is apparently authorized,
regardless of whether the agent was authorized by him
or not to make the representation.37
By their continued silence, Zenaida, Milagros and
Minerva have caused the Pahuds to believe that they
have indeed clothed Eufemia with the authority to
transact on their behalf. Clearly, the three co-heirs are
now estopped from impugning the validity of the sale
from assailing the authority of Eufemia to enter into
such transaction.
Accordingly, the subsequent sale made by the seven
co-heirs to Virgilio was void because they no longer
had any interest over the subject property which they
could alienate at the time of the second
transaction.38 Nemo dat quod non habet. Virgilio,
however, could still alienate his 1/8 undivided share to
the Belarminos.
The Belarminos, for their part, cannot argue that they
purchased the property from Virgilio in good faith. As a
general rule, a purchaser of a real property is not
required to make any further inquiry beyond what the
certificate of title indicates on its face. 39 But the rule
excludes those who purchase with knowledge of the
defect in the title of the vendor or of facts sufficient to
induce a reasonable and prudent person to inquire into
the status of the property.40 Such purchaser cannot
close his eyes to facts which should put a reasonable
man on guard, and later claim that he acted in good
faith on the belief that there was no defect in the title
of the vendor. His mere refusal to believe that such
defect exists, or his obvious neglect by closing his eyes

to the possibility of the existence of a defect in the

vendors title, will not make him an innocent purchaser
for value, if afterwards it turns out that the title was, in
fact, defective. In such a case, he is deemed to have
bought the property at his own risk, and any injury or
prejudice occasioned by such transaction must be
borne by him.41
In the case at bar, the Belarminos were fully aware that
the property was registered not in the name of the
immediate transferor, Virgilio, but remained in the
name of Pedro San Agustin and Agatona Genil. 42 This
fact alone is sufficient impetus to make further inquiry
and, thus, negate their claim that they are purchasers
for value in good faith.43 They knew that the property
was still subject of partition proceedings before the
trial court, and that the compromise agreement signed
by the heirs was not approved by the RTC following the
opposition of the counsel for Eufemia and her six other
co-heirs.44 The Belarminos, being transferees pendente
lite, are deemed buyers in mala fide, and they stand
exactly in the shoes of the transferor and are bound by
any judgment or decree which may be rendered for or
against the transferor.45 Furthermore, had they verified
the status of the property by asking the neighboring
residents, they would have been able to talk to the
Pahuds
who
occupy
an
adjoining
business
establishment46 and would have known that a portion
of the property had already been sold. All these
existing and readily verifiable facts are sufficient to
suggest that the Belarminos knew that they were
buying the property at their own risk.
WHEREFORE, premises considered, the April 23, 2003
Decision of the Court of Appeals as well as its October
8, 2003 Resolution in CA-G.R. CV No. 59426, are
REVERSED and SET ASIDE. Accordingly, the January 14,
1998 Decision of Branch 92 of the Regional Trial Court
of Calamba, Laguna is REINSTATED with the
MODIFICATION that the sale made by respondent
Virgilio San Agustin to respondent spouses Isagani
Belarmino and Leticia Ocampo is valid only with
respect to the 1/8 portion of the subject property. The
trial court is ordered to proceed with the partition of
the property with dispatch.
SO ORDERED.

G.R. No. L-20145

November 15, 1923

VICENTE VERZOSA and RUIZ, REMENTERIA Y CIA.,

S.
en
C., plaintiffs-appellants,
vs.
SILVINO LIM and SIY CONG BIENG and COMPANY,
INC., defendants-appellants.
STREET, J.:
This action was instituted in the Court of first Instance
of the City of Manila by Vicente Versoza and Ruiz,
Rementeria y Compania, as owners of the coastwise
vessel Perla, against Silvino Lim and Siy Cong Bieng &
Company, Inc., as owner and agent, respectively, of
the vessel Ban Yek, for the purpose of recovering a
sum of money alleged to be the damages resulting to
the plaintiffs from a collision which occurred on March
9, 1921, between the two vessels mentioned, it being
alleged that said collision was due to the experience,
carelessness and lack of skill on the part of the captain

