Académique Documents
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Culture Documents
the answer filed by defendants wherein they asked for the dismissal of the
complaint, as well as the agreed statement of facts, the Court of First
Instance of Ilocos Norte after rejecting the theory of the plaintiff that he was
an agent of the defendants and that as such agent he was entitled to
reimbursement of the expenses incurred by him in connection with the
agency (Arts. 1709-1729 of the old Civil Code), found that plaintiff had no
cause of action and dismissed the complaint without costs. De la Cruz
appealed directly to this Tribunal for the reason that only questions of law are
involved in the appeal.
We agree with the trial court that the relationship between the movie
corporation and the plaintiff was not that of principal and agent because the
principle of representation was in no way involved. Plaintiff was not employed
to represent the defendant corporation in its dealings with third parties. He
was a mere employee hired to perform a certain specific duty or task, that of
acting as special guard and staying at the main entrance of the movie house
to stop gate crashers and to maintain peace and order within the premises.
The question posed by this appeal is whether an employee or servant who in
line of duty and while in the performance of the task assigned to him,
performs an act which eventually results in his incurring in expenses, caused
not directly by his master or employer or his fellow servants or by reason of
his performance of his duty, but rather by a third party or stranger not in the
employ of his employer, may recover said damages against his employer.
The learned trial court in the last paragraph of its decision dismissing the
complaint said that "after studying many laws or provisions of law to find out
what law is applicable to the facts submitted and admitted by the parties, has
found none and it has no other alternative than to dismiss the complaint."
The trial court is right. We confess that we are not aware of any law or
judicial authority that is directly applicable to the present case, and realizing
the importance and far-reaching effect of a ruling on the subject-matter we
have searched, though vainly, for judicial authorities and enlightenment. All
the laws and principles of law we have found, as regards master and
servants, or employer and employee, refer to cases of physical injuries, light
or serious, resulting in loss of a member of the body or of any one of the
senses, or permanent physical disability or even death, suffered in line of
duty and in the course of the performance of the duties assigned to the
servant or employee, and these cases are mainly governed by the
Employer's Liability Act and the Workmen's Compensation Act. But a case
involving damages caused to an employee by a stranger or outsider while
said employee was in the performance of his duties, presents a novel
question which under present legislation we are neither able nor prepared to
decide in favor of the employee.
death of the deceased by the plaintiff was not the proximate cause of the
damages suffered but may be regarded as only a remote cause, because
from the shooting to the damages suffered there was not that natural and
continuous sequence required to fix civil responsibility.
In view of the foregoing, the judgment of the lower court is affirmed. No
costs.
4. The court erred in reversing the finding of the trial judge that
Nielson's action had prescribed, but considering only the first claim
and ignoring the prescriptibility of the other claims.
Alternative Grounds:
5. The court erred in holding that the period of suspension of the
contract on account of the war lasted from February 1942 to June
26, 1948.
EN BANC
G.R. No. L-21601
December 28, 1968
NIELSON & COMPANY, INC., plaintiff-appellant,
vs.
LEPANTO CONSOLIDATED MINING COMPANY, defendant-appellee.
RESOLUTION
ZALDIVAR, J.:
memorandum and its brief on appeal, and never did it assert the theory that it
has the right to terminate the management contract because that contract is
one of agency which it could terminate at will. While it is true that in its ninth
and tenth special affirmative defenses, in its answer in the court below,
Lepanto pleaded that it had the right to terminate the management contract
in question, that plea of its right to terminate was not based upon the ground
that the relation between Lepanto and Nielson was that of principal and
agent but upon the ground that Nielson had allegedly not complied with
certain terms of the management contract. If Lepanto had thought of
considering the management contract as one of agency it could have
amended its answer by stating exactly its position. It could have asserted its
theory of agency in its memorandum for the lower court and in its brief on
appeal. This, Lepanto did not do. It is the rule, and the settled doctrine of this
Court, that a party cannot change his theory on appeal that is, that a party
cannot raise in the appellate court any question of law or of fact that was not
raised in the court below or which was not within the issue made by the
parties in their pleadings (Section 19, Rule 49 of the old Rules of Court, and
also Section 18 of the new Rules of Court; Hautea vs. Magallon, L-20345,
November 28, 1964; Northern Motors, Inc. vs. Prince Line, L-13884,
February 29, 1960; American Express Co. vs. Natividad, 46 Phil. 207;
Agoncillo vs. Javier, 38 Phil. 424 and Molina vs. Somes, 24 Phil 49).
At any rate, even if we allow Lepanto to assert its new theory at this very late
stage of the proceedings, this Court cannot sustain the same.
Lepanto contends that the management contract in question (Exhibit C) is
one of agency because: (1) Nielson was to manage and operate the mining
properties and mill on behalf, and for the account, of Lepanto; and (2)
Nielson was authorized to represent Lepanto in entering, on Lepanto's
behalf, into contracts for the hiring of laborers, purchase of supplies, and the
sale and marketing of the ores mined. All these, Lepanto claims, show that
Nielson was, by the terms of the contract, destined to execute juridical acts
not on its own behalf but on behalf of Lepanto under the control of the Board
of Directors of Lepanto "at all times". Hence Lepanto claims that the contract
is one of agency. Lepanto then maintains that an agency is revocable at the
will of the principal (Article 1733 of the Old Civil Code), regardless of any
term or period stipulated in the contract, and it was in pursuance of that right
that Lepanto terminated the contract in 1945 when it took over and assumed
exclusive management of the work previously entrusted to Nielson under the
contract. Lepanto finally maintains that Nielson as an agent is not entitled to
damages since the law gives to the principal the right to terminate the agency
at will.
On the basis of the interpretation of Article 1709 of the old Civil Code, Article
1868 of the new Civil Code has defined the contract of agency in more
explicit terms, as follows:
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.
There is another obvious distinction between agency and lease of services.
Agency is a preparatory contract, as agency "does not stop with the agency
because the purpose is to enter into other contracts." The most characteristic
feature of an agency relationship is the agent's power to bring about
business relations between his principal and third persons. "The agent is
destined to execute juridical acts (creation, modification or extinction of
relations with third parties). Lease of services contemplate only material
(non-juridical) acts." (Reyes and Puno, "An Outline of Philippine Civil Law,"
Vol. V, p. 277).
In the light of the interpretations we have mentioned in the foregoing
paragraphs let us now determine the nature of the management contract in
question. Under the contract, Nielson had agreed, for a period of five years,
with the right to renew for a like period, to explore, develop and operate the
mining claims of Lepanto, and to mine, or mine and mill, such pay ore as
may be found therein and to market the metallic products recovered
therefrom which may prove to be marketable, as well as to render for
Lepanto other services specified in the contract. We gather from the contract
that the work undertaken by Nielson was to take complete charge subject at
all times to the general control of the Board of Directors of Lepanto, of the
exploration and development of the mining claims, of the hiring of a sufficient
and competent staff and of sufficient and capable laborers, of the prospecting
and development of the mine, of the erection and operation of the mill, and of
the benefication and marketing of the minerals found on the mining
properties; and in carrying out said obligation Nielson should proceed
diligently and in accordance with the best mining practice. In connection with
its work Nielson was to submit reports, maps, plans and recommendations
with respect to the operation and development of the mining properties,
make recommendations and plans on the erection or enlargement of any
existing mill, dispatch mining engineers and technicians to the mining
properties as from time to time may reasonably be required to investigate
and make recommendations without cost or expense to Lepanto. Nielson
was also to "act as purchasing agent of supplies, equipment and other
necessary purchases by Lepanto, provided, however, that no purchase shall
be made without the prior approval of Lepanto; and provided further, that no
truly,
In our decision we have dwelt lengthily on the points that the management
contract was suspended because of the war, and that the period of the
contract was extended for a period equivalent to the time when Nielson was
unable to perform the work of mining and milling because of the adverse
effects of the war on the work of mining and milling.
It is the contention of Lepanto that the happening of those events, and the
effects of those events, simply suspended the performance of the obligations
by either party in the contract, but did not suspend the period of the contract,
much less extended the period of the contract.
... it was impossible, as a result of the destruction of the mine, for the
plaintiff to manage and operate the same and because, as provided
in the agreement, the contract was suspended by reason of the war
(Lepanto's Brief, pp. 9-10).
Clause II, by its terms, is clear that the contract is suspended in case
fortuitous event or force majeure, such as war, adversely affects the
work of mining and milling. (Lepanto's Brief, p. 49).
Lepanto is correct when it said that the obligations under the contract were
suspended upon the happening of any of the events enumerated in
paragraph II of the management contract. Indeed, those obligations were
suspended because the contract itself was suspended. When we talk of a
contract that has been suspended we certainly mean that the contract
temporarily ceased to be operative, and the contract becomes operative
again upon the happening of a condition or when a situation obtains
which warrants the termination of the suspension of the contract.
In Our decision We pointed out that the agreement in the management
contract would be suspended when two conditions concur, namely: (1) the
happening of the event constituting a force majeure that was reasonably
beyond the control of Nielson, and (2) that the event constituting the force
majeure adversely affected the work of mining and milling. The suspension,
therefore, would last not only while the event constituting the force majeure
continued to occur but also for as long as the adverse effects of the force
majeure on the work of mining and milling had not been eliminated. Under
the management contract the happening alone of the event constituting the
force majeure which did not affect adversely the work of mining and milling
would not suspend the period of the contract. It is only when the two
conditions concur that the period of the agreement is suspended.
It is not denied that because of the war, in February 1942, the mine, the
original mill, the original power plant, the supplies and equipment, and all
installations at the Mankayan mines of Lepanto, were destroyed upon order
of the United States Army, to prevent their utilization by the enemy. It is not
denied that for the duration of the war Nielson could not undertake the work
of mining and milling. When the mines were liberated from the enemy in
August, 1945, the condition of the mines, the mill, the power plant and other
installations, was not the same as in February 1942 when they were ordered
destroyed by the US army. Certainly, upon the liberation of the mines from
the enemy, the work of mining and milling could not be undertaken by
Nielson under the same favorable circumstances that obtained before
February 1942. The work of mining and milling, as undertaken by Nielson in
January, 1942, could not be resumed by Nielson soon after liberation
because of the adverse effects of the war, and this situation continued until
June of 1948. Hence, the suspension of the management contract did not
end upon the liberation of the mines in August, 1945. The mines and the mill
and the installations, laid waste by the ravages of war, had to be
reconstructed and rehabilitated, and it can be said that it was only on June
26, 1948 that the adverse effects of the war on the work of mining and milling
had ended, because it was on that date that the operation of the mines and
the mill was resumed. The period of suspension should, therefore, be
reckoned from February 1942 until June 26, 1948, because it was during this
period that the war and the adverse effects of the war on the work of mining
and milling had lasted. The mines and the installations had to be rehabilitated
because of the adverse effects of the war. The work of rehabilitation started
soon after the liberation of the mines in August, 1945 and lasted until June
26, 1948 when, as stated in Lepanto's annual report to its stockholders for
the year 1948, "June 28, 1948 marked the official return to operation of this
company at its properties at Mankayan, Mountain Province, Philippines"
(Exh. F-1).
Lepanto would argue that if the management contract was suspended at all
the suspension should cease in August of 1945, contending that the effects
of the war should cease upon the liberation of the mines from the enemy.
This contention cannot be sustained, because the period of rehabilitation was
still a period when the physical effects of the war the destruction of the
mines and of all the mining installations adversely affected, and made
impossible, the work of mining and milling. Hence, the period of the
Lepanto. It was not until January 30, 1937 when the management contract in
question was entered into between Lepanto and Nielson (Exhibit A).
was suspended from February, 1942 to June 26, 1948, and that from the
latter date the contract had yet five years to go.
A contract for the management and operation of mines calls for a speculative
and risky venture on the part of the manager-operator. The manageroperator invests its technical know-how, undertakes back-breaking efforts
and tremendous spade-work, so to say, in the first years of its management
and operation of the mines, in the expectation that the investment and the
efforts employed might be rewarded later with success. This expected
success may never come. This had happened in the very case of the
Mankayan mines where, as recounted by Mr. Lednicky of Lepanto, various
persons and entities of different nationalities, including Lednicky himself,
invested all their money and failed. The manager-operator may not strike
sufficient ore in the first, second, third, or fourth year of the management
contract, or he may not strike ore even until the end of the fifth year. Unless
the manager-operator strikes sufficient quantity of ore he cannot expect
profits or reward for his investment and efforts. In the case of Nielson, its
corps of competent engineers, geologists, and technicians begun working on
the Mankayan mines of Lepanto since the latter part of 1936, and continued
their work without success and profit through 1937, 1938, and the earlier part
of 1939. It was only in December of 1939 when the efforts of Nielson started
to be rewarded when Lepanto realized profits and the first dividends were
declared. From that time on Nielson could expect profit to come to it as in
fact Lepanto declared dividends for 1940 and 1941 if the development and
operation of the mines and the mill would continue unhampered. The
operation, and the expected profits, however, would still be subject to
hazards due to the occurrence of fortuitous events, fires, earthquakes,
strikes, war, etc., constituting force majeure, which would result in the
destruction of the mines and the mill. One of these diverse causes, or one
after the other, may consume the whole period of the contract, and if it should
happen that way the manager-operator would reap no profit to compensate
for the first years of spade-work and investment of efforts and know-how.
Hence, in fairness to the manager-operator, so that he may not be deprived
of the benefits of the work he had accomplished, the force majeure clause is
incorporated as a standard clause in contracts for the management and
operation of mines.
The nature of the contract for the management and operation of mines
justifies the interpretation of the force majeure clause, that a period equal to
the period of suspension due to force majeure should be added to the
original term of the contract by way of an extension. We, therefore, reiterate
the ruling in Our decision that the management contract in the instant case
Executive Order No. 32 covered all debts and monetary obligation contracted
before the war (or before December 8, 1941) and those contracted
subsequent to December 8, 1941 and during the Japanese occupation.
Republic Act No. 342, approved on July 26, 1948, lifted the moratorium
provided for in Executive Order No. 32 on pre-war (or pre-December 8, 1941)
debts of debtors who had not filed war damage claims with the United States
War Damage Commission. In other words, after the effectivity of Republic Act
No. 342, the debt moratorium was limited: (1) to debts and other monetary
obligations which were contracted after December 8, 1941 and during the
Japanese occupation, and (2) to those pre-war (or pre-December 8, 1941)
debts and other monetary obligations where the debtors filed war damage
claims. That was the situation up to May 18, 1953 when this Court declared
Republic Act No. 342 unconstitutional. 7 It has been held by this Court,
however, that from March 10, 1945 when Executive Order No. 32 was
issued, to May 18, 1953 when Republic Act No. 342 was declared
unconstitutional or a period of 8 years, 2 months and 8 days the debt
moratorium was in force, and had the effect of suspending the period of
prescription.8
Lepanto is wrong when in its motion for reconsideration it claims that the
moratorium provided for in Executive Order No. 32 was continued by
Republic Act No. 342 "only with respect to debtors of pre-war obligations or
those incurred prior to December 8, 1941," and that "the moratorium
was lifted and terminated with respect to obligations incurred after December
8, 1941."9
This Court has held that Republic Act No. 342 does not apply to debts
contracted during the war and did not lift the moratorium in relations
thereto.10 In the case of Abraham, et al. vs. Intestate Estate of Juan C.
Ysmael, et al., L-16741, Jan. 31, 1962, this Court said:
We therefore reiterate the ruling in Our decision that the claim involved in the
first item awarded to Nielson had not prescribed.
It having been declared in Our decision, as well as in this resolution, that the
management contract had been extended for 5 years, or sixty months, from
June 27, 1948 to June 26, 1953, and that the cause of action of Nielson to
claim for its compensation during that period of extension had not prescribed,
it follows that Nielson should be awarded the management fees during the
whole period of extension, plus the 10% of the value of the dividends
declared during the said period of extension, the 10% of the depletion
reserve that was set up, and the 10% of any amount expended out of surplus
earnings for capital account.
5. In the seventh ground of its motion for reconsideration, Lepanto maintains
that this Court erred in ordering Lepanto to issue and deliver to Nielson
shares of stock together with fruits thereof.
In Our decision, We declared that pursuant to the modified agreement
regarding the compensation of Nielson which provides, among others, that
Nielson would receive 10% of any dividends declared and paid, when and as
paid, Nielson should be paid 10% of the stock dividends declared by Lepanto
during the period of extension of the contract.
It is not denied that on November 28, 1949, Lepanto declared stock
dividends worth P1,000,000.00; and on August 22, 1950, it declared stock
dividends worth P2,000,000.00). In other words, during the period of
extension Lepanto had declared stock dividends worth P3,000,000.00. We
held in Our decision that Nielson is entitled to receive l0% of the stock
dividends declared, or shares of stock worth P300,000.00 at the par value of
P0.10 per share. We ordered Lepanto to issue and deliver to Nielson those
shares of stocks as well as all the fruits or dividends that accrued to said
shares.
In its motion for reconsideration, Lepanto contends that the payment to
Nielson of stock dividends as compensation for its services under the
management contract is a violation of the Corporation Law, and that it was
not, and it could not be, the intention of Lepanto and Nielson as
contracting parties that the services of Nielson should be paid in shares of
stock taken out of stock dividends declared by Lepanto. We have
assiduously considered the arguments adduced by Lepanto in support of its
contention, as well as the answer of Nielson in this connection, and We have
arrived at the conclusion that there is merit in the contention of Lepanto.
Section 16 of the Corporation Law, in part, provides as follows:
xxx
xxx
stock in exchange for cash. But a share of stock thus issued should be part
of the original capital stock of the corporation upon its organization, or part of
the stocks issued when the increase of the capitalization of a corporation is
properly authorized. In other words, it is the shares of stock that are originally
issued by the corporation and forming part of the capital that can be
exchanged for cash or services rendered, or property; that is, if the
corporation has original shares of stock unsold or unsubscribed, either
coming from the original capitalization or from the increased capitalization.
Those shares of stock may be issued to a person who is not a stockholder, or
to a person already a stockholder in exchange for services rendered or for
cash or property. But a share of stock coming from stock dividends declared
cannot be issued to one who is not a stockholder of a corporation.
A "stock dividend" is any dividend payable in shares of stock of the
corporation declaring or authorizing such dividend. It is, what the term itself
implies, a distribution of the shares of stock of the corporation among the
stockholders as dividends. A stock dividend of a corporation is a dividend
paid in shares of stock instead of cash, and is properly payable only out of
surplus profits.15 So, a stock dividend is actually two things: (1) a dividend,
and (2) the enforced use of the dividend money to purchase additional
shares of stock at par.16 When a corporation issues stock dividends, it shows
that the corporation's accumulated profits have been capitalized instead of
distributed to the stockholders or retained as surplus available for
distribution, in money or kind, should opportunity offer. Far from being a
realization of profits for the stockholder, it tends rather to postpone said
realization, in that the fund represented by the new stock has been
transferred from surplus to assets and no longer available for actual
distribution.17 Thus, it is apparent that stock dividends are issued only to
stockholders. This is so because only stockholders are entitled to dividends.
They are the only ones who have a right to a proportional share in that part of
the surplus which is declared as dividends. A stock dividend really adds
nothing to the interest of the stockholder; the proportional interest of each
stockholder remains the same.18If a stockholder is deprived of his stock
dividends - and this happens if the shares of stock forming part of the stock
dividends are issued to a non-stockholder then the proportion of the
stockholder's interest changes radically. Stock dividends are civil fruits of the
original investment, and to the owners of the shares belong the civil fruits. 19
The term "dividend" both in the technical sense and its ordinary acceptation,
is that part or portion of the profits of the enterprise which the corporation, by
its governing agents, sets apart for ratable division among the holders of the
capital stock. It means the fund actually set aside, and declared by the
directors of the corporation as dividends and duly ordered by the director, or
From the sentence, "The Chairman stated that he believed that it would be
better to tie the computation of the 10% participation of Nielson & Company,
Inc., to the dividend, because Nielson will then be able to definitely compute
its net participation by the amount of the dividends declared" the idea is
conveyed that the intention of Lepanto, as expressed by its Chairman C. A.
DeWitt, was to make the value of the dividends declared whether the
dividends were in cash or in stock as the basis for determining the amount
of compensation that should be paid to Nielson, in the proportion of 10% of
the cash value of the dividends so declared. It does not mean, however, that
the compensation of Nielson would be taken from the amount actually
declared as cash dividend to be distributed to the stockholder, nor from the
shares of stocks to be issued to the stockholders as stock dividends, but
from the other assets or funds of the corporation which are not burdened by
the dividends thus declared. In other words, if, for example, cash dividends of
P300,000.00 are declared, Nielson would be entitled to a compensation of
P30,000.00, but this P30,000.00 should not be taken from the P300,000.00
to be distributed as cash dividends to the stockholders but from some other
funds or assets of the corporation which are not included in the amount to
answer for the cash dividends thus declared. This is so because if the
P30,000.00 would be taken out from the P300,000.00 declared as cash
dividends, then the stockholders would not be getting P300,000.00 as
dividends but only P270,000.00. There would be a dilution of the dividend
that corresponds to each share of stock held by the stockholders. Similarly, if
there were stock dividends worth one million pesos that were declared, which
means an issuance of ten million shares at the par value of ten centavos per
share, it does not mean that Nielson would be given 100,000 shares. It only
means that Nielson should be given the equivalent of 10% of the aggregate
cash value of those shares issued as stock dividends. That this was the
understanding of Nielson itself is borne out by the fact that in its appeal brief
Nielson urged that it should be paid "P300,000.00 being 10% of the
P3,000,000.00 stock dividends declared on November 28, 1949 and August
20, 1950...."21
We, therefore, reconsider that part of Our decision which declares that
Nielson is entitled to shares of stock worth P300,000.00 based on the stock
dividends declared on November 28, 1949 and on August 20, 1950, together
with all the fruits accruing thereto. Instead, We declare that Nielson is entitled
to payment by Lepanto of P300,000.00 in cash, which is equivalent to 10% of
the money value of the stock dividends worth P3,000,000.00 which were
declared on November 28, 1949 and on August 20, 1950, with interest
thereon at the rate of 6% from February 6, 1958.
In view of Our ruling in this resolution that Nielson is not entitled to receive
shares of stock as stock dividends in payment of its compensation under the
management contract, We do not consider it necessary to discuss this
ground of the motion for reconsideration. The awards in the present case are
all reduced to specific sums of money.
7. In the ninth ground of its motion for reconsideration Lepanto maintains that
this Court erred in rendering judgment or attorney's fees.
The matter of the award of attorney's fees is within the sound discretion of
this Court. In Our decision We have stated the reason why the award of
P50,000.00 for attorney's fees is considered by this Court as reasonable.
Accordingly, We resolve to modify the decision that We rendered on
December 17, 1966, in the sense that instead of awarding Nielson shares of
stock worth P300,000.00 at the par value of ten centavos (P0.10) per share
based on the stock dividends declared by Lepanto on November 28, 1949
and August 20, 1950, together with their fruits, Nielson should be awarded
the sum of P300,000.00 which is an amount equivalent to 10% of the cash
value of the stock dividends thus declared, as part of the compensation due
Nielson under the management contract. The dispositive portion of the
decision should, therefore, be amended, to read as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, We hereby reverse the
decision of the court a quo and enter in lieu thereof another, ordering the
appellee Lepanto to pay the appellant Nielson the different amounts as
specified hereinbelow:
(1) Seventeen thousand five hundred pesos (P17,500.00), equivalent to 10%
of the cash dividends of December, 1941, with legal interest thereon from the
date of the filing of the complaint;
(2) Two thousand five hundred pesos (P2,500.00) as management fee for
January 1942, with legal interest thereon from the date of the filing of the
complaint;
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received,
within a period of sixty days from the date of their shipment.
(C) The expenses for transportation and shipment shall be borne by M.
Quiroga, and the freight, insurance, and cost of unloading from the
vessel at the point where the beds are received, shall be paid by Mr.
Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its
payment, said payment when made shall be considered as a prompt
payment, and as such a deduction of 2 per cent shall be made from the
amount of the invoice.
EN BANC
G.R. No. L-11491
August 23, 1918
ANDRES QUIROGA, plaintiff-appellant,
vs.
PARSONS HARDWARE CO., defendant-appellee.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.
Crossfield & O'Brien for appellee.
AVANCEA, J.:
On January 24, 1911, in this city of manila, a contract in the following tenor
was entered into by and between the plaintiff, as party of the first part, and J.
Parsons (to whose rights and obligations the present defendant later
subrogated itself), as party of the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES
QUIROGA AND J. PARSONS, BOTH MERCHANTS
ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE
OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his
beds in the Visayan Islands to J. Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for
the latter's establishment in Iloilo, and shall invoice them at the same
price he has fixed for sales, in Manila, and, in the invoices, shall make
and allowance of a discount of 25 per cent of the invoiced prices, as
commission on the sale; and Mr. Parsons shall order the beds by the
dozen, whether of the same or of different styles.
The same discount shall be made on the amount of any invoice which
Mr. Parsons may deem convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before
hand of any alteration in price which he may plan to make in respect to
his beds, and agrees that if on the date when such alteration takes effect
he should have any order pending to be served to Mr. Parsons, such
order shall enjoy the advantage of the alteration if the price thereby be
lowered, but shall not be affected by said alteration if the price thereby be
increased, for, in this latter case, Mr. Quiroga assumed the obligation to
invoice the beds at the price at which the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except the
"Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement which, for
the benefit of both contracting parties, Mr. Parsons may find himself
obliged to make, Mr. Quiroga assumes the obligation to offer and give
the preference to Mr. Parsons in case anyone should apply for the
exclusive agency for any island not comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the
sale of "Quiroga" beds in all the towns of the Archipelago where there are
no exclusive agents, and shall immediately report such action to Mr.
Quiroga for his approval.
ART. 4. This contract is made for an unlimited period, and may be
terminated by either of the contracting parties on a previous notice of
ninety days to the other party.
Of the three causes of action alleged by the plaintiff in his complaint, only two
of them constitute the subject matter of this appeal and both substantially
amount to the averment that the defendant violated the following obligations:
not to sell the beds at higher prices than those of the invoices; to have an
open establishment in Iloilo; itself to conduct the agency; to keep the beds on
public exhibition, and to pay for the advertisement expenses for the same;
and to order the beds by the dozen and in no other manner. As may be seen,
with the exception of the obligation on the part of the defendant to order the
beds by the dozen and in no other manner, none of the obligations imputed
to the defendant in the two causes of action are expressly set forth in the
contract. But the plaintiff alleged that the defendant was his agent for the sale
of his beds in Iloilo, and that said obligations are implied in a contract of
commercial agency. The whole question, therefore, reduced itself to a
determination as to whether the defendant, by reason of the contract
hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the
sale of his beds.
In order to classify a contract, due regard must be given to its essential
clauses. In the contract in question, what was essential, as constituting its
cause and subject matter, is that the plaintiff was to furnish the defendant
with the beds which the latter might order, at the price stipulated, and that the
defendant was to pay the price in the manner stipulated. The price agreed
upon was the one determined by the plaintiff for the sale of these beds in
Manila, with a discount of from 20 to 25 per cent, according to their class.
Payment was to be made at the end of sixty days, or before, at the plaintiff's
request, or in cash, if the defendant so preferred, and in these last two cases
an additional discount was to be allowed for prompt payment. These are
precisely the essential features of a contract of purchase and sale. There
was the obligation on the part of the plaintiff to supply the beds, and, on the
part of the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but delivers to the
principal the price he obtains from the sale of the thing to a third person, and
if he does not succeed in selling it, he returns it. By virtue of the contract
between the plaintiff and the defendant, the latter, on receiving the beds, was
necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the
defendant and the plaintiff is one of purchase and sale, in order to show that
it was not one made on the basis of a commission on sales, as the plaintiff
claims it was, for these contracts are incompatible with each other. But,
besides, examining the clauses of this contract, none of them is found that
requested the plaintiff's prior consent with respect to said beds, which shows
that it was not considered that the defendant had a right, by virtue of the
contract, to make this return. As regards the shipment of beds without
previous notice, it is insinuated in the record that these brass beds were
precisely the ones so shipped, and that, for this very reason, the plaintiff
agreed to their return. And with respect to the so-called commissions, we
have said that they merely constituted a discount on the invoice price, and
the reason for applying this benefit to the beds sold directly by the plaintiff to
persons in Iloilo was because, as the defendant obligated itself in the
contract to incur the expenses of advertisement of the plaintiff's beds, such
sales were to be considered as a result of that advertisement.
In respect to the defendant's obligation to order by the dozen, the only one
expressly imposed by the contract, the effect of its breach would only entitle
the plaintiff to disregard the orders which the defendant might place under
other conditions; but if the plaintiff consents to fill them, he waives his right
and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and
between the plaintiff and the defendant was one of purchase and sale, and
that the obligations the breach of which is alleged as a cause of action are
not imposed upon the defendant, either by agreement or by law.
The judgment appealed from is affirmed, with costs against the appellant. So
ordered.
EN BANC
G.R. No. L-47538
June 20, 1941
GONZALO PUYAT & SONS, INC., petitioner,
vs.
ARCO AMUSEMENT COMPANY (formerly known as Teatro
Arco), respondent.
Feria & Lao for petitioner.
J. W. Ferrier and Daniel Me. Gomez for respondent.
LAUREL, J.:
This is a petition for the issuance of a writ of certiorari to the Court of Appeals
for the purpose of reviewing its Amusement Company (formerly known as
Teatro Arco), plaintiff-appellant, vs. Gonzalo Puyat and Sons. Inc., defendantappellee."
It appears that the respondent herein brought an action against the herein
petitioner in the Court of First Instance of Manila to secure a reimbursement
of certain amounts allegedly overpaid by it on account of the purchase price
of sound reproducing equipment and machinery ordered by the petitioner
from the Starr Piano Company of Richmond, Indiana, U.S.A. The facts of the
case as found by the trial court and confirmed by the appellate court, which
are admitted by the respondent, are as follows:
In the year 1929, the "Teatro Arco", a corporation duly organized
under the laws of the Philippine Islands, with its office in Manila, was
engaged in the business of operating cinematographs. In 1930, its
name was changed to Arco Amusement Company. C. S. Salmon was
the president, while A. B. Coulette was the business manager. About
the same time, Gonzalo Puyat & Sons, Inc., another corporation
doing business in the Philippine Islands, with office in Manila, in
addition to its other business, was acting as exclusive agents in the
Philippines for the Starr Piano Company of Richmond, Indiana, U.S.
A. It would seem that this last company dealt in cinematographer
equipment and machinery, and the Arco Amusement Company
desiring to equipt its cinematograph with sound reproducing devices,
approached Gonzalo Puyat & Sons, Inc., thru its then president and
acting manager, Gil Puyat, and an employee named Santos. After
some negotiations, it was agreed between the parties, that is to say,
Salmon and Coulette on one side, representing the plaintiff, and Gil
Puyat on the other, representing the defendant, that the latter would,
on behalf of the plaintiff, order sound reproducing equipment from
the Starr Piano Company and that the plaintiff would pay the
defendant, in addition to the price of the equipment, a 10 per cent
commission, plus all expenses, such as, freight, insurance, banking
charges, cables, etc. At the expense of the plaintiff, the defendant
sent a cable, Exhibit "3", to the Starr Piano Company, inquiring about
the equipment desired and making the said company to quote its
price without discount. A reply was received by Gonzalo Puyat &
Sons, Inc., with the price, evidently the list price of $1,700 f.o.b.
factory Richmond, Indiana. The defendant did not show the plaintiff
the cable of inquiry nor the reply but merely informed the plaintiff of
the price of $1,700. Being agreeable to this price, the plaintiff, by
means of Exhibit "1", which is a letter signed by C. S. Salmon dated
November 19, 1929, formally authorized the order. The equipment
arrived about the end of the year 1929, and upon delivery of the
same to the plaintiff and the presentation of necessary papers, the
price of $1.700, plus the 10 per cent commission agreed upon and
plus all the expenses and charges, was duly paid by the plaintiff to
the defendant.
Sometime the following year, and after some negotiations between
the same parties, plaintiff and defendants, another order for sound
reproducing equipment was placed by the plaintiff with the
defendant, on the same terms as the first order. This agreement or
order was confirmed by the plaintiff by its letter Exhibit "2", without
date, that is to say, that the plaintiff would pay for the equipment the
amount of $1,600, which was supposed to be the price quoted by the
Starr Piano Company, plus 10 per cent commission, plus all
expenses incurred. The equipment under the second order arrived in
due time, and the defendant was duly paid the price of $1,600 with
its 10 per cent commission, and $160, for all expenses and charges.
This amount of $160 does not represent actual out-of-pocket
expenses paid by the defendant, but a mere flat charge and rough
estimate made by the defendant equivalent to 10 per cent of the
price of $1,600 of the equipment.
About three years later, in connection with a civil case in Vigan, filed
by one Fidel Reyes against the defendant herein Gonzalo Puyat &
Sons, Inc., the officials of the Arco Amusement Company discovered
that the price quoted to them by the defendant with regard to their
two orders mentioned was not the net price but rather the list price,
and that the defendants had obtained a discount from the Starr
Piano Company. Moreover, by reading reviews and literature on
prices of machinery and cinematograph equipment, said officials of
the plaintiff were convinced that the prices charged them by the
defendant were much too high including the charges for out-ofpocket expense. For these reasons, they sought to obtain a
reduction from the defendant or rather a reimbursement, and failing
in this they brought the present action.
The trial court held that the contract between the petitioner and the
respondent was one of outright purchase and sale, and absolved that
petitioner from the complaint. The appellate court, however, by a division
of four, with one justice dissenting held that the relation between petitioner
and respondent was that of agent and principal, the petitioner acting as agent
of the respondent in the purchase of the equipment in question, and
sentenced the petitioner to pay the respondent alleged overpayments in the
total sum of $1,335.52 or P2,671.04, together with legal interest thereon from
the date of the filing of the complaint until said amount is fully paid, as well as
to pay the costs of the suit in both instances. The appellate court further
argued that even if the contract between the petitioner and the respondent
was one of purchase and sale, the petitioner was guilty of fraud in concealing
the true price and hence would still be liable to reimburse the respondent for
the overpayments made by the latter.
The petitioner now claims that the following errors have been incurred by the
appellate court:
I. El Tribunal de Apelaciones incurrio en error de derecho al declarar
que, segun hechos, entre la recurrente y la recurrida existia una
relacion implicita de mandataria a mandante en la transaccion de
que se trata, en vez de la de vendedora a compradora como ha
declarado el Juzgado de Primera Instncia de Manila, presidido
entonces por el hoy Magistrado Honorable Marcelino Montemayor.
II. El Tribunal de Apelaciones incurrio en error de derecho al declarar
que, suponiendo que dicha relacion fuerra de vendedora a
compradora, la recurrente obtuvo, mediante dolo, el consentimiento
de la recurrida en cuanto al precio de $1,700 y $1,600 de las
maquinarias y equipos en cuestion, y condenar a la recurrente ha
obtenido de la Starr Piano Company of Richmond, Indiana.
We sustain the theory of the trial court that the contract between the
petitioner and the respondent was one of purchase and sale, and not one of
agency, for the reasons now to be stated.
In the first place, the contract is the law between the parties and should
include all the things they are supposed to have been agreed upon. What
does not appear on the face of the contract should be regarded merely as
"dealer's" or "trader's talk", which can not bind either party. (Nolbrook v.
Conner, 56 So., 576, 11 Am. Rep., 212; Bank v. Brosscell, 120 III., 161; Bank
v. Palmer, 47 III., 92; Hosser v. Copper, 8 Allen, 334; Doles v. Merrill, 173
Mass., 411.) The letters, Exhibits 1 and 2, by which the respondent accepted
the prices of $1,700 and $1,600, respectively, for the sound reproducing
equipment subject of its contract with the petitioner, are clear in their terms
and admit no other interpretation that the respondent in question at the prices
indicated which are fixed and determinate. The respondent admitted in its
complaint filed with the Court of First Instance of Manila that the petitioner
agreed to sell to it the first sound reproducing equipment and machinery. The
third paragraph of the respondent's cause of action states:
The writ of certiorari should be, as it is hereby, granted. The decision of the
appellate court is accordingly reversed and the petitioner is absolved from
the respondent's complaint in G. R. No. 1023, entitled "Arco Amusement
Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo
Puyat & Sons, Inc., defendants-appellee," without pronouncement regarding
costs. So ordered.
EN BANC
G.R. No. L-20871 April 30, 1971
KER & CO., LTD., petitioner,
vs.
JOSE B. LINGAD, as Acting Commissioner of Internal
Revenue, respondent.
Ross, Selph and Carrascoso for petitioner.
Office of the Solicitor General Arturo A. Alafriz, Solicitor Alejandro B. Afurong
and Special Atty. Balbino Gatdula, Jr. for respondent.
FERNANDO, J.:
Petitioner Ker & Co., Ltd. would have us reverse a decision of the Court of
Tax Appeals, holding it liable as a commercial broker under Section 194 (t) of
the National Internal Revenue Code. Its plea, notwithstanding the vigorous
effort of its counsel, is not sufficiently persuasive. An obstacle, well-nigh
insuperable stands in the way. The decision under review conforms to and is
in accordance with the controlling doctrine announced in the recent case
of Commissioner of Internal Revenue v. Constantino. 1 The decisive test, as
therein set forth, is the retention of the ownership of the goods delivered to
the possession of the dealer, like herein petitioner, for resale to customers,
the price and terms remaining subject to the control of the firm consigning
such goods. The facts, as found by respondent Court, to which we defer,
unmistakably indicate that such a situation does exist. The juridical
consequences must inevitably follow. We affirm.
It was shown that petitioner was assessed by the then Commissioner of
Internal Revenue Melecio R. Domingo the sum of P20,272.33 as the
commercial broker's percentage tax, surcharge, and compromise penalty for
the period from July 1, 1949 to December 31, 1953. There was a request on
the part of petitioner for the cancellation of such assessment, which request
was turned down. As a result, it filed a petition for review with the Court of
Tax Appeals. In its answer, the then Commissioner Domingo maintained his
stand that petitioner should be taxed in such amount as a commercial broker.
In the decision now under review, promulgated on October 19, 1962, the
Court of Tax Appeals held petitioner taxable except as to the compromise
penalty of P500.00, the amount due from it being fixed at P19,772.33.
Such liability arose from a contract of petitioner with the United States
Rubber International, the former being referred to as the Distributor and the
Company and to change from time to time in its discretion. 9 The dealer, as
Distributor, is allowed a discount of ten percent on the net amount of sales of
merchandise made under such agreement. 10 On a date to be determined by
the Company, the petitioner, as Distributor, was required to report to it data
showing in detail all sales during the month immediately preceding,
specifying therein the quantities, sizes and types together with such
information as may be required for accounting purposes, with the Company
rendering an invoice on sales as described to be dated as of the date of
inventory and sales report. As Distributor, petitioner had to make payment on
such invoice or invoices on due date with the Company being privileged at its
option to terminate and cancel the agreement forthwith upon the failure to
comply with this obligation. 11 The Company, at its own expense, was to keep
the consigned stock fully insured against loss or damage by fire or as a result
of fire, the policy of such insurance to be payable to it in the event of loss.
Petitioner, as Distributor, assumed full responsibility with reference to the
stock and its safety at all times; and upon request of the Company at any
time, it was to render inventory of the existing stock which could be subject to
change. 12 There was furthermore this equally tell-tale covenant: "Upon the
termination or any cancellation of this agreement all goods held on
consignment shall be held by the Distributor for the account of the Company,
without expense to the Company, until such time as provision can be made
by the Company for disposition." 13
The issue with the Court of Tax Appeals, as with us now, is whether the
relationship thus created is one of vendor and vendee or of broker and
principal. Not that there would have been the slightest doubt were it not for
the categorical denial in the contract that petitioner was not constituted as
"the agent or legal representative of the Company for any purpose
whatsoever." It would be, however, to impart to such an express disclaimer a
meaning it should not possess to ignore what is manifestly the role assigned
to petitioner considering the instrument as a whole. That would be to lose
sight altogether of what has been agreed upon. The Court of Tax Appeals
was not misled in the language of the decision now on appeal: "That the
petitioner Ker & Co., Ltd. is, by contractual stipulation, an agent of U.S.