of the Ban Yek and to his failure to observe the rules of

navigation appropriate to the case. The defendants
answered with a general denial, and by way of special
defense asserted, among other things, that the
collision was due exclusively to the inexperience and
carelessness of the captain and officers of the
steamship Perla; for which reason the defendants in
turn, by way of counterclaim, prayed judgment for the
damages suffered by the Ban Yek from the same
collision. At the hearing the trial judge absolved the
defendants from the complaint and likewise absolved
the plaintiffs from the defendants' counterclaim. From
this judgment both parties appealed.
It appears in evidence that at about five o'clock in the
afternoon of March 9, 1921, the coastwise steamer Ban
Yekleft the port of Naga on the Bicol River, in the
Province of Camarines Sur, with destination to the City
of Manila. At the time of her departure from said port
the sea was approaching to high tide but the current
was still running in through the Bicol River, with the
result that the Ban Yek had the current against her. As
the ship approached the Malbong bend of the Bicol
River, in the municipality of Gainza, another vessel,
the Perla, was sighted coming up the river on the way
to Naga. While the boats were yet more than a
kilometer apart, the Ban Yek gave two blasts with her
whistle, thus indicating an intention to pass on the left,
or to her own port side. In reply to this signal
thePerla gave a single blast, thereby indicating that
she disagreed with the signal given by the Ban Yek and
would maintain her position on the right, that is, would
keep to the starboard. The Ban Yek made no reply to
this signal. As the Perla was navigating with the
current, then running in from the sea, this vessel,
under paragraph 163 of Customs Marine Circular No.
53, had the right of way over the Ban Yek, and the
officers of the Perla interpreted the action of the Ban
Yek in not replying to the Perla's signal as an indication
of acquiescene of the officers of theBan Yek in the
determination of the Perla to keep to the starboard.
The river at this point is about two hundred and fifty
feet wide, and the courses thus being respectively
pursued by the two vessels necessarily tended to bring
them into a head-on collision. When the danger of such
an occurrence became imminent, Captain Garrido of
the Perla, seeing that he was shut off by the Ban
Yek from passing to the right, put his vessel to port,
intending to avoid collision or minimize its impact by
getting farther out into the stream. An additional
reason for this maneuver, as stated by Captain Carrido,
is that the captain of theBan Yek waived his hand to
Garrido, indicating that the latter should turn his vessel
towards the middle of the stream. At about the same
time that the Perla was thus deflected from her course
the engine on the Ban Yek was reversed and three
blasts were given by this vessel to indicate that she
was backing.
Now, it appears that when the engine is reversed, a
vessel swings to the right or left in accordance with the
direction in which the blades of the propeller are set;
and as the Ban Yek began to back, her bow was thrown
out into the stream, a movement which was assisted
by the current of the river. By this means the Ban
Yek was brought to occupy an oblique position across
the stream at the moment the Perla was passing; and
the bow of theBan Yek crashed into the starboard
bumpers of the Perla, carrying away external parts of
the ship and inflicting material damage on the hull. To

effect the repairs thus

made necessary to
the Perla cost her owners the sum of P17,827,
including expenses of survey.
The first legal point presented in the case has
reference to the sufficiency of the protest. In this
connection it appears that within twenty-four hours
after the arrival of the Perla at the port of Naga,
Captain Garrido appeared before Vicente Rodi, the
auxiliary justice of the peace of the municipality of
Naga, and made before that officer the sworn protest
which is in evidence as Exhibit B. This protest is
sufficient in our opinion to answer all the requirements
of article 835 of the Code of Commerce. A regular
justice of the peace would without doubt be competent
to take a marine protest, and the same authority must
be conceded to the auxiliary justice in the absence of
any showing in the record to the effect that the justice
of the peace himself was acting at the time in the
municipality (Adm. Code, sec. 211; sec. 334, Code of
Civ. Proc., subsecs. 14, 15). We note that in his
certificate to this protest Vicente Rodi added to the
appellation of auxiliary justice of the peace, following
his name, the additional designation "notary public exofficio." However, under subsection (c) of section 242
of the Administrative Code, it is plain that an auxiliary
justice of the peace is not an ex-officio notary public. It
results that the taking of this protest must be ascribed
to the officer in his character as auxiliary justice of the
peace and not in the character of notary public exofficio. It is hardly necessary to add that this court
takes judicial notice of the fact that Naga is not a port
of entry and that no customs official of rank is there
stationed who could have taken cognizance of this
protest.
Upon the point of responsibility for the collision we
have no hesitancy in finding that the fault is to be
attributed exclusively to the negligence and inattention
of the captain and pilot in charge of the Ban Yek.
The Perlaundoubtedly had the right of way, since this
vessel was navigating with the current, and the officers
in charge of the Perla were correct in assuming, from
the failure of the Ban Yek to respond to the single blast
of the Perla, that the officers in charge of the Ban
Yek recognized that the Perla had a right of way and
acquiesced in her resolution to keep to the right. The
excuse urged for the Ban Yek is that this vessel is
somewhat larger than the Perla and that it was
desirable for the Ban Yek to keep on the side of the
long arc of the curve of the river; and in this connection
it is suggested that the river is deeper on the outer
edge of the bend than on the inner edge. It is also
stated that on a certain previous occasion the Ban
Yek on coming out from this port had gotten stuck in
the mud in this bend by keeping too far to the right.
Moreover, it is said to be the practice of ships in
navigating this stream to keep nearer the outside than
to the inside of the bend. These suggestions are by no
means convincing. It appears in evidence that the river
bottom here is composed of mud and silt, and as the
tide at the time of this incident was nearly at its flood,
there was ample depth of water to have
accommodated the Ban Yek if she had kept to that part
of the stream which it was proper for her to occupy. We
may further observe that the disparity in the size of the
vessels was not such as to dominate the situation and
deprive the Perla of the right of way under the
conditions stated. Blame for the collision must
therefore, as already stated, be attributed to the Ban
Yek.

On the other hand no fault can be attributed to the

officers navigating the Perla either in maintaining the
course which had been determined upon for that
vessel in conformity with the marine regulations
applicable to the case or in deflecting the vessel
towards the middle of the stream after the danger of
collision became imminent. The trial judge suggests in
his opinion that when Captain Garrido saw that the Ban
Yek was holding her course to the left, he (Garrido)
should have changed the course of the Perla to port
more promptly. The validity of this criticism cannot be
admitted. Among rules applicable to navigation none is
better founded on reason and experience than that
which requires the navigating officers of any vessel to
assume that an approaching vessel will observe the
regulations prescribed for navigation (G. Urrutia &
Co. vs. Baco River Plantation Co., 26 Phil., 632, 637).
Any other rule would introduce guess work into the
control of ships and produce uncertainty in the
operation of the regulations.
Our conclusion is that his Honor, the trial judge, was in
error in not awarding damages to the Perla; but no
error was committed in absolving the plaintiffs from the
defendants' cross-complaint.
The sum of P17,827 in our opinion represents the limit
of the plaintiffs' right of recovery. In the original
complaint recovery is sought for an additional amount
of P18,000, most of which consists of damages
supposed to have been incurred from the inability of
the Perla to maintain her regular schedule while laid up
in the dock undergoing repairs. The damages thus
claimed, in addition to being somewhat of a
speculative nature, are in our opinion not sufficiently
proved to warrant the court in allowing the
same. lawphil.net
Having determined the amount which the plaintiffs are
entitled to recover, it becomes necessary to consider
the person, or persons, who must respond for these
damages. Upon this point we note that Silvino Lim is
impleaded as owner; and Siy Cong Bieng & Co. is
impleaded as the shipping agent (casa naviera), or
person in responsible control of the Ban Yek at the time
of the accident. We note further that in article 826 of
the Code of Commerce it is declared that the owner of
any vessel shall be liable for the indemnity due to any
other vessel injured by the fault, negligence, or lack of
skill of the captain of the first. We say "owner," which is
the word used in the current translation of this article
in the Spanish Code of Commerce. It is to be observed,
however, that the Spanish text itself uses the
word naviero; and there is some ambiguity in the use
of said word in this article, owing to the fact
that naviero in Spanish has several meanings. The
author of the article which appears under the
word naviero in the Enciclopedia Juridica Espaola tells
us that in Spanish it may mean either owner, outfitter,
charterer, or agent, though he says that the
fundamental and correct meaning of the word is that of
"owner." That naviero, as used in the Spanish text of
article 826, means owner is further to be inferred from
article 837, which limits the civil liability expressed in
article 826 to the value of the vessel with all her
appurtenances and all the freight earned during the
voyage. There would have been no propriety in limiting
liability to the value of the vessel unless the owner
were understood to be the person liable. It is therefore
clear that by special provision of the Code of
Commerce the owner is made responsible for the