Rubber International is borne out by the facts that petitioner can dispose of
the products of the Company only to certain persons or entities and within
stipulated limits, unless excepted by the contract or by the Rubber Company
(Par. 2); that it merely receives, accepts and/or holds upon consignment the
products, which remain properties of the latter company (Par. 8); that every
effort shall be made by petitioner to promote in every way the sale of the
products (Par. 3); that sales made by petitioner are subject to approval by the
company (Par. 12); that on dates determined by the rubber company,
petitioner shall render a detailed report showing sales during the month (Par.
14); that the rubber company shall invoice the sales as of the dates of
inventory and sales report (Par. 14); that the rubber company agrees to keep
the consigned goods fully insured under insurance policies payable to it in
case of loss (Par. 15); that upon request of the rubber company at any time,
petitioner shall render an inventory of the existing stock which may be
checked by an authorized representative of the former (Par. 15); and that
upon termination or cancellation of the Agreement, all goods held on
consignment shall be held by petitioner for the account of the rubber
company until their disposition is provided for by the latter (Par. 19). All these
circumstances are irreconcilably antagonistic to the idea of an independent
merchant." 14 Hence its conclusion: "However, upon analysis of the contract,
as a whole, together with the actual conduct of the parties in respect thereto,
we have arrived at the conclusion that the relationship between them is one
of brokerage or agency." 15 We find ourselves in agreement, notwithstanding
the able brief filed on behalf of petitioner by its counsel. As noted at the
outset, we cannot heed petitioner's plea for reversal.
1. According to the National Internal Revenue Code, a commercial broker
"includes all persons, other than importers, manufacturers, producers, or
bona fide employees, who, for compensation or profit, sell or bring about
sales or purchases of merchandise for other persons or bring proposed
buyers and sellers together, or negotiate freights or other business for
owners of vessels or other means of transportation, or for the shippers, or
consignors or consignees of freight carried by vessels or other means of
transportation. The term includes commission merchants." 16 The controlling
decision as to the test to be followed as to who falls within the above
definition of a commercial broker is that of Commissioner of Internal
Revenue v. Constantino. 17 In the language of Justice J. B. L. Reyes, who
penned the opinion: "Since the company retained ownership of the goods,
even as it delivered possession unto the dealer for resale to customers, the
price and terms of which were subject to the company's control, the
relationship between the company and the dealer is one of agency, ... ." 18 An
excerpt from Salisbury v. Brooks 19 cited in support of such a view follows: "
'The difficulty in distinguishing between contracts of sale and the creation of
an agency to sell has led to the establishment of rules by the application of
which this difficulty may be solved. The decisions say the transfer of title or
agreement to transfer it for a price paid or promised is the essence of sale. If
such transfer puts the transferee in the attitude or position of an owner and
makes him liable to the transferor as a debtor for the agreed price, and not
merely as an agent who must account for the proceeds of a resale, the
transaction is a sale; while the essence of an agency to sell is the delivery to
an agent, not as his property, but as the property of the principal, who
remains the owner and has the right to control sales, fix the price, and terms,
demand and receive the proceeds less the agent's commission upon sales
made.' " 20 The opinion relied on the work of Mechem on Sales as well as
Mechem on Agency. Williston and Tiedman both of whom wrote treatises on
Sales, were likewise referred to.
Equally relevant is this portion of the Salisbury opinion: "It is difficult to
understand or appreciate the necessity or presence of these mutual
requirements and obligations on any theory other than that of a contract of
agency. Salisbury was to furnish the mill and put the timber owned by him
into a marketable condition in the form of lumber; Brooks was to furnish the
funds necessary for that purpose, sell the manufactured product, and
account therefor to Salisbury upon the specific terms of the agreement, less
the compensation fixed by the parties in lieu of interest on the money
advanced and for services as agent. These requirements and stipulations are
in tent with any other conception of the contract. If it constitutes an
agreement to sell, they are meaningless. But they cannot be ignored. They
were placed there for some purpose, doubtless as the result of definite
antecedent negotiations therefore, consummated by the final written
expression of the agreement." 21 Hence the Constantino opinion could
categorically affirm that the mere disclaimer in a contract that an entity like
petitioner is not "the agent or legal representative for any purpose
whatsoever" does not suffice to yield the conclusion that it is an independent
merchant if the control over the goods for resale of the goods consigned is
pervasive in character. The Court of Tax Appeals decision now under review
pays fealty to such an applicable doctrine.
2. No merit therefore attaches to the first error imputed by petitioner to the
Court of Tax Appeals. Neither did such Court fail to appreciate in its true
significance the act and conduct pursued in the implementation of the
contract by both the United States Rubber International and petitioner, as
was contended in the second assignment of error. Petitioner ought to have
been aware that there was no need for such an inquiry. The terms of the
contract, as noted, speak quite clearly. There is lacking that degree of
ambiguity sufficient to give rise to serious doubt as to what was contemplated
by the parties. A reading thereof discloses that the relationship arising
therefrom was not one of seller and purchaser. If it were thus intended, then
it would not have included covenants which in their totality would negate the
concept of a firm acquiring as vendee goods from another. Instead, the
stipulations were so worded as to lead to no other conclusion than that the
control by the United States Rubber International over the goods in question
is, in the language of the Constantino opinion, "pervasive". The insistence on
a relationship opposed to that apparent from the language employed might
even yield the impression that such a mode of construction was resorted to in
proof of purchases. Among these was SLDR No. 1214M, which gave rise to
the instant case. Dated October 16, 1989, SLDR No. 1214M covers 25,000
bags of sugar. Each bag contained 50 kilograms and priced at P638.00 per
bag as "per sales order VMC Marketing No. 042 dated October 16,
1989."[1] The transaction it covered was a "direct sale." [2] The SLDR also
contains an additional note which reads: "subject for (sic) availability of a (sic)
stock at NAWACO (warehouse)."[3]
On October 25, 1989, STM sold to private respondent Consolidated Sugar
Corporation (CSC) its rights in SLDR No. 1214M for P 14,750,000.00. CSC
issued one check dated October 25, 1989 and three checks postdated
November 13, 1989 in payment. That same day, CSC wrote petitioner that it
had been authorized by STM to withdraw the sugar covered by SLDR No.
1214M. Enclosed in the letter were a copy of SLDR No. 1214M and a letter
of authority from STM authorizing CSC "to withdraw for and in our behalf the
refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar
(SDR) No. 1214 dated October 16, 1989 in the total quantity of 25,000
bags."[4]
On October 27, 1989, STM issued 16 checks in the total amount of
P31,900,000.00 with petitioner as payee. The latter, in turn, issued Official
Receipt No. 33743 dated October 27, 1989 acknowledging receipt of the said
checks in payment of 50,000 bags. Aside from SLDR No. 1214M, said
checks also covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No. 1214M to the petitioner's
NAWACO warehouse and was allowed to withdraw sugar. However, after
2,000 bags had been released, petitioner refused to allow further withdrawals
of sugar against SLDR No. 1214M. CSC then sent petitioner a letter dated
January 23, 1990 informing it that SLDR No. 1214M had been "sold and
endorsed" to it but that it had been refused further withdrawals of sugar from
petitioner's warehouse despite the fact that only 2,000 bags had been
withdrawn.[5] CSC thus inquired when it would be allowed to withdraw the
remaining 23,000 bags.
On January 31, 1990, petitioner replied that it could not allow any further
withdrawals of sugar against SLDR No. 1214M because STM had already
dwithdrawn all the sugar covered by the cleared checks. [6]
On March 2, 1990, CSC sent petitioner a letter demanding the release of the
balance of 23,000 bags.
Seven days later, petitioner reiterated that all the sugar corresponding to the
amount of STM's cleared checks had been fully withdrawn and hence, there
would be no more deliveries of the commodity to STM's account. Petitioner
also noted that CSC had represented itself to be STM's agent as it had
withdrawn the 2,000 bags against SLDR No. 1214M "for and in behalf" of
STM.
On April 27, 1990, CSC filed a complaint for specific performance, docketed
as Civil Case No. 90-1118. Defendants were Teresita Ng Sy (doing business
under the name of St. Therese Merchandising) and herein petitioner. Since
the former could not be served with summons, the case proceeded only
against the latter. During the trial, it was discovered that Teresita Ng Go who
testified for CSC was the same Teresita Ng Sy who could not be reached
through summons.[7] CSC, however, did not bother to pursue its case against
her, but instead used her as its witness.
CSC's complaint alleged that STM had fully paid petitioner for the sugar
covered by SLDR No. 1214M. Therefore, the latter had no justification for
refusing delivery of the sugar. CSC prayed that petitioner be ordered to
deliver the 23,000 bags covered by SLDR No. 1214M and sought the award
of P1,104,000.00 in unrealized profits, P3,000,000.00 as exemplary
damages, P2,200,000.00 as attorney's fees and litigation expenses.
Petitioner's primary defense a quo was that it was an unpaid seller for the
23,000 bags.[8] Since STM had already drawn in full all the sugar
corresponding to the amount of its cleared checks, it could no longer
authorize further delivery of sugar to CSC. Petitioner also contended that it
had no privity of contract with CSC.
Petitioner explained that the SLDRs, which it had issued, were not
documents of title, but mere delivery receipts issued pursuant to a series of
transactions entered into between it and STM. The SLDRs prescribed
delivery of the sugar to the party specified therein and did not authorize the
transfer of said party's rights and interests.
Petitioner also alleged that CSC did not pay for the SLDR and was actually
STM's co-conspirator to defraud it through a misrepresentation that CSC was
an innocent purchaser for value and in good faith. Petitioner then prayed that
CSC be ordered to pay it the following sums: P10,000,000.00 as moral
damages; P10,000,000.00 as exemplary damages; and P1,500,000.00 as
attorney's fees. Petitioner also prayed that cross-defendant STM be ordered
clear in Exhibit 'F' that with respect to the sugar covered by SLDR No. 1214
the same has been fully paid as indicated by the word 'cleared' appearing
under the column of 'status of payment.'
"On the other hand, the claim of defendant Victorias Milling Company that the
purchase price of the 25,000 bags of sugar purchased by St. Therese
Merchandising covered by SLDR No. 1214 has not been fully paid is
supported only by the testimony of Arnulfo Caintic, witness for defendant
Victorias Milling Company. The Court notes that the testimony of Arnulfo
Caintic is merely a sweeping barren assertion that the purchase price has not
been fully paid and is not corroborated by any positive evidence. There is an
insinuation by Arnulfo Caintic in his testimony that the postdated checks
issued by the buyer in payment of the purchased price were dishonored.
However, said witness failed to present in Court any dishonored check or any
replacement check. Said witness likewise failed to present any bank record
showing that the checks issued by the buyer, Teresita Ng Go, in payment of
the purchase price of the sugar covered by SLDR No. 1214 were
dishonored."[10]
Petitioner appealed the trial courts decision to the Court of Appeals.
On appeal, petitioner averred that the dealings between it and STM were part
of a series of transactions involving only one account or one general contract
of sale. Pursuant to this contract, STM or any of its authorized agents could
withdraw bags of sugar only against cleared checks of STM. SLDR No.
21214M was only one of 22 SLDRs issued to STM andsince the latter had
already withdrawn its full quota of sugar under the said SLDR, CSC was
already precluded from seeking delivery of the 23,000 bags of sugar.
Private respondent CSC countered that the sugar purchases involving SLDR
No. 1214M were separate and independent transactions and that the details
of the series of purchases were contained in a single statement with a
consolidated summary of cleared check payments and sugar stock
withdrawals because this a more convenient system than issuing separate
statements for each purchase.
The appellate court considered the following issues: (a) Whether or not the
transaction between petitioner and STM involving SLDR No. 1214M was a
separate, independent, and single transaction; (b) Whether or not CSC had
the capacity to sue on its own on SLDR No. 1214M; and (c) Whether or not
CSC as buyer from STM of the rights to 25,000 bags of sugar covered by
SLDR No. 1214M could compel petitioner to deliver 23,000 bags allegedly
unwithdrawn.
On February 24, 1994, the Court of Appeals rendered its decision modifying
the trial court's judgment, to wit:
"WHEREFORE, the Court hereby MODIFIES the assailed judgment and
orders defendant-appellant to:
"1) Deliver to plaintiff-appellee 12,586 bags of sugar covered by SLDR No.
1214M;
" 2) Pay to plaintiff-appellee P792,918.00 which is 10% of the value of the
undelivered bags of refined sugar, as attorneys fees;
"3) Pay the costs of suit.
"SO ORDERED."[11]
Both parties then seasonably filed separate motions for reconsideration.
In its resolution dated September 30, 1994, the appellate court modified its
decision to read:
"WHEREFORE, the Court hereby modifies the assailed judgment and orders
defendant-appellant to:
"(1) Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR
No. 1214M;
"(2) Pay costs of suit.
"SO ORDERED."[12]
The appellate court explained the rationale for the modification as follows:
"There is merit in plaintiff-appellee's position.
"Exhibit F' We relied upon in fixing the number of bags of sugar which
remained undelivered as 12,586 cannot be made the basis for such a finding.
The rule is explicit that courts should consider the evidence only for the
purpose for which it was offered. (People v. Abalos, et al, 1 CA Rep 783).
The rationale for this is to afford the party against whom the evidence is
presented to object thereto if he deems it necessary. Plaintiff-appellee is,
therefore, correct in its argument that Exhibit F' which was offered to prove
that checks in the total amount of P15,950,000.00 had been cleared. (Formal
Offer of Evidence for Plaintiff, Records p. 58) cannot be used to prove the
proposition that 12,586 bags of sugar remained undelivered.
"Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p.
33] and Marianito L. Santos [TSN, 17 October 1990, pp. 16, 18, and
36]) presented by plaintiff-appellee was to the effect that it had withdrawn
only 2,000 bags of sugar from SLDR after which it was not allowed to
withdraw anymore. Documentary evidence (Exhibit I, Id., p. 78, Exhibit K, Id.,
p. 80) show that plaintiff-appellee had sent demand letters to defendantappellant asking the latter to allow it to withdraw the remaining 23,000 bags
of sugar from SLDR 1214M. Defendant-appellant, on the other hand, alleged
that sugar delivery to the STM corresponded only to the value of cleared
checks; and that all sugar corresponded to cleared checks had been
withdrawn. Defendant-appellant did not rebut plaintiff-appellee's assertions. It
did not present evidence to show how many bags of sugar had been
withdrawn against SLDR No. 1214M, precisely because of its theory that all
sales in question were a series of one single transaction and withdrawal of
sugar depended on the clearing of checks paid therefor.
"After a second look at the evidence, We see no reason to overturn the
findings of the trial court on this point."[13]
Hence, the instant petition, positing the following errors as grounds for
review:
"1. The Court of Appeals erred in not holding that STM's and private
respondent's specially informing petitioner that respondent was authorized by
buyer STM to withdraw sugar against SLDR No. 1214M "for and in our (STM)
behalf," (emphasis in the original) private respondent's withdrawing 2,000
bags of sugar for STM, and STM's empowering other persons as its agents
to withdraw sugar against the same SLDR No. 1214M, rendered respondent
like the other persons, an agent of STM as held in Rallos v. Felix Go Chan &
Realty Corp., 81 SCRA 252, and precluded it from subsequently claiming and
proving being an assignee of SLDR No. 1214M and from suing by itself for its
enforcement because it was conclusively presumed to be an agent (Sec. 2,
Rule 131, Rules of Court) and estopped from doing so. (Art. 1431, Civil
Code).
" 2. The Court of Appeals erred in manifestly and arbitrarily ignoring and
disregarding certain relevant and undisputed facts which, had they been
considered, would have shown that petitioner was not liable, except for 69
bags of sugar, and which would justify review of its conclusion of facts by this
Honorable Court.
" 3. The Court of Appeals misapplied the law on compensation under Arts.
1279, 1285 and 1626 of the Civil Code when it ruled that compensation
applied only to credits from one SLDR or contract and not to those from two
or more distinct contracts between the same parties; and erred in denying
petitioner's right to setoff all its credits arising prior to notice of assignment
from other sales or SLDRs against private respondent's claim as assignee
under SLDR No. 1214M, so as to extinguish or reduce its liability to 69 bags,
because the law on compensation applies precisely to two or more distinct
contracts between the same parties (emphasis in the original).
"4. The Court of Appeals erred in concluding that the settlement or liquidation
of accounts in Exh. F between petitioner and STM, respondent's admission
of its balance, and STM's acquiescence thereto by silence for almost one
year did not render Exh. `F' an account stated and its balance binding.
(3)....Whether or not the Court of Appeals erred in not ruling that the sale of
sugar under SLDR No. 1214M was a conditional sale or a contract to sell and
hence freed petitioner from further obligations.
(4)....Whether or not the Court of Appeals committed an error of law in not
applying the "clean hands doctrine" to preclude CSC from seeking judicial
relief.
The issues will be discussed in seriatim.
Anent the first issue, we find from the records that petitioner raised this issue
for the first time on appeal. It is settled that an issue which was not raised
during the trial in the court below could not be raised for the first time on
appeal as to do so would be offensive to the basic rules of fair play, justice,
and due process.[15] Nonetheless, the Court of Appeals opted to address this
issue, hence, now a matter for our consideration.
Petitioner heavily relies upon STM's letter of authority allowing CSC to
withdraw sugar against SLDR No. 1214M to show that the latter was STM's
agent. The pertinent portion of said letter reads:
"5. The Court of Appeals erred in not holding that the conditions of the
assigned SLDR No. 1214, namely, (a) its subject matter being generic, and
(b) the sale of sugar being subject to its availability at the Nawaco
warehouse, made the sale conditional and prevented STM or private
respondent from acquiring title to the sugar; and the non-availability of sugar
freed petitioner from further obligation.
"6. The Court of Appeals erred in not holding that the "clean hands" doctrine
precluded respondent from seeking judicial reliefs (sic) from petitioner, its
only remedy being against its assignor."[14]
"Art. 1868. By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with the
consent or authority of the latter."
It is clear from Article 1868 that the basis of agency is representation. [17] On
the part of the principal, there must be an actual intention to appoint [18] or an
intention naturally inferable from his words or actions; [19] and on the part of
the agent, there must be an intention to accept the appointment and act on it,
[20]
and in the absence of such intent, there is generally no agency. [21] One
factor which most clearly distinguishes agency from other legal concepts is
control; one person - the agent - agrees to act under the control or direction
of another - the principal. Indeed, the very word "agency" has come to
connote control by the principal. [22] The control factor, more than any other,
has caused the courts to put contracts between principal and agent in a
(1)....Whether or not the Court of Appeals erred in not ruling that CSC was an
agent of STM and hence, estopped to sue upon SLDR No. 1214M as an
assignee.
(2)....Whether or not the Court of Appeals erred in applying the law on
compensation to the transaction under SLDR No. 1214M so as to preclude
petitioner from offsetting its credits on the other SLDRs.
separate category.[23] The Court of Appeals, in finding that CSC, was not an
agent of STM, opined:
"This Court has ruled that where the relation of agency is dependent upon
the acts of the parties, the law makes no presumption of agency, and it is
always a fact to be proved, with the burden of proof resting upon the persons
alleging the agency, to show not only the fact of its existence, but also its
nature and extent (Antonio vs. Enriquez[CA], 51 O.G. 3536]. Here,
defendant-appellant failed to sufficiently establish the existence of an agency
relation between plaintiff-appellee and STM. The fact alone that it (STM) had
authorized withdrawal of sugar by plaintiff-appellee "for and in our (STM's)
behalf" should not be eyed as pointing to the existence of an agency
relation ...It should be viewed in the context of all the circumstances
obtaining. Although it would seem STM represented plaintiff-appellee as
being its agent by the use of the phrase "for and in our (STM's) behalf" the
matter was cleared when on 23 January 1990, plaintiff-appellee informed
defendant-appellant that SLDFR No. 1214M had been "sold and endorsed"
to it by STM (Exhibit I, Records, p. 78). Further, plaintiff-appellee has shown
that the 25, 000 bags of sugar covered by the SLDR No. 1214M were sold
and transferred by STM to it ...A conclusion that there was a valid sale and
transfer to plaintiff-appellee may, therefore, be made thus capacitating
plaintiff-appellee to sue in its own name, without need of joining its imputed
principal STM as co-plaintiff."[24]
In the instant case, it appears plain to us that private respondent CSC was a
buyer of the SLDFR form, and not an agent of STM. Private respondent CSC
was not subject to STM's control. The question of whether a contract is one
of sale or agency depends on the intention of the parties as gathered from
the whole scope and effect of the language employed. [25]That the
authorization given to CSC contained the phrase "for and in our
(STM's) behalf" did not establish an agency. Ultimately, what is decisive is
the intention of the parties.[26] That no agency was meant to be established by
the CSC and STM is clearly shown by CSC's communication to petitioner
that SLDR No. 1214M had been "sold and endorsed" to it. [27]The use of the
words "sold and endorsed" means that STM and CSC intended a contract of
sale, and not an agency. Hence, on this score, no error was committed by
the respondent appellate court when it held that CSC was not STM's agent
and could independently sue petitioner.
On the second issue, proceeding from the theory that the transactions
entered into between petitioner and STM are but serial parts of one account,
petitioner insists that its debt has been offset by its claim for STM's unpaid
purchases, pursuant to Article 1279 of the Civil Code. [28] However, the trial
court found, and the Court of Appeals concurred, that the purchase of sugar
covered by SLDR No. 1214M was a separate and independent transaction; it
was not a serial part of a single transaction or of one account contrary to
petitioner's insistence. Evidence on record shows, without being rebutted,
that petitioner had been paid for the sugar purchased under SLDR No.
1214M. Petitioner clearly had the obligation to deliver said commodity to
STM or its assignee. Since said sugar had been fully paid for, petitioner and
CSC, as assignee of STM, were not mutually creditors and debtors of each
other. No reversible error could thereby be imputed to respondent appellate
court when, it refused to apply Article 1279 of the Civil Code to the present
case.
Regarding the third issue, petitioner contends that the sale of sugar under
SLDR No. 1214M is a conditional sale or a contract to sell, with title to the
sugar still remaining with the vendor. Noteworthy, SLDR No. 1214M contains
the following terms and conditions:
"It is understood and agreed that by payment by buyer/trader of refined sugar
and/or receipt of this document by the buyer/trader personally or through a
representative, title to refined sugar is transferred to buyer/trader and
delivery to him/it is deemed effected and completed (stress supplied) and
buyer/trader assumes full responsibility therefore" [29]
The aforequoted terms and conditions clearly show that petitioner transferred
title to the sugar to the buyer or his assignee upon payment of the purchase
price. Said terms clearly establish a contract of sale, not a contract to sell.
Petitioner is now estopped from alleging the contrary. The contract is the law
between the contracting parties.[30] And where the terms and conditions so
stipulated are not contrary to law, morals, good customs, public policy or
public order, the contract is valid and must be upheld.[31] Having transferred
title to the sugar in question, petitioner is now obliged to deliver it to the
purchaser or its assignee.
As to the fourth issue, petitioner submits that STM and private respondent
CSC have entered into a conspiracy to defraud it of its sugar. This conspiracy
is allegedly evidenced by: (a) the fact that STM's selling price to CSC was
below its purchasing price; (b) CSC's refusal to pursue its case against
Teresita Ng Go; and (c) the authority given by the latter to other persons to
withdraw sugar against SLDR No. 1214M after she had sold her rights under
said SLDR to CSC. Petitioner prays that the doctrine of "clean hands" should
be applied to preclude CSC from seeking judicial relief. However, despite
careful scrutiny, we find here the records bare of convincing evidence
Petitioner seeks reversal of the decision and the resolution of the Court of
Appeals, ordering Schmid & Oberly Inc. (hereafter to be referred to simply as
"SCHMID") to refund the purchase price paid by RJL Martinez Fishing
Corporation (hereafter to be referred to simply as "RJL MARTINEZ") to D.
Nagata Co., Ltd. of Japan (hereafter to be referred to simply as NAGATA
CO.") for twelve (12) defective "Nagata"-brand generators, plus
consequential damages, and attorneys fees.
The facts as found by the Court of Appeals, are as follows:
The findings of facts by the trial court (Decision, pp. 21-28,
Record on Appeal) shows: that the plaintiff RJL Martinez
Fishing Corporation is engaged in deep-sea fishing, and in
the course of its business, needed electrical generators for
the operation of its business; that the defendant sells
electrical generators with the brand of "Nagata", a Japanese
product; that the supplier is the manufacturer, the D. Nagata
Co. Ltd., of Japan, that the defendant Schmid & Oberly Inc.
On the basis thereof, the Court of Appeals affirmed the decision of the trial
court ordering petitioner to refund to private respondent the purchase price
for the twelve (12) generators and to accept delivery of the same and to pay
s and attorney's fees, with a slight modification as to the amount to be
refunded. In its resolution of the motion for reconsideration, the Court of
Appeals further modified the trial courts decision as to the award of
consequential damages.
Ordinarily, the Court will not disturb the findings of fact of the Court of
Appeals in petitions to review the latter's decisions under Rule 45 of the
Revised Rules of Court, the scope of the Court's inquiry being limited to a
review of the imputed errors of law [Chan v. Court of Appeals, G.R. No. L27488, June 30, 1970, 33 SCRA 77; Tiongco v. De la Merced, G.R. No. L24426, July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No.
62482, April 28, 1983, 121 SCRA 865; Baniqued v. Court of Appeals, G.R.
No.
L-47531, January 30, 1984, 127 SCRA 596.] However, when, as in this case,
it is the petitioner's position that the appealed judgment is premised on a
misapprehension
of
facts, * the Court is compelled to review the Court of Appeal's factual findings
[De la Cruz v. Sosing, 94 Phil. 26 (1953); Castillo v. Court of Appeals, G.R.
No. I,48290, September 29, 1983, 124 SCRA 808.]
Considering the sketchiness of the respondent court's narration of facts,
whether or not the Court of Appeals indeed misapprehended the facts could
not be determined without a thorough review of the records.
Thus, after a careful scrutiny of the records, the Court has found the
appellate court's narration of facts incomplete. It failed to include certain
material facts.
The facts are actually as follows:
RJL MARTINEZ is engaged in the business of deep-sea fishing. As RJL
MARTINEZ needed electric generators for some of its boats and SCHMIID
sold electric generators of different brands, negotiations between them for
the acquisition thereof took place. The parties had two separate transactions
over "Nagata"-brand generators.
The first transaction was the sale of three (3) generators. In this transaction,
it is not disputed that SCHMID was the vendor of the generators. The
company supplied the generators from its stockroom; it was also SCHMID
which invoiced the sale.
The second transaction, which gave rise to the present controversy, involves
twelve (12) "Nagata"-brand generators. 'These are the facts surrounding this
particular transaction:
As RJL MARTINEZ was canvassing for generators, SC gave RJL MARTINEZ
its Quotation dated August 19, 1975 [Exhibit 'A"] for twelve (12) "Nagata'brand generators with the following specifications:
The tests revealed that the generators were overrated. As indicated both in
the quotation and in the invoice, the capacity of a generator was supposed to
be 5 KVA (kilovolt amperes). However, it turned out that the actual capacity
was only 4 KVA.
SCHMID replaced the three (3) generators subject of the first sale with
generators of a different brand.
As for the twelve (12) generators subject of the second transaction, the
Japanese technicians advised RJL MARTINEZ to ship three (3) generators to
Japan, which the company did. These three (3) generators were repaired by
NAGATA CO. itself and thereafter returned to RJL MARTINEZ; the remaining
nine (9) were neither repaired nor replaced. NAGATA CO., however, wrote
SCHMID suggesting that the latter check the generators, request for spare
parts for replacement free of charge, and send to NAGATA CO. SCHMID's
warranty claim including the labor cost for repairs [Exhibit "I".] In its reply
letter, SCHMID indicated that it was not agreeable to these terms [Exhibit
"10".]
As not all of the generators were replaced or repaired, RJL MARTINEZ
formally demanded that it be refunded the cost of the generators and paid
damages. SCHMID in its reply maintained that it was not the seller of the
twelve (12) generators and thus refused to refund the purchase price
therefor. Hence, on February 14, 1977, RJL MARTINEZ brought suit against
SCHMID on the theory that the latter was the vendor of the twelve (12)
generators and, as such vendor, was liable under its warranty against hidden
defects.
Both the trial court and the Court of Appeals upheld the contention of RJL
MARTINEZ that SCHMID was the vendor in the second transaction and was
liable under its warranty. Accordingly, the courts a quo rendered judgment in
favor of RJL MARTINEZ. Hence, the instant recourse to this Court.
In this petition for review, SCHMID seeks reversal on the following grounds:
(i) Schmid was merely the indentor in the sale [of the twelve
(12) generators] between Nagata Co., the exporter and RJL
Martinez, the importer;
(ii) as mere indentor, Schmid is not liable for the seller's
implied warranty against hidden defects, Schmid not having
personally assumed any such warranty.
(iii) in any event, conformably with Article 1563 of the Civil
Code, there was no implied warranty against hidden defects
in the sale of these twelve (12) generators because these
were sold under their trade name "Nagata"; and
(iv) Schmid, accordingly, is not liable for the reimbursement
claimed by RJL Martinez nor for the latter's unsubstantiated
claim of PI 10.33 operational losses a day nor for exemplary
damages, attorney's fees and costs. [Petition, p. 6.]
1. As may be expected, the basic issue confronting this Court is whether the
second transaction between the parties was a sale or an indent transaction.
SCHMID maintains that it was the latter; RJL MARTINEZ claims that it was a
sale.
At the outset, it must be understood that a contract is what the law defines it
to be, considering its essential elements, and not what it is caged by the
contracting parties [Quiroga v. Parsons Hardware Co., 38 Phil. 501 (1918).]
The Civil Code defines a contract of sale, thus:
ART. 458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
It has been said that the essence of the contract of sale is transfer of title or
agreement to transfer it for a price paid or promised [Commissioner of
Internal Revenue v. Constantino, G.R. No. L-25926, February 27, 1970, 31
SCRA 779, 785, citing Salisbury v. Brooks, 94 SE 117,118-19.] "If such
transfer puts the transferee in the attitude or position of an owner and makes
him liable to the transferor as a debtor for the agreed price, and not merely
as an agent who must account for the proceeds of a resale, the transaction
is, a sale." [Ibid.]
On the other hand, there is no statutory definition of "indent" in this
jurisdiction. However, the Rules and Regulations to Implement Presidential
Decree No. 1789 (the Omnibus Investments Code) lumps "indentors"
together with "commercial brokers" and "commission merchants" in this
manner:
... A foreign firm which does business through
the middlemen acting in their own names, such asindentors,
commercial brokers or commission merchants, shall not be
deemed doing business in the Philippines. But such
indentors, commercial brokers or commission merchants
shall be the ones deemed to be doing business in the
Philippines [Part I, Rule I, Section 1, par. g (1).]
Therefore, an indentor is a middlemen in the same class as commercial
brokers and commission merchants. To get an Idea of what an indentor is, a
look at the definition of those in his class may prove helpful.
A broker is generally defined as one who is engaged, for
others, on a commission, negotiating contracts relative to
property with the custody of which he has no concern; the
negotiator between other parties, never acting in his own
Webster defines an indent as "a purchase order for goods especially when
sent from a foreign country." [Webster's Ninth New Collegiate Dictionary 612
(1986).] It would appear that there are three parties to an indent transaction,
namely, the buyer, the indentor, and the supplier who is usually a nonresident manufacturer residing in the country where the goods are to be
bought [Commissioner of Internal Revenue v. Cadwallader Pacific Company,
G.R. No. L-20343, September 29, 1976, 73 SCRA 59.] An indentor may
therefore be best described as one who, for compensation, acts as a
middleman in bringing about a purchase and sale of goods between a foreign
supplier and a local purchaser.
Coming now to the case at bar, the admissions of the parties and the facts
appearing on record more than suffice to warrant the conclusion that
SCHMID was not a vendor, but was merely an indentor, in the second
transaction.
Second, it is asserted that the acts of SCHMID after it was informed of the
defect in the generators were indicative of its awareness that it was the
vendor and acknowledgment of its liability as such vendor. Attention is called
to these facts: When RJL MARTINEZ complained to SCHMID that the
generators were defective, SCHMID immediately asked RJL MARTINEZ to
send the defective generators to its shop to determine what was wrong.
SCHMID likewise informed NAGATA CO. about the complaint of RJL
MARTINEZ. When the Japanese technicians arrived, SCHMID made
available its technicians, its shop and its testing equipment. After the
generators were found to have factory defects, SCHMID facilitated the
shipment of three (3) generators to Japan and, after their repair, back to the
Philippines [Memorandum for the Respondent, p. 8.]
Third, it is argued that the contents of the letter from NAGATA CO. to
SCHMID regarding the repair of the generators indicated that the latter was
"within the purview of a seller." [Ibid.]
Fourth, it is argued that if SCHMID is considered as a mere agent of
NAGATA CO., a foreign corporation not licensed to do business in the
Philippines, then the officers and employees of the former may be penalized
for violation of the old Corporation Law which provided:
Sec. 69 ... Any officer or agent of the corporation or any
person transacting business for any foreign corporation not
having the license prescribed shall be punished by
imprisonment for not less than six months nor more than two
years or by a fine 'of not less than two hundred pesos nor
more than one thousand pesos or both such imprisonment
and fine, in the discretion of the Court.
The facts do not bear out these contentions.
The first contention disregards the circumstances surrounding the second
transaction as distinguished from those surrounding the first transaction, as
noted above.
Neither does the solicitous manner by which SCHMID responded to RJL
MARTINEZ's complaint prove that the former was the seller of the
generators. As aptly stated by counsel, no indentor will just fold its hands
when a client complains about the goods it has bought upon the indentor's
mediation. In its desire to promote the product of the seller and to retain the
goodwill of the buyer, a prudent indentor desirous of maintaining his business
would have to act considerably. towards his clients.
Note that in contrast to its act of replacing the three (3) generators subject of
the first transaction, SCHMID did not replace any of the twelve (12)
generators, but merely rendered assistance to both RJL TINES and NAGATA
CO. so that the latter could repair the defective generators.
The proposal of NAGATA CO. rejected by SCHMID that the latter undertake
the repair of the nine (9) other defective generators, with the former
supplying the replacement parts free of charge and subsequently
reimbursing the latter for labor costs [Exhibit "I"], cannot support the
conclusion that SCHMID is vendor of the generators of the second
transaction or was acting "within the purview of a seller."
Finally, the afore-quoted penal provision in the Corporation Law finds no
application to SCHMID and its officers and employees relative to the
transactions in the instant case. What the law seeks to prevent, through said
provision, is the circumvention by foreign corporations of licensing
requirements through the device of employing local representatives. An
indentor, acting in his own name, is not, however, covered by the abovequoted provision. In fact, the provision of the Rules and Regulations
implementing the Omnibus Investments Code quoted above, which was
copied from the Rules implementing Republic Act No. 5455, recognizes the
distinct role of an indentor, such that when a foreign corporation does
business through such indentor, the foreign corporation is not deemed doing
business in the Philippines.
In view of the above considerations, this Court rules that SCHMID was
merely acting as an indentor in the purchase and sale of the twelve (12)
generators subject of the second transaction. Not being the vendor, SCHMID
cannot be held liable for the implied warranty for hidden defects under the
Civil Code [Art. 1561, et seq.]
2. However, even as SCHMID was merely an indentor, there was nothing to
prevent it from voluntarily warranting that twelve (12) generators subject of
the second transaction are free from any hidden defects. In other words,
SCHMID may be held answerable for some other contractual obligation, if
indeed it had so bound itself. As stated above, an indentor is to some extent
an agent of both the vendor and the vendee. As such agent, therefore, he
may expressly obligate himself to undertake the obligations of his principal
(See Art. 1897, Civil Code.)
The Court's inquiry, therefore, shifts to a determination of whether or not
SCHMID expressly bound itself to warrant that the twelve (12) generators are
free of any hidden defects.
Atty. CATRAL:
The trial court, however, relied on the testimony of Patrocinio Balagtas, the
head of the Electrical Department of RJL MARTINEZ, to support the finding
that SCHMID did warrant the twelve (12) generators against defects.
Upon careful examination of Balagtas' testimony, what is at once apparent is
that Balagtas failed to disclose the nature or terms and conditions of the
warranty allegedly given by SC Was it a warranty that the generators would
be fit for the fishing business of the buyer? Was it a warranty that the
generators to be delivered would meet the specifications indicated in the
Quotation? Considering the different kinds of warranties that may be
contracted, unless the nature or terms and conditions of the warranty are
known, it would not be possible to determine whether there has been a
breach thereof.
Moreover, a closer examination of the statements allegedly made by the
representative of SCHMID reveals that they merely constituted an expression
of opinion which cannot by any means be construed as a warranty [See Art.
1546, Civil Code.]
We quote from Balagtas' testimony:
Atty. CATRAL:
Q Did you not say at the start of your cross
examination, Mr. Balagtas, that the only
participation you had in the acquisition of
those twelve (12) units [of] generators was
your having issued a purchase order to your
own company for the purchase of the units?
ATTY. AQUINO:
Misleading, your Honor.
COURT:
He has the right to ask that question
because he is on cross. Moreover, if I
remember, he mentioned something like
that. Witness may answer.
A Yes, sir. Before I submitted that, we
negotiated with Schmid and Oberly the beat
generators they can recommend because
we are looking for generators. The
representative of Schmid and Oberly said
that Nagata is very good. That is why I
recommended that to the management.
[t.s.n., October 14, 1977, pp. 23-25.]
At any rate, when asked where SCHMID's warranty was contained, Balagtas
testified initially that it was in the receipts covering the sale. (At this point, it
may be stated that the invoice [Exhibit "B-l"] was issued by NAGATA CO. and
nowhere is it stated therein that SCHMID warranted the generators against
defects.) When confronted with a copy of the invoice issued by NAGATA CO.,
he changed his assertion and claimed that what he meant was that the date
of the commencement of the period of SCHMID's warranty would be based
on the date of the invoice. On further examination, he again changed his
mind and asserted that the warranty was given verbally [TSN, October 14,
1977, pp. 19-22.] But then again, as stated earlier, the witness failed to
disclose the nature or terms and conditions of the warranty allegedly given by
SCHMID.
On the other hand, Hernan Adad SCHMID's General Manager, was
categorical that the company does not warrant goods bought on indent and
that the company warrants only the goods bought directly from it, like the
three generators earlier bought by RJL MARTINEZ itself [TSN, December 19,
1977, pp. 63-64.] It must be recalled that SCHMID readily replaced the three
generators from its own stock. In the face of these conflicting testimonies,
this Court is of the view that RJL has failed to prove that SCHMID had given
a warranty on the twelve (12) generators subject of the second transaction.
Even assuming that a warranty was given, there is no way to determine
whether there has been a breach thereof, considering that its nature or terms
and conditions have not been shown.
3. In view of the foregoing, it becomes unnecessary to pass upon the other
issues.
WHEREFORE, finding the Court of Appeals to have committed a reversible
error, the petition is GRANTED and the appealed Decision and Resolution of
the Court of Appeals are REVERSED. The complaint of RJL Martinez Fishing
Corporation is hereby DISMISSED. No costs.
SO ORDERED.
ABACUS SECURITIES G.R. No. 160016
CORPORATION,
Petitioner, Present:
Panganiban, CJ,
Chairman,
Ynares-Santiago,
- versus - Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ
Promulgated:
RUBEN U. AMPIL,
Respondent. February 27, 2006
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
PANGANIBAN, CJ:
S
tock market transactions affect the general public and the national economy. The
rise and fall of stock market indices reflect to a considerable degree the state of the
economy. Trends in stock prices tend to herald changes in business
conditions. Consequently, securities transactions are impressed with public
interest,
and
are
thus
subject
to public regulation. In particular, the laws and regulations requiring payment
of traded shares within specified periods are meant to protect the economy
from excessive stock market speculations, and are thus mandatory.
In the present case, respondent cannot escape payment of stocks validly
traded by petitioner on his behalf. These transactions took place before both
parties violated the trading law and rules. Hence, they fall outside the
purview of the pari delicto rule.
The Case
Before the Court is a Petition for Review [1] under Rule 45 of the Rules
of Court, challenging the March 21, 2003 Decision [2] and the September 19,
2003 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 68273. The
assailed Decision disposed as follows:
Evidence adduced by the [petitioner] has established the fact that [petitioner]
is engaged in business as a broker and dealer of securities of listed
companies at the Philippine Stock Exchange Center.