damage caused by an accident of the kind under

consideration in this case; and in more than one case
this court has held the owner liable, when sued alone
(Philippine Shipping Co. vs.Garcia Vergara, 6 Phil., 281;
G. Urrutia & Co. vs. Baco River Plantation Co., 26 Phil.,
632).
But while it is thus demonstrated that Silvino Lim is
liable for these damages in the character of owner, it
does not necessarily follows that Siy Cong Bieng & Co.,
as character or agent (casa naviera), is exempt from
liability; and we are of the opinion that both the owner
and agent can be held responsible where both are
impleaded
together.
In
Philippine
Shipping
Co., vs. Garcia Vergara (6 Phil., 281), it seems to have
been accepted as a matter of course that both owner
and agent of the offending vessel are liable for the
damage done; and this must, we think, be true. The
liability of the naviero, in the sense of charterer or
agent, if not expressed in article 826 of the Code of
Commerce, is clearly deducible from the general
doctrine of jurisprudence stated in article 1902 of the
Civil Code, and it is also recognized, but more
especially as regards contractual obligations, in article
586 of the Code of Commerce. Moreover, we are of the
opinion that both the owner and agent (naviero) should
be declared to be jointly and severally liable, since the
obligation which is the subject of this action had its
origin in a tortious act and did not arise from contract.
Article 1137 of the Civil Code, declaring that joint
obligations shall be apportionable unless otherwise
provided, has no application to obligation arising from
tort.
For the reasons stated the judgment appealed from will
be affirmed in so far as it absolves the plaintiffs from
the defendants' cross-complaint but will be reversed in
so far as it absolves the defendants from the plaintiffs'
complaint; and judgment will be entered for the
plaintiffs to recover jointly and severally from the
defendants Silvino Lim and Siy Cong Bieng & Co. the
sum of seventeen thousand eight hundred and twentyseven pesos (P17,827), with interest from the date of
the institution of the action, without special
pronouncement as to costs of either instance. So
ordered.

[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.
DECISION
CARPIO, J.:
The Case
Before us is a Petition for Review on
Certiorari[1] seeking to annul the Decision of the Court
of Appeals[2] dated May 4, 1994 in CA-G.R. CV No.
37996, which affirmed in toto the decision[3] of the
Regional Trial Court of Quezon City, Branch 80, in Civil
Case No. Q-89-2631. The trial court disposed as
follows:

WHEREFORE, the Court finds defendants Constante

and Corazon Amor de Castro jointly and solidarily liable
to plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral
damages;
c) P45,000.00 for and by way of attorneys
fees;
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 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 the agent as commission. It was appellee who
first found Times Transit Corporation, represented by
its president Mr. Rondaris, as prospective buyer which
desired to buy two (2) lots only, specifically lots 14 and
15. Eventually, sometime in May of 1985, the sale of
lots 14 and 15 was consummated. Appellee received
from appellants P48,893.76 as commission.
It was then that the rift between the contending parties
soon emerged. Appellee apparently felt short changed
because according to him, his total commission should
be P352,500.00 which is five percent (5%) of the
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 to appellants and
unceasingly facilitated the negotiation which ultimately
led to the consummation of the sale. Hence, he sued
below to collect the balance ofP303,606.24 after
having received P48,893.76 in advance.
On the other hand, appellants completely traverse
appellees claims and essentially argue that appellee is
selfishly asking for more than what he truly deserved
as commission to the prejudice of other agents who
were more instrumental in the consummation of the
sale. Although appellants readily concede that it was
appellee who first introduced Times Transit Corp. to
them, appellee was not designated by them as their
exclusive real estate agent but that in fact there were
more or less eighteen (18) others whose collective
efforts in the long run dwarfed those of appellees,
considering that the first negotiation for the sale where
appellee took active participation failed and it was
these other agents who successfully brokered in the
second negotiation. But despite this and out of
appellants pure liberality, beneficence and
magnanimity, appellee nevertheless was given the

largest cut in the commission (P48,893.76), although

on the principle of quantum meruit he would have
certainly been entitled to less. So appellee should not
have been heard to complain of getting only a pittance
when he actually got the lions share of the commission
and worse, he should not have been allowed to get the
entire commission. Furthermore, the purchase price for
the two lots was only P3.6 million as appearing in the
deed of sale and not P7.05 million as alleged by
appellee. Thus, even assuming that appellee is entitled
to the entire commission, he would only be getting 5%
of the P3.6 million, or P180,000.00.
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision
of the trial court.
First. The Court of Appeals found that Constante
authorized Artigo to act as agent in the sale of two lots
in Cubao, Quezon City. The handwritten authorization
letter signed by Constante clearly established a
contract of agency between Constante and Artigo.
Thus, Artigo sought prospective buyers and found
Times
Transit
Corporation
(Times
Transit
for
brevity). Artigo facilitated the negotiations which
eventually led to the sale of the two lots. Therefore, the
Court of Appeals decided that Artigo is entitled to the
5% commission on the purchase price as provided in
the contract of agency.
Second. The Court of Appeals ruled that Artigos
complaint is not dismissible for failure to implead as
indispensable parties the other co-owners of the two
lots. The Court of Appeals explained that it is not
necessary to implead the other co-owners since the
action is exclusively based on a contract of agency
between Artigo and Constante.
Third. The Court of Appeals likewise declared that
the trial court did not err in admitting parol evidence to
prove the true amount paid by Times Transit to the De
Castros for the two lots. The Court of Appeals ruled
that evidence aliunde could be presented to prove that
the actual purchase price was P7.05 million and not
P3.6 million as appearing in the deed of
sale. Evidence aliunde is admissible considering that
Artigo is not a party, but a mere witness in the deed of
sale between the De Castros and Times Transit. The
Court of Appeals explained that, the rule that oral
evidence is inadmissible to vary the terms of written
instruments is generally applied only in suits between
parties to the instrument and strangers to the contract
are not bound by it. Besides, Artigo was not suing
under the deed 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
and not P3.6 million.
Hence, the instant petition.

II. NOT ORDERING THE DISMISSAL OF THE

COMPLAINT ON THE GROUND THAT
ARTIGOS CLAIM HAS BEEN EXTINGUISHED
BY
FULL
PAYMENT,
WAIVER,
OR
ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED
TESTIMONY;
V.

SANCTIONING AN AWARD OF
DAMAGES AND ATTORNEYS FEES;

MORAL

VI. NOT AWARDING THE DE CASTROS MORAL

AND
EXEMPLARY
DAMAGES,
AND
ATTORNEYS FEES.
The Courts Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits
dismissal for failure to implead other co-owners
as indispensable parties
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 claim
that Artigo always knew that the two lots were coowned by Constante and Corazon with their other
siblings Jose and Carmela whom Constante merely
represented. The De Castros contend that failure to
implead such indispensable parties is fatal to the
complaint since Artigo, as agent of all the four coowners, would be paid with funds co-owned by the four
co-owners.
The De Castros contentions are devoid of legal
basis.
An indispensable party is one whose interest will
be affected by the courts 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 courts cannot proceed without their
presence.[8] Whenever it appears to the court in the
course of a proceeding that an indispensable party has
not been joined, it is the duty of the court to stop the
trial and order the inclusion of such party. [9]
However, the rule on mandatory joinder of
indispensable parties is not applicable to the instant
case.
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 million at a
5 percent commission. The authority was on a first
come, first serve basis. The authority reads in full:

The Issues
24 Jan. 84
According to petitioners, the Court of Appeals
erred in I. NOT ORDERING THE DISMISSAL OF THE
COMPLAINT FOR FAILURE TO IMPLEAD
INDISPENSABLE PARTIES-IN-INTEREST;

To Whom It May Concern:

This is to state that Mr. Francisco Artigo is authorized
as our real estate broker in connection with the sale of
our property located at Edsa Corner New York &
Denver, Cubao, Quezon City.