[Respondent] further claims that all his trades with [petitioner] were
not paid in full in cash at anytime after purchase or within the T+4 [4 days
subsequent to trading] and none of these trades was cancelled by [petitioner]
as required in Exhibit A-1. Neither did [petitioner] apply with either the
Philippine Stock Exchange or the SEC for an extension of time for the
payment or settlement of his cash purchases. This was not brought to his
attention by his broker and so with the requirement of collaterals in margin
account. Thus, his trade under an offset transaction with [petitioner] is
unlimited subject only to the discretion of the broker. x x x [Had petitioner]
followed the provision under par. 8 of Exh. A-1 which stipulated the
liquidation within the T+3 [3 days subsequent to trading], his net deficit would
only be P1,601,369.59. [Respondent] however affirmed that this is not in
accordance with RSA [Rule 25-1 par. C, which mandates that if you do not
pay for the first] order, you cannot subsequently make any further order
without depositing the cash price in full. So, if RSA Rule 25-1, par. C, was
applied, he was limited only to the first transaction. That [petitioner] did not
comply with the T+4 mandated in cash transaction. When [respondent] failed
to comply with the T+3, [petitioner] did not require him to put up a deposit
before it executed its subsequent orders. [Petitioner] did not likewise apply
for extension of the T+4 rule.Because of the offset transaction, [respondent]
was induced to [take a] risk which resulted [in] the filing of the instant suit
The Facts
Since April 10, 1997, [respondent] actively traded his account, and
as a result of such trading activities, he accumulated an outstanding
obligation in favor of [petitioner] in the principal sum of P6,617,036.22 as
of April 30, 1997.
Despite the lapse of the period within which to pay his account as well as
sufficient time given by [petitioner] for [respondent] to comply with his
proposal to settle his account, the latter failed to do so. Such that [petitioner]
thereafter sold [respondents] securities to set off against his unsettled
obligations.
After the sale of [respondents] securities and application of the proceeds
thereof against his account, [respondents] remaining unsettled obligation to
[petitioner] was P3,364,313.56. [Petitioner] then referred the matter to its
legal counsel for collection purposes.
applicable jurisprudence considering that respondent was the first one who
violated the terms of the Account Opening Form, [which was the] agreement
between
the
parties.
In its Decision[6] dated June 26, 2000, the Regional Trial Court (RTC) of
Makati City (Branch 57) held that petitioner violated Sections 23 and 25 of
the Revised Securities Act (RSA) and Rule 25-1 of the Rules Implementing
the Act (RSA Rules) when it failed to: 1) require the respondent to pay for his
stock purchases within three (T+3) or four days (T+4) from trading; and 2)
request from the appropriate authority an extension of time for the payment
of respondents cash purchases. The trial court noted that despite
respondents non-payment within the required period, petitioner did not
cancel the purchases of respondent. Neither did it require him to deposit
cash payments before it executed the buy and/or sell orders subsequent to
the first unsettled transaction. According to the RTC, by allowing respondent
to trade his account actively without cash, petitioner effectively induced him
to purchase securities thereby incurring excessive credits.
The trial court also found respondent to be equally at fault, by
incurring excessive credits and waiting to see how his investments turned out
before deciding to invoke the RSA. Thus, the RTC concluded that petitioner
and respondent were in pari delicto and therefore without recourse against
each other.
II.
Whether or not the Court of Appeals ruling that the petitioner and respondent
are in pari delicto is in accord with law and applicable jurisprudence
considering the Account Opening Form is a valid agreement.
III.
Whether or not the Court of Appeals ruling that petitioner cannot recover from
respondent is in accord with law and applicable jurisprudence since the
evidence and admission of respondent proves that he is liable to petitioner
for his outstanding obligations arising from the stock trading through
petitioner.
IV.
Whether or not the Court of Appeals ruling on petitioners alleged violation of
the Revised Securities Act [is] in accord with law and jurisprudence since the
lower court has no jurisdiction over violations of the Revised Securities Act. [9]
Briefly, the issues are (1) whether the pari delicto rule is applicable in
the present case, and (2) whether the trial court had jurisdiction over the
case.
The Courts Ruling
The Petition is partly meritorious.
Main Issue:
Applicability of the
Pari Delicto Principle
In the present controversy, the following pertinent facts are undisputed:
(1) on April 8, 1997, respondent opened a cash account with petitioner for his
transactions in securities;[10] (2) respondents purchases were consistently
unpaid from April 10 to 30, 1997; [11] (3) respondent failed to pay in full, or
even just his deficiency,[12] for the transactions on April 10 and 11, 1997; [13] (4)
despite respondents failure to cover his initial deficiency, petitioner
subsequently purchased and sold securities for respondents account on April
25 and 29;[14] (5) petitioner did not cancel or liquidate a substantial amount of
respondents stock transactions until May 6, 1997.[15]
The provisions governing the above transactions are Sections 23
and 25 of the RSA[16] and Rule 25-1 of the RSA Rules, which state as follows:
next ninety (90) days, the customer shall be required to deposit sufficient
funds in the account to cover each purchase transaction prior to execution.
xxxxxxxxx
(f) Written application for an extension of the period of time required
for payment under paragraph (a) be made by the broker or dealer to the
Philippine Stock Exchange, in the case of a member of the Exchange, or to
the Commission, in the case of a non-member of the Exchange. Applications
for the extension must be based upon exceptional circumstances and must
be filed and acted upon before the expiration of the original payment period
or the expiration of any subsequent extension.
Section 23(b) above -- the alleged violation of petitioner which provides the
basis for respondents defense -- makes it unlawful for a broker to extend or
maintain credit on any securities other than in conformity with the rules and
regulations issued by Securities and Exchange Commission (SEC). Section
25 lays down the rules to prevent indirect violations of Section 23 by brokers
or dealers. RSA Rule 25-1 prescribes in detail the regulations
governing cash accounts.
The United States, from which our countrys security policies are patterned,
[17]
abound with authorities explaining the main purpose of the above statute
on margin[18] requirements. This purpose is to regulate the volume of credit
flow, by way of speculative transactions, into the securities market and
redirect resources into more productive uses. Specifically, the main objective
of the law on margins is explained in this wise:
The main purpose of these margin provisions xxx is not to increase the
safety of security loans for lenders. Banks and brokers normally require
sufficient collateral to make themselves safe without the help of law. Nor is
the main purpose even protection of the small speculator by making it
impossible for him to spread himself too thinly although such a result will be
achieved as a byproduct of the main purpose.
xxxxxxxxx
The main purpose is to give a [g]overnment credit agency an effective
method of reducing the aggregate amount of the nations credit resources
which can be directed by speculation into the stock market and out of other
more desirable uses of commerce and industry x x x.[19]
A related purpose of the governmental regulation of margins is the
stabilization of the economy.[20] Restrictions on margin percentages are
imposed in order to achieve the objectives of the government with due regard
for the promotion of the economy and prevention of the use of excessive
credit.[21]
[29]
Otherwise stated, the margin requirements set out in the RSA are primarily
intended to achieve a macroeconomic purpose -- the protection of the overall
economy from excessive speculation in securities. Their recognized
secondary purpose is to protect small investors.
Right is one thing; obligation is quite another. A right may not be exercised; it
may even be waived. An obligation, however, must be performed; those who
do not discharge it prudently must necessarily face the consequence of their
dereliction or omission.[30]
Because of this awareness, the law imposes upon them the primary
obligation to enforce the margin requirements.
to advance the payment to the settlement banks without prejudice to the right
of the broker to collect later from the client.[34]
In securities trading, the brokers are essentially the counterparties to the
stock transactions at the Exchange.[35] Since the principals of the broker are
generally undisclosed, the broker is personally liable for the contracts thus
made.[36] Hence, petitioner had to advance the payments for respondents
trades. Brokers
have
a
right to be reimbursed for sums advanced by them with the express or
implied authorization of the principal,[37] in this case, respondent.
It should be clear that Congress imposed the margin requirements to protect
the general economy, not to give the customer a free ride at the expense of
the broker.[38] Not to require respondent to pay for his April 10 and 11 trades
would put a premium on his circumvention of the laws and would enable him
to enrich himself unjustly at the expense of petitioner.
In the present case, petitioner obviously failed to enforce the terms and
conditions of its Agreement with respondent, specifically paragraph 8 thereof,
purportedly acting on the plea[39] of respondent to give him time to raise funds
therefor. These stipulations, in relation to paragraph 4, [40] constituted faithful
compliance with the RSA. By failing to ensure respondents payment of his
first purchase transaction within the period prescribed by law, thereby
allowing him to make subsequent purchases, petitioner effectively converted
respondents cash account into a credit account. However, extension or
maintenance of credits on nonmargin transactions, are specifically prohibited
under Section 23(b). Thus, petitioner was remiss in its duty and cannot be
said to have come to court with clean hands insofar as it intended to collect
on transactions subsequent to the initial trades of April 10 and 11, 1997.
Respondent Equally Guilty
for Subsequent Trades
On the other hand, we find respondent equally guilty in entering into the
transactions in violation of the RSA and RSA Rules. We are not prepared to
accept his self-serving assertions of being an innocent victim in all the
transactions. Clearly, he is not an unsophisticated, small investor merely
prodded by petitioner to speculate on the market with the possibility of large
profits with low -- or no -- capital outlay, as he pictures himself to be. Rather,
he is an experienced and knowledgeable trader who is well versed in the
securities market and who made his own investment decisions. In fact, in the
Account Opening Form (AOF), he indicated that he had excellent knowledge
of stock investments; had experience in stocks trading, considering that he
had similar accounts with other firms. [41]Obviously, he knowingly speculated
on the market, by taking advantage of the no-cash-out arrangement
extended to him by petitioner.
We note that it was respondent who repeatedly asked for some time to pay
his obligations for his stock transactions. Petitioner acceded to his
requests. It is only when sued upon his indebtedness that respondent raised
as a defense the invalidity of the transactions due to alleged violations of the
RSA. It was respondents privilege to gamble or speculate, as he apparently
did so by asking for extensions of time and refraining from giving orders to
his broker to sell, in the hope that the prices would rise. Sustaining his
argument now would amount to relieving him of the risk and consequences
of his own speculation and saddling them on the petitioner after the result
was known to be unfavorable.[42] Such contention finds no legal or even moral
justification and must necessarily be overruled.Respondents conduct is
precisely the behavior of an investor deplored by the law.
In the final analysis, both parties acted in violation of the law and did not
come to court with clean hands with regard to transactions subsequent to the
initial trades made on April 10 and 11, 1997. Thus, the peculiar facts of the
present case bar the application of the pari delicto rule -- expressed in the
maxims Ex dolo malo non oritur action and In pari delicto potior est conditio
defendentis -- to all the transactions entered into by the parties. The pari
delecto rule refuses legal remedy to either party to an illegal agreement and
leaves them where they were.[43] In this case, the pari delicto rule applies only
to transactions entered into after the initial trades made on April 10 and
11, 1997.
Since the initial trades are valid and subsisting obligations, respondent is
liable for them. Justice and good conscience require all persons to satisfy
their debts.Ours are courts of both law and equity; they compel fair dealing;
they do not abet clever attempts to escape just obligations. Ineludibly, this
Court would not hesitate to grant relief in accordance with good faith and
conscience.
Pursuant to RSA Rule 25-1, petitioner should have liquidated the transaction
(sold the stocks) on the fourth day following the transaction (T+4) and
completed its liquidation not later than ten days following the last day for the
customer to pay (effectively T+14). Respondents outstanding obligation is
therefore to be determined by using the closing prices of the stocks
purchased at T+14 as basis.
We consider the foregoing formula to be just and fair under the
circumstances. When petitioner tolerated the subsequent purchases of
respondent without performing its obligation to liquidate the first failed
transaction, and without requiring respondent to deposit cash before
embarking on trading stocks any further, petitioner, as the broker, violated the
law at its own peril. Hence, it cannot now complain for failing to obtain the full
amount of its claim for these lattertransactions.
On the other hand, with respect to respondents counterclaim for damages for
having been allegedly induced by petitioner to generate additional purchases
despite his outstanding obligations, we hold that he deserves no legal or
equitable relief consistent with our foregoing finding that he was not an
innocent investor as he presented himself to be.
Second Issue:
Jurisdiction
It is axiomatic that the allegations in the complaint, not the defenses
set up in the answer or in the motion to dismiss determine which court has
jurisdiction over an action.[44] Were we to be governed by the latter rule, the
question of jurisdiction would depend almost entirely upon the defendant. [45]
The instant controversy is an ordinary civil case seeking to enforce
rights arising from the Agreement (AOF) between petitioner and
respondent. It relates to acts committed by the parties in the course of their
business relationship. The purpose of the suit is to collect respondents
alleged outstanding debt to petitioner for stock purchases.
To be sure, the RSA and its Rules are to be read into the Agreement
entered into between petitioner and respondent. Compliance with the terms
of the AOF necessarily means compliance with the laws. Thus, to determine
whether the parties fulfilled their obligations in the AOF, this Court had to
pass upon their compliance with the RSA and its Rules. This, in no way,
deprived the Securities and Exchange Commission (SEC) of its authority to
determine willful violations of the RSA and impose appropriate sanctions
therefor, as provided under Sections 45 and 46 of the Act.
Moreover, we uphold the SEC in its Opinion, thus:
As to the issue of jurisdiction, it is settled that a party cannot invoke the
jurisdiction of a court to secure affirmative relief against his opponent and
after obtaining or failing to obtain such relief, repudiate or question that same
jurisdiction.
Indeed, after voluntarily submitting a cause and encountering an adverse
decision on the merits, it is too late for petitioner to question the jurisdictional
power of the court. It is not right for a party who has affirmed and invoked the
jurisdiction of a court in a particular matter to secure an affirmative relief, to
afterwards deny that same jurisdiction to escape a penalty.[46]
WHEREFORE, the assailed Decision and Resolution of the Court of
Appeals are hereby MODIFIED. Respondent is ordered to pay petitioner the
fees. They alleged that they were the efficient procuring cause in bringing
about the sale of the property to the Sisters of Mary, but that their efforts in
consummating the sale were frustrated by the private respondents who, in
evident bad faith, malice and in order to evade payment of brokers fee, dealt
directly with the buyer whom petitioners introduced to them. They further
pointed out that the deed of sale was undervalued obviously to evade
payment of the correct amount of capital gains tax, documentary stamps and
other internal revenue taxes.
In their answer, private respondents countered that, contrary to
petitioners claim, they were not the efficient procuring cause in bringing
about the consummation of the sale because another broker, Roberto
Pacana, introduced the property to the Sisters of Mary ahead of the
petitioners.[14] Private respondents maintained that when petitioners
introduced the buyers to private respondent Eduardo Gullas, the former were
already decided in buying the property through Pacana, who had been paid
his commission. Private respondent Eduardo Gullas admitted that petitioners
were in his office on July 3, 1992, but only to ask for the reimbursement of
their cellular phone expenses.
In their reply and answer to counterclaim, [15] petitioners alleged that
although the Sisters of Mary knew that the subject land was for sale through
various agents, it was petitioners who introduced them to the owners thereof.
After trial, the lower court rendered judgment in favor of petitioners, the
dispositive portion of which reads:
WHEREFORE, UPON THE AEGIS OF THE FOREGOING, judgment is
hereby rendered for the plaintiffs and against the defendants. By virtue
hereof, defendants Eduardo and Norma Gullas are hereby ordered to pay
jointly and severally plaintiffs Manuel Tan, Gregg Tecson and Alexander
Saldaa;
1) The sum of SIX HUNDRED TWENTY FOUR THOUSAND AND SIX
HUNDRED EIGHTY FOUR PESOS (P624,684.00) as brokers fee with legal
interest at the rate of 6% per annum from the date of filing of the complaint;
and
2) The sum of FIFTY THOUSAND PESOS (P50,000.00) as attorneys fees
and costs of litigation.
For lack of merit, defendants counterclaim is hereby DISMISSED.
IT IS SO ORDERED.[16]
Both parties appealed to the Court of Appeals. Private respondents
argued that the lower court committed errors of fact and law in holding that it
was petitioners efforts which brought about the sale of the property and
disregarding the previous negotiations between private respondent Norma
Gullas and the Sisters of Mary and Pacana. They further alleged that the
lower court had no basis for awarding brokers fee, attorneys fees and the
costs of litigation to petitioners.[17]
The records show that petitioner Manuel B. Tan is a licensed real estate
broker, and petitioners Gregg M. Tecson and Alexander Saldaa are his
associates. In Schmid and Oberly v. RJL Martinez Fishing Corporation, [20] we
defined a broker as one who is engaged, for others, on a commission,
negotiating contracts relative to property with the custody of which he has no
concern; the negotiator between other parties, never acting in his own name
but in the name of those who employed him. x x x a broker is one whose
occupation is to bring the parties together, in matters of trade, commerce or
navigation. (Emphasis supplied)
Petitioners, for their part, assailed the lower courts basis of the award of
brokers fee given to them. They contended that their 3% commission for the
sale of the property should be based on the price of P55,180,420.00, or at
P530.00 per square meter as agreed upon and not on the alleged actual
selling price of P20,822,800.00 or at P200.00 per square meter, since the
actual purchase price was undervalued for taxation purposes. They also
claimed that the lower court erred in not awarding moral and exemplary
damages in spite of its finding of bad faith; and that the amount of
P50,000.00 as attorneys fees awarded to them is insufficient. Finally,
petitioners argued that the legal interest imposed on their claim should have
been pegged at 12% per annum instead of the 6% fixed by the court. [18]
The Court of Appeals reversed and set aside the lower courts decision
and rendered another judgment dismissing the complaint. [19]
computed from the filing of the complaint on March 18, 1993, and attorneys
fees in the amount of P100,000.00.
On appeal, the CA affirmed in toto the RTCs decision. In ruling for Estrada,
both the trial and appellate courts held that Estrada was the efficient
procuring cause in the execution of the service agreement between Meralco
and Maxicare consistent with our ruling in Manotok Brothers, Inc. v. Court of
Appeals.[4]
Undaunted, Maxicare comes to this Court and insists on the reversal of the
RTC Decision as affirmed by the CA, raising the following issues, to wit:
1. Whether the Court of Appeals committed serious error in
affirming Estradas entitlement to commissions for the
execution of the service agreement between Meralco and
Maxicare.
2. Corollarily, whether Estrada is entitled to commissions for
the two (2) consecutive renewals of the service agreement
effective on December 1, 1992[5] and December 1, 1995.[6]
We are in complete accord with the trial and appellate courts ruling. Estrada
is entitled to commissions for the premiums paid under the service
agreement between Meralco and Maxicare from 1991 to 1996.
Well-entrenched in jurisprudence is the rule that factual findings of
the trial court, especially when affirmed by the appellate court, are accorded
the highest degree of respect and are considered conclusive between the
parties.[7] A review of such findings by this Court is not warranted except
upon a showing of highly meritorious circumstances, such as: (1) when the
findings of a trial court are grounded entirely on speculation, surmises or
conjectures; (2) when a lower courts inference from its factual findings is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
discretion in the appreciation of facts; (4) when the findings of the appellate
court go beyond the issues of the case, or fail to notice certain relevant facts
which, if properly considered, will justify a different conclusion; (5) when there
is a misappreciation of facts; (6) when the findings of fact are conclusions
without mention of the specific evidence on which they are based, are
premised on the absence of evidence, or are contradicted by evidence on
record.[8] None of the foregoing exceptions which would warrant a reversal of
the assailed decision obtains in this instance.
Maxicare urges us that both the RTC and CA failed to take into
account the stipulations contained in the February 19, 1991 letter agreement
authorizing the payment of commissions only upon satisfaction of twin
conditions, i.e., collection and contemporaneous remittance of premium dues
by Estrada to Maxicare. Allegedly, the lower courts disregarded Estradas
admission that the negotiations with Meralco failed. Thus, the flawed
application of the efficient procuring cause doctrine enunciated in Manotok
and specifications.[10] For example, in its letter to Hahn dated February 23,
1996, BMW stated:
In the last years we have pointed out to you in several discussions and
letters that we have to tackle the Philippine market more professionally
and that we are through your present activities not adequately prepared
to cope with the forthcoming challenges.[11]
In effect, BMW was holding Hahn accountable to it under the 1967
Agreement.
This case fits into the mould of Communications Materials, Inc. v. Court
of Appeals,[12] in which the foreign corporation entered into a "Representative
Agreement" and a "Licensing Agreement" with a domestic corporation, by
virtue of which the latter was appointed "exclusive representative" in the
Philippines for a stipulated commission. Pursuant to these contracts, the
domestic corporation sold products exported by the foreign corporation and
put up a service center for the products sold locally. This Court held that
these acts constituted doing business in the Philippines. The arrangement
showed that the foreign corporation's purpose was to penetrate the Philippine
market and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive
distributor in the Philippines, even as it announced in the Asian region that
Hahn was the "official BMW agent" in the Philippines. [13]
The Court of Appeals also found that petitioner Alfred Hahn dealt in
other products, and not exclusively in BMW products, and, on this basis,
ruled that Hahn was not an agent of BMW. (p. 14) This finding is based
entirely on allegations of BMW in its motion to dismiss filed in the trial court
and in its petition for certiorari before the Court of Appeals.[14] But this
allegation was denied by Hahn [15] and therefore the Court of Appeals should
not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should have
indicated to the Court of Appeals the necessity of affirming the trial court's
order deferring resolution of BMW's motion to dismiss. Petitioner alleged that
whether or not he is considered an agent of BMW, the fact is that BMW did
business in the Philippines because it sold cars directly to Philippine
buyers. [16]This was denied by BMW, which claimed that Hahn was not its
agent and that, while it was true that it had sold cars to Philippine buyers, this
was done without solicitation on its part.[17]
It is not true then that the question whether BMW is doing business
could have been resolved simply by considering the parties' pleadings. There
are genuine issues of facts which can only be determined on the basis of
evidence duly presented. BMW cannot short circuit the process on the plea
that to compel it to go to trial would be to deny its right not to submit to the
jurisdiction of the trial court which precisely it denies. Rule 16, 3 authorizes
courts to defer the resolution of a motion to dismiss until after the trial if the
ground on which the motion is based does not appear to be indubitable. Here
the record of the case bristles with factual issues and it is not at all clear
whether some allegations correspond to the proof.
Anyway, private respondent need not apprehend that by responding to
the summons it would be waiving its objection to the trial court's jurisdiction. It
is now settled that. for purposes of having summons served on a foreign
corporation in accordance with Rule 14, 14, it is sufficient that it be alleged in
the complaint that the foreign corporation is doing business in the
Philippines. The court need not go beyond the allegations of the complaint in
order to determine whether it has jurisdiction. [18] A determination that the
foreign corporation is doing business is only tentative and is made only for
the purpose of enabling the local court to acquire jurisdiction over the foreign
corporation through service of summons pursuant to Rule 14, 14. Such
determination does not foreclose a contrary finding should evidence later
show that it is not transacting business in the country. As this Court has
explained:
This is not to say, however, that the petitioner's right to question the
jurisdiction of the court over its person is now to be deemed a foreclosed
matter. If it is true, as Signetics claims, that its only involvement in the
Philippines was through a passive investment in Sigfil, which it even later
disposed of, and that TEAM Pacific is not its agent, then it cannot really be
said to be doing business in the Philippines. It is a defense, however, that
requires the contravention of the allegations of the complaint, as well as a full
ventilation, in effect, of the main merits of the case, which should not thus be
within the province of a mere motion to dismiss. So, also, the issue posed by
the petitioner as to whether a foreign corporation which has done business in
the country, but which has ceased to do business at the time of the filing, of a
complaint, can still be made to answer for a cause of action which accrued
while it was doing, business, is another matter that would yet have to await
the reception and admission of evidence. Since these points have
seasonably been raised by the petitioner, there should be no real cause for
what may understandably be its apprehension, i.e., that by its participation
during the trial on the merits, it may, absent an invocation of separate or
26, 1984, 128 SCRA 388: ". . . that nothing can justify the issuance of the
search warrant but the fulfillment of the legal requisites. It might be well to
point out what has been said in Asian Surety & Insurance Co., Inc. v.
Herrera: It has been said that of all the rights of a citizen, few are of greater
importance or more essential to his peace and happiness than the right of
personal security, and that involves the exemption of his private affairs,
books and papers from inspection and scrutiny of others. While the power to
search and seize is necessary to the public welfare, still it must be exercised
and the law enforced without transgressing the constitutional rights of the
citizens, for the enforcement of no statute is of sufficient importance to justify
indifference to the basic principles of government." "Thus, in issuing a search
warrant the Judge must strictly comply with the requirements of the
Constitution and the statutory provisions. A liberal construction should be
given in favor of the individual to prevent stealthy encroachment upon, or
gradual depreciation of the rights secured by the Constitution. No
presumption of regularity are to be invoked in aid of the process when an
officer undertakes to justify it."
DECISION
NARVASA, J.:
A claim for alleged unpaid commissions of an agent is what is basically
involved in the action at bar. Somehow, it twice escaped outright rejection for
lack of jurisdiction in the Department of Labor where the case was resolved
at the first instance and on appeal. Both the Labor Arbiter and the National
Labor Relations Commission appeared unaware of the utter lack of laborrelated issues in the parties conflicting contentions as to the existence of
agency relations between them, and proceeded to decide the case. Neither
of them of course had competence to do so. Be that as it may, the instant
petition for certiorari will be decided on its merits to the end that the
controversy may now be laid to rest without further proceedings.chanrobles
virtual lawlibrary
The protagonists in this case are:chanrob1es virtual 1aw library
1) Marcelina A. Escandor engaged, under the name and style of Guardex
Enterprises, in (a) the manufacture and sale of fire-fighting equipment such
as fire extinguishers, fire hose cabinets and related products, and (b)
occasionally, the building or fabrication of fire trucks; and
2) Jumbee Orbeta a "freelance" salesman. 1
It appears that Orbeta somehow learned that Escandor had offered to
fabricate a fire truck for Rubberworld (Phil.) Inc. He wrote to Escandor
inquiring about the amount of commission for the sale of a fire truck.
Escandor wrote back on the same day to advise that it was P15,000.00 per
unit. Four days later, Orbeta offered to look after (follow-up) Escandors
pending proposal to sell a fire truck to Rubberworld, and asked for P250.00
as representation expenses. Escandor agreed and gave him the money.
Manager.
When no word was received by Escandor from Orbeta after three days, she
herself inquired in writing from Rubberworld about her offer of sale of a fire
truck. Having apparently received an encouraging response, Escandor sent
Rubberworld a revised price quotation some ten days later.
Escandor denies that she had ever given Orbeta any such verbal authority.
Indeed, months prior to Orbetas approaching Escandor, the latter had
already made a written offer of a fire truck to Rubberworld. All that she
consented to was for Orbeta to "follow up" that pending offer. In truth, it does
not even appear that on the strength of this "arrangement" vague as it was
Orbeta undertook the promised follow-up at all. He reported nothing of his
efforts or their fruits to Escandor. It was Escandor who, in the months that
followed her initial meeting with Orbeta, determinedly pushed the
Rubberworld deal. Orbeta was simply nowhere to be found. Furthermore, it
seems fairly evident that the "representation allowance" of P250 was meant
to cover the expenses for the "follow-up" offered by Orbeta an ambiguous
fact which does not of itself suggest the creation of an agency and is not at
all inconsistent with the theory of its absence in this case.
The circumstances have not been correctly read by Orbeta and his corespondents.
Even a finding that under these circumstances, an agency had indeed been
constituted will not save the day for Orbeta, because nothing in the record
tends to prove that he succeeded in carrying out its terms or even as much
as attempted to do so. The evidence in fact clearly indicates otherwise. The
terms of Escandors letter of August 14, 1978 assuming that it was indeed
an "authority to sell," as Orbeta insists are to the effect that entitlement to
the P15,000 commission is contingent on the purchase by a customer of a
fire truck, the implicit condition being that the agent would earn the
commission if he was instrumental in bringing the sale about. Orbeta
certainly had nothing to do with the sale of the fire truck, and is not therefore
entitled to any commission at all.
Furthermore, even if Orbeta is considered to have been Escandors agent for
the time he was supposed to "follow up" the offer to sell, such agency would
have been deemed revoked upon the resumption of direct negotiations
between Escandor and Rubberworld, Orbeta having in the meantime
abandoned all efforts (if indeed any were exerted) to secure the deal in
Escandors behalf.chanrobles law library : red
It has of course already been stated at the outset that, given the sole issue
raised by the parties concededly from the cases inception (i.e., whether or
not Orbeta is Escandors agent as regards the sale of a fire truck to
Rubberworld), the competence to resolve the controversy did not pertain to
either the Labor Arbiter or the NLRC. The jurisdiction vested in them by the
Labor Code extends, generally speaking, only to cases arising from
employer-employee relationships.3 What has all along been at issue here, as
advanced by the parties themselves and as is evident from the facts, is the
PARAS, J.:p
This is a petition for review on certiorari which seeks to reverse and set aside
(1) the decision of the Court of Appeals dated July 21, 1987 in CA-G.R. No.
CV-06522 entitled "B.A. Finance Corporation, Plaintiff-Appellant, vs. Manuel
Cuady and Lilia Cuady, Defendants-Appellees," affirming the decision of the
Regional Trial Court of Manila, Branch 43, which dismissed the complaint in
Civil Case No. 82-10478, and (2) the resolution dated February 9, 1988
denying petitioner's motion for reconsideration.
As gathered from the records, the facts are as follows:
On July 15, 1977, private respondents Manuel Cuady and Lilia Cuady
obtained from Supercars, Inc. a credit of P39,574.80, which amount covered
the cost of one unit of Ford Escort 1300, four-door sedan. Said obligation
was evidenced by a promissory note executed by private respondents in
favor of Supercars, Inc., obligating themselves to pay the latter or order the
sum of P39,574.80, inclusive of interest at 14% per annum, payable on
monthly installments of P1,098.00 starting August 16, 1977, and on the 16th
day of the next 35 months from September 16, 1977 until full payment
thereof. There was also stipulated a penalty of P10.00 for every month of late
installment payment. To secure the faithful and prompt compliance of the
obligation under the said promissory note, the Cuady spouses constituted a
chattel mortage on the aforementioned motor vehicle. On July 25, 1977,
Supercars, Inc. assigned the promissory note, together with the chattel
mortgage, to B.A. Finance Corporation. The Cuadys paid a total of
P36,730.15 to the B.A. Finance Corporation, thus leaving an unpaid balance
of P2,344.65 as of July 18, 1980. In addition thereto, the Cuadys owe B.A.
Finance Corporation P460.00 representing penalties or surcharges for tardy
monthly installments (Rollo, pp. 27-29).
petitioner, filed a motion for postponement, the reason being that the
"handling" counsel, Atty. Ferdinand Macibay was temporarily assigned in
Cebu City and would not be back until after August 15, 1984. Said motion
was, however, denied by the trial court on August 10, 1984. On August 15,
1984, the date of hearing, the trial court allowed private respondents to
adduce evidence ex-parte in the form of an affidavit to be sworn to before
any authorized officer. B.A. Finance Corporation filed a motion for
reconsideration of the order of the trial court denying its motion for
postponement. Said motion was granted in an order dated September 26,
1984, thus:
B.A. Finance Corporation, however, never complied with the abovementioned order, paving the way for the trial court to render its decision on
January 18, 1985, the dispositive portion of which reads as follows:
IN VIEW WHEREOF, the Court DISMISSES the complaint
without costs.
SO ORDERED. (Rollo, p. 143)
On appeal, the respondent appellate court * affirmed the decision of the trial
court. The decretal portion of the said decision reads as follows:
WHEREFORE, after consultation among the undersigned
members of this Division, in compliance with the provision of
Section 13, Article VIII of the Constitution; and finding no
reversible error in the judgment appealed from, the same is
hereby AFFIRMED, without any pronouncement as to costs.
(Ibid., p. 33)
B.A. Finance Corporation moved for the reconsideration of the above
decision, but the motion was denied by the respondent appellate court in a
resolution dated February 9, 1988 (Ibid., p. 38).
Hence, this present recourse.
On July 11, 1990, this Court gave due course to the petition and required the
parties to submit their respective memoranda. The parties having complied
with the submission of their memoranda, the case was submitted for
decision.
The real issue to be resolved in the case at bar is whether or not B.A.
Finance Corporation has waived its right to collect the unpaid balance of the
Cuady spouses on the promissory note for failure of the former to enforce the
total loss provision in the insurance coverage of the motor vehicle subject of
the chattel mortgage.
It is the contention of B.A. Finance Corporation that even if it failed to enforce
the total loss provision in the insurance policy of the motor vehicle subject of
the chattel mortgage, said failure does not operate to extinguish the unpaid
balance on the promissory note, considering that the circumstances
obtaining in the case at bar do not fall under Article 1231 of the Civil Code
relative to the modes of extinguishment of obligations (Memorandum for the
Petitioner, p. 11).
On the other hand, the Cuadys insist that owing to its failure to enforce the
total loss provision in the insurance policy, B.A. Finance Corporation lost not
only its opportunity to collect the insurance proceeds on the mortgaged motor
vehicle in its capacity as the assignee of the said insurance proceeds
pursuant to the memorandum in the insurance policy which states that the
"LOSS: IF ANY, under this policy shall be payable to BA FINANCE CORP., as
their respective rights and interest may appear" (Rollo, p. 91) but also the
remaining balance on the promissory note (Memorandum for the
Respondents, pp. 16-17).
The petition is devoid of merit.
B.A. Finance Corporation was deemed subrogated to the rights and
obligations of Supercars, Inc. when the latter assigned the promissory note,
together with the chattel mortgage constituted on the motor vehicle in
question in favor of the former. Consequently, B.A. Finance Corporation is
bound by the terms and conditions of the chattel mortgage executed between
the Cuadys and Supercars, Inc. Under the deed of chattel mortgage, B.A.
Finance Corporation was constituted attorney-in-fact with full power and
authority to file, follow-up, prosecute, compromise or settle insurance claims;
to sign execute and deliver the corresponding papers, receipts and
documents to the Insurance Company as may be necessary to prove the
claim, and to collect from the latter the proceeds of insurance to the extent of
its interests, in the event that the mortgaged car suffers any loss or damage
(Rollo, p. 89). In granting B.A. Finance Corporation the aforementioned
powers and prerogatives, the Cuady spouses created in the former's favor an
agency. Thus, under Article 1884 of the Civil Code of the Philippines, B.A.
Finance Corporation is bound by its acceptance to carry out the agency, and
is liable for damages which, through its non-performance, the Cuadys, the
principal in the case at bar, may suffer.
Unquestionably, the Cuadys suffered pecuniary loss in the form of salvage
value of the motor vehicle in question, not to mention the amount equivalent
to the unpaid balance on the promissory note, when B.A. Finance
Corporation steadfastly refused and refrained from proceeding against the
insurer for the payment of a clearly valid insurance claim, and continued to
ignore the yearning of the Cuadys to enforce the total loss provision in the
insurance policy, despite the undeniable fact that Rea Auto Center, the auto
repair shop chosen by the insurer itself to repair the aforementioned motor
vehicle, misrepaired and rendered it completely useless and unserviceable
(Ibid., p. 31).
Accordingly, there is no reason to depart from the ruling set down by the
respondent appellate court. In this connection, the Court of Appeals said:
... Under the established facts and circumstances, it is
unjust, unfair and inequitable to require the chattel
mortgagors, appellees herein, to still pay the unpaid balance
of their mortgage debt on the said car, the non-payment of
which account was due to the stubborn refusal and failure of
appellant mortgagee to avail of the insurance money which
became due and demandable after the insured motor vehicle
was badly damaged in a vehicular accident covered by the
insurance risk. ... (Ibid.)
On the allegation that the respondent court's findings that B.A. Finance
Corporation failed to claim for the damage to the car was not supported by
evidence, the records show that instead of acting on the instruction of the
Cuadys to enforce the total loss provision in the insurance policy, the
petitioner insisted on just having the motor vehicle repaired, to which private
respondents reluctantly acceded. As heretofore mentioned, the repair shop
chosen was not able to restore the aforementioned motor vehicle to its
condition prior to the accident. Thus, the said vehicle bogged down shortly
thereafter. The subsequent request of the Cuadys for the B.A. Finance
Corporation to file a claim for total loss with the insurer fell on deaf ears,
EN BANC
G.R. No. L-20567
July 30, 1965
PHILIPPINE NATIONAL BANK, petitioner,
vs.
MANILA SURETY and FIDELITY CO., INC. and THE COURT OF
APPEALS (Second Division), respondents.
Besa, Galang and Medina for petitioner.
De Santos and Delfino for respondents.
The Philippine National Bank petitions for the review and reversal of the
decision rendered by the Court of Appeals (Second Division), in its case CAG.R. No. 24232-R, dismissing the Bank's complaint against respondent
Manila Surety & Fidelity Co., Inc., and modifying the judgment of the Court of
First Instance of Manila in its Civil Case No. 11263.
The material facts of the case, as found by the appellate Court, are as
follows:
The Philippine National Bank had opened a letter of credit and advanced
thereon $120,000.00 to Edgington Oil Refinery for 8,000 tons of hot asphalt.
Of this amount, 2,000 tons worth P279,000.00 were released and delivered
to Adams & Taguba Corporation (known as ATACO) under a trust receipt
guaranteed by Manila Surety & Fidelity Co. up to the amount of P75,000.00.
To pay for the asphalt, ATACO constituted the Bank its assignee and
attorney-in-fact to receive and collect from the Bureau of Public Works the
amount aforesaid out of funds payable to the assignor under Purchase Order
No. 71947. This assignment (Exhibit "A") stipulated that:
The conditions of this assignment are as follows:
1. The same shall remain irrevocable until the said credit
accomodation is fully liquidated.
2. The PHILIPPINE NATIONAL BANK is hereby appointed as our
Attorney-in-Fact for us and in our name, place and stead, to collect
and to receive the payments to be made by virtue of the aforesaid
Purchase Order, with full power and authority to execute and deliver
on our behalf, receipt for all payments made to it; to endorse for
deposit or encashment checks, money order and treasury warrants
which said Bank may receive, and to apply said payments to the
settlement of said credit accommodation.
This power of attorney shall also remain irrevocable until our total
indebtedness to the said Bank have been fully liquidated. (Exhibit E)
ATACO delivered to the Bureau of Public Works, and the latter accepted,
asphalt to the total value of P431,466.52. Of this amount the Bank regularly
collected, from April 21, 1948 to November 18, 1948, P106,382.01.
Thereafter, for unexplained reasons, the Bank ceased to collect, until in 1952
its investigators found that more moneys were payable to ATACO from the
Public Works office, because the latter had allowed mother creditor to collect
The Court of Appeals found the Bank to have been negligent in having
stopped collecting from the Bureau of Public Works the moneys falling due in
favor of the principal debtor, ATACO, from and after November 18, 1948,
before the debt was fully collected, thereby allowing such funds to be taken
and exhausted by other creditors to the prejudice of the surety, and held that
the Bank's negligence resulted in exoneration of respondent Manila Surety &
Fidelity Company.
This holding is now assailed by the Bank. It contends the power of attorney
obtained from ATACO was merely in additional security in its favor, and that it
was the duty of the surety, and not that of the creditor, owed see to it that the
obligor fulfills his obligation, and that the creditor owed the surety no duty of
active diligence to collect any, sum from the principal debtor, citing Judge
Advocate General vs. Court of Appeals, G.R. No. L-10671, October 23, 1958.
This argument of appellant Bank misses the point. The Court of Appeals did
not hold the Bank answerable for negligence in failing to collect from the
principal debtor but for its neglect in collecting the sums due to the debtor
from the Bureau of Public Works, contrary to its duty as holder of an
exclusive and irrevocable power of attorney to make such collections, since
an agent is required to act with the care of a good father of a family (Civ.
Code, Art. 1887) and becomes liable for the damages which the principal
may suffer through his non-performance (Civ. Code, Art. 1884). Certainly, the
Bank could not expect that the Bank would diligently perform its duty under
its power of attorney, but because they could not have collected from the
Bureau even if they had attempted to do so. It must not be forgotten that the
Bank's power to collect was expressly made irrevocable, so that the Bureau
of Public Works could very well refuse to make payments to the principal
debtor itself, and a fortiori reject any demands by the surety.
Even if the assignment with power of attorney from the principal debtor were
considered as mere additional security still, by allowing the assigned funds to
be exhausted without notifying the surety, the Bank deprived the former of
any possibility of recoursing against that security. The Bank thereby
exonerated the surety, pursuant to Article 2080 of the Civil Code:
ART. 2080. The guarantors, even though they be solidary, are
released from their obligation whenever by come act of the creditor
they cannot be subrogated to the rights, mortgages and preferences
of the latter. (Emphasis supplied.)
The appellant points out to its letter of demand, Exhibit "K", addressed to the
Bureau of Public Works, on May 5, 1949, and its letter to ATACO, Exhibit "G",
informing the debtor that as of its date, October 31, 1949, its outstanding
balance was P156,374.83. Said Exhibit "G" has no bearing on the issue
whether the Bank has exercised due diligence in collecting from the Bureau
of Public Works, since the letter was addressed to ATACO, and the funds
were to come from elsewhere. As to the letter of demand on the Public
Works office, it does not appear that any reply thereto was made; nor that the
demand was pressed, nor that the debtor or the surety were ever apprised
that payment was not being made. The fact remains that because of the
Bank's inactivity the other creditors were enabled to collect P173,870.31,
when the balance due to appellant Bank was only P158,563.18. The finding
of negligence made by the Court of Appeals is thus not only conclusive on us
but fully supported by the evidence.
Even if the Court of Appeals erred on the second reason it advanced in
support of the decision now under appeal, because the rules on application
of payments, giving preference to secured obligations are only operative in
cases where there are several distinct debts, and not where there is only one
that is partially secured, the error is of no importance, since the principal
reason based on the Bank's negligence furnishes adequate support to the
decision of the Court of Appeals that the surety was thereby released.
WHEREFORE, the appealed decision is affirmed, with costs against
appellant Philippine National Bank.
EN BANC
G.R. No. L-21237
Saigon
Java
New Zealand
India
China
Tasmania
Sumatra
Hongkong
Siam and the Straits Settlements, also in the United States of America until
May 1, 1921.
As regard bituminous limestone mined from the Lucio property. No orders for
less than one thousand (1,000) tons will be accepted except under special
agreement with us. All orders for said products are to be billed to you as
follows:
Per ton
In 1,000 ton lots ...........................................
In 2,000 ton lots ...........................................
In 5,000 ton lots ...........................................
In 10,000 ton lots ..........................................
P15
14
12
10
with the understanding, however that, should the sales in the above territory
equal or exceed ten thousand (10,000) tons in the year ending October 1,
1921, then in that event the price of all shipments made during the above
period shall be ten pesos (P10) per ton, and any sum charged to any of your
customers or buyers in the aforesaid territory in excess of ten pesos (P10)
per ton, shall be rebated to you. Said rebate to be due and payable when the
gross sales have equalled or exceeded ten thousand (10,000) tons in the
twelve months period as hereinbefore described. Rebates on lesser sales to
apply as per above price list.
Should your sales equal exceed ten thousand (10,000) tons in the year
ending October 1, 1921, or twenty thousand (20,000) tons by May 1, 1922,
then this contract is to be continued automatically for an additional three
years ending April 30, 1925, under the same terms and conditions as above
stipulated.
You are to have full authority to sell said product of the Lucio mine for any
sum see fit in excess of the prices quoted above and such excess in price
shall be your extra and additional profit and commission. Should we make
any collection in excess of the prices quoted, we agree to remit same to your
within ten (10) days of the date of such collections or payments.
The products of the other mines can be sold by you in the aforesaid
territories under the same terms and conditions as the products of
the Lucio mine; scale of prices to be mutually agreed upon between us.
(Sgd.) W. C. A. PALMER
Secretary
Approved by Board of Directors,
October 1, 1920.
(Sgd.) WM. ANDERSON
President
Accepted.
(Sgd.) JAMES D. BARTON
Witness D. G. MCVEAN
Upon careful perusal of the fourth paragraph from the end of this letter it is
apparent that some negative word has been inadvertently omitted before
"prepared," so that the full expression should be "unless we should notify you
specifically prior to that date that we are unprepared to load at that rate," or
"not prepared to load at that rate."
Very soon after the aforesaid contract became effective, the plaintiff
requested the defendant company to give him a similar selling agency for
Japan. To this request the defendant company, through its president, Wm.
Anderson, replied, under date of November 27, 1920, as follows:
In re your request for Japanese agency, will say, that we are willing
to give you, the same commission on all sales made by you in
Japan, on the same basis as your Australian sales, but we do not
feel like giving you a regular agency for Japan until you can make
some large sized sales there, because some other people have
given us assurances that they can handle our Japanese sales,
therefore we have decided to leave this agency open for a time.
Meanwhile the plaintiff had embarked for San Francisco and upon arriving at
that port he entered into an agreement with Ludvigsen & McCurdy, of that
city, whereby said firm was constituted a subagent and given the sole selling
rights for the bituminous limestone products of the defendant company for
the period of one year from November 11, 1920, on terms stated in the letter
Exhibit K. The territory assigned to Ludvigsen & McCurdy included San
Francisco and all territory in California north of said city. Upon an earlier
voyage during the same year to Australia, the plaintiff had already made an
agreement with Frank B. Smith, of Sydney, whereby the latter was to act as
the plaintiff's sales agent for bituminous limestone mined at the defendant's
quarry in Leyte, until February 12, 1921. Later the same agreement was
extended for the period of one year from January 1, 1921. (Exhibit Q.)
On February 5, 1921, Ludvigsen & McCurdy, of San Francisco, addressed a
letter to the plaintiff, then in San Francisco, advising hi that he might enter an
order for six thousand tons of bituminous limestone to be loaded at Leyte not
later than May 5, 1921, upon terms stated in the letter Exhibit G. Upon this
letter the plaintiff immediately indorsed his acceptance.
The plaintiff then returned to Manila; and on March 2, 1921, Anderson wrote
to him from Cebu, to the effect that the company was behind with
construction and was not then able to handle big contracts. (Exhibit FF.) On
March 12, Anderson was in Manila and the two had an interview in the
Manila Hotel, in the course of which the plaintiff informed Anderson of the
San Francisco order. Anderson thereupon said that, owing to lack of capital,
adequate facilities had not been provided by the company for filling large
orders and suggested that the plaintiff had better hold up in the matter of
taking orders. The plaintiff expressed surprise at this and told Anderson that
he had not only the San Francisco order (which he says he exhibited to
Anderson) but other orders for large quantities of bituminous limestone to be
shipped to Australia and Shanghai. In another interview on the same
Anderson definitely informed the plaintiff that the contracts which be claimed
to have procured would not be filled.
person through whom this contract had been made, and it was stated that
the consignee would be named later, no destination for the shipment being
given. The plaintiff explains that the name White, as used in this letter, was
based on an inference which he had erroneously drawn from the cable sent
by Frank B. Smith, and his intention was to have the second shipment
consigned to Australia in response to Smith's order.
It will be noted in connection with this letter of the plaintiff, of March 15, 1921,
that no mention was made of the names of the person, or firm, for whom the
shipments were really intended. The obvious explanation that occurs in
connection with this is that the plaintiff did not then care to reveal the fact that
the two orders had originated from his own subagents in San Francisco and
Sydney.
To the plaintiff's letter of March 15, the assistant manager of the defendant
company replied on March, 25, 1921, acknowledging the receipt of an order
for five thousand tons of bituminous limestone to be consigned to John
Chapman Co., of San Francisco, and the further amount of five thousand
tons of the same material to be consigned to Henry E. White, and it was
stated that "no orders can be entertained unless cash has been actually
deposited with either the International Banking Corporation or the Chartered
Bank of India, Australia and China, Cebu." (Exhibit Z.)
To this letter the plaintiff in turn replied from Manila, under date of March,
1921, questioning the right of the defendant to insist upon a cash deposit in
Cebu prior to the filling of the orders. In conclusion the plaintiff gave orders
for shipment to Australia of five thousand tons, or more, about May 22, 1921,
and ten thousand tons, or more, about June 1, 1921. In conclusion the
plaintiff said "I have arranged for deposits to be made on these additional
shipments if you will signify your ability to fulfill these orders on the dates
mentioned." No name was mentioned as the purchaser, or purchases, of
these intended Australian consignments.
Three days later the plaintiff addressed a letter (Exhibit Y) to the defendant
company in Cebu, in which he notified the company to be prepared to ship
five thousand tons of bituminous limestone to John Chapman Co., San
Francisco, loading to commence on May 1, and to proceed at the rate of one
thousand tons per day of each twenty-four hours, weather permitting.
Soon after writing the letter last above-mentioned, the plaintiff embarked for
China and Japan. With his activities in China we are not here concerned, but
we note that in Tokio, Japan, he came in contact with one H. Hiwatari, who
appears to have been a suitable person for handling bituminous limestone for
construction work in Japan. In the letter Exhibit X, Hiwatari speaks of himself
as if he had been appointed exclusive sales agent for the plaintiff in Japan,
but no document expressly appointing him such is in evidence.
While the plaintiff was in Tokio he procured the letter Exhibit W, addressed to
himself, to be signed by Hiwatari. This letter, endited by the plaintiff himself,
contains an order for one thousand tons of bituminous limestone from the
quarries of the defendant company, to be delivered as soon after July 1,
1921, as possible. In this letter Hiwatari states, "on receipt of the cable from
you, notifying me of date you will be ready to ship, and also tonnage rate, I
will agree to transfer through the Bank of Taiwan, of Tokio, to the Asia
Banking Corporation, of Manila, P. I., the entire payment of $16,000 gold, to
be subject to our order on delivery of documents covering bill of lading of
shipments, the customs report of weight, and prepaid export tax receipt. I will
arrange in advance a confirmed or irrevocable letter of credit for the above
amounts so that payment can be ordered by cable, in reply to your cable
advising shipping date."
In a letter, Exhibit X, of May 16, 1921, Hiwatari informs the plaintiff that he
had shown the contract, signed by himself, to the submanager of the Taiwan
Bank who had given it as his opinion that he would be able to issue, upon
request of Hiwatari, a credit note for the contracted amount, but he added
that the submanager was not personally able to place his approval on the
contract as that was a matter beyond his authority. Accordingly Hiwatari
advised that he was intending to make further arrangements when the
manager of the bank should return from Formosa.
After the suit was brought, the plaintiff filed an amendment to his complaint in
which he set out, in tabulated form, the orders which he claims to have
received and upon which his letters of notification to the defendant company
were based. In this amended answer the name of Ludvigsen & McCurdy
appears for the first time; and the name of Frank B. Smith, of Sydney, is used
for the first time as the source of the intended consignments of the letters,
Exhibits G, L, M, and W, containing the orders from Ludvigen & McCurdy,
Frank B. Smith and H. Hiwatari were at no time submitted for inspection to
any officer of the defendant company, except possibly the Exhibit G, which
the plaintiff claims to have shown to Anderson in Manila on March, 12, 1921.
In the letter of May 5, 1921, containing Hiwatari's order for one thousand tons
of bituminous limestone, it was stated that if the material should prove
satisfactory after being thoroughly tested by the Paving Department of the
City of Tokio, he would contract with the plaintiff for a minimum quantity of ten
thousand additional tons, to be used within a year from September 1, 1921,
and that in this event the contract was to be automatically extended for an
additional four years. The contents of the letter of May 5 seems to have been
conveyed, though imperfectly, by the plaintiff to his attorney, Mr. Frank B.
Ingersoll, of Manila; and on May 17, 1921, Ingersoll addressed a note to the
defendant company in Cebu in which he stated that he had been requested
by the plaintiff to notify the defendant that the plaintiff had accepted an order
from Hiwatari, of Tokio, approved by the Bank of Taiwan, for a minimum order
of ten thousand tons of the stone annually for a period of five years, the first
shipment of one thousand tons to be made as early after July 1 as possible.
It will be noted that this communication did not truly reflect the contents of
Hiwatari's letter, which called unconditionally for only one thousand tons, the
taking of the remainder being contingent upon future eventualities.
It will be noted that the only written communications between the plaintiff and
the defendant company in which the former gave notice of having any orders
for the sale of bituminous limestone are the four letters Exhibit Y, AA, BB, and
II. In the first of these letters, dated March 15, 1921, the plaintiff advises the
defendant company to be prepared to ship five thousand tons of bituminous
limestone, to be consigned to John Chapman, Co., of San Francisco, to be
loaded by March 5, and a further consignment of five thousand tons, through
a contract with Henry E. White, consignees to be named later. In the letter
Exhibit BB dated May 17, 1921, the plaintiff's attorney gives notice of the
The different items conspiring the award which the trial judge gave in favor of
the plaintiff are all based upon the orders given by Ludvigsen & McCurdy
(Exhibit G), by Frank B. Smith (Exhibit L and M), and by Hiwatari in Exhibit
W; and the appealed does not involve an order which came from Shanghai,
China. We therefore now address ourselves to the question whether or not
the orders contained in Exhibit G, L, M, and W, in connection with the
subsequent notification thereof given by the plaintiff to the defendant, are
sufficient to support the judgment rendered by the trial court.
The transaction indicated in the orders from Ludvigsen, & McCurdy and from
Frank B. Smith must, in our opinion, be at once excluded from consideration
as emanating from persons who had been constituted mere agents of the
plaintiff. The San Francisco order and the Australian orders are the same in
legal effect as if they were orders signed by the plaintiff and drawn upon
himself; and it cannot be pretended that those orders represent sales to bona
fide purchasers found by the plaintiff. The original contract by which the
plaintiff was appointed sales agent for a limited period of time in Australia and
the United States contemplated that he should find reliable and solvent
buyers who should be prepared to obligate themselves to take the quantity of
bituminous limestone contracted for upon terms consistent with the contract.
These conditions were not met by the taking of these orders from the
plaintiff's own subagents, which was as if the plaintiff had bought for himself
the commodity which he was authorized to sell to others. Article 267 of the
Code of Commerce declares that no agent shall purchase for himself or for
another that which he has been ordered to sell. The law has placed its ban
upon a broker's purchasing from his principal unless the latter with full
knowledge of all the facts and circumstances acquiesces in such course; and
even then the broker's action must be characterized by the utmost good faith.
A sale made by a broker to himself without the consent of the principal is
ineffectual whether the broker has been guilty of fraudulent conduct or not. (4
R. C. L., 276-277.) We think, therefore, that the position of the defendant
company is indubitably sound in so far as it rest upon the contention that the
plaintiff has not in fact found any bona fidepurchasers ready and able to take
the commodity contracted for upon terms compatible with the contract which
is the basis of the action.
It will be observed that the contract set out at the beginning of this opinion
contains provisions under which the period of the contract might be
extended. That privilege was probably considered a highly important incident
of the contract and it will be seen that the sale of five thousand tons which
the plaintiff reported for shipment to San Francisco was precisely adjusted to
the purpose of the extension of the contract for the United States for the
period of an additional year; and the sales reported for shipment to Australia
were likewise adjusted to the requirements for the extention of the contract in
that territory. Given the circumstances surrounding these contracts as they
were reported to the defendant company and the concealment by the plaintiff
of the names of the authors of the orders, -- who after all were merely the
plaintiff's subagents, the officers of the defendant company might justly
have entertained the suspicion that the real and only person behind those
contracts was the plaintiff himself. Such at least turns out to have been the
case.
Much energy has been expended in the briefs upon his appeal over the
contention whether the defendant was justified in laying down the condition
mentioned in the letter of March 26, 1921, to the effect that no order would
be entertained unless cash should be deposited with either the International
Banking Corporation of the Chartered Bank of India, Australia and China, in
Cebu. In this connection the plaintiff points to the stipulation of the contract
which provides that contracts with responsible parties are to be accepted
"subject to draft attached to bill of lading in full payment of such shipment."
What passed between the parties upon this point appears to have the
character of mere diplomatic parrying, as the plaintiff had no contract from
any responsible purchaser other than his own subagents and the defendant
company could no probably have filled the contracts even if they had been
backed by the Bank of England.
Upon inspection of the plaintiff's letters (Exhibit Y and AA), there will be found
ample assurance that deposits for the amount of each shipment would be
made with a bank in Manila provided the defendant would indicated its ability
to fill the orders; but these assurance rested upon no other basis than the
personally responsible. The Ludvigsen & McCurdy order from San Francisco
begins: "You can enter our order for 6,000 tons of bituminous limestone as
per sample submitted, at $10 gold per ton, f. o. b., island of Leyte, subject to
the following terms and conditions:
* * * "(Exhibit G). The Smith order from Australia contains the following: "It is
therefore with great pleasure I confirm the booking of the following orders, to
be shipped at least within a week of respective dates: . . ." (Exhibit L). The
Japan order starts with the following sentence: "You can enter my order for
1,000 tons of 1,000 kilos each of bituminous limestone from the quarries of
the Leyte Asphalt and Mineral Oil Co. . . ." (Exhibit W.)
But the main point of the plaintiff which the majority decision misses entirely
centers on the proposition that the orders were communicated by the plaintiff
to the defendant, and that the only objection the defendant had related to the
manner of payment. To emphasize this thought again, let me quote the reply
of the defendant to the plaintiff when the defendant acknowledge receipts of
the orders placed by the plaintiff. The letter reads: "In reply to same we have
to advice you that no orders can be entertained unless cash has been
actually deposited with either the International Banking Corporation or the
Chartered Bank of India, Australia and China, Cebu." (Exhibit Y.) Prior to the
filing of suit, the defendant company never at any time raised any questioned
as to whether the customers secured by plaintiff were "responsible firms"
within the meaning of the contract, and never secured any information
whatsoever as to their financial standing. Consequently, defendant is now
estopped by its conduct from raising new objections for rejection of the
orders. (Mechem on Agency, section 2441.)
The majority decision incidentally takes up for consideration assignments of
error 1 and 2 having to do with either the admission or the rejection by the
trial court of certain exhibits. Having in mind that the Court reverses the
courta quo on the facts, what is said relative to these two assignments is
absolutely unnecessary for a judgment, and even as obiter dicta, contains
unfortunate expressions. Exhibit 14, for example, is a letter addressed by the
plaintiff to his lawyer and probably merely shown to the counsel of the
defendant during negotiations to seek a compromise. Whether that exhibit be
considered improperly rejected or not would not change the result one iota.
The rule now announced by the Court that it makes no difference how the
adversary acquired possession of the document, and that a court will take no
notice of how it was obtained, is destructive of the attorney's privilege and
constitutes and obstacle to attempts at friendly compromise. In the case
of Uy Chico vs. Union Life Assurance Society ([1915], 29 Phil., 163), it was
held that communications made by a client to his attorney for the purpose of
being communicated to others are not privileged if they have been so
communicated. But here, there is no intimation that Exhibit 14 was sent by
the client to the lawyer for the purpose of being communicated to others. The
Supreme Court of Georgia in the case of Southern Railway Co. vs.
White ([1899], 108 Ga., 201), held that statements in a letter to a party's
attorney handed by the latter to the opponent's attorney, are confidential
communications and must be excluded.
Briefly, the decision of the majority appears to me to be defective in the
following particulars: (1) It sets aside without good reason the fair findings of
fact as made by the trial court and substitutes therefor other findings not
warranted by the proof; (2) it fails to stress plaintiff's main argument, and (3)
it lay downs uncalled for rules which undermine the inviolability of a client's
communications to his attorney.
Accordingly, I dissent and vote for an affirmance of the judgment.
On appeal, the Court of Appeals affirmed the Decision of the trial court that
there was a perfected contract of sale. 21 It further ruled that granting that
there was no perfected contract of sale, petitioner, nevertheless, ratified the
sale to respondent Locsin by his receipt of the purchase price, and his failure
to raise any protest over the said sale. 22 The Court of Appeals refused to
credit the petitioners allegation that the money his wife received constituted
his salary from Businessday since the amount he received as his
salary, P24,000.00 per month, did not correspond to the amount he received
during his detention, P20,000.00 per month (deposits of P10,000.00 on every
15th and 30th of each month in the accounts of the petitioners in-laws). On
the other hand, the total amount received, P600,000.00, corresponds to the
aggregate par value of petitioners shares in Businessday. Moreover, the
financial condition of Businessday prevented it from granting any form of
financial assistance in favor of the petitioner, who was placed in an indefinite
leave of absence, and, therefore, not entitled to any salary.23
The Court of Appeals also ruled that although the manner of the cancellation
of the petitioners certificates of stock and the subsequent issuance of the
new certificate of stock in favor of respondent Locsin was irregular, this
irregularity will not relieve petitioner of the consequences of a consummated
sale.24
Finally, the Court of Appeals affirmed the Decision of the trial court
disallowing respondent Locsins claims for moral and exemplary damages
due to lack of supporting evidence.25
Hence, the present petition, where the following issues were raised:
I.
THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A
PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND MR.
LOCSIN OVER THE SHARES;
II.
THE APPELLATE COURT ERRED IN RULING THAT PETITIONER
CONSENTED TO THE ALLEGED SALE OF THE SHARES TO MR. LOCSIN;
III.
THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS
RECEIVED BY PETITIONERS IN LAWS WERE NOT PETITIONERS
SALARY FROM THE CORPORATION BUT INSTALLMENT PAYMENTS
FOR THE SHARES;
IV.
petitioner, to sell the shares of stock, and other related acts. This
construction covers the situation wherein petitioner was arrested and
detained. This much is admitted by petitioner in his testimony.32
Petitioners contention that the shares may only be sold for the sole purpose
of applying the proceeds of the sale to the satisfaction of petitioners
subsisting obligations to the company is far-fetched. The construction, which
will carry out the purpose, is that which should be applied. Petitioner had not
submitted evidence that he was in debt with Businessday at the time he had
executed the SPA. Nor could he have considered incurring any debts since
he admitted that, at the time of its execution, he was concerned about his
possible arrest, death and disappearance. The language of the SPA clearly
enumerates, as among those acts that the agents were authorized to do, the
act of applying the proceeds of the sale of the shares to any obligations
petitioner might have against the Businessday group of companies. This
interpretation is supported by the use of the word "and" in enumerating the
authorized acts, instead of phrases such as "only for," "for the purpose of,"
"in order to" or any similar terms to indicate that the petitioner intended that
the SPA be used only for a limited purpose, that of paying any liabilities with
the Businessday group of companies.
Secondly, petitioner argued that the records failed to show that he gave his
consent to the sale of the shares to respondent Locsin for the price
of P600,000.00. This argument is unsustainable. Petitioner received from
respondent Locsin, through his wife and in-laws, the installment payments for
a total of P600,000.00 from 1980 to 1982, without any protest or complaint. It
was only four years after 1982 when petitioner demanded the return of the
shares. The petitioners claim that he did not instruct respondent Locsin to
deposit the money to the bank accounts of his in-laws fails to prove that
petitioner did not give his consent to the sale since respondent Locsin was
authorized, under the SPA, to negotiate the terms and conditions of the sale
including the manner of payment. Moreover, had respondent Locsin given
the proceeds directly to the petitioner, as the latter suggested in this petition,
the proceeds were likely to have been included among petitioners properties
which were confiscated by the military. Instead, respondent Locsin deposited
the money in the bank accounts of petitioners in-laws, and consequently,
assured that the petitioners wife received these amounts. Article 1882 of the
Civil Code provides that the limits of an agents authority shall not be
considered exceeded should it have been performed in a manner more
advantageous to the principal than that specified by him.
In addition, petitioner made two inconsistent statements when he alleged that
(1) respondent Locsin had not asked the petitioner to endorse and deliver the
shares of stock, and (2) when Rebecca Fernando asked the petitioner to
endorse and deliver the certificates of stock, but petitioner refused and even
became upset.33 In either case, both statements only prove that petitioner
refused to honor his part as seller of the shares, even after receiving
payments from the buyer. Had the petitioner not known of or given his
consent to the sale, he would have given back the payments as soon as
Fernando asked him to endorse and deliver the certificates of stock, an
incident which unequivocally confirmed that the funds he received, through
his wife and his in-laws, were intended as payment for his shares of stocks.
Instead, petitioner held on to the proceeds of the sale after it had been made
clear to him that respondent Locsin had considered the P600,000.00 as
payment for the shares, and asked petitioner, through Fernando, to endorse
and deliver the stock certificates for cancellation.
As regards the third issue, petitioners allegation that the installment
payments he was adjudged to have received for the shares were actually
salaries which Businessday promised to pay him during his detention is
unsupported and implausible. Petitioner received P20,000.00 per month
through his in-laws; this amount does not correspond to his monthly salary
at P24,000.00.34 Nor does the amount received correspond to the amount
which Businessday was supposed to be obliged to pay petitioner, which was
only P45,000.00 to P60,000.00 per annum.35 Secondly, the petitioners wife
did not receive funds from respondent Locsin or Businessday for the entire
duration of petitioners detention. Instead, when the total amount received by
the petitioner reached the aggregate amount of his shares at par value
-- P600,000.00 -- the payments stopped. Petitioner even testified that when
respondent Locsin denied knowing the petitioner soon after his arrest, he
believed respondent Locsins commitment to pay his salaries during his
detention to be nothing more than lip-service.36
Granting that petitioner was able to prove his allegations, such an act of
gratuity, on the part of Businessday in favor of petitioner, would be void. An
arrangement whereby petitioner will receive "salaries" for work he will not
perform, which is not a demandable debt since petitioner was on an
extended leave of absence, constitutes a donation under Article 726 37 of the
Civil Code. Under Article 748 of the Civil Code, if the value of the personal
property donated exceeds P5,000.00, the donation and the acceptance shall
have to be made in writing. Otherwise, the donation will be void. In the
present case, petitioner admitted in his testimony38 that such arrangement
was not made in writing and, hence, is void.
The fact that some of the deposit slips and communications made to
petitioners wife contain the phrase "household expenses" does not disprove
the sale of the shares. The money was being deposited to the bank accounts
of the petitioners in-laws, and not to the account of the petitioner or his wife,
precisely because some of his property had already been confiscated by the
military. Had they used the phrase "sale of shares," it would have defeated
the purpose of not using their own bank accounts, which was to conceal from
the military any transaction involving the petitioners property.
Petitioner raised as his fourth issue that granting that there was a sale,
Businessday, and not respondent Locsin, was the party to the transaction.
The curious facts that the payments were received on the 15th and 30th of
each month and that the payor named in the checks was Businessday, were
adequately explained by respondent Locsin. Respondent Locsin had
obtained cash advances from the company, paid to him on the 15th and 30th
of the month, so that he can pay petitioner for the shares. To support his
claim, he presented Businessdays financial records and the testimony of Leo
Atienza, the Companys Accounting Manager. When asked why the term
"shares of stock" was used for the entries, instead of "cash advances,"
Atienza explained that the term "shares of stock" was more specific rather
than the broader phrase "cash advances."39 More to the point, had the entries
been for "shares of stock," the issuance of shares should have been
reflected in the stock and transfer books of Businessday, which the petitioner
presented as evidence. Instead the stock and transfer books reveal that the
increase in respondent Locsins shares was a result of the cancellation and
transfer of petitioners shares in favor of respondent Locsin.
Petitioner alleges that the purported sale between himself and respondent
Locsin of the disputed shares of stock is void since it contravenes Article
1491 of the Civil Code, which provides that:
ART. 1491. The following persons cannot acquire by purchase, even at a
public or judicial auction, either in person or through the mediation of
another:
xxxx
(2) Agents, the property whose administration or sale may have been
entrusted to them, unless the consent of the principal has been given; x x x.
It is, indeed, a familiar and universally recognized doctrine that a person who
undertakes to act as agent for another cannot be permitted to deal in the
agency matter on his own account and for his own benefit without the
consent of his principal, freely given, with full knowledge of every detail
known to the agent which might affect the transaction. 40 The prohibition
against agents purchasing property in their hands for sale or management is,
however, clearly, not absolute. It does not apply where the principal consents
to the sale of the property in the hands of the agent or administrator.>41
In the present case, the parties have conflicting allegations. While
respondent Locsin averred that petitioner had permitted him to purchase
petitioners shares, petitioner vehemently denies having known of the
transaction. However, records show that petitioners position is less credible
than that taken by respondent Locsin given petitioners contemporaneous
and subsequent acts.42 In 1980, when Fernando returned a stock certificate
she borrowed from the petitioner, it was marked "cancelled." Although the
petitioner alleged that he was furious when he saw the word cancelled, he
had not demanded the issuance of a new certificate in his name. Instead of
having been put on his guard, petitioner remained silent over this obvious red
flag and continued receiving, through his wife, payments which totalled to the
aggregate amount of the shares of stock valued at par. When the payments
stopped, no demand was made by either petitioner or his wife for further
payments.
From the foregoing, it is clear that petitioner knew of the transaction, agreed
to the purchase price of P600,000.00 for the shares of stock, and had in fact
facilitated the implementation of the terms of the payment by providing
respondent Locsin, through petitioners wife, with the information on the bank
accounts of his in-laws. Petitioners wife and his son even provided receipts
for the payments that were made to them by respondent Locsin, 43 a practice that
bespeaks of an onerous transaction and not an act of gratuity.
Lastly, petitioner claims that the cancellation of the shares and the
subsequent transfer thereof were fraudulent, and, therefore, illegal. In the
present case, the shares were transferred in the name of the buyer,
respondent Locsin, without the petitioner delivering to the buyer his
certificates of stock. Section 63 of the Corporation Code provides that:
Sec.63. Certificate of stock and transfer of shares. xxx Shares of stock so
issued are personal property and may be transferred by delivery of the
certificate or certificates indorsed by the owner or his attorney-in-fact or other
person legally authorized to make the transfer. No transfer, however, shall be
valid, except as between the parties, until the transfer is recorded in the
books of the corporation showing the names of the parties to the transaction,
the date of the transfer, the number of the certificate or certificates and the
number of shares transferred. (Emphasis provided.)
The aforequoted provision furnishes the procedure for the transfer of shares
the delivery of the endorsed certificates, in order to prevent the fraudulent
transfer of shares of stock. However, this rule cannot be applied in the
present case without causing the injustice sought to be avoided. As had been
amply demonstrated, there was a valid sale of stocks. Petitioners failure to
deliver the shares to their rightful buyer is a breach of his duty as a seller,
which he cannot use to unjustly profit himself by denying the validity of such
sale. Thus, while the manner of the cancellation of petitioners certificates of
stock and the issuance of the new certificates in favor of respondent Locsin
was highly irregular, we must, nonetheless, declare the validity of the sale
between the parties. Neither does this irregularity prove that the transfer was
fraudulent. In his testimony, petitioner admitted that they had intended to
conceal his being a stockholder of Businessday.44 The cancellation of his
name from the stock and transfer book, even before the shares were actually
sold, had been done with his consent. As earlier explained, even the
subsequent sale of the shares in favor of Locsin had been done with his
consent.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court
AFFIRMS the assailed Decision of the Court of Appeals, promulgated on 30
June 2003, affirming the validity of the sale of the shares of stock in favor of
respondent Locsin. No costs.
SO ORDERED.
EN BANC
G.R. No. L-23181
defendants on the note in the Court of First Instance of the City of Manila,
civil case No. 25218; that in such case the court rendered judgment against
the defendants Gabriela Andrea de Coster y Roxas, Jean M. Poizat and J. M.
Poizat and Co. jointly and severally for P292,000, with interest at the rate of 9
per cent per annum from the 31st of August, 1923, P10,000 as attorney's
fees, and P2,500 for and in account of insurance upon the steamer Gabrielle
Poizat, with interest on that amount from February 9, 1924, at the rate of 9
per cent per annum, and costs; that the said defendants have not paid the
judgment or any part thereof, and that the full amount of the debt secured by
the mortgaged on the property described in the complaint is now due and
owing. Wherefore, plaintiff prays for an order of the court to direct the sheriff
of the City of Manila to take immediate possession of the property described
in the chattel mortgage and sell the same according to the Chattel Mortgage
Law; that the property described in the real mortgage or so much thereof as
may be required to pay the amount due the plaintiff be sold according to law;
that out of such sales plaintiff shall be paid the amount due and owing it; and
that such defendants be adjudged to pay any remaining deficiency.
Copies of the chattel and real mortgage are attached to, and made a part of,
the complaint and marked, respectively, Exhibits A and B.
On April 24, 1924, the La Orden de Dominicos or PP. Predicadores de la
Provincia del Santisimo Rosario appeared in the suit and filed the following
plea:
The defendant corporation, La Orden de Dominicos or PP.
Predicadores de la Provincia del Santisimo Rosario, for answer to
the complaint, shows:
I. That the encumbrance above-mentioned, but not determined in
paragraph V of the complaint, consisting of a first mortgage in favor
of the aforesaid religious corporation on the property described in
paragraph IV of the same complaint is P125,000 with interest of 10
per cent per annum;
II. That the mortgagors Jean M. Poizat and Gabriela Andrea de
Coster y Roxas, have not paid the principal or the interest stipulated
and agreed upon from the 16th of December, 1921 up to the present
date;
III. The interest due up to the 30th of April of the present year 1924
amounts to a total sum of P27,925.34.
J.M. Poizat & Co., third, that it was executed by her husband, because the
bank desired more security for the payment of her husband's debt to the
bank; fourth, that it was executed by her husband in excess of the powers
given to him under his power of attorney; fifth, that it was executed as the
result of collusion between the bank and the defendant liable for the
obligation of a third person. That as to the mortgage: First, it was executed to
secure a void obligation; second, it does not guarantee any loan made to this
defendant; third, it was executed to secure a void litigation; second, it does
not guarantee any loan made to third defendant; third, it was executed
without the express marital consent which the law requires; fourth, it was
executed through collusion. That if the judgment is not set aside, the
defendant will suffer irreparable injury; that through surprise and negligence,
for which she was not responsible, this defendant was prevented from
defending herself in this action; that this is a case which comes under section
113 of the Code of Civil Procedure. She prays that the judgment annulled
and set aside and the case be reopened, and that she be permitted to file an
answer, and that the case be tried on its merits, and that a final judgment be
rendered, absolving her from all liability.
The motion was based upon, and supported by, the affidavit of the defendant
wife, to which was attached a large number of exhibits all of which tended to
support the motion.
After counter showings by the bank and the Dominican Fathers and the
arguments of respective counsel, the motion to set aside and vacate the
judgment was denied. A motion for a reconsideration was then made, and the
motion of the defendant to file an answer and make a defense was again
denied. The defendant Gabriela Andrea de Coster y Roxas appeals,
assigning the following errors;
PART
AS TO THE JURISDICTION
II. The lower court erred in holding that the relief on the part of J.M.
Poizat that there was no defense against the claim of the plaintiff on
an obligation contracted by said J.M. Poizat apparently as agent of
the defendant Gabriela Andrea de Coster y Roxas, but in truth
beyond the scope of his authority, and with knowledge on the part of
the plaintiff bank that he was so acting beyond his powers, was such
an error was can be imputed to this defendant, and against which
she can obtain no redress.
III. The lower court erred in not holding that a principal is not liable for
an obligation contracted by his agent beyond his power even when
both the creditor and the agent believed that the latter was acting
within the scope of his powers.
IV. The lower court erred in holding that because the agent of the
defendant Gabriela Andrea de Coster y Roxas had power to appear
for her in court, his non-appearance could render this defendant
liable to a judgment by default, when the record shows that there
was no service of the summons in accordance with any of the forms
of service provided by law.
V. The lower court erred in holding that J.M. Poizat was summoned
as agent of hi wife, the defendant Gabriela Andrea de Coster y
Roxas, and was, in that capacity, notified of all the decisions
rendered in this case, there being nothing in the record to support
the truth of such finding.
VI. The lower court erred in holding that in contracting the obligations
in favor of the plaintiff Bank of the Philippine Islands and of the
defendant Orden de PP. Predicadores de la Provincia del Santisimo
Rosario, the agent of the defendant Gabriela Andrea de Coster y
Roxas acted within the scope of his powers.
VII. The lower court erred in not holding that the plaintiff Bank of the
Philippine Islands and the defendant Orden de PP. Predicadores de
la Provincia del Santisimo Rosario had knowledge of the fact that
J.M. Poizat in contracting the respective obligations in their favor,
pretending to act as agent of the defendant Gabriela Andrea de
Coster y Roxas, was acting beyond the scope of his powers as such
agent.
VIII. The lower court erred in making the following statement:
XV. The lower court has acted throughout these proceedings with a
clear abuse of discretion.
JOHNS, J.:
We will decide the case of the bank first
The petition of the appellant states under oath:
II. That this defendant has been absent from the Philippine Islands
and residing in the City of Paris, France, since the year 1908 (1909),
up to April 30, 1924, on which date she arrived in this City of Manila,
Philippine Islands.
III. That at the time when the complaint in this case was filed and the
summons issued, she was still absent from the Philippine Islands
and had no knowledge either of the filing of this action or of the facts
which led to it.
Under oath the plaintiff, through its acting president, says:
I-II. That it admits the allegations contained in paragraphs I and II of
the aforesaid motion.
III. That it admits the first part of this paragraph, to wit: That at the
time that the complaint in the above entitled case was filed, the
defendant Gabriela Andrea de Coster y Roxas was absent from the
Philippine Islands.
Paragraph 6 of section 396 of the Code of Civil Procedure provides:
In all other cases, to the defendant personally, or by leaving a copy
at his usual place of residence, in the hands of some person resident
therein of sufficient discretion to receive the same. But service upon
a corporation, as provided in subsections one and two, may be made
by leaving the copy at the office of the proper officer thereof if such
officer cannot be found.
The return of the sheriff as to the service is as follows:
On this date I have served a copy of the within summons, and of the
complaint attached, upon Jean M. Poizat, personally, and the copies
corresponding to J.M. Poizat and Co., a company duly organized
under the laws of the Philippine Islands, by delivering said copies to
its President Mr. Jean M. Poizat, personally, and the copies
corresponding to Gabriela Andrea de Coster y Roxas, by leaving the
same in the place of her usual residence in the City of Manila and in
the hands of her husband, Mr. J.M. Poizat, a person residing therein
and of sufficient discretion to receive it, personally.
Done at Manila, P.I., this 13th day of March, 1924.
RICARDO SUMMERS
Sheriff of Manila
By GREGORIO GARCIA
I hereby certify that on this date I have delivered a copy of this
summons and of the complaint corresponding to the "La Orden de
Dominicos or PP. Predicadores de la Provincia del Santisimo
Rosario," through Father Pedro Pratt, Procurador General of said
Orden de Dominicos or PP. Predicadores de la Provincia del
Santisimo Rosario, personally.
Manila, P.I., April 1, 1924.
RICARDO SUMMERS
Sheriff of Manila
By SIMEON D. SERDEA
It will be noted that the service of summons and complaint was made on this
defendant on the 13th day of March, 1924, and that it is a stipulated fact that
since the year 1908 and up to April 30, 1924, she was "residing in the City of
Paris, France." Even so, it is contended that the service was valid by reason
of the fact that it was made at the usual place of residence and abode of the
defendant husband, and that legally the residence of the wife is that of the
husband. That contention is in direct conflict with the admission of the plaintiff
that since the year 1908 and up to April 30, 1924, the wife was residing in the
City of Paris. The residence of the wife in the City of Paris covered a period
of sixteen years.
It may be that where in the ordinary course of business the wife is absent
from the residence of husband on a pleasure trip or for business reasons or
to visit friends or relatives that, in the nature of such things, the residence of
the wife would continue and remain to be that of the husband. That is not this
case. For sixteen years the residence of the husband was in the City of
Manila, and the residence of the wife was in the City of Paris.
Upon the admitted facts, we are clearly of the opinion that the residence of
the husband was not the usual place of residence of the wife. Giving full
force and effect to the legal presumption that the usual place of residence of
the wife is that of her husband, that presumption is overcome by the admitted
fact that the wife was "residing in the City of Paris, France, since the year
1908 up to April 30, 1924."
Without placing a limitation upon the length of time sufficient to overcome the
legal presumption, suffice it to say that sixteen years is amply sufficient.
It follows that the substituted service attempted to be made under the
provisions of section 396 of the Code of Civil Procedure is null and void, and
that by such service the court never acquired jurisdiction of the person of the
defendant wife. In that event the plaintiff contends that under his power of
attorney, the husband was the general agent of the wife with authority to
accept service of process for her and in her name, and that by reason of the
fact that the husband was duly served and that he failed or neglected to
appear or answer, his actions and conduct were binding on the defendant
wife. Be that as it may, there is nothing in the record tending to show that the
husband accepted service of any process for or on account of his wife or as
her agent, or that he was acting for or representing her in his failure and
neglect to appear or answer.