Asking price P23,000,000.00 with

Indeed, Article 1216 of the Civil Code provides

that a creditor may sue any of the solidary
debtors. This article reads:

5% commission as agents fee.

C
.C. de Castro
o
wner & representing
c
o-owners
This authority is on a first-come
First serve basis CAC
Constante signed the note as owner and as
representative of the other co-owners. Under this note,
a contract of agency was clearly constituted between
Constante and Artigo. Whether Constante appointed
Artigo as agent, in Constantes individual or
representative capacity, or both, the De Castros cannot
seek the dismissal of the case for failure to implead the
other co-owners as indispensable parties. The De
Castros admit that the other co-owners are
solidarily liable under the contract of agency,
[10]
citing Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed an
agent for a common transaction or undertaking, they
shall be solidarily liable to the agent for all the
consequences of the agency.
The solidary liability of the four co-owners, however,
militates against the De Castros theory that the other
co-owners should be impleaded as indispensable
parties. A noted commentator explained Article 1915
thus
The rule in this article applies even when the
appointments were made by the principals in separate
acts, provided that they are for the same
transaction. The solidarity arises from the
common interest of the principals, and not from
the act of constituting the agency. By virtue of
this solidarity, the agent can recover from any
principal the whole compensation and indemnity
owing to him by the others. The parties, however,
may, by express agreement, negate this solidary
responsibility. The solidarity does not disappear by the
mere partition effected by the principals after the
accomplishment of the agency.
If the undertaking is one in which several are
interested, but only some create the agency, only the
latter are solidarily liable, without prejudice to the
effects of negotiorum gestio with respect to the
others. And if the power granted includes various
transactions some of which are common and others are
not, only those interested in each transaction shall be
liable for it.[11]
When the law expressly provides for solidarity of
the obligation, as in the liability of co-principals in a
contract of agency, each obligor may be compelled to
pay the entire obligation.[12] The agent may recover the
whole compensation from any one of the co-principals,
as in this case.

Art. 1216. The creditor may proceed against any one of

the solidary debtors or some or all of them
simultaneously. The demand made against one of them
shall not be an obstacle to those which may
subsequently be directed against the others, so long as
the debt has not been fully collected.
Thus,
the
Court
has
ruled
in Operators
Incorporated vs. American Biscuit Co., Inc.[13] that
x x x solidarity does not make a solidary obligor
an indispensable party in a suit filed by the
creditor. Article 1216 of the Civil Code says that the
creditor `may proceed against anyone of the solidary
debtors or some or all of them simultaneously.
(Emphasis supplied)
Second Issue: whether Artigos claim has been
extinguished by full payment, waiver or
abandonment
The De Castros claim that Artigo was fully paid on
June 14, 1985, that is, 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 the sale and entitled to a
proportionate share in the commission. They assert
that Artigo did absolutely nothing during the second
negotiation but to sign as a witness in the deed of
sale. He did not even prepare the documents for the
transaction as an active real estate broker usually
does.
The De Castros arguments are flimsy.
A contract of agency which is not contrary to law,
public order, public policy, morals or good custom is a
valid contract, and constitutes the law 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 terms and conditions
in good faith.
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
contract of agency granting Artigo a 5 percent
commission based on the selling price. These other
agents turned out to be employees of Times Transit,
the buyer Artigo introduced to the De Castros. This
prompted the trial court to observe:
The alleged `second group of agents came into the
picture only during 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.
Prudencio, happened to be employees of Times Transit,
the buyer of the properties. And their efforts were
limited to convincing Constante to part away with the
properties because the redemption period of the
foreclosed properties is around the corner, so to speak.
(tsn. June 6, 1991).
xxx