The first appearance in court of the defendant wife was made when she filed
the motion of August 26, 1924, in which she prays in legal effect that the
judgment against her be annulled and set aside and the case reopened, and
that she be permitted to file an answer and to have the case tried on its
merits. That was a general appearance as distinguished from a special
appearance. When she filed that motion asking to be relieved from the legal
force and effect of the judgment, she submitted herself to the jurisdiction of
the court. If, in the first instance, she had made a special appearance to
question only the jurisdiction of the court, and had not appeared for any other
or different purpose, another and a different question would have been
presented. Having made a general appearance for one purpose, she is now
in court for all purposes.
You will search the terms and provisions of the power of attorney in vain to
find any authority for the husband to make his wife liable as a surety for the
payment of the preexisting debt of a third person.
The fact that an agent failed and neglected to perform his duties and to
represent the interests of his principal is not a bar to the principal obtaining
legal relief for the negligence of her agent, provided that the application for
such a relief is duly and properly made under the provisions of section 113.
It is very apparent from the face of the instrument that the whole purpose and
intent of the power of attorney was to empower and authorize the husband to
look after and protect the interests of the wife and for her and in her name to
transact any and all of her business. But nowhere does it provide or
authorize him to make her liable as a surety for the payment of the
preexisting debt of a third person.
Paragraph 6 authorizes him to "enter into any kind of contracts whether civil
or mercantile, giving due form thereof either by private documents or public
deeds, etc."
Hence, it follows that the husband was not authorized or empowered to sign
the note in question for and on behalf of the wife as her act and deed, and
that as to her the note is void for want of power of her husband to execute it.
The same thing is true as to the real mortgage to the bank. It was given to
secure the note in question and was not given for any other purpose. The
real property described in the mortgage to the bank was and is the property
of the wife. The note being void as to her, it follows that as to her the real
mortgage to the bank is also void for want of power to execute it.
The foregoing are the clauses in the power of attorney upon which the bank
relies for the authority of the husband to execute promissory notes for and on
behalf of his wife and as her agent.
It will be noted that there is no provision in either of them which authorizes or
empowers him to sign anything or to do anything which would make his wife
liable as a surety for a preexisting debt.
It is fundamental rule of construction that where in an instrument powers and
duties are specified and defined, that all of such powers and duties are
limited and confined to those which are specified and defined, and that all
other powers and duties are excluded.
Paragraph 8 of the power of attorney authorizes the husband to institute,
prosecute and defend all actions or proceedings in a court of justice,
including "accepting notices and summons."
There is nothing in the record tending to show that the husband accepted the
service of any notice or summons in the action on behalf of the bank, and
even so, if he had, it would not be a defense to open up and vacate a
judgment under section 113 of the Code of Civil Procedure. The same thing
is true as to paragraph 9 of the power of attorney.
It appears that before the motion in question was filed, there were certain
negotiations between the bank and the attorney for the wife with a view of a
compromise or settlement of the bank's claim against her, and that during
such negotiations, there was some evidence or admissions on the part of her
attorney that she was liable for the bank's claim. It now contends that as a
result of such negotiations and admissions, the wife is estopped to deny her
liability. but it also appears that during such negotiations, both the wife and
her attorney did not have any knowledge of the actual facts, and that she
was then ignorant of the defense upon which she now relies. Be that as it
may, such negotiations were more or less in the nature of a compromise
which was rejected by the bank, and it appears that in any event both the
wife and her attorney did not have any knowledge of the facts upon which
they now rely as a defense.
There is no claim or pretense that the debt in question was contracted for or
on account of the "usual daily expenses of the family, incurred by the wife or
by her order, with the tacit consent of the husband," as provided for in article
1362 of the Civil Code. Neither is there any evidence tending to show that
the wife was legally liable for any portion of the original debt evidence by the
note in question.
This decision as to the bank on this motion is based on the assumption that
the facts are true as set forth and alleged in the petition to set aside and
vacate the judgment as to the wife, but we are not making any finding as to
the actual truth of such facts. That remains for the defendant wife to prove
such alleged facts when the case is tried on its merits.
It follows that the opinion of the lower court in refusing to set aside and
vacate the judgment of the plaintiff bank against the defendant wife is
reversed, and that judgment is vacated and set aside, and as to the bank the
case is remanded to the lower court, with leave for the wife to file an answer
to plaintiff's cause of action, and to have the case tried on its merits and for
any further proceedings not inconsistent with this opinion.
As to the judgment in favor of the Dominican Fathers, it appears that their
plea above quoted in the statement of facts was filed on April 24, 1924. In
that plea they say that they have a first mortgage on the property described
in paragraph IV of the complaint for P125,000 with interest at 10 per cent per
annum. That the mortgagors Jean M. Poizat and Gabriela Andrea de Coster
y Roxas have not paid the principal or the stipulated interest from December
16, 1921, to date, which up to the 30th day of April, 1924, amounts to
P27,925.34. Wherefore, it is prayed that the credit above-mentioned be taken
into account when the second mortgage is foreclosed.
No other plea of any kind, nature or description was filed by it. The record
shows that a copy of this alleged plea was served upon the attorneys for the
plaintiff bank. There is nothing in the record which shows or tends to show
that a copy of it was ever served on either one of the defendants. Neither is
there any evidence that either of the defendants ever appeared in the original
action. In fact, judgment was rendered against them by default.
Under such a state of facts, the judgment in favor of the Dominican Fathers
cannot be sustained. In the first place, the plea above quoted filed on April
24, 1924, would not be sufficient to sustain a judgment. It does not even ask
for a judgment of the foreclosure of its mortgage. In the second place, no
copy of the plea was ever served upon either of the defendants, who were
the real parties in interest, and against whom a judgment was rendered for
the full amount of the note and the foreclosure of the mortgage. Such a
proceeding cannot be sustained on any legal principle.
Unless waived, a defendant has a legal right to service of process, to his day
in court and to be heard in his defense.
From what has been said, it follows that, if the transaction between the
Dominican Fathers and Jean M. Poizat as attorney in fact for his wife was an
original one and the P125,000 was actually loaned at the time the note and
mortgage were executed and the money was in good faith delivered to the
husband as the agent and attorney in fact of the wife, it would then be a valid
exercise of the power given to the husband, regardless of the question as to
what he may have done with the money.
Paragraph 5 of the power of attorney specifically authorizes him to borrow
money for and on account of his wife and her name, "and making all these
transactions with or without mortgages, pledges or personal guaranty."
It follows that the judgment of the lower court in favor of La Orden de
Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario is
reversed, without prejudice to its right to either file an original suit to foreclose
its mortgage or to file a good and sufficient plea as intervenor in the instant
suit, setting forth the facts upon which it relies for a judgment on its note and
the foreclosure of its mortgage, copies of which should be served upon the
defendants.
Neither party to recover costs. So ordered.
The antecedents as disclosed in the decisions of both the trial court and the
Court of Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc.
(hereinafter Toyota) and respondent Luna L. Sosa (hereinafter Sosa) are as
follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a
Toyota Lite Ace. It was then a seller's market and Sosa had difficulty finding a
dealer with an available unit for sale. But upon contacting Toyota Shaw, Inc.,
he was told that there was an available unit. So on 14 June 1989, Sosa and
his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro
Manila. There they met Popong Bernardo, a sales representative of Toyota.
BETWEEN
BERNARDO
MR.
OF
SOSA
TOYOTA
Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17
June 1989 because he, his family, and abalikbayan guest would use it on 18
June 1989 to go to Marinduque, his home province, where he would
celebrate his birthday on the 19th of June. He added that if he does not
arrive in his hometown with the new car, he would become a "laughing
stock." Bernardo assured Sosa that a unit would be ready for pick up at
10:00 a.m. on 17 June 1989. Bernardo then signed the aforequoted
"Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It
was also agreed upon by the parties that the balance of the purchase price
would be paid by credit financing through B.A. Finance, and for this Gilbert,
on behalf of his father, signed the documents of Toyota and B.A. Finance
pertaining to the application for financing.
The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the
downpayment of P100,000.00. They met Bernardo who then accomplished a
printed Vehicle Sales Proposal (VSP) No. 928, 2 on which Gilbert signed
under the subheading CONFORME. This document shows that the
customer's name is "MR. LUNA SOSA" with home address at No. 2316 Guijo
Street, United Paraaque II; that the model series of the vehicle is a "Lite Ace
1500" described as "4 Dr minibus"; that payment is by "installment," to be
financed by "B.A.," 3 with the initial cash outlay of P100,000.00 broken down
as follows:
a)
downpayment
P 53,148.00
b)
insurance
P 13,970.00
c)
P 1,067.00
CHMO fee
P 2,715.00
service fee
P 500.00
accessories
P 29,000.00
After trial on the issues agreed upon during the pre-trial session, 11 the trial
court rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled
that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND POPONG
BERNARDO," was a valid perfected contract of sale between Sosa and
Toyota which bound Toyota to deliver the vehicle to Sosa, and further agreed
with Sosa that Toyota acted in bad faith in selling to another the unit already
reserved for him.
As to Toyota's contention that Bernardo had no authority to bind it through
Exhibit "A," the trial court held that the extent of Bernardo's authority "was not
made known to plaintiff," for as testified to by Quirante, "they do not volunteer
any information as to the company's sales policy and guidelines because
they are internal matters." 13 Moreover, "[f]rom the beginning of the
transaction up to its consummation when the downpayment was made by the
plaintiff, the defendants had made known to the plaintiff the impression that
Popong Bernardo is an authorized sales executive as it permitted the latter to
do acts within the scope of an apparent authority holding him out to the
public as possessing power to do these acts." 14 Bernardo then "was an
agent of the defendant Toyota Shaw, Inc. and hence bound the
defendants." 15
The court further declared that "Luna Sosa proved his social standing in the
community and suffered besmirched reputation, wounded feelings and
sleepless nights for which he ought to be compensated." 16 Accordingly, it
disposed as follows:
WHEREFORE, viewed from the above findings, judgment is hereby
rendered in favor of the plaintiff and against the defendant:
1. ordering the defendant to pay to the plaintiff the sum of
P75,000.00 for moral damages;
2. ordering the defendant to pay the plaintiff the sum of
P10,000.00 for exemplary damages;
3. ordering the defendant to pay the sum of P30,000.00
attorney's fees plus P2,000.00 lawyer's transportation fare
per trip in attending to the hearing of this case;
4. ordering the defendant to pay the plaintiff the sum of
P2,000.00 transportation fare per trip of the plaintiff in
attending the hearing of this case; and
5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the Court of
Appeals. The case was docketed as CA-G.R. CV No. 40043. In its decision
promulgated on 29 July 1994, 17 the Court of Appeals affirmed in toto the
appealed decision.
Toyota now comes before this Court via this petition and raises the core
issue stated at the beginning of the ponenciaand also the following related
issues: (a) whether or not the standard VSP was the true and documented
understanding of the parties which would have led to the ultimate contract of
sale, (b) whether or not Sosa has any legal and demandable right to the
delivery of the vehicle despite the non-payment of the consideration and the
non-approval of his credit application by B.A. Finance, (c) whether or not
Toyota acted in good faith when it did not release the vehicle to Sosa, and (d)
whether or not Toyota may be held liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the conclusion
that Exhibit "A" is a perfected contract of sale.
Article 1458 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed perfected:
Art. 1475. The contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the
object of the contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing
the form of contracts.
What is clear from Exhibit "A" is not what the trial court and the Court of
Appeals appear to see. It is not a contract of sale. No obligation on the part
of Toyota to transfer ownership of a determinate thing to Sosa and no
correlative obligation on the part of the latter to pay therefor a price certain
appears therein. The provision on the downpayment of P100,000.00 made
no specific reference to a sale of a vehicle. If it was intended for a contract of
sale, it could only refer to a sale on installment basis, as the VSP executed
the following day confirmed. But nothing was mentioned about the full
purchase price and the manner the installments were to be paid.
This Court had already ruled that a definite agreement on the manner of
payment of the price is an essential element in the formation of a binding and
enforceable contract of sale. 18 This is so because the agreement as to the
manner of payment goes into the price such that a disagreement on the
manner of payment is tantamount to a failure to agree on the price.
Definiteness as to the price is an essential element of a binding agreement to
sell personal property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds between
Toyota and Sosa. For one thing, Sosa did not even sign it. For another, Sosa
was well aware from its title, written in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA &
POPONG BERNARDO OF TOYOTA SHAW,
INC.
that he was not dealing with Toyota but with Popong Bernardo and that the
latter did not misrepresent that he had the authority to sell any Toyota
vehicle. He knew that Bernardo was only a sales representative of Toyota
and hence a mere agent of the latter. It was incumbent upon Sosa to act with
ordinary prudence and reasonable diligence to know the extent of Bernardo's
authority
as
an
agent 20 in respect of contracts to sell Toyota's vehicles. A person dealing with
an agent is put upon inquiry and must discover upon his peril the authority of
the agent. 21
At the most, Exhibit "A" may be considered as part of the initial phase of the
generation or negotiation stage of a contract of sale. There are three stages
in the contract of sale, namely:
(a) preparation, conception, or generation, which is the
period of negotiation and bargaining, ending at the moment
of agreement of the parties;
(b) perfection or birth of the contract, which is the moment
when the parties come to agree on the terms of the contract;
and
the vehicle will not be ready for pick-up at 10:00 a.m. of June
17, 1989 but at 2:00 p.m. of that day instead. Plaintiff and his
son went to defendant's office on June 17 1989 at 2:00 p.m.
in order to pick-up the vehicle but the defendant for reasons
known only to its representatives, refused and/or failed to
release the vehicle to the plaintiff. Plaintiff demanded for an
explanation, but nothing was given; . . . (Emphasis
supplied). 25
The VSP was a mere proposal which was aborted in lieu of subsequent
events. It follows that the VSP created no demandable right in favor of Sosa
for the delivery of the vehicle to him, and its non-delivery did not cause any
legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's fees and
costs of suit is without legal basis. Besides, the only ground upon which Sosa
claimed moral damages is that since it was known to his friends, townmates,
and relatives that he was buying a Toyota Lite Ace which they expected to
see on his birthday, he suffered humiliation, shame, and sleepless nights
when the van was not delivered. The van became the subject matter of talks
during his celebration that he may not have paid for it, and this created an
impression against his business standing and reputation. At the bottom of
this claim is nothing but misplaced pride and ego. He should not have
announced his plan to buy a Toyota Lite Ace knowing that he might not be
able to pay the full purchase price. It was he who brought embarrassment
upon himself by bragging about a thing which he did not own yet.
Since Sosa is not entitled to moral damages and there being no award for
temperate, liquidated, or compensatory damages, he is likewise not entitled
to exemplary damages. Under Article 2229 of the Civil Code, exemplary or
corrective damages are imposed by way of example or correction for the
public good, in addition to moral, temperate, liquidated, or compensatory
damages.
Also, it is settled that for attorney's fees to be granted, the court must
explicitly state in the body of the decision, and not only in the dispositive
portion thereof, the legal reason for the award of attorney's fees. 26 No such
explicit determination thereon was made in the body of the decision of the
trial court. No reason thus exists for such an award.
WHEREFORE, the instant petition is GRANTED. The challenged decision of
the Court of Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38
of the Regional Trial Court of Marinduque in Civil Case No. 89-14 are
REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is
DISMISSED. The counterclaim therein is likewise DISMISSED.
No pronouncement as to costs.
SO ORDERED.
"A few days before the scheduled flight of plaintiffs, their son, Adrian
Yu, called the Pan Am office to verify the status of the flight.
According to said Adrian Yu, a personnel of defendant Pan Am told
him over the phone that plaintiffs booking[s] are confirmed.
"On July 23, 1978, plaintiffs left for Hongkong and stayed there for
five (5) days. They left Hongkong for Tokyo on July 28, 1978. Upon
their arrival in Tokyo, they called up Pan-Am office for reconfirmation
of their flight to San Francisco. Said office, however, informed them
that their names are not in the manifest. Since plaintiffs were
supposed to leave on the 29th of July, 1978, and could not remain in
Japan for more than 72 hours, they were constrained to agree to
accept airline tickets for Taipei instead, per advise of JAL officials.
This is the only option left to them because Northwest Airlines was
then on strike, hence, there was no chance for the plaintiffs to obtain
airline seats to the United States within 72 hours. Plaintiffs paid for
these tickets.
"Upon reaching Taipei, there were no flight[s] available for plaintiffs,
thus, they were forced to return back to Manila on August 3, 1978,
instead of proceeding to the United States. [Japan] Air Lines (JAL)
refunded the plaintiffs the difference of the price for Tokyo-Taipei
[and] Tokyo-San Francisco (Exhs. I & J) in the total amount of
P2,602.00.
"In view of their failure to reach Fairfield, New Jersey, Radiant Heat
Enterprises, Inc. cancelled Yu Eng Chos option to buy the two lines
of infra-red heating system (Exh. K). The agreement was for him to
inspect the equipment and make final arrangement[s] with the said
company not later than August 7, 1978. From this business
transaction, plaintiff Yu Eng Cho expected to realize a profit of
P300,000.00 to P400,000.00."
below the printed word "status" for the flights from Tokyo to San
Francisco which means "under request," (Exh. 3-A, 4-A Pan-Am).
Before the date of the scheduled departure, defendant Tagunicar
received several calls from the plaintiffs inquiring about the status of
their bookings. Tagunicar in turn called up TWSI/Canilao to verify;
and if Canilao would answer that the bookings are not yet confirmed,
she would relate that to the plaintiffs. Calrky
A careful scrutiny of the decision rendered by the trial court will show that
after narrating the evidence of the parties, it proceeded to dispose of the
case with a one-paragraph generalization, to wit: Missdaa
Tagunicar where she admitted that she is a duly authorized agent of TWSI;
and (3) the admission made by Canilao that TWSI received commissions
from ticket sales made by Tagunicar. Korte
We do not agree. 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.[7] The elements of agency are: (1)
consent, express or implied, of the parties to establish the relationship; (2)
the object is the execution of a juridical act in relation to a third person; (3)
the agent acts as a representative and not for himself; (4) the agent acts
within the scope of his authority.[8] It is a settled rule that persons dealing with
an assumed agent are bound at their peril, if they would hold the principal
liable, to ascertain not only the fact of agency but also the nature and extent
of authority, and in case either is controverted, the burden of proof is upon
them to establish it.[9]
In the case at bar, petitioners rely on the affidavit of respondent Tagunicar
where she stated that she is an authorized agent of TWSI. This affidavit,
however, has weak probative value in light of respondent Tagunicars
testimony in court to the contrary. Affidavits, being taken ex parte, are almost
always incomplete and often inaccurate, sometimes from partial suggestion,
or for want of suggestion and inquiries. Their infirmity as a species of
evidence is a matter of judicial experience and are thus considered inferior to
the testimony given in court. [10] Further, affidavits are not complete
reproductions of what the declarant has in mind because they are generally
prepared by the administering officer and the affiant simply signs them after
the same have been read to her.[11] Respondent Tagunicar testified that her
affidavit was prepared and typewritten by the secretary of petitioners lawyer,
Atty. Acebedo, who both came with Adrian Yu, son of petitioners, when the
latter went to see her at her office. This was confirmed by Adrian Yu who
testified that Atty. Acebedo brought his notarial seal and notarized the
affidavit of the same day.[12] The circumstances under which said affidavit was
prepared put in doubt petitioners claim that it was executed voluntarily by
respondent Tagunicar. It appears that the affidavit was prepared and was
based on the answers which respondent Tagunicar gave to the questions
propounded to her by Atty. Acebedo.[13] They never told her that the affidavit
would be used in a case to be filed against her.[14] They even assured her that
she would not be included as defendant if she agreed to execute the
affidavit.[15] Respondent Tagunicar was prevailed upon by petitioners son and
their lawyer to sign the affidavit despite her objection to the statement therein
that she was an agent of TWSI. They assured her that "it is immaterial" [16] and
that "if we file a suit against you we cannot get anything from you." [17] This
purported admission of respondent Tagunicar cannot be used by petitioners
It grinds against the grain of human experience that petitioners did not insist
that they be allowed to board, considering that it was then doubly difficult to
get seats because of the ongoing Northwest Airlines strike. It is also
perplexing that petitioners readily accepted whatever the Tokyo office had to
offer as an alternative. Inexplicably too, no demand letter was sent to
respondents TWSI and Canilao.[29] Nor was a demand letter sent to
respondent Pan Am. To say the least, the motive of petitioners in suing Pan
Am is suspect. x law
We hasten to add that it is not sufficient to prove that Pan Am did not allow
petitioners to board to justify petitioners claim for damages. Mere refusal to
accede to the passengers wishes does not necessarily translate into
damages in the absence of bad faith. [30] The settled rule is that the law
presumes good faith such that any person who seeks to be awarded
damages due to acts of another has the burden of proving that the latter
acted in bad faith or with ill motive. [31] In the case at bar, we find the evidence
presented by petitioners insufficient to overcome the presumption of good
faith. They have failed to show any wanton, malevolent or reckless
misconduct imputable to respondent Pan Am in its refusal to accommodate
petitioners in its Tokyo-San Francisco flight. Pan Am could not have acted in
bad faith because petitioners did not have confirmed tickets and more
importantly, they were not in the passenger manifest. Sc
In not a few cases, this Court did not hesitable to hold an airline liable for
damages for having acted in bad faith in refusing to accommodate a
passenger who had a confirmed ticket and whose name appeared in the
passenger manifest. In Ortigas Jr. v. Lufthansa German Airlines Inc. [32] we
ruled that there was a valid and binding contract between the airline and its
passenger after finding that validating sticker on the passengers ticket had
the letters "O.K." appearing in the Res. Status box which means "space
confirmed" and that the ticket is confirmed or validated. In Pan American
World Airways Inc. v. IAC, et al. [33] where a would-be-passenger had the
necessary ticket, baggage claim and clearance from immigration all clearly
showing that she was a confirmed passenger and included in the passenger
manifest and yet was denied accommodation in said flight, we awarded
damages. In Armovit, et al. v. CA, et al., [34] we upheld the award of damages
made against an airline for gross negligence committed in the issuance of
tickets with erroneous entries as to the time of flight. In Alitalia Airways v. CA,
et al.,[35] we held that when airline issues a ticket to a passenger confirmed on
a particular flight, on a certain date, a contract of carriage arises, and the
passenger has every right to expect that he would fly on that flight and on
that date. If he does not, then the carrier opens itself to a suit for breach of
contract of carriage. And finally, an award of damages was held proper in the
On October 13, 1988, the disputed decision in the suit below was rendered
by the court of origin in this manner:
1. Ordering Rock B.A. and Rogelio Villar y Amare jointly and
severally to pay the plaintiffs as follows:
a) To the plaintiff Carlos Ocampo P121,650.00;
b) To the plaintiff Moises Ocampo P298,500.00
c) To the plaintiff Nicolas Cruz P154,740.00
d) To the plaintiff Inocencio Turla, Sr. 48,000.00
2. Dismissing the case against Lino Castro
3. Dismissing the third-party complaint against STRONGHOLD
4. Dismissing all the counterclaim of the defendants and third-party
defendants.
5. Ordering ROCK to reimburse B.A. the total amount of
P622,890.00 which the latter is adjudged to pay to the plaintiffs. (p.
46, Rollo)
SO ORDERED.
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
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
high-risk 1986 contracts, which were evidently entered into by Monteverde
for his personal benefit.
The trial court ruled that Safic failed to substantiate its claim for actual
damages. Likewise, it rejected IVOs counterclaim and supplemental
counterclaim.
Thus, on August 28, 1992, the trial court rendered judgment as follows:
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:
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.
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:
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.
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
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]
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.
Witness
A. Trading future[s] contracts wherein the trader commits a price and to
deliver coconut oil in the future in which he is yet to acquire the
stocks in the future.
Atty. Abad
Q. Who established the so-called physical trading in IVO?
A. The Board of Directors, sir.
Atty. Abad.
Q. How did you know that?
A. There was a meeting held in the office at the factory and it was brought
out and suggested by our former president, Dominador Monteverde,
that the company should engaged (sic) in future[s] 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?
Atty. Abad
Q. Were you a member of the board at the time?
A. In 1975, I am already a stockholder and a member.
Q. Then would [you] now answer my question?
Atty. Fernando
No basis, your Honor. What we are talking is about 1985.
Atty. Abad
Q. When you mentioned about the meeting in 1985 wherein the Board of
Directors rejected the future[s] 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 these future[s] contracts in the companys
books of accounts.
Atty. Abad
Q. What do you mean by that the future[s] contracts were not entered into
the books of accounts of the company?
Witness
A. Those were not recorded at all in the books of accounts of the
company, sir.[20]
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 7-I). Emelita Ortega, formerly an
assistant of Dominador Monteverde, testified that they were strange goingson 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.
After trial, the lower court rendered the assailed decision in favor of SMC and
against the petitioners and Savellon as follows:
WHEREFORE, by preponderance of evidence, the Court hereby
renders judgment in favor of plaintiff and against defendants,
ordering defendants Rene Savellon, Bacaltos Coal Mines and
German A. Bacaltos, jointly and severally, to pay to plaintiff:
1. The amount of P433,000.00 by way of reimbursement of the
consideration paid by plaintiff, plus 12% interest to start from date of
written demand, which is June 14, 1989;
2. The amount of P20,000.00 by way of exemplary damages;
3. The amount of P20,000.00 as attorney's fees and P5,000.00 as
Litigation expenses. Plus costs. 10
Or, as stated in Harry E. Keller Electric Co. vs. Rodriguez, 15 quoting Mechem
on Agency:
The person dealing with the agent must also act with ordinary
prudence and reasonable diligence. Obviously, if he knows or has
good reason to believe that the agent is exceeding his authority, he
cannot claim protection. So if the suggestions of probable limitations
be of such a clear and reasonable quality, or if the character
assumed by the agent is of such a suspicious or unreasonable
nature, or if the authority which he seeks to exercise is of such an
unusual or improbable character, as would suffice to put an ordinarily
prudent man upon his guard, the party dealing with him may not shut
his eyes to the real estate of the case, but should either refuse to
deal with the agent at all, or should ascertain from the principal the
true condition of affairs. [emphasis supplied].
Since the principal subject of the Authorization is the coal operating contract,
SMC should have required its presentation to determine what it is and how it
may be used by Savellon. Such a determination is indispensable to an
inquiry into the extent or scope of his authority. For this reason, we now
deem it necessary to examine the nature of a coal operating contract.
technical
records
and
account
of
its
The Authorization itself does not state that Bacaltos Coal Mines owns any
vessel, and since it is clear therefrom that it is not engaged in shipping but in
coal mining or in coal business, SMC should have required the presentation
of pertinent documentary proof of ownership of the vessel to be chartered. Its
in-house surveyor who saw the vessel while drydocked in Danao and
thereafter conducted a sea worthiness test could not have failed to ascertain
the registered owner of the vessel. The petitioners themselves declared in
open court that they have not leased any vessel for they do not need it in
their coal operations 23 thereby implying that they do not even own one.
The Court of Appeals' asseveration that there was no need to verify the
ownership of the vessel because such ownership is warranted on the face of
the trip charter party begs the question since Savellon's authority to enter into
that contract is the very heart of the controversy.
We are not prepared to accept SMC's contention that the petitioners' claim
that they are not engaged in shipping and do not own any ship is belied by
the fact that they maintained a pre-printed business form known as a "Notice
of Readiness" (Exhibit "A-1"). 24 This paper is only a photocopy and, despite
its reservation to present the original for purposes of comparison at the next
hearing, 25 SMC failed to produce the latter. This "Notice of Readiness" is not,
therefore, the best evidence, hence inadmissible under Section 3, Rule 130
of the Rules of Court. It is true that when SMC made a formal offer of its
exhibits, the petitioners did not object to the admission of Exhibit "A-1," the
"Notice of Readiness," under the best evidence rule but on the ground that
Savellon was not authorized to enter into the Trip Charter Party and that the
party who signed it, one Elmer Baliquig, is not the petitioners' employee but
of Premier Shipping Lines, the owner of the vessel in question. 26 The
petitioners raised the issue of inadmissibility under the best evidence rule
only belatedly in this petition. But although Exhibit "A-1" remains admissible
for not having been timely objected to, it has no probative value as to the
ownership of the vessel.
There is likewise no proof that the petitioners received the consideration of
the Trip Charter Party. The petitioners denied having received it. 27 The
evidence for SMC established beyond doubt that it was Savellon who
requested in writing on 19 October 1988 that the check in payment therefor
be drawn in favor of BACALTOS COAL MINES/RENE SAVELLON (Exhibit
"B-3") and that SMC drew the check in favor of RENE SAVELLON IN TRUST
FOR BACALTOS COALMINES (Exhibit "B") and delivered it to Savellon who
there upon issued a receipt (Exhibit "B-1"). We agree with the petitioners that
SMC committed negligence in drawing the check in the manner aforestated.
It even disregarded the request of Savellon that it be drawn in favor of
BACALTOS COAL MINES/RENE SAVELLON. Furthermore, assuming that
the transaction was permitted in the Authorization, the check should still have
been drawn in favor of the principal. SMC then made possible the wrong
done. There is an equitable maxim that between two innocent parties, the
one who made it possible for the wrong to be done should be the one to bear
the resulting loss. 28 For this rule to apply, the condition precedent is that both
parties must be innocent. In the present case, however, SMC is guilty of not
ascertaining the extent and limits of the authority of Savellon. In not doing so,
SMC dealt with Savellon at its own peril.
Having thus found that SMC was the author of its own damage and that the
petitioners are, therefore, free from any liability, it has become unnecessary
to discuss the issue of whether Bacaltos Coal Mines is a corporation with a
personality distinct and separate from German Bacaltos.
WHEREFORE, the instant petition is GRANTED and the challenged decision
of 30 September 1993 of the Court of Appeals in CA-G.R. CV No. 35180 is
hereby REVERSED and SET ASIDE and another judgment is hereby
rendered MODIFYING the judgment of the Regional Trial Court of Cebu,
Branch 9, in Civil Case No. CEB-8187 by setting aside the declaration of
solidary liability, holding defendant RENE R. SAVELLON solely liable for the
amounts adjudged, and ordering the dismissal of the case as against herein
petitioners.
SO ORDERED.
After appropriate proceedings and trial, on March 4, 1993, the trial court
rendered its decision in favor of Mahtani,[9] the dispositive portion of which
reads as follows:
WHEREFORE, premises considered, judgment is rendered for the
plaintiff and against the defendant for which defendant is ordered to
pay plaintiff the sum of Seven Thousand (P7,000.00) Pesos for the
value of the two (2) suit cases; Four Hundred U.S. ($400.00)
Dollars representing the value of the contents of plaintiffs luggage;
Fifty Thousand (P50,000.00) Pesos for moral and actual damages
and twenty percent (20%) of the total amount imposed against the
defendant for attorneys fees and costs of this action.
The Third-Party Complaint against third-party defendant Philippine
Airlines is DISMISSED for lack of cause of action.
SO ORDERED.
Dissatisfied, BA appealed to the Court of Appeals, which however,
affirmed the trial courts findings. Thus:
WHEREFORE, in view of all the foregoing considerations, finding
the Decision appealed from to be in accordance with law and
evidence, the same is hereby AFFIRMED in toto, with costs against
defendant-appellant.
SO ORDERED.[10]
BA is now before us seeking the reversal of the Court of Appeals
decision.
8. On said travel, plaintiff took with him the following items and its
corresponding value, to wit:
Since plaintiff did not declare the value of the contents in his
luggage and even failed to show receipts of the alleged gifts for the
members of his family in Bombay, the most that can be expected for
trial when questions and answers regarding the actual claims and damages
sustained by the passenger were asked.[23]
Given the foregoing postulates, the inescapable conclusion is that BA
had waived the defense of limited liability when it allowed Mahtani to testify
as to the actual damages he incurred due to the misplacement of his
luggage, without any objection. In this regard, we quote the pertinent
transcript of stenographic notes of Mahtanis direct testimony: [24]
Q - How much are you going to ask from this court?
A - P100,000.00.
Q - What else?
A - Exemplary damages.
Q - How much?
A - P100,000.00.
Q - What else?
A - The things I lost, $5,000.00 for the gifts I lost and my
personal belongings, P10,000.00.
Q - What about the filing of this case?
A - The court expenses and attorneys fees is 30%.
Indeed, it is a well-settled doctrine that where the proponent offers
evidence deemed by counsel of the adverse party to be inadmissible for any
reason, the latter has the right to object.However, such right is a mere
privilege which can be waived. Necessarily, the objection must be made at
the earliest opportunity, lest silence when there is opportunity to speak may
operate as a waiver of objections.[25] BA has precisely failed in this regard.
To compound matters for BA, its counsel failed, not only to interpose a
timely objection, but even conducted his own cross-examination as well. [26] In
the early case of Abrenica v. Gonda,[27] we ruled that:
[31]
Also, it is worth mentioning that both BA and PAL are members of the
International Air Transport Association (IATA), wherein member airlines are
regarded as agents of each other in the issuance of the tickets and other
matters pertaining to their relationship. [35] Therefore, in the instant case, the
contractual relationship between BA and PAL is one of agency, the former
being the principal, since it was the one which issued the confirmed ticket,
and the latter the agent.
Our pronouncement that BA is the principal is consistent with our ruling
in Lufthansa German Airlines v. Court of Appeals.[36] In that case, Lufthansa
issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard
different airlines. Unfortunately, Air Kenya, one of the airlines which was to
carry Antiporda to a specific destination bumped him off.
An action for damages was filed against Lufthansa which, however,
denied any liability, contending that its responsibility towards its passenger is
limited to the occurrence of a mishap on its own line. Consequently, when
Antiporda transferred to Air Kenya, its obligation as a principal in the contract
of carriage ceased; from there on, it merely acted as a ticketing agent for Air
Kenya.
EN BANC
decision dated December 9, 1957, acquitted plaintiff Paulo Ang of the crime
of arson.
The present action was instituted on May 5, 1958. The action was originally
instituted against both the Fulton Fire Insurance Company and the
Paramount Surety and Insurance Company, Inc., but on June 16, 1958, upon
motion of the Paramount Surety, the latter was dropped from the complaint.
On May 26, 1958, the defendant Fulton Fire Insurance Company filed an
answer to the complaint, admitting the existence of the contract of insurance,
its renewal and the loss by fire of the department store and the merchandise
contained therein, but denying that the loss by the fire was accidental,
alleging that it was occasioned by the willful act of the plaintiff Paulo Ang
himself. It claims that under paragraph 13 of the policy, if the loss or damage
is occasioned by the willful act of the insured, or if the claim is made and
rejected but no action is commenced within 12 months after such rejection,
all benefits under the policy would be forfeited, and that since the claim of the
plaintiffs was denied and plaintiffs received notice of denial on April 18, 1956,
and they brought the action only on May 5, 1958, all the benefits under the
policy have been forfeited.
On February 12, 1959, plaintiffs filed a reply to the above answer of the
Fulton Fire Insurance, alleging that on May 11, 1956, plaintiffs had instituted
Civil Case No. 2949 in the Court of First Instance of Manila, to assert the
claim; that this case was dismissed without prejudice on September 3, 1957
and that deducting the period within which said action was pending, the
present action was still within the 12 month period from April 12, 1956. The
court below held that the bringing of the action in the Court of First Instance
of Manila on May 11, 1956, tolled the running of the 12 month period within
which the action must be filed. Said the court on this point:
True, indeed, plaintiffs committed a procedural mistake in first suing
the agent instead of its principal, the herein defendant, as correctly
pointed out by counsel for the defendant, for 'Un agente residente de
una compania de seguros extranjera que comercia en las Islas
Filipinos no es responsable como mandante ni como mandatario, en
virtud de contratas de seguro expendidos a nombre de la compania',
(Macias & Co. vs. Warner, Barnes & Co., 43 Phil. 161). But the
mistake being merely procedural, and the defendant not having been
misled by the error, 'There is nothing sacred about process or
pleadings, their forms or contents. Their sole purpose is to facilitate
the application of justice to the rival claims of contending parties.
They were created not to hinder and delay, but to facilitate and
Court of the United States in Riddlesbarger vs. Hartford Fire Insurance Co. (7
Wall., 386), the rights of the parties flow from the contract of insurance,
hence they are not bound by the statute of limitations nor by exemptions
thereto. In the words of our own law, their contract is the law between the
parties, and their agreement that an action on a claim denied by the insurer
must be brought within one year from the denial, governs, not the rules on
the prescription of actions.
The judgment appealed from is hereby set aside and the case dismissed,
with costs against the plaintiffs-appellees.
appellee Ker & Co. denied and refused indemnification and payment. To
enforce its claims, plaintiff-appellant instituted its complaint, dated August 30,
1965 docketed as Civil Case No. 63181 of the Court of First Instance of
Manila.
In its answer, defendant-appellee Ker & Co. justified its denial of the claims of
plaintiff-appellant on various reasns, such as non-compliance with the
conditions stipulated in the insurance policy; non-presentation of evidence
regarding the various charges of dishonesty and misrepresentation against
Tomas E. Ablaza and non-production of the documents to prove the alleged
loss. Ker & Co. likewise averred that it was merely an agent and- as such it
was not liable under the policy.
On June 22, 1966, counsel for Ker & Co. filed a request for admission,
furnishing plaintiff-appellant's counsel with a copy thereof requesting
admission of the following facts: 1wph1.t
This appeal was originally brought before the Court of Appeals but was
certified to this Court pursuant to the appellate court's resolution of October
13, 1967 since it involved purely questions of law.
Sometime in January, 1958, plaintiff-appellant Bay View Hotel, Inc., then the
lessee arid operator of the Manila Hotel, secured a fidelity guarantee bond
from defendant-appellee Ker & Co., Ltd., for its accountable employees
against acts of fraud and dishonesty. Said defendant-appellee Ker & Co.,
Ltd., is the Philippine general agent of Phoenix Assurance Co., Ltd. a foreign
corporation duly licensed to do insurance business in the Philippines.
When one of the bonded employees, Tomas E. Ablaza, while acting in his
capacity as cashier, was discovered by plaintiff-appellant to have had a cash
shortage and unremitted collections in the total amount of P42,490.95, it filed
claims for payments on the said fidelity guarantee bond but defendant-
1. On February 14, 1967, the Bay View Hotel, Inc., applied to the
Phoenix Assurance Co., Ltd., for a fidelity guarantee bond through a
proposal form, a true copy of which is annexed to our answer as
Annex "A" thereof.
2. Such a policy was actually issued on January 22, 1958 by the
Phoenix Assurance Co., Ltd., in favor of the Bay View Hotel, Inc.,
and was renewed from time to time with amendments. A true copy of
the policy as it finally stood at the time of the alleged defalcation is
annexed to our answer as Annex 'B ' thereof.
3. This claim filed by the Bay View Hotel, Inc., under this policy was
denied on behalf of the Phoenix Assurance Co., Ltd., by a letter
dated 18th June, 1965 sent by registered mail to the Bay View Hotel,
Inc. on June 22, 1965. A true copy of this letter of denial is annexed
to the present request as Annex "C" hereof. "
When plaintiff-appellant failed to make any answer to the request for
admission within the period prescribed by the rules, defendant-appellee Ker
& Co. filed a Motion to Dismiss on Affirmative Defense, dated July 6, 1966,
insisting that since under Sec. 2, Rule 26 of the Rules of Court, plaintiffappellant was deemed to have impliedly admitted each of the matters
enumerated in the request for admission, it followed that the proper party in
interest against whom plaintiff-appellant might have a claim was the principal
Phoenix Assurance Co. (Phoenix) and not the agent Ker & Co.
Plaintiff-appellant filed an opposition, dated July 19, 1966 arguing that the
proper remedy, under the circumstances was not to dismiss the complaint
but to amend it in order to bring the necessary or indispensable parties to the
suit. Defendant-appellee Ker & Co. filed a reply to the opposition reiterating
its stand that since it merely acted as an agent, the case should be
dismissed and plaintiff-appellant should file the necessary action against the
principal Phoenix.
On August 1, 1966, plaintiff-appellant filed a Motion for Leave to Admit
Amended Complaint, attaching copy of the complaint, as amended, this time
impleading Phoenix as party defendant. On August 16, 1966, defendantsappellees filed their joint answer to the amended complaint. Again, Ker &
Co., Ltd., argued that it was merely an agent and therefore not liable under
the policy. On the other hand, Phoenix, averred that under Condition 8 of the
insurance policy, plaintiff-appellant was deemed to have abandoned its claim
in view of the fact that it did not ask for an arbitration of its claim within twelve
(12) months from June 22, 1965 the date of receipt of the denial of the claim.
On August 24, 1966, defendants-appellees filed a motion for summary
judgment which the trial court granted in its decision of November 4, 1966,
ordering the dismissal of the case. After denial of its motion for
reconsideration, plaintiff-appellant filed the present appeal, raising the
following assignment of errors: 1wph1.t
I
The lower court erred and acted with grave abuse of discretion in
extending the legal effects, if any, of the request for admission filed
by Ker & Co., Ltd. to the Phoenix Assurance Co., Ltd., which was not
a party-defendant at the time said request was filed and for whom no
similar request was ever filed.
II
The lower court erred and acted with grave abuse of discretion in
giving legal effects to a request for admission by the defendantappellee under the original complaint after the said original complaint
was, with leave of court, amended.
III
The lower court erred and acted with grave abuse of discretion in
holding that "Condition No. 8 of the Policy No. FGC-5018-P requires
that should there be a controversy in the payment of the claims, it
should be submitted to an arbitration" despite the admissions by the
parties and the established fact that Condition No. 8 of said Policy
No. FGC-5018-P provides for Arbitration if any dispute shall arise as
to the amount of company's liability."
IV
The lower court erred and acted with grave abuse of discretion in
granting the Motion for Summary Judgment and dismissing the
complaint.
The first two errors assigned may be taken jointly. Plaintiff-appellant argues
that since the implied admission was made before the amendment of its
complaint so as to include Phoenix, it follows that Phoenix has no right to
avail of these admissions, and that the trial court committed a grave abuse of
discretion in extending to Phoenix the legal effects of the request for
admission filed solely by Ker & Co.
The argument is untenable, Admission is in the nature of evidence and its
legal effects were already part of the records of the case and therefore could
be availed of by any party even by one subsequently impleaded. The
amendment of the complaint per se cannot set aside the legal effects of the
request for admission since its materiality has not been affected by the
amendment. If a fact is admitted to be true at any stage of the proceedings, it
is not stricken out through the amendment of the complaint. To allow a party
to alter the legal effects of the request for admission by the mere amendment
of a pleading would constitute a dangerous and undesirable precedent. The
legal effects of plaintiff- appellant's failure to answer the request for
admission could and should have been corrected below by its filing a motion
to be relieved of the consequences of the implied admission with respect to
respondent Phoenix.
Moreover, since an agent may do such acts as may be conducive to the
accomplishment of the purpose of the agency, admissions secured by the
agent within the scope of the agency ought to favor the principal. This has to
be the rule, for the act or declarations of an agent of the party within the
scope of the agency and during its existence are considered and treated in
turn as the declarations, acts and representations of his principal 1 and may
be given in evidence against such party.
Plaintiff-appellant insists that since the motion for summary judgment was
filed on behalf of defendant-appellee Ker & Co. alone, there was no motion
for summary judgment as far as Phoenix was concerned and the trial court's
decision dismissing the case should not have included the principal Phoenix.
But the motion for summary judgment was filed after the complaint had been
amended and answer thereto had been filed. The issues, therefore, with
respect to Phoenix had already been likewise joined. Moreover, a reading of
the said motion for summary judgment, more particularly the prayer thereof,
shows that Phoenix did join Ker & Co. in moving for the dismissal of the case
and prayed "that the present action be dismissed as against Ker & Co., Ltd.,
because being purely and simply the agent of the insurer, it is not liable
under the policy and as against the Phoenix Assurance Co., Ltd. because by
failing to seek an arbitration within twelve months from the date of its receipt
of the denial of its claim on June 22, 1965, plaintiff Bay View Hotel, Inc., is
deemed under condition 8 of ,, tie policy, to have abandoned its claim against
said defendant phoenix Assurance Co., Ltd."
The main issue raised by plaintiff-appellant is with respect to Condition No. 8
of the insurance policy, photostatic copy of which was submitted to the trial
court and reproduced as follows: 1wph1.t
If any dispute shall arise as to the amount of company's
liability under this Policy the matter shall if required by either
party be to the decision of two neutral persons as arbitrators
one of, whom shall be named by each party or of an umpire
who shall be appointed by the said arbitrators before
entering on the reference and in case either party or his
representative shall neglect or refuse for the space of two
months after request in writing from the other party so to do
to name an arbitrator the arbitrator of the other party may
proceed alone. And it is hereby expressly agreed and
declared that it shag be a condition precedent to any right of
action or upon this Policy that the award by such arbitrators,
arbitrator or umpire of the amount of the loss shall first be
obtained. The costs of and connected with the arbitration
shag be in the discretion of the arbitrators, arbitrator or
umpire. 2
Plaintiff-appellant maintains that Condition No. 8 of the policy provides for
arbitration only "if any dispute should arise as to the amount of company's
liability" consequently, the reference to arbitration is not a condition
precedent to the filing of the suit contrary to the insurer company's posture.
Plaintiff-appellant points out that in the instant case, there is a total and
complete negation of liability. There is no dispute as to the amount of
company's liability because this presupposes an admission of responsibility
although not to the extent of the cost thereof, while here the insurer denies
liability wholly and totally.
We find in favor of plaintiff-appellant. The provisions of Condition No. 8, more
specifically the portion thereof which reads, "if any dispute shall arise as to
the amount of company's liability under this policy ...," do not appear to
require any extended interpretation. Condition No. 8 requires arbitration only
as to disputes regarding the amountof the insurer's liability but not as to any
dispute as to the existence or non- existence of liability. Thus, Condition No.
8 comes into play only if the insurer admits liability but cannot agree with the
insured as to the amount thereof and cannot be invoked in cases like that at
bar where the insurer completely denies any liability. Defendants-appellees'
contention that plaintiff-appellant's failure to request arbitration proceedings
is a bar to its filing of the suit at bar against the insurer company cannot be
sustained, specially considering the established principle that contracts of
adhesion such as the insurance policy in question are to be strictly construed
in case of doubt against the insurer.
As to appellee Ker & Co., Ltd., however, there appears to be no serious
contradiction as to the fact that it merely acted as the agent of its principal,
Phoenix. Considering that there was full disclosure of such agency since the
insurance policy was actually issued by Phoenix, We find no error in the
dismissal of the case against said defendant Ker & Co., Ltd.
Accordingly, the dismissal of the case against Ker & Co., Ltd., is hereby
affirmed and maintained, while the dismissal of the case against Phoenix
Assurance Co., Ltd. is hereby set aside and the case is remanded to the
court of origin for further proceedings and determination on the merits. No
costs.
EN BANC
G.R. No. L-8346
March 30, 1915
GUTIERREZ HERMANOS, plaintiff-appellant,
vs.
ORIA HERMANOS & CO., defendant-appellant.
Rafael de la Sierra for plaintiff.
Chicote and Miranda for defendant.
TORRES, J.:
On August 12, 1909, counsel for the mercantile firm of Gutierrez Hermanos
of this city filed a written complaint in the Court of First Instance of Manila
against the commercial concern of Oria Hermanos & Co. of Laoang,
which it had in its possession, 2 1/2 per cent of the amount collected by
reason of the said charter parties for commission and brokerage, there being
no stipulation whatever relative to the collection of this commission; that
Gutierrez Hermanos, moreover, charged against the said amount collected
by it 8 per cent compound interest; and that the sum in such wise improperly
charged and appropriated amounted, together with the accumulated interest,
to P15,000, which defendant prayed be returned to it by Gutierrez Hermanos.
The object of the sixth counterclaim is the recovery of P31,000, in which
amount defendant, Oria Hermanos & Co., alleged it was injured by Gutierrez
Hermanos having arbitrarily charged in the current account compound
interest at the rate of 8 per cent per semester from the year 1900 up to the
time of the closing of the said current account, while the agreement made
between both firms upon opening the said account was that the latter should
bear a mutual interest of 8 per cent per annum only.
On May 14, 1910, counsel for Gutierrez Hermanos filed a written answer to
the foregoing countercomplaints and counterclaims, and prayed that plaintiff
be absolved therefrom.
On August 1, 1910, this case came up for hearing and was continued on the
following days until on April 24, 1912, the Honorable S. del Rosario, judge,
rendering judgment therein, the dispositive part of which is as follows:
"Messrs. Oria Hermanos & Co. are sentenced to pay to Messrs. Gutierrez
Hermanos the sum of P147,204.28, with interest thereon at the rate of 8 per
cent per annum from the 30th of June, 1909, after deduction of all the sums
that result as balances, in favor of the former, from the accounts that shall be
rendered by the latter, in conformity with the cross complaints and
counterclaims that have been admitted.
Messrs. Gutierrez Hermanos are sentenced:
(a) With respect to the first cross complaint, to render to Messrs. Oria
Hermanos & co. accounts, supported by vouchers, only of those
articles in the acquisition of which fraud, deceit, or error has been
proven and to which the following pronouncements refer.
(b) As regards the second cross complaint, to return to Messrs. Oria
Hermanos & Co., after due settlement of the accounts, all the sums
collected as internal-revenue tax and referred to in the invoices of
rice, salt, petroleum, lime, rattan, flour, aniseed spirit, cigarettes, and
other articles mentioned in their respective places in the record,
This action was brought to recover the sum of P147,204.28, the balance of a
current account opened on May 1, 1900, between Gutierrez Hermanos and
the commercial firm of Oria Hermanos & Co., at the rate 8 per cent mutual
interest up to June 30, 1909, which sum was found to be owing by Oria
Hermanos & Co. to the commercial firm of Gutierrez Hermanos.
(c) With respect to the third cross complaint, plaintiff must render to
defendant an account, supported by vouchers, of the shipments of
rice concerned in the invoices examined in which fraud or error was
discovered, and said account shall embrace the 153 invoices
referred to by the litigants in this suit (page 324 of the transcript of
the stenographic notes, session of November 29, 1910).
Other subject matters of the present suit are the rendition of accounts by
Gutierrez Hermanos, as commission agent, to Oria Hermanos & Co., as
principal, and the collection of various sums demanded by the latter in the
cross complaints and counterclaims filed, during the trial, by its counsel
against the claim made by Gutierrez Hermanos for the payment of the
amount specified in the preceding paragraph.
(d) With regard to the fourth cross complaint, plaintiff shall render an
account, supported by vouchers, of all the purchases it made of
petroleum for Messrs. Oria Hermanos & Co., and in connection with
the invoices held in the latter's possession and referred to on page
391 of the transcript of the stenographic notes of the session of
November 29, 1910.
ORIA
That, on May 25, 1909, the plaintiff firm notified the defendant firm that it
could not continue to do business with the latter and therefore the current
account stipulated between both parties would be closed within a period of
thirty days; plaintiff therefore transmitted to defendant a general detailed
account that comprised the period from January, 1909, to June 30 of the
same year, with the warning that after that date (May 25, 1909) defendant
would have to pay the debit balance, inasmuch as, although the said last
account had not been approved, no objection whatever had been made
thereto by Oria Hermanos & Co. Therefore in the said letter of May 25,
plaintiff demanded of defendant the payment of the sum mentioned of
P147,204.28 which the latter had not paid in spite of plaintiff's demands and
notwithstanding the fact that defendant had made no objection whatever to
the last account rendered.
Counsel for defendant, Oria Hermanos & Co., after a denial of the facts that
had not been admitted prayed in special defense and in four cross
complaints that the plaintiff, Gutierrez Hermanos, be compelled to present a
general account, duly verified and supported by vouchers, of all the
shipments of hemp, copra, rice and other effects specifically mentioned, and
to render a final account in conformity with the agreement made between
both parties and converting the details mentioned in the said cross
complaints.
Notwithstanding the proof shown in the record of the certainty and reality of
the debt as a balance resulting from the current account kept between the
parties, it is of course impossible to determine the net amount, the object of
the claim presented by plaintiff, until there shall have first been decided
whether there should or not be rendered a general account, accompanied by
vouchers, comprehensive of the business transacted in connection with the
different commercial articles dealt in, and of the mercantile relations between
both firms from May 1, 1900, to June 30, 1909, and also whether Gutierrez
Hermanos is indebted to Oria Hermanos & Co. and what is the amount of the
debt.
Even upon the supposition that the plaintiff, Gutierrez Hermanos, is obliged
to make a general rendition of accounts comprehensive of the business
transacted between both firms within the dates mentioned, it is evident that,
until it be known whether plaintiff is or is not indebted to Oria Hermanos &
Co. and what is the amount owing as disclosed by the account rendered, it
cannot be decided whether plaintiff is or is not entitled to collect the whole
amount claimed in the complaint, for only in view of the result of the rendition
of accounts requested by plaintiff can it be lawfully established whether
Gutierrez Hermanos is a creditor of Oria Hermanos & Co. and what amount
is owing to it by the latter. All this is referred to in the first error alleged by
defendant.
In case it should be held that the law does not allow the rendition of accounts
requested by the defendant, Oria Hermanos & Co., and that this latter is not
a creditor of Gutierrez Hermanos, it is evident of course that plaintiff would be
unquestionably entitled to collect the amount specified in the complaint, or
some other amount duly proved at trial to be owing it by defendant. It is
therefore incumbent upon us to elucidate hereinafter the propriety or
impropriety of the contentions made by defendant in its four cross
complaints.
Defendant's counsel in his first cross-complaint and special defense prayed
that the plaintiff, Gutierrez Hermanos, be compelled to render and present a
general, final, complete and verified account, pursuant to the agreement
made between both parties, inasmuch as plaintiff bound itself to send
periodically to defendant a note or numerical extract of the current account,
and in case the mercantile relations between both firms should come to an
end or be finally closed, Gutierrez Hermanos bound itself to present a
general and complete account, duly supported by vouchers, and defendant,
in accepting and approving the semiannual accounts rendered by plaintiff,
did not waive its right to demand the general account agreed upon, at the
time of the final closing of the said current account, the obligation to furnish
which was not complied with by the plaintiff, Gutierrez Hermanos.
The latter denied in its answer the allegations made by Oria Hermanos & Co.
in its cross-complaint, and set forth that, in consequence of the mutual
current account opened between the parties from the year 1900, plaintiff
transmitted weekly or fortnightly, according to circumstances, a specific
statement of the transactions effected, as well as, semiannually, a general
account of the business done during the six months last elapsed, and that
defendant, after an examination of such semiannual account together with its
details and vouchers, and after some objections thereto had been explained,
was accustomed to prove the same. This was the produre carried on for
more than nine years during which Oria Hermanos & Co. from time to time
approved each one of the 17 account that were presented to it, and upon
Gutierrez Hermanos closing the current account from January to June, 1909,
it also presented to defendant a general detailed account, which,
nothwithstanding that no objection whatever was made to it, was not
approved. Therefore the complaint was filed that initiated this litigation.
Had the agreement between the parties been recorded with all its conditions
in some instrument, it would have appeared whether Gutierrez Hermanos
actually bound itself to present to Oria Hermanos and Co., besides the
semiannual accounts rendered, a general account comprising all the
business undertaken between 1900 and June, 1909, on which latter date it
was considered by Gutierrez Hermanos as terminated. The allegation made
by defendant relative to this point had not been substantiated by any
evidence whatever, and therefore there is no reason nor legal ground
whereby plaintiff could be compelled to present that general account
requested in the first cross-complaint.
It is, in our opinion, appropriate it insert hereinafter what the trial court, in the
judgment rendered, says with respect to this matter: "If commission agents
be obliged to render to their principals itemized accounts, supported by
vouchers, of the sums they collect as commission and of the transactions
effected by them in relation with their principals, as often as the latter may
desire, in cases where there arises some trouble, some difference of opinion
or a conflict of interests, or where the commission agents close the account,
as occurs in the case at bar because the principals did not pay what they
were owing or because, instead of the debt being diminished, it was
increased, the commission contract would become an inexhaustible and
never ending source of litigation and of claims without number, a formidable
arm for spiteful principals against which it would be insufficient to oppose an
arsenal of vouchers such as might be treasured by the most prescient
commission agent, because there could be avoided neither the brother
resulting from their necessary examination, nor the heavy expenses and loss
of time that are the inevitable accompaniment of this class of work."
When an account has been presented or rendered and has been approved
by the party whom it concerns or interests, it is not proper to revise it, unless
it should be proved that in its approval there was deceit, fraud, or error
seriously prejudicial to the party who gave such approval. Arts. 1265 and
1266, Civil Code.)
In the decision rendered in the case of Pastor vs. Nicasio, (6 Phil. Rep., 152),
the following doctrine was laid down;
When accounts of the agent to the principal are once approved by
the principal, the latter has no right to ask afterwards for a revision of
the same or for a detailed account of the business, unless he can
show that there was fraud, deceit, error or mistake in the approval of
the accounts facts not proven in this case.
The record does not show it to have been duly proven that upon Oria
Hermanos & Co. giving its approval to the 17 accounts presented by
Gutierrez Hermanos there was deceit, fraud, or mistake prejudicial to the
former's interests. For the sole reason that Gutierrez Hermanos, upon closing
the current account with Oria Hermanos & Co. was obliged, certainly an
unwarranted obligation, to render a general account comprehensive of all the
business transacted between both parties during more than nine years, and
there being no proof of the alleged agreement between them, it would be
improper to hold that the plaintiff is obliged to render and present a general
account in the sense requested by Oria Hermanos & Co. in its first crosscomplaint.
With respect to the second cross-complaint, relative to the sale on
commission of lots of hemp and copra by defendants to plaintiff during the
period from may, 1900, until the close of the mercantile relations between
both firms, it was alleged that for such sale or sale on commission Gutierrez
Hermanos collected a large and important commission of many thousands of
pesos and credited defendant in the current account with lesser prices than
those obtained and that defendant received information that these lots of
hemp and copra which were said to have sold to third persons were
afterwards found to have been purchased by the firm of Gutierrez Hermanos
itself, to the fraud, injury, and prejudice of the defendant, Oria Hermanos and
Co.; wherefore the latter prayed that plaintiff should present a general and
complete account, duly verified by vouchers and with the details specified of
each and all of the shipments of hemp and copra forwarded to plaintiff from
May, 1900, to 1909. These facts were denied by plaintiff, and the court, in
view of the evidence adduced by both parties, held that the record showed
absolutely no proof that plaintiff, Gutierrez Hermanos, had committed any
fraud or error prejudicial to defendant.
In fact it was not proved that Gutierrez Hermanos credited in the current
account a lesser price than that obtained from the sale on commission of the
lots of hemp and copra sent to it by Oria Hermanos and Co., for from the
documentary evidence consisting of account transmitted by plaintiff to the
commercial firms of Stevenson and Co. and Warner, Barnes and Co.
(Limited), in collection of the price of hemp and copra acquired by these
houses, it appears that the prices fixed at sale to the latter are the same and
agree with those specified in the statements transmitted by plaintiff to
defendant, Oria Hermanos and Co., and that the hemp and copra shipped by
the defendant were sold on commission to third persons that is, to the
aforesaid commercial firms.
The charge laid against plaintiff, that it did not disclose the name of the
commercial firm or concern from whom the hemp that it sold had come, does
not, although it may have concealed this fact, constitute a fraudulent act, nor
one originating civil liability, inasmuch as plaintiff realized on the lots of hemp
under the marks of Oria Hermanos & Co. which they bore from their point of
origin and by which they were known both in Manila and abroad (Exhibit DD)
and not only in the invoices, but also in the accounts presented by Gutierrez
Hermanos upon its collecting the price of such hemp sold on commission,
there appeared the marks stamped by Oria Hermanos & Co. on their lots of
hemp, and therefore it cannot be affirmed that Gutierrez Hermanos
superseded Oria Hermanos & Co. as the owner of the hemp that plaintiff sold
on commission and that came from defendant during the more than nine
years in which the former was a commission agent of the latter.
With respect to the fact of Gutierrez Hermanos not having disclosed the
name of the concern to which the hemp belonged, in the cases where
plaintiff sold it in its own name, plaintiff's procedure cannot be qualified as
deceitful or fraudulent, inasmuch as article 245 of the Code of Commerce
authorized it to act as it did, to contract on its own account without need of
disclosing the name of its principal, in which case Gutierrez Hermanos was
liable to the person or concern with whom it contracted, as if the business
were its own. So, then, the purchaser has no right of action against the
principal, nor the latter against the former, without prejudice to the actions
which lie respectively in behalf of the principal and the commission agent,
pursuant to the provisions of article 246 of the Civil Code.
With regard to the lots of copra, notwithstanding the allegations made in this
cross-complaint, defendant has not produced any proof whatever of the facts
charged, in face of plaintiff's denial in its answer. Therefore, in consideration
of the reasons set forth with respect to the lots of hemp, the judgment of the
lower court disallowing defendant's petition that plaintiff render accounts
relative to the sales of hemp and copra is held to be in accordance with law.
In this part of the judgment of the trial court consideration was also given to
the fact of plaintiff's having debited against defendant in the account
rendered it the payment of the internal-revenue tax of one-third of 1 per cent.
With respect to the tax paid on the price of the hemp and copra sold by the
plaintiff in the name and for the account of the defendant, the procedure of
the plaintiff is perfectly legal, in accordance with the provisions of section 139
of the Internal Revenue Law, in laying upon Oria Hermanos & Co. the
obligation to pay the said tax as the owner of the hemp and copra sold, and,
the facts which he had admitted as true in such manner as they were
presented to him.
Oria Hermanos & Co., upon its accepting and approving the accounts which
were presented to it by Gutierrez Hermanos, as transcripts or copies from the
latter's books, did not have an opportunity to make the required verification of
the entries of rice contained in the said accounts or of the invoices of this
article in all their details, and whenever it has discovered that Gutierrez
Hermanos, as commission agent, has made overcharged or placed extra
prices in addition to the 2 per cent commission, it has a right to demand
reimbursement of the excess in price which it had erroneously paid as
principal. The judgment of the lower court must, therefore, be affirmed with
respect to the entries of rice made in the 170 invoices referred to in the
accounts presented by plaintiff, by means of a revision of the accounts
presented in connection with the said article of the Code of Commerce.
With respect to the fourth crosscomplaint relative to Gutierrez Hermanos
having entered in the invoices transmitted to Oria Hermanos & Co. higher
prices than those paid for the salt, beverages, tobacco, wine, beer, and
groceries, in spite of the allegations made by plaintiff the record of the
proceedings shows no proof of the truth of the act charged to plaintiff. The
fact of not having recorded in the invoices of the said effects shipped to
defendant the names of the persons who had acquired them does not
constitute proof nor even a presumption of illegal procedure on the part of
Gutierrez Hermanos. Neither is plaintiff obliged by any law to state the
names of the owners of such articles, nor does the omission thereof show
bad faith on the part of the commission agents.
As regards the petroleum, it is undeniable that in the invoices to which the
fourth cross-complaint refers higher prices were given than those it actually
cost. Moreover, Oria Hermanos & Co. is entitled to the discount obtained by
the commission house from the commercial firm which sold the petroleum.
The trial judge, as grounds for his finding, says the following: "It is therefore
evident that, according to the proofs submitted, Messrs. Gutierrez Hermanos
committed fraud in the purchase and shipments of the said article, not only
because they kept the discount allowed by the selling firm by which their
principals, for whom they purchased the petroleum should have profited, and
not the commission agents who acted for them simply in the capacity of
agents; but also because in one of the invoices they charged, besides, a
greater price than they paid to the vendors, and then collected a commission
of 2 per cent on all the invoices. It is the obligation of commission agents to
make the purchases for their principals on the most advantageous terms. For
this they are paid the rate of commission stipulated. They have no right to
keep the discount allowed by the vendors on the price of the articles they
purchase for their principals, even less to increase, to their benefit, the price
charged them."
In consideration, then, of evidence introduced relative to the purchase of the
petroleum shipped to defendant, referred to in the fourth cross-complaint,
plaintiff must render an account, verified by vouchers, of the price of all the
petroleum that it acquired for Oria Hermanos & Co. and which is covered by
the invoices mentioned on page 391 of the transcript of the stenographic
notes taken of the session of December 28, 1910.
The judgment of the lower court treats of the fact that Gutierrez Hermanos
charged interest on the value of the articles which it had purchased for Oria
Hermanos & Co., before even having paid the vendors the price of the
articles acquired. Defendant has complaint against this procedure on the part
of plaintiff and qualifies as improper and illegal the collection of the 8 per cent
interest on the price of the effects forwarded to Oria Hermanos & Co. from
the date of their shipment, when actual payment of such purchases was
made many days afterwards.
The accounts presented by Gutierrez Hermanos, wherein note was made of
the collection of interest at the rate of 8 per cent on the price of the effects
acquired by plaintiff for Oria Hermanos & Co. and shipped to defendant for its
disposal, notwithstanding that they were not paid for unit many days
afterwards, were approved and accepted by plaintiff without any objection
thereto whatever and with no protest against the notation of the interest on
the price of the articles purchased. Therefore, aside from the reasons given
by the lower court in his judgment and relative to this point, it can not be held
that there was either fraud or error in the procedure observed by Gutierrez
Hermanos in charging in its account the stipulated interest from the date
when it acquired the effects, afterwards shipped to the defendant, Oria
Hermanos & Co., because Gutierrez Hermanos could have paid cash for the
articles purchased. Even though payment might have been delayed for a few
days more it is certain that Gutierrez Hermanos as commission agent was
obliged to pay the price of the articles acquired and, consequently, said price
began to draw interest chargeable to the consignee who, as owner of such
articles, could dispose of them freely. For these reasons defendant's claim
can not be sustained.
We now take up the fifth special defense, or the first counterclaim presented
by defendant against plaintiff, wherein it is prayed that the latter be
sentenced to pay to the former the sum of P13,894.60, together with the
legal interest thereon, which sum is the difference between the 5 per cent
which was all Oria Hermanos & Co. should have the sum of P47,649, the
debt contracted by Juan T. Molleda in favor of Gutierrez Hermanos and
transferred to Oria Hermanos and Co. who assumed its payment instead of
Molleda.
The reasons, set forth in the judgment appealed from and based on
documentary evidence, are so clear and conclusive that they could not be
rejected by defendant, nor invalidated at trial by other evidence in rebuttal.
Consequently, we are constrained to admit them as decisive of the point in
controversy and as duly showing that the interest stipulated on the amount
which was transferred to Oria Hermanos and Co. is 8 per cent and not 5 per
cent as defendant claims. Therefore the sum of P13,894.60 claimed cannot
be recovered, and it is held that the finding made by the trial judge in respect
to the first counterclaim filed by defendant is in accord with the law and the
evidence. This finding is based on the following grounds: "If the firm of
Molleda and Oria as well as that of Oria Hermanos & Co., of which latter Mr.
Tomas Oria is manager, both consented to Messrs. Gutierrez Hermanos
charging in all the extracts of current account sent to them an interest of 8
per cent on the sum of P47,649 56; and if they willingly and constantly
acquiesced in the payment of a particular rate of interest instead of that of 5
per cent, during nine years without raising any objection whatever, they are
not entitled to obtained restitution for the difference paid of 3 per cent, nor
have they any right to consider as unlawfully collected the 8 per cent interest
on the sum above mentioned. The record shows no proof of the existence of
any of the vices which, according to law, might invalidate the consent given
by defendant to the collection from it of the interest of 8 per cent, which must
be that stipulated, nor was such a vice alleged by Oria Hermanos & Co."
Moreover, against this finding in plaintiff's favor no error whatever has been
alleged by defendant.
In the second counterclaim, the sixth special defense, defendant prays that
Gutierrez Hermanos be sentenced to the payment of P63,700, with legal
interest thereon from the date of the presentation of this counterclaim, and
alleged; that the firm of Gutierrez Hermanos, disregarding the instructions of
Molleda and Oria, the predecessor of Oria Hermanos and Co., merely
insured the stocks of hemp and merchandise which the latter had in Laoang,
for an imaginary value of P67,000, leaving totally unprotected the stocks of
hemp and merchandise in Catubig, valued at P32,000; that such failure to
comply with said instruction caused Oria Hermanos and Co., by reason of
the fire that occurred in Catubig, to lose the sum of P63,700, including the
premiums. expenses, and interest paid, and that defendant, immediately
upon discovery of the loss by plaintiff's fault and negligence, filed claim
therefor and protested against the same.
In answer Gutierrez Hermanos alleged that in the letter from Oria Hermanos
and Co., of the date of April 28, 1900, the latter stated that it recommended
to plaintiff the question of the insurance of the warehouses in Laoangand of
the houses in Catubig, advised that if the stocks of hemp and merchandise
therein were insured, as defendant believed they were, plaintiff should
endeavor to increase the insurance thereon; and that in another letter of the
same date Don Tomas Oria, after relating the fact that the insurgents had
attacked the pueblo of Catubig and killed the troops there garrisoned, stated
that he earnestly recommended to Gutierrez the matter of the insurance in
order that it might be made as soon as possible in the manner explained in
the official letter of the same date.
Gutierrez Hermanos, supposing that Catubig might already have been
burned and destroyed as a result of the occurrences related by Oria in his
letter, judging by the news published in the newspapers of this city on May 2,
1900, deemed that it would be a useless expense to increase the insurance
of the merchandise held in stock in the said pueblo under ordinary fire
insurance which was that taken out by the firm of Molleda and Oria, for the
reason that the insurance companies would refuse to pay the amount of the
insurance in case the damage was caused by war, invasion, riot, military
force, etc. As Gutierrez Hermanos then had no means whereby it might
communicates with Molleda and Oria to request specific instructions from this
latter firm in regard to the insurance ordered, which ordinary and not war
insurance, it had to consult Don Casimiro Oria, a partner of Oria Hermanos
and Co., and this gentleman, with a full knowledge of the state of affairs in
Catubig, advised that no further attempt be made to increase the ordinary fire
insurance on the goods in Catubig, because it would be a useless expense
and because there were well-founded reasons for supposing that at that date
the pueblo had already been completely destroyed, together with the
buildings and stocks of merchandise which it was proposed to insure. But
after taking into account the importance of the buildings and the large stocks
of goods stored inLaoang, which pueblo, according to a letter from Oria to
Gutierrez Hermanos, was also in danger of being attacked by the insurgents,
plaintiff proceeded to insure them against war risks for three months for
P7,000 sterling, a transaction which was communicated by plaintiff to
Molleda and Oria by a letter of May 5, 1900, and which this latter firm
acknowledged without making any objection whatever to the war insurance
placed; that, since the 2d of June of the same year, neither was any claim or
protest made by the firm of Oria Hermanos, but, on the contrary, Oria
Hermanos and Co. applied to the Government of the United States claiming
stored in Catubig, Oria Hermanos & Co. would not have been benefited
thereby, because the insurance company would have refused to pay the
increase, just as it did not pay the amount of the original insurance for the
reason aforementioned. Furthermore, as we have already stated, the order to
increase the insurance only refers to ordinary insurance against fire, and not
to extraordinary insurance against war risks.
With respect to the war insurance placed on the stocks of goods in Laoang,
the trial court could not in accordance with law hold plaintiff to be liable for
the payment of the sum Oria Hermanos and Co. did not protest nor object in
any wise against the placing of the said war insurance on the merchandise
in Laoang, and also because in the second counterclaim no petition or
demand whatever was made in connection with this transaction. For these
reasons therefore, Gutierrez Hermanos must be absolved of the second
counterclaim.
We now come to the third counterclaim, the seventh special defense
presented by defendant, wherein petition was made that the firm of Gutierrez
Hermanos be compelled to pay to Oria Hermanos the sum of P67,000,
besides the legal interest thereon since the filing of this claim, which sum
was the amount of the insurance, premiums paid, fees, costs, interest, and
charges for telegrams, etc., alleged to have been expended and lost through
the inattention, negligence, improvidence, and carelessness of the plaintiff,
Gutierrez Hermanos, without defendant's being able to collect the amount of
the insurance on the stock of hemp in Catarman, Samar.
In a letter of May 10, 1900, addressed by Oria Hermanos & Co. to Gutierrez
Hermanos, the former commissioned the latter to try to insure against war
risks some 1,400 piculs of hemp that Oria Hermanos and Co. had in the
pueblo of Catarman which had been evacuated by the American troops; and
in another letter of the same date Tomas Oria said to Gutierrez Hermanos
that Catarman had been evacuated by the troops three days after the
departure of the steamer Santander which was unable to load about 3,000
piculs of hemp that his firm had there, and, as he knew that the said pueblo
had not been burned, he wished to have insurance taken out on the value of
about 1,400 piculs of hemp stored in the Delgado warehouse. Gutierrez
Hermanos had Stevenson and Co., of Manila, cable to the latter's head office
in London for the desired insurance, and as soon as it was obtained
Gutierrez Hermanos wrote to Oria Hermanos & Co. informing defendant that
plaintiff had insured against war risks 1,400 piculs of hemp deposited in the
Delgado warehouse in Catarman, for three months from the 18th of May,
1900.
A few days subsequent to the placing of this insurance, Oria Hermanos & Co.
ordered Gutierrez Hermanos to collect the amount of the insurance, for the
reason that all the stock of hemp in Catarman had been stolen by the
insurgents. The representative of the underwriter refused, however, to pay
the amount of the insurance because Oria Hermanos and Co. had concealed
certain facts which, had they been known to the underwriter, would have
deterred the company from issuing a policy for the hemp, and all the steps
taken for the purpose of obtaining the collection of the 3,000 sterling for
which the hemp had been insured, resulted in failure.
Therefore, on petition of the firm of Oria Hermanos & Co. through the firm of
Stevenson and Co., suit was duly brought before the English courts in
London. The prosecution of this suit was commended to English attorneys to
whom Oria Hermanos & Co. furnished, through Gutierrez Hermanos, all the
documents and data conducive to a successful issue. Notwithstanding, the
claim of Oria Hermanos & Co. was rejected by the London courts. No liability
attached to Gutierrez Hermanos for the failure of the suit in London.
The firm of Gutierrez Hermanos merely complied with the orders of Oria
Hermanos & Co. to insure the stock of hemp in Cataraman, with an
insurance company established in London, through Stevenson and Co. of
Manila, in view of the fact that there was no insurance company in this city
which would issue policies against war risks. For this purpose, by a letter of
October 17, 1905, Exhibit F-2 Oria Hermanos & Co. transmitted to Gutierrez
Hermanos the power of attorney and the letter for Messrs. Horsley, Kibble
and Co. for the purpose of the latter's negotiating with the underwriters for
some honorable settlement of the matter, during the time required for the
receipt of all the documents that had been requested. In another letter of
January 25, 1906, Oria Hermanos & Co. stated to Stevenson and Co. that it
took pleasure in replying to the latter's favor of the 19th instant, addressed to
Mr. Oria; that Delgado's letter to Oria of the date of October 19, 1901, was
forwarded in the original to London, through Messrs. Gutierrez Hermanos, to
Stevenson and Co., on July 16, 1904; that defendant inclosed a copy of
Delgado's declaration before the municipal judge of Catarman, transmitted to
Stevenson and Co. on November 21, 1903; and that the two letters to
Gutierrez Hermanos, of May 28, 1903, and October 2, 1901, as well as the
memorandum of the values of the goods, had been transmitted to Gutierrez
Hermanos with a telegraphic order to said firm to deliver them to Stevenson
and Co. If the amount of the insurance could not afterwards be collected, it
was not through fault of Gutierrez Hermanos, who acted in the matter in
accordance with instructions from Oria Hermanos and Co.
So that firm of Gutierrez Hermanos was a mere conductor through which the
stock of hemp in Catarman was insured by a firm in London through
mediation of Messrs. Stevenson and Co., for the firm of Oria Hermanos and
Co. had to grant a power of attorney on behalf of the said Messrs. Horsley,
Kibble and Co. in order that the latter might represent the former before the
courts in England. If afterwards the representatives of Oria Hermanos and
Co. did not obtain a favorable decision in those courts, the loss of the suit
cannot be ascribed to either the fault or the negligence of Gutierrez
Hermanos, inasmuch as this plaintiff merely complied with the orders of the
defendant, Oria Hermanos and Co., to bring suit in the English courts, not
against Stevenson and Co. of these Islands, but against the insurance
company of London.
The firm of Gutierrez Hermanos, in executing orders and charges of Oria
Hermanos and Co., became, by virtue of an implied agency, an agent of the
latter and, in the fulfillment of the orders of the principal, adjusted its action to
the instructions of Oria Hermanos & Co. The record does not show that in so
doing it proceeded with negligence or with deceit. Therefore there is no
reason nor legal ground whereby plaintiff should be compelled to pay the
sum demanded in the third counterclaim for the causes therein stated. (Arts.
1710, 1719 and 1726 of the Civil Code.) Consequently Gutierrez Hermanos
should be absolved from the third counterclaim filed by defendant.
In the fourth counterclaim, the eighth special defense, defendant, Oria
Hermanos & Co., prays that plaintiff, Gutierrez Hermanos, be sentenced to
pay P75,000 for losses and damages, with interest, inasmuch as by reason
of a contract executed between both parties, plaintiff bound itself to acquire
for and transmit to defendant rice and other articles, including coin, which
Oria Hermanos & Co. might request at Laoang, Samar, and so plaintiff did;
but since 1904, the fifth year of their mercantile relations, plaintiff failed
repeatedly to comply with its obligation to send the rice and other article
requested by defendant, totally sometimes and at other times partially limiting
the shipment of the effects ordered and excusing itself from remitting money
on the pretext that it could not obtain insurance for the shipment of cash; that
defendant afterwards discovered that there were in this city large stocks of
rice and other effects which plaintiff [defendant] had requested, and could
surely have been sold in Laoang and the pueblos of the coast of Samar, as
Oria Hermanos & Co. was the only importing firm in that island; and had
defendant received from plaintiff the rice and the other effects the former had
requested to be shipped to it, defendant would have obtained a profit of not
less than P25,000 whereupon it could have bought large quantities of hemp
which would have brought it great profit. Defendant further alleged that such
failure on the part of plaintiff to comply with the agreement made caused
injury to the reputation and mercantile credit of Oria Hermanos and Co., in
Samar, and losses and damages of the value of about P50,000, the total of
the losses and damages suffered on both accounts amounting to a sum of
not less than P75, 000; and that the motive of such procedure on the part of
Gutierrez Hermanos was to injure and destroy defendant's credit
in Laoang and on the entire coast of Samar, because plaintiff planned to
establish there a business of its own like that of Oria Hermanos and Co.
Plaintiff, Gutierrez Hermanos, specifically denied the facts alleged by
defendant in its counterclaim and set forth that the evidence introduced
relative to such facts showed that since 1904 plaintiff had been reducing the
shipments of rice, wine, and other effects to such extent that in 1906 and
1907 cases occurred where the order shipped was reduced to one-third, and
in 1908 also where the steamer Serantes was sent without any cargo
whatever, for the reason that the debit balance in defendant's current account
amounted, in 1905, to P321,000 and because Oria Hermanos and Co. did
not send a quantity of hemp and copra sufficient in value to cover the value
of the remittance of money and of the shipments of the effects requested;
that defendant, instead of sending hemp to plaintiff for the gradual payment
of its debt, sent it to Cebu; that therefore Oria Hermanos & Co. had no wellfounded grounds whereupon to claim indemnity for losses and damages,
especially since, according to the stipulations of the agreement and as
shown by the evidence, the part of the credit utilized by defendant was to be
covered and paid for with the price of the hemp, copra and other effects
which Oria Hermanos & Co. should have to send to Gutierrez Hermanos;
and that, if the debtor balance of the current account continued to increase
instead of decreasing, it must be concluded that the procedure of Gutierrez
Hermanos in reducing the amount of the shipments of the orders was due to
the conduct of Oria Hermanos & Co. who did not endeavor by the shipment
of copra, hemp, and other effects gradually to pay even a part of the credit
opened, notwithstanding that the rights and obligations established in the
contract should have been mutual.