To accept Constantes version of the story is to open

the floodgates of fraud and deceit. A seller could
always pretend rejection of the offer and 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 instant case easily
presents itself if one has to consider that the
alleged `second group are the employees of the
buyer, Times Transit and they have not bettered
the offer secured by Mr. Artigo for P7 million.
It is to be noted also that while Constante was too
particular about the unrenewed real estate brokers
license of Mr. Artigo, he did not bother at all to inquire
as to the licenses of Prudencio and Castillo. (tsn, April
11, 1991, pp. 39-40).[15] (Emphasis supplied)
In any event, we find that the 5 percent real estate
brokers commission is reasonable and within the
standard practice in the real estate industry for
transactions of this nature.
The De Castros also contend that Artigos inaction
as well as failure to protest estops him from recovering
more than what was actually paid him. The De Castros
cite Article 1235 of the Civil Code which reads:
Art. 1235. When the obligee accepts the performance,
knowing its incompleteness and irregularity, and
without expressing any protest or objection, the
obligation is deemed fully complied with.
The De Castros reliance on Article 1235 of the Civil
Code is misplaced. Artigos acceptance of partial
payment of his commission neither amounts to a
waiver of the balance nor puts him in estoppel. This is
the import of Article 1235 which was explained in this
wise:
The word accept, as used in Article 1235 of the Civil
Code, means to take as satisfactory or sufficient, or
agree to an incomplete or irregular
performance. Hence, the mere receipt of a partial
payment is not equivalent to the required
acceptance of performance as would extinguish
the whole obligation.[16] (Emphasis supplied)
There is thus a clear distinction between
acceptance and mere receipt. In this case, it is evident
that Artigo merely received the partial payment
without waiving the balance. Thus, there is no estoppel
to speak of.
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. Hence,
Artigos claim for the balance of his commission is
barred by laches.
Laches means the failure or neglect, for an
unreasonable and unexplained length of time, to do
that which by exercising due diligence could or should
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 assert it either
has abandoned it or declined to assert it.[17]
Artigo disputes the claim that he neglected to
assert his rights. He was appointed as agent on January
24, 1984. The two lots were finally sold in June

1985. As found by the trial court, Artigo demanded in

April and July of 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]
After it became clear that his demands for payment
have fallen on deaf ears, Artigo decided to sue on May
29, 1989.
Actions upon a written contract, such as a contract
of agency, must be brought within ten years from the
time the right of action accrues.[19] The right of action
accrues from the moment the breach of right or duty
occurs. From this moment, the creditor can institute
the action even as the ten-year prescriptive period
begins to run.[20]
The De Castros admit that Artigos claim was filed
within the ten-year prescriptive period. The De Castros,
however, still maintain that Artigos cause of action is
barred by laches. Laches does not apply because only
four years had lapsed from the time of the sale in June
1985. Artigo made a demand in July 1985 and filed the
action in court on May 29, 1989, well within the tenyear prescriptive period. This does not constitute an
unreasonable delay in asserting ones right. The Court
has ruled, a delay within the prescriptive period is
sanctioned by law and is not considered to be a
delay that would bar relief.[21] In explaining that
laches applies only in the absence of a statutory
prescriptive period, the Court has stated Laches is recourse in equity. Equity, however, is
applied only in the absence, never in
contravention, of statutory law. Thus, laches,
cannot, as a rule, be used to abate a collection
suit filed within the prescriptive period
mandated by the Civil Code.[22]
Clearly, the De Castros defense of laches finds no
support in law, equity or jurisprudence.
Third issue: whether the determination of the
purchase price was made in violation of the
Rules on Evidence
The De Castros want the Court to re-examine the
probative value of the evidence adduced in the trial
court to determine whether the actual selling price of
the two lots was P7.05 million and not P3.6 million. The
De Castros 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 appellate
court. The De Castros insist that the purchase price is
P3.6 million as expressly stated in the deed of sale, the
due execution and authenticity of which was admitted
during the trial.
The De Castros believe that the trial and appellate
courts
committed
a
mistake
in
considering
incompetent evidence and disregarding the best
evidence and parole evidence rules. They claim that
the Court of Appeals erroneously affirmed sub
silentio the trial courts reliance on the various
correspondences between Constante and Times Transit
which were mere photocopies that do not satisfy the
best evidence rule. Further, these letters covered only
the first negotiations between Constante and Times
Transit which failed; hence, these are immaterial in
determining the final purchase price.