If defendant, without concerning itself with diminishing its debtor balance, did
no more than order goods for sale and remit drafts to the paid by Gutierrez
Hermanos, not sending in exchange to plaintiff hemp, copra, and other
effects, plaintiff, Gutierrez Hermanos, in refusing discretionally to furnish
certain effects to defendant and to pay drafts drawn by the latter, did not
violate the obligations it assumed in the contract.
The fact that the debtor balance accepted by Oria Hermanos and Co. on
March 9, 1909, Exhibit A, was raised to P144,473.78, is the best proof of the
good conduct observed by plaintiff during the nine years of mercantile
relations between both parties, and is at the same time the most graphical
demonstration that defendant's contention made in its fourth counterclaim is
not based on any just or legal grounds.
Article 1100, last paragraph of subarticle 2, of the Civil Code prescribes: "In
mutual obligations none of the persons bound shall incur default if the other
does not fulfill or does not submit to properly fulfill what is incumbent upon
him. From the time one of the persons obligated fulfills his obligation the
default begins for the other party." Article 1124 of the same Code provides as
follows: "The right to rescind the obligations is considered as implied in
mutual ones, in case one of the obligated persons does not comply with what
is incumbent upon him.
The person prejudiced may chose between exacting the fulfillment of
the obligation or its rescission, with indemnity for damages and
payment of interest in either case. He may also demand the
rescission, even after having requested its fulfillment, should the
latter appear impossible." Under these grounds we hold that the
absolutory finding contained in the judgment appealed from is in
accordance with the law and the evidence.
In the fifth counterclaim, the ninth special defense, defendant, Oria
Hermanos and CO., prayed that Gutierrez Hermanos be sentenced to pay
the sum of P15,000, together with the legal interest thereon, inasmuch as
plaintiff, Gutierrez Hermanos, charged in the current account, collected and
appropriated to itself the funds which Oria Hermanos & Co. had in plaintiff's
possession and assessed against the same compound interest at 8 per cent
and 2 per cent on the net amount of the collection made as charterage for
the steamers Serantes and Laoang, the launches Comillas and Golondrina,
and the cutter Remedios, as commission for said charterage, when all the
steps for the collection of the same were taken personally by Messrs. Oria
and further, defendant's partners and there was no contracts whatever
between the parties whereby Gutierrez Hermanos might collect, enter into
the current account and appropriate to itself the said amount as commission
through the collection of the aforesaid charterage.
Plaintiff's counsel merely denied the facts alleged, which certainly were not
proved at the trial. It was, on the contrary, fully proven that Don Tomas Oria
and the managers of Oria Hermanos & Co. knew, by reason of the accounts
Gutierrez Hermanos had been sending them, that the plaintiff firm charged
the 2 per cent commission on the amount of the charterages, for it is so
recorded in the letter from Oria addressed to Gutierrez Hermanos under date
of June 12, 1901, in which P690 appears annotated as the amount of
plaintiff's 2 per cent commission for the charterage of the Laoang and
the Serantes, and in other letter from Oria Hermanos and Co. of October 18,
1900, (Exhibit A-2, page 476 of the record) wherein demand was made for
vouchers and a memorandum of the collections effected for the charterage of
these steamers, the Laoang, and the Serates. Furthermore, it appears in this
same letter for it is stead that credit has been given in Gutierrez Hermanos'
account for P272.50, as being the amount this firm was entitled to receive as
2 per cent commission on the P15,625 collected by it from the quartermaster
for the charterage of the Serates and for the transportation of eight
passengers on the steamerLaoang; and it is also therein stated that
Gutierrez Hermanos' account has been credited with the sum of P24, as the
amount of 2 per cent commission on P1,200 collected for four days'
charterage of the Laoang. These documents show that Gutierrez Hermanos
has taken part in the collection of the said charterages and, therefore, was
entitled to receive the amount agreed upon as commission for such
collection. Oria's assertion that Gutierrez Hermanos did nothing for the
collection of the P400,000, the amount of the charterage for the boats of Oria
Hermanos and Co., Gutierrez Hermanos relative to the collection of the
charterages due for the launchesGolondrina and Adela, and for this purpose
he sent the proper vouchers for such collection. Consequently there is
neither reason nor legal ground to prevent our holding as proper the finding
established by the trial court that Oria Hermanos & Co. did, with due
knowledge of the matter, approve the amount of the commissions collected
by Gutierrez Hermanos on the sums it had collected as charterage for the
defendant's boats, in accordance with the agreement made between the
parties, which defendant can not repudiate, nor can its regret for the part it
took therein avail it for the reimbursement sought in its fifth counterclaim. The
finding of the trial judge in regard to the latter is, therefore, in conformity with
the law.
The object of the sixth counterclaim is to obtain reimbursement of the sum of
P31,000, the amount of the interest charged and compounded semiannually,
instead of annually, at the rate of 8 per cent net interest. Oria Hermanos &
Co. demands this sum from Gutierrez Hermanos, alleging that there was an
agreement between the parties to the effect that a settlement of the interest
should be made at the end of each year, and also that the interest due and
unpaid should be capitalized annually.
The firm of Oria Hermanos & Co., Tomas Oria, one of the partners of the
same, and the defendant's bookkeeper, a relative of the said Oria and also a
partner of the firm, had been receiving extracts or copies of the semiannual
accounts rendered by Gutierrez Hermanos, and, after a careful examination
of the same, after offering objections thereto which sometimes delayed Oria
Hermanos and Co.'s approval thereof for more than six months, after
receiving the explanations requested and vouchers demanded of plaintiff,
they concluded by admitting and agreeing to the accounts rendered and the
amounts involved, and made neither objection nor protest whatever against
the system or method employed by Gutierrez Hermanos in capitalizing at the
end of each year the interest of the semiannual accounts rendered, nor
against the interest charged on the capitalized interest, not only in
defendant's debit, but also by reciprocation in the credit given it in the
account of the receipts obtained from price of the hemp, copra and other
products shipped to Gutierrez Hermanos. All the foregoing facts appear on
page 18 of the transcript of the stenographic notes taken of the hearing on
July 14, 1914.
The transaction effected by Gutierrez Hermanos in the accounts it presented
to defendant, Oria Hermanos & Co., is confirmed by some twenty letters
signed, some of them, by Pria Hermanos and Co., others, the greater part of
them, by Tomas Oria, and still others by Mr. Fuster, a partner of the latter
firm. Therefore the semiannual capitalization made by plaintiff, Gutierrez
Hermanos, was sanctioned and approved by defendant on the seventeen
occasions that it approved the accounts presented by plaintiff, expressive of
such capitalization of the reciprocal interest stipulated between the
contracting parties.
Article 1109 of the Civil Code prescribes as follows: "Interest due shall earn
legal interest from the time it is judicially demanded, even if the obligation
should have been silent on this point.
In commercial transactions the provisions of the Code of Commerce
shall be observed.
Article 317 of the Code of Commerce provides: "Interest which has fallen due
and has not been paid shall not earn interest. The contracting parties may,
however, capitalized the net interest which has not been paid, which, as new
principal, shall earn interest."
Upon the execution of the contract which was the origin of the mercantile
relations between Gutierrez Hermanos and Oria Hermanos & Co., the
stipulation made between both parties were not sent forth in any document,
they being content with a verbal agreement in which it was stipulated that the
rate of interest of the reciprocal current account to be kept between them
should be 8 per cent, without determining whether such interest was to fall
due annually, as affirmed by Tomas Oria, the manager of Oria Hermanos &
EN BANC
G.R. No. L-20567
July 30, 1965
PHILIPPINE NATIONAL BANK, petitioner,
vs.
MANILA SURETY and FIDELITY CO., INC. and THE COURT OF
APPEALS (Second Division), respondents.
Besa, Galang and Medina for petitioner.
De Santos and Delfino for respondents.
REYES, J.B.L., J.:
The Philippine National Bank petitions for the review and reversal of the
decision rendered by the Court of Appeals (Second Division), in its case CAG.R. No. 24232-R, dismissing the Bank's complaint against respondent
Manila Surety & Fidelity Co., Inc., and modifying the judgment of the Court of
First Instance of Manila in its Civil Case No. 11263.
The material facts of the case, as found by the appellate Court, are as
follows:
The Philippine National Bank had opened a letter of credit and advanced
thereon $120,000.00 to Edgington Oil Refinery for 8,000 tons of hot asphalt.
Of this amount, 2,000 tons worth P279,000.00 were released and delivered
to Adams & Taguba Corporation (known as ATACO) under a trust receipt
guaranteed by Manila Surety & Fidelity Co. up to the amount of P75,000.00.
To pay for the asphalt, ATACO constituted the Bank its assignee and
attorney-in-fact to receive and collect from the Bureau of Public Works the
amount aforesaid out of funds payable to the assignor under Purchase Order
No. 71947. This assignment (Exhibit "A") stipulated that:
The conditions of this assignment are as follows:
1. The same shall remain irrevocable until the said credit
accomodation is fully liquidated.
2. The PHILIPPINE NATIONAL BANK is hereby appointed as our
Attorney-in-Fact for us and in our name, place and stead, to collect
and to receive the payments to be made by virtue of the aforesaid
Purchase Order, with full power and authority to execute and deliver
on our behalf, receipt for all payments made to it; to endorse for
deposit or encashment checks, money order and treasury warrants
which said Bank may receive, and to apply said payments to the
settlement of said credit accommodation.
This power of attorney shall also remain irrevocable until our total
indebtedness to the said Bank have been fully liquidated. (Exhibit E)
From said decision, only the defendant Surety Company has duly perfected
its appeal. The Central Bank of the Philippines did not appeal, while
defendant ATACO failed to perfect its appeal.
ATACO delivered to the Bureau of Public Works, and the latter accepted,
asphalt to the total value of P431,466.52. Of this amount the Bank regularly
collected, from April 21, 1948 to November 18, 1948, P106,382.01.
Thereafter, for unexplained reasons, the Bank ceased to collect, until in 1952
its investigators found that more moneys were payable to ATACO from the
Public Works office, because the latter had allowed mother creditor to collect
funds due to ATACO under the same purchase order to a total of
P311,230.41.
Its demands on the principal debtor and the Surety having been refused, the
Bank sued both in the Court of First Instance of Manila to recover the
balance of P158,563.18 as of February 15, 1950, plus interests and costs.
On October 4, 1958, the trial court rendered a decision, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Ordering defendants, Adams & Taguba Corporation and Manila
Surety & Fidelity Co., Inc., to pay plaintiff, Philippines National Bank,
the sum of P174,462.34 as of February 24, 1956, minus the amount
of P8,000 which defendant, Manila Surety Co., Inc. paid from March,
1956 to October, 1956 with interest at the rate of 5% per annum from
February 25, 1956, until fully paid provided that the total amount that
should be paid by defendant Manila Surety Co., Inc., on account of
this case shall not exceed P75,000.00, and to pay the costs;
2. Orderinq cross-defendant, Adams & Taguba Corporation, and
third-party defendant, Pedro A. Taguba, jointly and severally, to pay
cross and third-party plaintiff, Manila Surety & Fidelity Co., Inc.,
whatever amount the latter has paid or shall pay under this
judgment;
3. Dismissing the complaint insofar as the claim for 17% special tax
is concerned; and
Even if the assignment with power of attorney from the principal debtor were
considered as mere additional security still, by allowing the assigned funds to
be exhausted without notifying the surety, the Bank deprived the former of
any possibility of recoursing against that security. The Bank thereby
exonerated the surety, pursuant to Article 2080 of the Civil Code:
ART. 2080. The guarantors, even though they be solidary, are
released from their obligation whenever by come act of the creditor
they cannot be subrogated to the rights, mortgages and preferences
of the latter. (Emphasis supplied.)
The appellant points out to its letter of demand, Exhibit "K", addressed to the
Bureau of Public Works, on May 5, 1949, and its letter to ATACO, Exhibit "G",
informing the debtor that as of its date, October 31, 1949, its outstanding
balance was P156,374.83. Said Exhibit "G" has no bearing on the issue
whether the Bank has exercised due diligence in collecting from the Bureau
of Public Works, since the letter was addressed to ATACO, and the funds
were to come from elsewhere. As to the letter of demand on the Public
Works office, it does not appear that any reply thereto was made; nor that the
demand was pressed, nor that the debtor or the surety were ever apprised
that payment was not being made. The fact remains that because of the
Bank's inactivity the other creditors were enabled to collect P173,870.31,
when the balance due to appellant Bank was only P158,563.18. The finding
of negligence made by the Court of Appeals is thus not only conclusive on us
but fully supported by the evidence.
Even if the Court of Appeals erred on the second reason it advanced in
support of the decision now under appeal, because the rules on application
of payments, giving preference to secured obligations are only operative in
cases where there are several distinct debts, and not where there is only one
that is partially secured, the error is of no importance, since the principal
reason based on the Bank's negligence furnishes adequate support to the
decision of the Court of Appeals that the surety was thereby released.
WHEREFORE, the appealed decision is affirmed, with costs against
appellant Philippine National Bank.
about P35,000.00 with daily interest thereon from November 17, 1959 until
fully paid and commission equivalent to 3/8% for every thirty (30) days or
fraction thereof plus attorney's fees equivalent to 10% of the total amount
due and costs. 6 The complaint filed by the Philippine Bank of Commerce
contains twenty-two (22) causes of action referring to twenty-two (22)
transactions entered into by the said Bank and Aruego on different dates
covering the period from August 28, 1950 to March 14, 1951. 7 The sum
sought to be recovered represents the cost of the printing of "World Current
Events," a periodical published by the defendant. To facilitate the payment of
the printing the defendant obtained a credit accommodation from the plaintiff.
Thus, for every printing of the "World Current Events," the printer, Encal
Press and Photo Engraving, collected the cost of printing by drawing a draft
against the plaintiff, said draft being sent later to the defendant for
acceptance. As an added security for the payment of the amounts advanced
to Encal Press and Photo-Engraving, the plaintiff bank also required
defendant Aruego to execute a trust receipt in favor of said bank wherein
said defendant undertook to hold in trust for plaintiff the periodicals and to
sell the same with the promise to turn over to the plaintiff the proceeds of the
sale of said publication to answer for the payment of all obligations arising
from the draft. 8
Aruego received a copy of the complaint together with the summons on
December 2, 1959. 9 On December 14, 1959 defendant filed an urgent
motion for extension of time to plead, and set the hearing on December 16,
1959. 10 At the hearing, the court denied defendant's motion for extension.
Whereupon, the defendant filed a motion to dismiss the complaint on
December 17, 1959 on the ground that the complaint states no cause of
action because:
a) When the various bills of exchange were presented to the defendant as
drawee for acceptance, the amounts thereof had already been paid by the
plaintiff to the drawer (Encal Press and Photo Engraving), without knowledge
or consent of the defendant drawee.
b) In the case of a bill of exchange, like those involved in the case at bar, the
defendant drawee is an accommodating party only for the drawer (Encal
Press and Photo-Engraving) and win be liable in the event that the
accommodating party (drawer) fails to pay its obligation to the plaintiff. 11
The complaint was dismissed in an order dated December 22, 1959, copy of
which was received by the defendant on December 24, 1959. 12
appeal on May 13, 1960. The following day, May 14, 1960, the lower court
dismissed defendant's appeal from the order dated March 25, 1960 denying
his motion to set aside the order of default. 22 On May 19, 1960, the
defendant filed a motion for reconsideration of the trial court's order
dismissing his appeal. 23 The plaintiff, on May 20, 1960, opposed the
defendant's motion for reconsideration of the order dismissing appeal. 24 On
May 21, 1960, the trial court reconsidered its previous order dismissing the
appeal and approved the defendant's record on appeal. 25 On May 30, 1960,
the defendant received a copy of a notice from the Clerk of Court dated May
26, 1960, informing the defendant that the record on appeal filed ed by the
defendant was forwarded to the Clerk of Court of Appeals. 26
On June 1, 1960 Aruego filed a motion to set aside the judgment rendered
after he was declared in default reiterating the same ground previously
advanced by him in his motion for relief from the order of default. 27 Upon
opposition of the plaintiff filed on June 3, 1960, 28 the trial court denied the
defendant's motion to set aside the judgment by default in an order of June
11, 1960. 29 On June 20, 1960, the defendant filed his notice of appeal from
the order of the court denying his motion to set aside the judgment by
default, his appeal bond, and his record on appeal. The defendant's record
on appeal was approved by the trial court on June 25, 1960. 30 Thus, the
defendant had two appeals with the Court of Appeals: (1) Appeal from the
order of the lower court denying his motion to set aside the order of default
docketed as CA-G.R. NO. 27734-R; (2) Appeal from the order denying his
motion to set aside the judgment by default docketed as CA-G.R. NO.
27940-R.
In his brief, the defendant-appellant assigned the following errors:
I
THE LOWER COURT ERRED IN HOLDING THAT THE
DEFENDANT WAS IN DEFAULT.
II
THE LOWER COURT ERRED IN ENTERTAINING THE
MOTION TO DECLARE DEFENDANT IN DEFAULT
ALTHOUGH AT THE TIME THERE WAS ALREADY ON FILE
AN ANSWER BY HIM WITHOUT FIRST DISPOSING OF
SAID ANSWER IN AN APPROPRIATE ACTION.
III
THE LOWER COURT ERRED IN DENYING DEFENDANT'S
PETITION FOR RELIEF OF ORDER OF DEFAULT AND
FROM
JUDGMENT
BY
DEFAULT
AGAINST
DEFENDANT. 31
It has been held that to entitle a party to relief from a judgment taken against
him through his mistake, inadvertence, surprise or excusable neglect, he
must show to the court that he has a meritorious defense. 32 In other words,
in order to set aside the order of default, the defendant must not only show
that his failure to answer was due to fraud, accident, mistake or excusable
negligence but also that he has a meritorious defense.
The record discloses that Aruego received a copy of the complaint together
with the summons on December 2, 1960; that on December 17, 1960, the
last day for filing his answer, Aruego filed a motion to dismiss; that on
December 22, 1960 the lower court dismissed the complaint; that on January
23, 1960, the plaintiff filed a motion for reconsideration and on March 7,
1960, acting upon the motion for reconsideration, the trial court issued an
order setting aside the order of dismissal; that a copy of the order was
received by the defendant on March 11, 1960 at 5:00 o'clock in the afternoon
as shown in the affidavit of the deputy sheriff; and that on the following day,
March 12, 1960, the defendant filed his answer to the complaint.
The failure then of the defendant to file his answer on the last day for
pleading is excusable. The order setting aside the dismissal of the complaint
was received at 5:00 o'clock in the afternoon. It was therefore impossible for
him to have filed his answer on that same day because the courts then held
office only up to 5:00 o'clock in the afternoon. Moreover, the defendant
immediately filed his answer on the following day.
However, while the defendant successfully proved that his failure to answer
was due to excusable negligence, he has failed to show that he has a
meritorious defense. The defendant does not have a good and substantial
defense.
Defendant Aruego's defenses consist of the following:
a) The defendant signed the bills of exchange referred to in the plaintiff's
complaint in a representative capacity, as the then President of the Philippine
Education Foundation Company, publisher of "World Current Events and
Decision Law Journal," printed by Encal Press and Photo-Engraving, drawer
of the said bills of exchange in favor of the plaintiff bank;
b) The defendant signed these bills of exchange not as principal obligor, but
as accommodation or additional party obligor, to add to the security of said
plaintiff bank. The reason for this statement is that unlike real bills of
exchange, where payment of the face value is advanced to the drawer only
upon acceptance of the same by the drawee, in the case in question,
payment for the supposed bills of exchange were made before acceptance;
so that in effect, although these documents are labelled bills of exchange,
legally they are not bills of exchange but mere instruments evidencing
indebtedness of the drawee who received the face value thereof, with the
defendant as only additional security of the same. 33
The first defense of the defendant is that he signed the supposed bills of
exchange as an agent of the Philippine Education Foundation Company
where he is president. Section 20 of the Negotiable Instruments Law
provides that "Where the instrument contains or a person adds to his
signature words indicating that he signs for or on behalf of a principal or in a
representative capacity, he is not liable on the instrument if he was duly
authorized; but the mere addition of words describing him as an agent or as
filing a representative character, without disclosing his principal, does not
exempt him from personal liability."
An inspection of the drafts accepted by the defendant shows that nowhere
has he disclosed that he was signing as a representative of the Philippine
Education Foundation Company. 34 He merely signed as follows: "JOSE
ARUEGO (Acceptor) (SGD) JOSE ARGUEGO For failure to disclose his
principal, Aruego is personally liable for the drafts he accepted.
The defendant also contends that he signed the drafts only as an
accommodation party and as such, should be made liable only after a
showing that the drawer is incapable of paying. This contention is also
without merit.
For services rendered, the National Food Authority paid Gil Medalla
P27,000.00 for freightage.
Judgment was rendered in favor of the plaintiff. Defendant National
Food Authority appealed to this court on the sole issue as to whether
it is jointly and severally liable with defendant Gil Medalla for
freightage. (pp. 61-62, Rollo)
The appellate court affirmed the judgment of the lower court, hence, this
appeal by way of certiorari, petitioner NFA submitting a lone issue to wit:
whether or not the instant case falls within the exception of the general rule
provided for in Art. 1883 of the Civil Code of the Philippines.
It is contended by petitioner NFA that it is not liable under the exception to
the rule (Art. 1883) since it had no knowledge of the fact of agency between
respondent Superior Shipping and Medalla at the time when the contract was
entered into between them (NFA and Medalla). Petitioner submits that "(A)n
undisclosed principal cannot maintain an action upon a contract made by his
agent unless such principal was disclosed in such contract. One who deals
with an agent acquires no right against the undisclosed principal."
Petitioner NFA's contention holds no water. It is an undisputed fact that Gil
Medalla was a commission agent of respondent Superior Shipping
Corporation which owned the vessel "MV Sea Runner" that transported the
sacks of rice belonging to petitioner NFA. The context of the law is clear. Art.
1883, which is the applicable law in the case at bar provides:
Art. 1883. If an agent acts in his own name, the principal has no right
of action against the persons with whom the agent has contracted;
neither have such persons against the principal.
In such case the agent is the one directly bound in favor of the
person with whom he has contracted, as if the transaction were his
own, except when the contract involves things belonging to the
principal.
The provision of this article shall be understood to be without
prejudice to the actions between the principal and agent.
Consequently, when things belonging to the principal (in this case, Superior
Shipping Corporation) are dealt with, the agent is bound to the principal
although he does not assume the character of such agent and appears
acting in his own name. In other words, the agent's apparent representation
yields to the principal's true representation and that, in reality and in effect,
the contract must be considered as entered into between the principal and
the third person (Sy Juco and Viardo v. Sy Juco, 40 Phil. 634). Corollarily, if
the principal can be obliged to perform his duties under the contract, then it
can also demand the enforcement of its rights arising from the contract.
WHEREFORE, PREMISES CONSIDERED, the petition is hereby DENIED
and the appealed decision is hereby AFFIRMED.
SO ORDERED.
The vessel arrived in Manila on October 3, 1979, and unloaded part of the
consignee's goods, then proceeded to Cebu on October 19, 1979, to
discharge the rest of the cargo. On October 31, 1979, the consignee filed a
formal claim against Maritime, copy furnished Macondray, for the amount of
P87,163.54, representing C & F value of the 1,383 shortlanded bags. 5 On
January 12, 1980, the consignee filed another formal claim, this time against
Viva Customs Brokerage, for the amount of P36,030.23, representing the
value of 574 bags of net unrecovered spillage. 6
CRUZ, J.:
Transcontinental Fertilizer Company of London chartered from Hongkong
Island Shipping Company of Hongkong the motor vessel named "Hongkong
Island" for the shipment of 8073.35 MT (gross) bagged urea from
Novorossisk, Odessa, USSR to the Philippines, the parties signing for this
purpose a Uniform General Charter dated August 9, 1979. 1
Of the total shipment, 5,400.04 MT was for the account of Atlas Fertilizer
Company as consignee, 3,400.04 to be discharged in Manila and the
remaining 2,000 MT in Cebu. 2 The goods were insured by the consignee
with the Union Insurance Society of Canton, Ltd. for P6,779,214.00 against
all risks. 3
Maritime Agencies & Services, Inc. was appointed as the charterer's agent
and Macondray Company, Inc. as the owner's agent. 4
These claims having been rejected, the consignee then went to Union, which
on demand paid the total indemnity of P113,123.86 pursuant to the insurance
contract. As subrogee of the consignee, Union then filed on September 19,
1980, a complaint for reimbursement of this amount, with legal interest and
attorney's fees, against Hongkong Island Company, Ltd., Maritime Agencies
& Services, Inc. and/or Viva Customs Brokerage. 7 On April 20, 1981, the
complaint was amended to drop Viva and implead Macondray Company, Inc.
as a new defendant. 8
On January 4, 1984, after trial, the trial court rendered judgment holding the
defendants liable as follows:
(a) defendants Hongkong Island Co., Ltd., and its local agent
Macondray & Co., Inc. to pay the plaintiff the sum of P87,163.54 plus
12% interest from April 20, 1981 until the whole amount is fully paid,
P1,000.00 as attorney's fees and to pay one-half (1/2) of the costs;
and
(b) defendant Maritime Agencies & Services, Inc., to pay the plaintiff
the sum of P36,030.23, plus 12% interest from April 20, 1981 until
the whole amount is fully paid, P600.00 as attorney's fees and to pay
one-half (1/2) of the costs. 9
Petitioner appealed the decision to the Court of Appeals, which rendered a
decision on November 28, 1986, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is modified, finding the
charterer Transcontinental Fertilizer Co., Ltd. represented by its
agent Maritime Agencies & Services, Inc. liable for the amount of
P87,163.54 plus interest at 12% plus attorney's fees of P1,000.00.
Defendant Hongkong Island Co., Ltd. represented by Macondray
Co., Inc. are accordingly exempted from any liability. 10
Maritime and Union filed separate motions for reconsideration which were
both denied. The movants are now before us to question the decision of the
respondent court.
In G.R. No. 77638, Maritime pleads non-liability on the ground that it was
only the charterer's agent and should not answer for whatever responsibility
might have attached to the principal. It also argues that the respondent court
erred in applying Articles 1734 and 1735 of the Civil Code in determining the
charterer's liability.
In G.R. No. 77674, Union asks for the modification of the decision of the
respondent court so as to make Maritime solidarily and solely liable, its
principal not having been impleaded and so not subject to the jurisdiction of
our courts.
These two cases were consolidated and given due course, the parties being
required to submit simultaneous memoranda. All complied, including
Hongkong Island Company, Ltd., and Macondray Company, Inc., although
they pointed out that they were not involved in the petitions.
There are three general categories of charters, to wit, the demise or
"bareboat charter," the time charter and the voyage charter.
A demise involves the transfer of full possession and control of the vessel for
the period covered by the contract, the charterer obtaining the right to use
the vessel and carry whatever cargo it chooses, while manning and
supplying the ship as well. 11
A time charter is a contract to use a vessel for a particular period of time, the
charterer obtaining the right to direct the movements of the vessel during the
chartering period, although the owner retains possession and control. 12
A voyage charter is a contract for the hire of a vessel for one or a series of
voyages usually for the purpose of transporting goods for the charterer. The
voyage charter is a contract of affreightment and is considered a private
carriage. 13
Tested by those definitions, the agreement entered into in the cases at bar
should be considered. This brings us to the basic question of who, in this
kind of charter, shall be liable for the cargo.
A voyage charter being a private carriage, the parties may freely contract
respecting liability for damage to the goods and other matters. The basic
principle is that "the responsibility for cargo loss falls on the one who agreed
to perform the duty involved" in accordance with the terms of most voyage
charters. 14
This is true in the present cases where the charterer was responsible for
loading, stowage and discharging at the ports visited, while the owner was
responsible for the care of the cargo during the voyage. Thus, Par. 2 of the
Uniform General Charter read:
2. Owners are to be responsible for loss of or damage to the goods
or for delay in delivery of the goods only in case the loss, damage or
delay has been caused by the improper or negligent stowage of the
goods or by personal want of due diligence on the part of the Owners
or their Manager to make the vessel in all respects seaworthy and to
secure that she is properly manned, equipped and supplied or by the
personal act or default of the Owners or their Manager.
And the Owners are responsible for no loss or damage or delay
arising from any other cause whatsoever, even from the neglect or
default of the Captain or crew or some other person employed by the
Owners onboard or ashore for whose acts they would, but for this
clause, be responsible, or from unseaworthiness of the vessel on
loading or commencement of the voyage or at any time whatsoever.
Damage caused by contact with or leakage, smell or evaporation
from other goods or by the inflammable or explosive nature or
insufficient package of other goods not to be considered as caused
by improper or negligent stowage, even if in fact so caused.
while Clause 17 of Additional Clauses to Charter party provided:
The cargo shall be loaded, stowed and discharged free of expense
to the vessel under the Master's supervision. However, if required at
loading and discharging ports the vessel is to give free use of
winches and power to drive them gear, runners and ropes. Also
slings, as on board. Shore winchmen are to be employed and they
are to be for Charterers' or Shippers' or Receivers' account as the
case may be. Vessel is also to give free use of sufficient light, as on
board, if required for night work. Time lost through breakdown of
winches or derricks is not to count as laytime.
liable for the acts of the ship captain who was responsible for the cargo while
under the custody of the vessel.
As for the charterer's agent, the evidence showed that it represented the
vessel when it took charge of the unloading of the cargo and issued cargo
receipts (or tally sheets) in its own name. Claims against the vessel for the
losses/damages sustained by that cargo were also received and processed
by it. As a result, the charterer's agent was also considered a ship agent and
so was held to be solidarily liable with its principal.
The facts in the cases at bar are different. The charterer did not represent
itself as a carrier and indeed assumed responsibility ability only for the
unloading of the cargo, i.e, after the goods were already outside the custody
of the vessel. In supervising the unloading of the cargo and issuing Daily
Operations Report and Statement of Facts indicating and describing the dayto-day discharge of the cargo, Maritime acted in representation of the
charterer and not of the vessel. It thus cannot be considered a ship agent. As
a mere charterer's agent, it cannot be held solidarily liable with
Transcontinental for the losses/damages to the cargo outside the custody of
the vessel. Notably, Transcontinental was disclosed as the charterer's
principal and there is no question that Maritime acted within the scope of its
authority.
Hongkong and Macondray point out in their memorandum that the appealed
decision is not assailed insofar as it favors them and so has become final as
to them. We do not think so. First of all, we note that they were formally
impleaded as respondents in G.R No. 77674 and submitted their comment
and later their memorandum, where they discussed at length their
position vis-a-vis the claims of the other parties. Secondly, we reiterate the
rule that even if issues are not formally and specifically raised on appeal,
they may nevertheless be considered in the interest of justice for a proper
decision of the case.itc-asl Thus, we have held that:
Besides, an unassigned error closely related to the error properly
assigned, or upon which the determination of the question raised by
the error properly assigned is dependent, will be considered by the
appellate court notwithstanding the failure to assign it as error.
At any rate, the Court is clothed with ample authority to review
matters, even if they are not assigned as errors in their appeal, if it
finds that their consideration is necessary in arriving at a just
decision of the case. 21
We affirm the factual findings but must modify the legal conclusions. As
previously discussed, the liability of Macondray can no longer be enforced
because the claim against it has prescribed; and as for Maritime, it cannot be
held liable for the acts of its known principal resulting in injury to Union. The
interest must also be reduced to the legal rate of 6%, conformably to our
ruling in Reformina v. Tomol 24 and Article 2209 of the Civil Code, and should
commence, not on April 20, 1981, but on September 19, 1980, date of the
filing of the original complaint.
WHEREFORE, the decision of the respondent court is SET ASIDE and that
of the trial court is REINSTATED as above modified. The parties shall bear
their respective costs.
This Petition for Review on certiorari assails the 25 July 1995 decision
of the Court of Appeals[1] in CA GR CV No. 41407, entitled Nicholas Y.
Cervantes vs. Philippine Air Lines Inc., affirming in totothe judgment of the
trial court dismissing petitioners complaint for damages.
On March 27, 1989, the private respondent, Philippines Air Lines, Inc. (PAL),
issued to the herein petitioner, Nicholas Cervantes (Cervantes), a round trip
plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket
expressly provided an expiry of date of one year from issuance, i.e., until
March 27, 1990. The issuance of the said plane ticket was in compliance with
a Compromise Agreement entered into between the contending parties in
two previous suits, docketed as Civil Case Nos. 3392 and 3451 before the
Regional Trial Court in Surigao City.[2]
SO ORDERED.
On March 23, 1990, four days before the expiry date of subject ticket,
the petitioner used it. Upon his arrival in Los Angeles on the same day, he
immediately booked his Los Angeles-Manila return ticket with the PAL office,
and it was confirmed for the April 2, 1990 flight.
Upon learning that the same PAL plane would make a stop-over in San
Francisco, and considering that he would be there on April 2, 1990, petitioner
made arrangements with PAL for him to board the flight in San Francisco
instead of boarding in Los Angeles.
On April 2, 1990, when the petitioner checked in at the PAL counter in
San Francisco, he was not allowed to board. The PAL personnel concerned
marked the following notation on his ticket: TICKET NOT ACCEPTED DUE
EXPIRATION OF VALIDITY.
Aggrieved, petitioner Cervantes filed a Complaint for Damages, for
breach of contract of carriage docketed as Civil Case No. 3807 before
Branch 32 of the Regional Trial Court of Surigao del Norte in Surigao
City. But the said complaint was dismissed for lack of merit.[3]
The issues raised for resolution are: (1) Whether or not the act of the
PAL agents in confirming subject ticket extended the period of validity of
petitioners ticket; (2) Whether or not the defense of lack of authority was
correctly ruled upon; and (3) Whether or not the denial of the award for
damages was proper.
To rule on the first issue, there is a need to quote the findings
below. As a rule, conclusions and findings of fact arrived at by the trial court
are entitled to great weight on appeal and should not be disturbed unless for
strong and cogent reasons.[4]
The facts of the case as found by the lower court [5] are, as follows:
The plane ticket itself (Exhibit A for plaintiff; Exhibit 1 for defendant) provides
that it is not valid after March 27, 1990. (Exhibit 1-F). It is also stipulated in
paragraph 8 of the Conditions of Contract (Exhibit 1, page 2) as follows:
"8. This ticket is good for carriage for one year from date of
issue, except as otherwise provided in this ticket, in carriers tariffs,
conditions of carriage, or related regulations. The fare for carriage hereunder
is subject to change prior to commencement of carriage. Carrier may refuse
transportation if the applicable fare has not been paid. [6]
The question on the validity of subject ticket can be resolved in light of
the ruling in the case of Lufthansa vs. Court of Appeals[7]. In the said case,
the Tolentinos were issued first class tickets on April 3, 1982, which will be
valid until April 10,1983. On June 10, 1982, they changed their
accommodations to economy class but the replacement tickets still contained
the same restriction. On May 7, 1983, Tolentino requested that subject tickets
be extended, which request was refused by the petitioner on the ground that
the said tickets had already expired. The non-extension of their tickets
prompted the Tolentinos to bring a complaint for breach of contract of
carriage against the petitioner. In ruling against the award of damages, the
Court held that the ticket constitute the contract between the parties. It is
axiomatic that when the terms are clear and leave no doubt as to the
intention of the contracting parties, contracts are to be interpreted according
to their literal meaning.
In his effort to evade this inevitable conclusion, petitioner theorized that
the confirmation by the PALs agents in Los Angeles and San Francisco
changed the compromise agreement between the parties.
The admission by Cervantes that he was told by PALs legal counsel that
he had to submit a letter requesting for an extension of the validity of subject
tickets was tantamount to knowledge on his part that the PAL employees had
no authority to extend the validity of subject tickets and only PALs legal
counsel was authorized to do so.
Neither can the claim for exemplary damages be upheld. Such kind of
damages is imposed by way of example or correction for the public good,
and the existence of bad faith is established. The wrongful act must be
accompanied by bad faith, and an award of damages would be allowed only
if the guilty party acted in a wanton, fraudulent, reckless or malevolent
manner.[15] Here, there is no showing that PAL acted in such a manner. An
award for attorneys fees is also improper.
This is a petition for review on certiorari under Rule 45 of the Revised Rules
of Court to reverse and set aside the decision of the Court of Appeals in CAG.R CV No. 26434 and its resolution denying reconsideration thereof.
We affirm the decision of the Court of Appeals with modification.
I
In May 1987, Juan B. Dans, together with his wife Candida, his son and
daughter-in-law, applied for a loan of P500,000.00 with the Development
Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor,
Dans, then 76 years of age, was advised by DBP to obtain a mortgage
redemption insurance (MRI) with the DBP Mortgage Redemption Insurance
Pool (DBP MRI Pool).
At the pre-trial, DBP and the DBP MRI Pool admitted all the documents and
exhibits submitted by respondent Estate. As a result of these admissions, the
trial court narrowed down the issues and, without opposition from the parties,
found the case ripe for summary judgment. Consequently, the trial court
ordered the parties to submit their respective position papers and
documentary evidence, which may serve as basis for the judgment.
On March 10, 1990, the trial court rendered a decision in favor of respondent
Estate and against DBP. The DBP MRI Pool, however, was absolved from
liability, after the trial court found no privity of contract between it and the
deceased. The trial court declared DBP in estoppel for having led Dans into
applying for MRI and actually collecting the premium and the service fee,
despite knowledge of his age ineligibility. The dispositive portion of the
decision read as follows:
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of
10 percent, was credited by DBP to the savings account of the DBP MRI
Pool. Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice,
relayed this information to the DBP MRI Pool. On September 23, 1987, the
DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage,
being over the acceptance age limit of 60 years at the time of application.
On October 21, 1987, DBP apprised Candida Dans of the disapproval of her
late husband's MRI application. The DBP offered to refund the premium of
P1,476.00 which the deceased had paid, but Candida Dans refused to
accept the same, demanding payment of the face value of the MRI or an
amount equivalent to the loan. She, likewise, refused to accept an ex
gratia settlement of P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as
administratrix, filed a complaint with the Regional Trial Court, Branch I,
Basilan, against DBP and the insurance pool for "Collection of Sum of Money
with Damages." Respondent Estate alleged that Dans became insured by the
DBP MRI Pool when DBP, with full knowledge of Dans' age at the time of
application, required him to apply for MRI, and later collected the insurance
premium thereon. Respondent Estate therefore prayed: (1) that the sum of
P139,500.00, which it paid under protest for the loan, be reimbursed; (2) that
the mortgage debt of the deceased be declared fully paid; and (3) that
damages be awarded.
The DBP and the DBP MRI Pool separately filed their answers, with the
former asserting a cross-claim against the latter.
I hereby declare and agree that all the statements and answers
contained herein are true, complete and correct to the best of my
knowledge and belief and form part of my application for insurance. It
is understood and agreed that no insurance coverage shall be
effected unless and until this application is approved and the full
premium is paid during my continued good health (Records, p. 40).
Under the aforementioned provisions, the MRI coverage shall take effect: (1)
when the application shall be approved by the insurance pool; and (2) when
the full premium is paid during the continued good health of the applicant.
These two conditions, being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the DBP
MRI Pool. The pool, however, did not approve the application of Dans. There
is also no showing that it accepted the sum of P1,476.00, which DBP
credited to its account with full knowledge that it was payment for Dan's
premium. There was, as a result, no perfected contract of insurance; hence,
the DBP MRI Pool cannot be held liable on a contract that does not exist.
The liability of DBP is another matter.
It was DBP, as a matter of policy and practice, that required Dans, the
borrower, to secure MRI coverage. Instead of allowing Dans to look for his
own insurance carrier or some other form of insurance policy, DBP compelled
him to apply with the DBP MRI Pool for MRI coverage. When Dan's loan was
released on August 11, 1987, DBP already deducted from the proceeds
thereof the MRI premium. Four days latter, DBP made Dans fill up and sign
his application for MRI, as well as his health statement. The DBP later
submitted both the application form and health statement to the DBP MRI
Pool at the DBP Main Building, Makati Metro Manila. As service fee, DBP
deducted 10 percent of the premium collected by it from Dans.
In dealing with Dans, DBP was wearing two legal hats: the first as a lender,
and the second as an insurance agent.
respondent Estate in ex gratia settlement of its claim and that DBP's nondisclosure of the limits of its authority amounted to a deception to its client,
an award of moral damages in the amount of P50,000.00 would be
reasonable.