The De Castros further argue that if there was an

undervaluation, Artigo who signed as witness benefited
therefrom, and being equally guilty, 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 the purpose considered by
the trial court. Specifically, Exhibits B, C, D and E were
not offered to prove that the purchase price was P7.05
Million. Finally, they argue that the courts a quo erred
in giving credence to the perjured testimony of
Artigo. They want the entire testimony of Artigo
rejected as a falsehood because he was lying when he
claimed at the outset that he was a licensed real estate
broker when he was not.
Whether the actual purchase price was P7.05
Million as found by the trial court and affirmed by the
Court of Appeals, or P3.6 Million as claimed by the De
Castros, is a question of fact and not of law. Inevitably,
this calls for an inquiry into the facts and evidence on
record. This we can not do.
It is not the function of this Court to re-examine
the evidence submitted by the parties, or analyze or
weigh the evidence again.[23] This Court is not the
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 petitioner can only
raise questions of law. Our pronouncement in the case
of Cormero vs. Court of Appeals[24] bears reiteration:
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 respondent court. Such task
however is foreclosed by the rule that in petitions for
certiorari as a mode of appeal, like this one, only
questions of law distinctly set forth may be
raised. These questions have been defined as those
that do not call for any examination of the probative
value of the evidence presented by the
parties. (Uniland Resources vs. Development Bank of
the Philippines, 200 SCRA 751 [1991] citing Goduco vs.
Court of appeals, et al., 119 Phil. 531; Hernandez vs.
Court of Appeals, 149 SCRA 67). And when this court is
asked to go over the proof presented by the parties,
and analyze, assess and weigh them to ascertain if the
trial court and the appellate court were correct in
according superior credit to this or that piece of
evidence and eventually, to the totality of the evidence
of one party or the other, the court cannot and will not
do the same. (Elayda vs. Court of Appeals, 199 SCRA
349 [1991]).Thus, in the absence of any showing that
the findings complained of are totally devoid of support
in the record, or that they are so glaringly erroneous as
to constitute serious abuse of discretion, such findings
must stand, for this court is not expected or required to

examine or contrast the oral and documentary

evidence submitted by the parties. (Morales vs. Court
of Appeals, 197 SCRA 391 [1991] citing Santa Ana vs.
Hernandez, 18 SCRA 973 [1966]).
We find no reason to depart from this
principle. The trial and appellate courts are in a much
better position to evaluate properly the evidence.
Hence, we find no other recourse but to affirm their
finding on the actual purchase price.
Fourth Issue: whether award of moral damages
and attorneys fees is proper
The De Castros claim that Artigo failed to prove
that he is entitled to moral damages and attorneys
fees. The De Castros, however, cite no concrete reason
except to say that they are the ones entitled to
damages since the case was filed to harass and extort
money from them.
Law and jurisprudence support the award of moral
damages and attorneys fees in favor of Artigo. The
award of damages and attorneys fees is left to the
sound discretion of the court, and if such discretion is
well exercised, as in this case, it will not be disturbed
on appeal.[25] Moral damages may be awarded when in
a breach of contract the defendant acted in bad faith,
or in wanton disregard of his contractual obligation.
[26]
On the other hand, attorneys fees are awarded in
instances where the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiffs
plainly valid, just and demandable claim. [27] There is no
reason to disturb the trial courts finding that the
defendants lack of good faith and unkind treatment of
the plaintiff in refusing to give his due commission
deserve
censure.
This
warrants
the
award
of P25,000.00 in moral damages and P45,000.00 in
attorneys fees. The amounts are, in our view, fair and
reasonable. Having found a buyer for the two lots,
Artigo had already performed his part of the bargain
under the contract of agency. The De Castros should
have exercised fairness and good judgment in dealing
with Artigo by fulfilling their own part of the bargain paying Artigo his 5 percent brokers commission based
on the actual purchase price of the two lots.
WHEREFORE, the petition is denied for lack of
merit. The Decision of the Court of Appeals dated May
4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.
SO ORDERED.