Article 20 provides:
Every person who, contrary to law, willfully or negligently causes
damage to another, shall indemnify the latter for the same.
Article 21 provides:
Any person, who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
The DBP's liability, however, cannot be for the entire value of the insurance
policy. To assume that were it not for DBP's concealment of the limits of its
authority, Dans would have secured an MRI from another insurance
company, and therefore would have been fully insured by the time he died, is
highly speculative. Considering his advanced age, there is no absolute
certainty that Dans could obtain an insurance coverage from another
company. It must also be noted that Dans died almost immediately, i.e., on
the nineteenth day after applying for the MRI, and on the twenty-third day
from the date of release of his loan.
One is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved (Civil Code of the Philippines, Art.
2199). Damages, to be recoverable, must not only be capable of proof, but
must be actually proved with a reasonable degree of certainty (Refractories
Corporation v. Intermediate Appellate Court, 176 SCRA 539 [1989]; Choa Tek
Hee v. Philippine Publishing Co., 34 Phil. 447 [1916]). Speculative damages
are too remote to be included in an accurate estimate of damages (Sun Life
Assurance v. Rueda Hermanos, 37 Phil. 844 [1918]).
While Dans is not entitled to compensatory damages, he is entitled to moral
damages. No proof of pecuniary loss is required in the assessment of said
kind of damages (Civil Code of Philippines, Art. 2216). The same may be
recovered in acts referred to in Article 2219 of the Civil Code.
The assessment of moral damages is left to the discretion of the court
according to the circumstances of each case (Civil Code of the Philippines,
Art. 2216). Considering that DBP had offered to pay P30,000.00 to
The award of attorney's fees is also just and equitable under the
circumstances (Civil Code of the Philippines, Article 2208 [11]).
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV
No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to
REIMBURSE respondent Estate of Juan B. Dans the amount of P1,476.00
with legal interest from the date of the filing of the complaint until fully paid;
and (2) to PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00)
as moral damages and the amount of Ten Thousand Pesos (P10,000.00) as
attorney's fees. With costs against petitioner.
SO ORDERED.
parties shall comply in good faith to the terms of the herein compromise
agreement and that any violation thereof shall automatically entitle the
aggrieved party to damages in the amount of P250,000.00 plus P50,000.00
attorneys fees.[12]
SO ORDERED.[6]
On October 26, 1998, the trial court issued the assailed order denying
petitioners motion seeking to quash the writ of execution and to modify the
judgment on compromise. It gave credence to the testimony of Atty.
Leonardo Cruz that petitioner consented to the penalty clause in the
compromise agreement. The court further noted that it was only on February
20, 1997, or more than one year from receipt of the judgment on compromise
on October 25, 1995, when he questioned the inclusion of the penalty clause
in the approved compromise agreement despite several opportunities to
raise said objection. The dispositive portion of the said order states:
assuming that Atty. Leonardo Cruz exceeded his authority in inserting the
penalty clause, the status of the said clause is not void but merely
voidable, i.e., capable of being ratified. [17] Indeed, petitioners failure to
question the inclusion of the 2% monthly interest and 25% attorneys fees in
the judicial compromise despite several opportunities to do so was
tantamount to ratification. Hence, he is estopped from assailing the validity
thereof.[18]
Finally, we find no merit in petitioners contention that the compromise
agreement should be annulled because Atty. Leonardo Cruz, who assisted
him in entering into such agreement, was then an employee of the Quezon
City government, and is thus prohibited from engaging in the private practice
of his profession. Suffice it to state that the isolated assistance provided by
Atty. Cruz to the petitioner in entering into a compromise agreement does not
constitute a prohibited private practice of law by a public official. Private
practice of a profession, specifically the law profession does not pertain to an
isolated court appearance; rather, it contemplates a succession of acts of the
same nature habitually or customarily holding ones self to the public as a
lawyer.[19] Such was never established in the instant case.
WHEREFORE, in view of all the foregoing, the instant petition
is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 62237,
which sustained the trial courts denial of petitioners motion to quash the writ
of execution and to modify the compromise judgment, is AFFIRMED.
SO ORDERED.
obligation. In entering into the contract, Namerco, however, did not disclose
to NPC that Namercos principal, in a cabled instruction, stated that the sale
was subject to availability of a steamer, and contrary to its principals
instruction, Namerco agreed that non-availability of a steamer was not a
justification for non-payment of liquidated damages. The New York supplier
was not able to deliver the sulfur due to its inability to secure shipping space.
Consequently, the Government Corporate Counsel rescinded the contract of
sale due to the suppliers non-performance of its obligations, and demanded
payment of liquidated damages from both Namerco and the surety.
Thereafter, NPC sued for recovery of the stipulated liquidated damages. After
trial, the Court of First Instance rendered judgment ordering defendantsappellants to pay solidarity to the NPC reduced liquidated damages with
interest.
The Supreme Court held that Namerco is liable fur damages because under
Article 1897 of the Civil Code the agent who exceeds the limits of his
authority without giving the party with whom he contracts sufficient notice of
his powers is personally liable to such party. The Court, however, further
reduced the solidary liability of defendants-appellants for liquidated damages.
SYLLABUS
instant case since it is the agent, not the principal, that is sought to be held
liable on the contract of sale which was expressly repudiated by the principal
because the agent took chances, it exceeded its authority and, in effect. it
acted in its own name.
4. ID.; ID.; ID.; THE CONTRACT ENTERED INTO BY AN AGENT WHO
ACTED BEYOND HIS POWERS IS UNENFORCEABLE ONLY AS AGAINST
THE PRINCIPAL BUT NOT AGAINST THE AGENT AND ITS SURETY.
Article 1403 of the Civil Code which provides that a contract entered into in
the name of another person by one who has acted beyond his powers is
unenforceable, refers to the unenforceability of the contract against the
principal. In the instant case, the contract containing the stipulation for
liquidated damages is not being enforced against its principal but against the
agent and its surety. It being enforced against the agent because Article 1897
implies that the agent who acts in excess of his authority is personally liable
to the party with whom he contracted. And that rule is complimented by
Article 1898 of the Civil Code which provides that "if the agent contracts, in
the name of the principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the party with whom
the agent contracted is aware of the limits of the powers granted by the
principal." Namerco never disclosed to the NPC the cabled or written
instructions of its principal. For that reason and because Namerco exceeded
the limits of its authority, it virtually acted in its own name and not as agent
and it is, therefore, bound by the contract of sale which, however, it not
enforceable against its principal. If, as contemplated in Articles 1897 and
1898, Namerco is bound under the contract of sale, then it follows that it is
bound by the stipulation for liquidated damages in that contract.
5. ID.; ID.; ID.; THE LIABILITY OF AN AGENT WHO EXCEEDS THE LIMITS
OF HIS AUTHORITY IS BASED ON CONTRACT AND NOT ON TORT OR
QUASI-DELICT; CASE AT BAR. Defendants contention that Namercos
liability should be based on tort or quasi-delict, as held in some American
cases, like Mendelson v. Holton, 149 N.E. 38,42 ACR 1307, is not well-taken.
As correctly argued by the NPC, it would be unjust and inequitable for
Namerco to escape liability of the contract after it had deceived the NPC by
not disclosing the limits of its powers and entering into the contract with
stipulations contrary to its principals instructions.
6. ID.; ID.; ID.; LIABILITY OF THE SURETY ON THE OBLIGATION
CONTRACTED BY AN AGENT WHO EXCEEDED HIS AUTHORITY IS NOT
AFFECTED THEREBY. The contention of the defendants that the
Domestic Insurance Company is not liable to the NPC because its bond was
posted, not to Namerco, the agent, but for the New York firm which is not
liable on the contract of sale, cannot be sustained because it was Namerco
that actually solicited the bond from the Domestic Insurance Company and,
Namerco is being held liable under the contract of sale because it virtually
acted in its own name. In the last analysis, the Domestic Insurance Company
acted as surety for Namerco. The rule is that "want of authority of the person
who executes an obligation as the agent or representative of the principal will
not, as a general rule, affect the surety thereon, especially in the absence of
fraud, even though the obligation is not binding on the principal." (72 C.J.S.
525).
7. CIVIL LAW; DAMAGES; IMPOSITION OF INTEREST THEREON NOT
WARRANTED WHERE THE DISPOSITION OF THE CASE HAS BEEN
DELAYED DUE TO NO FAULT OF DEFENDANTS. With respect to the
imposition of the legal rate of interest on the damages from the filing of the
complaint in 1957, or a quarter of a century ago, defendants contention that
interest should not be collected on the amount of damages is meritorious. It
should be manifestly iniquitous to collect interest on the damages especially
considering that the disposition of this case has been considerably delayed
due to no fault of the defendants
8. ID.; ID.; LIQUIDATED DAMAGES; NO PROOF OF PECUNIARY LOSS IS
REQUIRED FOR RECOVERY THEREOF. No proof of pecuniary lost is
required for the recovery of liquited damages. The stipulatian for liquidated
damages is intended to obviate controversy on the amount of damages.
There can be no question that the NPC suffered damages because its
production of fertilizer was disrupted or diminished by reason of the nondelivery of the sulfur. The parties foresaw that it might be difficult to ascertain
the exact amount of damages for non-delivey of the sulfur. So, they fixed the
liquidated damages to be paid as indemnity to the NPC.
9. ID.; ID.; NOMINAL DAMAGES; NOT A CASE OF. Nominal damages
are damages in name only or are in fact the same as no damages (25 C.J.S.
466). It would not be correct to hold in this case that the NPC suffered
damages in name only or that the breach of contract "as merely technical in
character since the NPC suffered damages because its production of
fertilizer "as disrupted or diminished by reason of the non-delivery of the
sulfur.
DECISION
AQUINO, J.:
This case is about the recovery of liquidated damages from a sellers agent
that allegedly exceeded its authority in negotiating the sale.
Plaintiff National Power Corporation appealed on questions of law from the
decision of the Court of First Instance of Manila dated October 10, 1966,
ordering defendants National Merchandising Corporation and Domestic
Insurance Company of the Philippines to pay solidarily to the National Power
event that would excuse non-performance and that the NPC would resort to
legal remedies to enforce its rights (Exh. L and M).
The Government Corporate Counsel in his letter to Sycip dated May 8, 1957
rescinded the contract of sale due to the New York suppliers nonperformance of its obligations (Exh. G). The same counsel in his letter of
June 8, 1957 demanded from Namerco the payment of P360,572.80 as
liquidated damages. He explained that time was of the essence of the
contract. A similar demand was made upon the surety (Exh. H and H-1).
The liquidated damages were computed on the basis of the 115-day period
between January 15, 1957, the deadline for the delivery of the sulfur at Iligan
City, and May 9, 1957 when Namerco was notified of the rescission of the
contract, or P54,085.92 for the first thirty days and P306,486.88 for the
remaining eighty-five days. Total: P360,572.80.
On November 5, 1957, the NPC sued the New York firm, Namerco and the
Domestic Insurance Company for the recovery of the stipulated liquidated
damages (Civil Case No. 33114).
The trial court in its order of January 17, 1958 dismissed the case as to the
New York firm for lack of jurisdiction because it was not doing business in the
Philippines (p. 60, Defendants Record on Appeal).
On the other hand, Melvin Wallick, as the assignee of the New York
corporation and after the latter was dropped as a defendant in Civil Case No.
33114, sued Namerco for damages in connection with the same sulfur
transaction (Civil Case No. 37019). The two cases, both filed in the Court of
First Instance of Manila, were consolidated. A joint trial was held. The lower
court rendered separate decisions in the two cases on the same date.
In Civil Case No. 37019, the trial court dismissed Wallicks action for
damages against Namerco because the assignment in favor of Wallick was
champertous in character. Wallick appealed to this Court. The appeal was
dismissed because the record on appeal did not disclose that the appeal was
perfected on time (Res. of July 11, 1972 in L-33893).In this Civil Case No.
33114, although the records on appeal were approved in 1967, inexplicably,
they were elevated to this Court in 1971. That anomaly initially contributed to
the delay in the adjudication of this case.
Defendants appeal L-33819. They contend that the delivery of the sulfur
was conditioned on the availability of a vessel to carry the shipment and that
Namerco acted within the scope of its authority as agent in signing the
contract of sale.
The documentary evidence belies these contentions. The invitation to bid
should be allowed to withdraw right away the full amount of the letter of credit
and not merely eighty percent thereof (pp- 123-124, Record on Appeal).
The defendants argue that it was incumbent upon the NPC to inquire into the
extent of the agents authority and, for its failure to do so, it could not claim
any liquidated damages which, according to the defendants, were provided
for merely to make the seller more diligent in looking for a steamer to
transport the sulfur.
The NPC counter-argues that Namerco should have advised the NPC of the
limitations on its authority to negotiate the sale.
We agree with the trial court that Namerco is liable for damages because
under article 1897 of the Civil Code the agent who exceeds the limits of his
authority without giving the party with whom he contracts sufficient notice of
his powers is personally liable to such party.
The truth is that even before the contract of sale was signed Namerco was
already aware that its principal was having difficulties in booking shipping
space. In a cable dated October 16, 1956, or one day before the contract of
sale was signed, the New York supplier advised Namerco that the latter
should not sign the contract unless it (Namerco) wished to assume sole
responsibility for the shipment (Exh. T).
Sycip, Namercos president, replied in his letter to the seller dated also
October 16, 1956, that he had no choice but to finalize the contract of sale
because the NPC would forfeit Namercos bidders bond in the sum of
P45,100 posted by the Domestic Insurance Company if the contract was not
formalized (Exh. 14, 14-A and Exh. V).
Three days later, or on October 19, the New York firm cabled Namerco that
the firm did not consider itself bound by the contract of sale and that
Namerco signed the contract on its own responsibility (Exh. W).
In its letters dated November 8 and 19, 1956, the New York corporation
informed Namerco that since the latter acted contrary to the formers cabled
instructions, the former disclaimed responsibility for the contract and that the
responsibility for the sale rested on Namerco (Exh. Y and Y-1).
The letters of the New York firm dated November 26 and December 11, 1956
were even more revealing. It bluntly told Namerco that the latter was never
authorized to enter into the contract and that it acted contrary to the repeated
instructions of the former (Exh. U and Z). Said the vice-president of the New
York firm to Namerco:chanrobles virtual lawlibrary
"As we have pointed out to you before, you have acted strictly contrary to our
contract of sale, then it follows that it is bound by the stipulation for liquidated
damages in that contract.
Defendants contention that Namercos liability should be based on tort or
quasi-delict, as held in some American cases, like Mendelsohn v. Holton, 149
N.E. 38, 42 ALR 1307, is not well-taken. As correctly argued by the NPC, it
would be unjust and inequitable for Namerco to escape liability after it had
deceived the NPC.
Another contention of the defendants is that the Domestic Insurance
Company is not liable to the NPC because its bond was posted, not for
Namerco, the agent, but for the New York firm which is not liable on the
contract of sale.
That contention cannot be sustained because it was Namerco that actually
solicited the bond from the Domestic Insurance Company and, as explained
already, Namerco is being held liable under the contract of sale because it
virtually acted in its own name. It became the principal in the performance
bond. In the last analysis, the Domestic Insurance Company acted as surety
for Namerco.
The rule is that "want of authority of the person who executes an obligation
as the agent or representative of the principal will not, as a general rule,
affect the suretys liability thereon, especially in the absence of fraud, even
though the obligation is not binding on the principal" (72 C.J.S. 525).
In reducing the liquidated damages, the trial court relied on article 2227 of
the Civil Code which provides that "liquidated damages, whether intended as
an indemnity or a penalty, shall be equitably reduced if they are iniquitous or
unconscionable."
Defendants other contentions are that they should be held liable only for
nominal damages, that interest should not be collected on the amount of
damages and that the damages should be computed on the basis of a fortyfive day period and not for a period of one hundred fifteen days.
With respect to the imposition of the legal rate of interest on the damages
from the filing of the complaint in 1957, or a quarter of a century ago,
defendants contention is meritorious. It would be manifestly inequitable to
collect interest on the damages especially considering that the disposition of
this case has been considerably delayed due to no fault of the defendants.
The trial court also took into account the fact that the selling price of the
sulfur was P450,716 and that to award as liquidated damages more than
eighty percent of the price would not be altogether reasonable.
The NPC contends that Namerco was an obligor in bad faith and, therefore, it
should be responsible for all damages which could be reasonably attributed
to its nonperformance of the obligation as provided in article 2201 of the Civil
Code.
On the other hand, the defendants argue that Namerco having acted as a
mere agent, was not liable for the liquidated damages stipulated in the
alleged unenforceable contract of sale; that, as already noted, Namercos
liability should be based on tort or quasi-delict and not on the contract of
sale; that if Namerco is not liable, then the insurance company, its surety, is
likewise not liable; that the NPC is entitled only to nominal damages because
it was able to secure the sulfur from another source (58-59 tsn November 10,
1960) and that the reduced award of stipulated damages is highly iniquitous,
considering that Namerco acted in good faith and that the NPC did not suffer
any actual damages.chanrobles law library : red
These contentions have already been resolved in the preceding discussion.
We find no sanction or justification for NPCs claim that it is entitled to the full
payment of the liquidated damages computed by its official.
Ruling on the amount of damages. A painstaking evaluation of the equities
of the case in the light of the arguments of the parties as expounded in their
five briefs leads to the conclusion that the damages due from the defendants
should be further reduced to P45,100 which is equivalent to their bidders
bond or to about ten percent of the selling price of the sulfur.
WHEREFORE, the lower courts judgment is modified and defendants
National Merchandising Corporation and Domestic Insurance Company of
the Philippines are ordered to pay solidarily to the National Power
Corporation the sum of P45,100.00 as liquidated damages. No costs.
SO ORDERED.
JESUS M. GOZUN,
Petitioner,
- versus 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. 76309[1] 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 diary[9] receipt of the amount.[10]
Petitioner later sent respondent a Statement of Account [11] 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 receipt[12] 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 complaint[15] against respondent to collect the
acknowledged that nothing of that sort was written on all the materials made
by petitioner.[21]
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.
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
amount
was
delivered
and
in
what
capacity
did Lilian R. Soriano received [sic] the money. The note
reads:
3-31-95
261,120 ADVANCE MONEY FOR TRAINEE
RECEIVED BY
RECEIVED FROM JMG THE AMOUNT OF
253,000 TWO HUNDRED FIFTY THREE
THOUSAND PESOS
(SIGNED)
LILIAN R. SORIANO
3-31-95
Nowhere in the note can it be inferred that defendantappellant 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)
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.
This is a petition for certiorari under Section 1, Rule 65 of the Rules of Court
seeking the annulment and setting aside of the decision of the Court of
Appeals * and promulgated on September 2, 1974 in CA-G.R. No. 48521-R
entitled "Union Import and Export Corporation, et al., Plaintiffs-Appellees v.
Marimperio Compaia Naviera, S.A., Defendant-Appellant", ordering
petitioner to pay respondent the total sum of US $265,482.72 plus attorney's
fees of US$100,000.00 and (b) the resolution of the said Court of Appeals in
the same case, dated February 17, 1975 fixing the amount of attorney, s fees
to Pl00,000.00 instead of $100,000.00 as erroneously stated in the decision
but denying petitioner's motion for reconsideration and/or new trial.
The dispositive portion of the decision sought to be annulled (Rollo, p. 215)
reads as follows:
For all the foregoing, and in accordance therewith, let judgment be
entered (a) affirming the decision appealed from insofar as it directs
the defendant-appellant: (1) to pay plaintiffs the sum of US
$22,500.00 representing the remittance of plaintiffs to said defendant
for the first 15-day hire of the vessel "SS PAXOI" including overtime
and an overpayment of US $254.00; (2) to pay plaintiffs the sum of
US $16,000.00, corresponding to the remittance of plaintiffs to
defendant for the second 15-day hire of the aforesaid vessel; (3) to
pay plaintiffs the sum of US $6,982.72, representing the cost of
bunker oil, survey and watering of the said vessel; (4) to pay plaintiffs
the sum of US $100,000.00 as and for attorney's fees; and, (b)
reversing the portion granting commission to the intervenor-appellee
and hereby dismissing the complaint-in-intervention. The order of the
court a quo denying the plaintiffs' Motion for Partial Reconsideration,
is likewise, affirmed, without any special pronouncement as to costs.
The facts of the case as gathered from the amended decision of the lower
court (Amended Record on Appeal, p. 352), are as follows:
authorize a sub-charter of said vessel to other parties; and that at any rate,
any such sub-charter was without the knowledge or consent of defendant or
defendant's agent, and therefore, has no effect and/or is not binding upon
defendant. By way of counterclaim, defendant prayed that plaintiffs be
ordered to pay defendant (1) the sum of 5,085.133d or its equivalent, in
Philippine currency of P54,929.60, which the defendant failed to realize
under the substitute charter, from May 3, 1965 to May 16, 1965, while the
vessel was under attachment; (2) the sum of E68.7.10 or its equivalent of
P7,132.83, Philippine currency, as premium for defendant's counterbond for
the first year, and such other additional premiums that will have to be paid by
defendant for additional premiums while the case is pending; and (3) a sum
of not less than P200,000.00 for and as attomey's fees and expenses of
litigations (Amended Record on Appeal, p. 64).
On March 16, 1966, respondent Interocean Shipping Corporation filed a
complaint-in-intervention to collect what it claims to be its loss of income by
way of commission and expenses in the amount of P15,000.00 and the sum
of P2,000.00 for attorney's fees (Amended Record on Appeal, p. 87). In its
amended answer to the complaint-in-intervention petitioner, by way of special
defenses alleged that (1) the plaintiff-in-intervention, being the charterer, did
not notify the defendant shipowner, petitioner, herein, about any alleged subcharter of the vessel "SS PAXOI" to the plaintiffs; consequently, there is no
privity of contract between defendant and plaintiffs and it follows that plaintiffin-intervention, as charterer, is responsible for defendant shipowner for the
proper performance of the charter party; (2) that the charter party provides
that any dispute arising from the charter party should be referred to
arbitration in London; that Charterer plaintiff-in-intervention has not complied
with this provision of the charter party; consequently its complaint-in
intervention is premature; and (3) that the alleged commission of 2 1/2 and
not become due for the reason, among others, that the charterer violated the
contract, and the full hiring fee due the shipowner was not paid in
accordance with the terms and conditions of the charter party. By way of
counterclaim defendant shipowner charged the plaintiff-in-intervention
attorney's fees and expenses of litigation in the sum of P10,000.00
(Amended Record on Appeal, p. 123).
On November 22, 1969 the Court of First Instance of Manila, Branch VIII
rendered its decision ** in favor of defendant Marimperio Compania Naviera,
S.A., petitioner herein, and against plaintiffs Union Import and Export
Corporation and Philippine Traders Corporation, respondents herein,
dismissing the amended complaint, and ordering said plaintiff on the
counterclaim to pay defendant, jointly and severally, the amount of f 8,011.38
or its equivalent in Philippine currency of P75,303.40, at the exchange rate of
P9.40 to 1 for the unearned charter hire due to the attachment of the vessel
"PAXOI" in Davao, plus premiums paid on the counterbond as of April 22,
1968 plus the telex and cable charges and the sum of P10,000.00 as
attorney's fees and costs. The trial court dismissed the complaint-inintervention, ordering the intervenor, on the counterclaim, to pay defendant
the sum of P10,000.00 as attorney's fees, and the costs (Amended Record
on Appeal, p. 315).
Plaintiffs filed a Motion for Reconsideration and/or new trial of the decision of
the trial court on December 23, 1969 (Amended Record on Appeal, p. 286);
the intervenor filed its motion for reconsideration and/or new trial on January
7, 1970 (Amended Record on Appeal, p. 315).
Acting on the two motions for reconsideration, the trial court reversed its
stand in its amended decision dated January 24, 1978. The dispositive
portion of the amended decision states:
FOR ALL THE FOREGOING CONSIDERATIONS, the Court renders
judgment for the plaintiffs Union Import & Export Corporation and
Philin Traders Corporation, and plaintiff-in-intervention, Interocean
Shipping Corporation, and consequently orders the defendant,
Marimperio Compania Naveria S.A.:
(1) To pay plaintiffs the sum of US$22,500.00 representing
the remittance of plaintiffs to said defendant for the first 15day hire of the vessel "SS PAXOI" including overtime and an
overpayment of US$254.00;
(2) To pay plaintiffs the sum of US$16,000.00 corresponding
to the remittance of plaintiffs to defendant for the second 15day hire of the aforesaid vessel;
(3) To pay plaintiffs the sum of US$6,982.72 representing the
cost of bunker oil, survey and watering of the said vessel;
(4) To pay plaintiffs the sum of US$220,0,00.00 representing
the unrealized profits; and
(5) To pay plaintiffs the sum of P100,000.00, as and for
attorney's fees (Moran, Comments on the Rules of Court,
Vol. III, 1957 5d 644, citing Haussermann vs. Rahmayer, 12
Phil. 350; and others)" (Francisco vs. Matias, G.R. No. L-
16349, January 31, 1964; Sison vs. Suntay, G.R. No. L-1000
. December 28, 1957).
The Court further orders defendant to pay plaintiff-inintervention the amount of P15,450.44, representing the
latter's commission as broker, with interest thereon at 6% per
annum from the date of the filing of the complaint-inintervention, until fully paid, plus the sum of P2,000.00 as
attorney's fees.
The Court finally orders the defendant to pay the costs.
In view of the above conclusion, the Court orders the dismissal of the
counterclaims filed by defendant against the plaintiffs and plaintiff-inintervention, as wen as its motion for the award of damages in
connection with the issuance of the writ of preliminary attachment.
Defendant (petitioner herein), filed a motion for reconsideration and/or new
trial of the amended decision on February 19, 1970 (Amended Record on
Appeal, p. 382). Meanwhile a new Judge was assigned to the Trial Court
(Amended Record on Appeal, p. 541). On September 10, 1970 the trial court
issued its order of September 10, 1970 *** denying defendant's motion for
reconsideration (Amended Record on Appeal, p. 583).
On Appeal, the Court of Appeals affirmed the amended decision of the lower
court except the portion granting commission to the intervenor- appellee,
which it reversed thereby dismissing the complaint-in- intervention. Its two
motions (1) for reconsideration and/or new trial and (2) for new trial having
been denied by the Court of Appeals in its Resolution of February 17, 1975
which, however, fixed the amount of attorney's fees at P100,000.00 instead
of $100,000.00 (Rollo, p. 81), petitioner filed with this Court its petition for
review on certiorari on March 19, 197 5 (Rollo, p. 86).
After deliberating on the petition, the Court resolved to require the
respondents to comment thereon, in its resolution dated April 2, 1975 (rollo,
p. 225).
The comment on petition for review by certiorari was filed by respondents on
April 21, 1975, praying that the petition for review by certiorari dated March
18, 1975 be dismissed for lack of merit Rollo p. 226). The reply to comment
was filed on May 8, 1975 (Rollo, p. 259). The rejoinder to reply to comment
was filed on May 13, 197 5 (Rollo, p. 264).
On October 20, 1975, the Court resolved (a) to give due course to the
petition; (b) to treat the petition for review as a special civil action; and (c) to
require both parties to submit their respective memoranda within thirty (30)
days from notice hereof (Rollo, p. 27).
Respondents filed their memoranda on January 27, 1976 (Rollo, p. 290);
petitioner, on February 26, 1976 (Rollo, p. 338). Respondents' reply
memorandum was filed on April 14, 1976 (Rollo, p. 413) and Rejoinder to
respondents' reply memorandum was filed on May 28, 1976 (Rollo, p. 460).
On June 11, 1976, the Court resolved to admit petitioner's rejoinder to
respondents' reply memorandum and to declare this case submitted for
decision (Rollo, p. 489).
The main issues raised by petitioner are:
1. Whether or not respondents have the legal capacity to bring the
suit for specific performance against petitioner based on the charter
party, and
2. Whether or not the default of Charterer in the payment of the
charter hire within the time agreed upon gives petitioner a right to
rescind the charter party extra judicially.
I.
According to Article 1311 of the Civil Code, a contract takes effect between
the parties who made it, and also their assigns and heirs, except in cases
where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law. Since a
contract may be violated only by the parties, thereto as against each other, in
an action upon that contract, the real parties in interest, either as plaintiff or
as defendant, must be parties to said contract. Therefore, a party who has
not taken part in it cannot sue or be sued for performance or for cancellation
thereof, unless he shows that he has a real interest affected thereby (Macias
& Co. v. Warner Barners & Co., 43 Phil. 155 [1922] and Salonga v. Warner
Barnes & Co., Ltd., 88 Phil. 125 [1951]; Coquia v. Fieldmen's Insurance Co.,
Inc., 26 SCRA 178 [1968]).
It is undisputed that the charter party, basis of the complaint, was entered
into between petitioner Marimperio Compaia Naviera, S.A., through its duly
authorized agent in London, the N & J Vlassopulos Ltd., and the Interocean
Shipping Company of Manila through the latter's duly authorized broker, the
Overseas Steamship Co., Inc., represented by Matthews, Wrightson
Burbridge Ltd., for the Charter of the 'SS PAXOI' (Amended Complaint,
Amended Record on Appeal, p. 33; Complaint-in-Intervention, Amended
Record on Appeal, p. 87). It is also alleged in both the Complaint (Amended
Record on Appeal 18) and the Amended Complaint (Amended Record on
Appeal, p. 39) that the Interocean Shipping Company sublet the said vessel
to respondent Union Import and Export Corporation which in turn sublet the
same to respondent Philippine Traders Corporation. It is admitted by
respondents that the charterer is the Interocean Shipping Company. Even
paragraph 3 of the complaint-in-intervention alleges that respondents were
given the use of the vessel "pursuant to paragraph 20 of the Uniform Time
Charter ..." which precisely provides for the subletting of the vessel by the
charterer (Rollo, p. 24). Furthermore, Article 652 of the Code of Commerce
provides that the charter party shall contain, among others, the name,
surname, and domicile of the charterer, and if he states that he is acting by
commission, that of the person for whose account he makes the contract. It
is obvious from the disclosure made in the charter party by the authorized
broker, the Overseas Steamship Co., Inc., that the real charterer is the
Interocean Shipping Company (which sublet the vessel to Union Import and
Export Corporation which in turn sublet it to Philippine Traders Corporation).
In a sub-lease, there are two leases and two distinct judicial relations
although intimately connected and related to each other, unlike in a case of
assignment of lease, where the lessee transmits absolutely his right, and his
personality disappears; there only remains in the juridical relation two
persons, the lessor and the assignee who is converted into a lessee
(Moreno, Philippine Law Dictionary, 2nd ed., p. 594). In other words, in a
contract of sub-lease, the personality of the lessee does not disappear; he
does not transmit absolutely his rights and obligations to the sub-lessee; and
the sub-lessee generally does not have any direct action against the owner
of the premises as lessor, to require the compliance of the obligations
contracted with the plaintiff as lessee, or vice versa (10 Manresa, Spanish
Civil Code, 438).
However, there are at least two instances in the Civil Code which allow the
lessor to bring an action directly (accion directa) against the sub-lessee (use
and preservation of the premises under Art. 1651, and rentals under Article
1652).
Art. 1651 reads:
Without prejudice to his obligation toward the sub-lessor, the sublessee is bound to the lessor for all acts which refer to the use and
preservation of the thing leased in the manner stipulated between
the lessor and the lessee.
Article 1652 reads:
The sub-lessee is subsidiarily liable to the lessor for any rent due
from the lessee. However, the sub-lessee shall not be responsible
beyond the amount of rent due from him, in accordance with the
terms of the sub-lease, at the time of the extra-judicial demand by
the lessor.
Payments of rent in advance by the sub-lessee shall be deemed not
to have been made, so far as the lessor's claim is concerned, unless
said payments were effected in virtue of the custom of the place.
It will be noted however that in said two Articles it is not the sub-lessee, but
the lessor, who can bring the action. In the instant case, it is clear that the
sub-lessee as such cannot maintain the suit they filed with the trial court (See
A. Maluenda and Co. v. Enriquez, 46 Phil. 916).
In the law of agency "with an undisclosed principal, the Civil Code in Article
1883 reads:
If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither
have such persons against the principal.
In such case the agent is the one directly bound in favor of the
person with whom he has contracted, as if the transaction were his
own, except when the contract involves things belonging to the
principal.
The provisions of this article shag be understood to be without
prejudice to the actions between the principal and agent.
While in the instant case, the true charterers of the vessel were the private
respondents herein and they chartered the vessel through an intermediary
which upon instructions from them did not disclose their names. Article 1883
cannot help the private respondents, because although they were the actual
principals in the charter of the vessel, the law does not allow them to bring
any action against the adverse party and vice, versa.
II.
The answer to the question of whether or not the default of charterer in the
payment of the charter hire within the time agreed upon gives petitioner a
right to rescind the charter party extrajudicially, is undoubtedly in the
affirmative.
Clause 6 of the Charter party specifically provides that the petitioner has the
right to withdraw the vessel fromthe service of the charterers, without noting
any protest and without interference of any court or any formality in the event
that the charterer defaults in the payment of hire. The payment of hire was to
be made every fifteen (1 5) days in advance.
It is undisputed that the vessel "SS PAXOI" came on hire on March 27, 1965.
On March 29, Vlassopulos notified by letter the charterer through Matthews
of that fact, enclosing therein owner's debit note for a 15-day hire payable in
advance. On March 30, 1965 the shipowner again notified Matthews that the
payment for the first 15-day hire was overdue. Again on April 2 the shipowner
telexed Matthews insisting on the payment, but it was only on April 7 that the
amount of US $22,500.00 was remitted to Williams Deacons Bank, Ltd.
through the Rizal Commercial Banking Corporation for the account of
Vlassopulos, agent of petitioner, corresponding to the first 15-day hire from
March 27 to April 11, 1965.
On April 8, 1965, Vlassopulos acknowledged receipt of the payment, again
with a debit note for the second 15-day hire and overtime which was due on
April 11, 1965. On April 23, 1965, Vlassopulos notified Matthews by telex that
charterers were in default and in accordance with Clause 6 of the charter
party, the vessel was being withdrawn from charterer's service, holding them
responsible for unpaid hire and all other legal claims of the owner.
Respondents remitted the sum of US$6,000.00 and US$10,000.00 to the
bank only on April 26, 1965 representing payment for the second 15-day hire
from April 12 to April 27, 1965, received and accepted by the payee,
Vlassopulos without any comment or protest.
EN BANC
G.R. No. L-39037
The defendant Paz Agudelo y Gonzaga appeals to this court from the
judgment rendered by the Court of First Instance of Occidental Negros, the
dispositive part of which reads as follows:
Wherefore, judgment is rendered herein absolving the defendant
Mauro A. Garrucho from the complaint and ordering the defendant
Paz Agudelo y Gonzaga to pay to the plaintiff the sum of P31,091.55,
Philippine currency, together with the interest on the balance of
P20,774.73 at 8 per cent per annum of P4.55 daily from July 16,
1929, until fully paid, plus the sum of P1,500 as attorney's fees, and
the costs of this suit.
It is hereby ordered that in case the above sums adjudged in favor of
the defendant by virtue of this judgment are not paid to the Philippine
National Bank or deposited in the office of the clerk of this court, for
delivery to the plaintiff, within three months from the date of this
decision, the provincial sheriff of Occidental Negros shall set at
public auction the mortgaged properties described in annex E of the
second amended complaint, and apply the proceeds thereof to the
payment of the sums in question.
It is further ordered that in case the proceeds of the mortgaged
properties are not sufficient to cover the amount of this judgment, a
writ of execution be issued against any other property belonging to
the defendant Paz Agudelo y Gonzaga, not otherwise exempt from
execution, to cover the balance resulting therefrom.
In support of her appeal, the appellant assigns six alleged errors as
committed by the trial court, which we shall discuss in the course of this
decision.
The following pertinent facts, which have been proven without dispute during
the trial, are necessary for the decision of the questions raised in the present
appeal, to wit:
On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga
executed in favor of her nephew, Mauro A. Garrucho, the document Exhibit K
conferring upon him a special power of attorney sufficiently broad in scope to
enable him to sell, alienate and mortgage in the manner and form he might
deem convenient, all her real estate situated in the municipalities of Murcia
and Bacolod, Occidental Negros, consisting in lots Nos. 61 and 207 of the
cadastral survey of Bacolod, Occidental Negros, together with the
improvement thereon.
On December 22, 1920, Amparo A. Garrucho executed the document Exhibit
H whereby she conferred upon her brother Mauro A Garrucho a special
power of attorney sufficiently broad in scope to enable him to sell, alienate,
mortgage or otherwise encumber, in the manner and form he might deem
convenient, all her real estate situated in the municipalities of Murcia and
Bago, Occidental Negros.
Nothing in the aforesaid powers of attorney expressly authorized Mauro A.
Garrucho to contract any loan nor to constitute a mortgage on the properties
belonging to the respective principals, to secure his obligations.
On December 23, 1920, Mauro A. Garrucho executed in the favor of the
plaintiff entity, the Philippine National bank, the document Exhibit G, whereby
he constituted a mortgage on lot No. 878 of the cadastral survey of Murcia,
Occidental Negros, with all the improvements thereon, described in transfer
certificate of title No. 2415 issued in the name of Amparo A. Garrucho, to
secure the payment of credits, loans, commercial overdrafts, etc., not
exceeding P6,000, together with interest thereon, which he might obtain from
the aforesaid plaintiff entity, issuing the corresponding promissory note to that
effect.
During certain months of the year 1921 and 1922, Mauro A. Garrucho
maintained a personal current account with the plaintiff bank in the form of a
commercial credit withdrawable through checks (Exhibits S, 1 and T).
On August 24, 1931, the said Mauro A. Garrucho executed in favor of the
plaintiff entity, the Philippine National Bank, the document Exhibit J whereby
he constituted a mortgage on lots Nos. 61 and 207 of the cadastral survey of
Bacolod together with the buildings and improvements thereon, described in
original certificates of title Nos. 2216 and 1148, respectively, issued in the
name of Paz Agudelo y Gonzaga, to secure the payment of credits, loans
and commercial overdrafts which the said bank might furnish him to the
amount of P16,00, payable on August 24, 1922, executing the corresponding
promissory note to that effect.
The mortgage deeds Exhibit G and J as well as the corresponding
promissory notes for P6,000 and P16,000, respectively, were executed in
Mauro A. Garrucho's own name and signed by him in his personal capacity,
authorizing the mortgage creditor, the Philippine National Bank, to take
possession of the mortgaged properties, by means of force if necessary, in
case he failed to comply with any of the conditions stipulated therein.
On January 4, 1922, the manager of the Iloilo branch of the Philippine
National Bank notified Mauro A. Garrucho that his promissory note for
P6,000 of 10 days within which to make payment thereof (Exhibit
O).1awphil.net
On May 9, 1922, the said manager notified Mauro A. Garrucho that his
commercial credit was closed from that date (Exhibit S).
Inasmuch as Mauro A. Garrucho had overdrawn his credit with the plaintiffappellee, the said manager thereof, in a letter dated June 27, 1922 (Exhibit
T), requested him to liquidate his account amounting to P15,148.15, at the
same time notifying him that his promissory note for P16,000 giving as
security for the commercial overdraft in question, had fallen due some time
since.
On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff entity
the deed Exhibit C whereby he constituted a mortgage on lots Nos. 61 and
207 of the cadastral survey of Bacolod, together with the improvements
thereon, described in transfer certificates of title Nos. 2216 and 1148,
respectively, issued in the name of Paz Agudelo y Gonzaga, and on lot No.
878 of the cadastral survey of Murcia, described in transfer certificate of title
No. 2415, issued in the name of Amparo A. Garrucho.
In connection of the credits, loans, and commercial overdrafts amounting to
P21,000 which had been granted him, Mauro A. Garrucho, on the said date
July 15, 1922, executed the promissory note, Exhibit B, for P21,000 as a
novation of the former promissory notes for P6,000 and P16,000,
respectively.
Aside from the phrases "attorney in fact of his sister, Amparo A. Garrucho, as
evidenced by the power of attorney attached hereto" and "attorney in fact of
Paz Agudelo y Gonzaga" written after the name of Mauro A. Garrucho in the
mortgage deeds, Exhibits G. and J, respectively, there is nothing in the said
mortgage deeds to show that Mauro A. Garrucho is attorney in fact of
Amparo A. Garrucho and of Paz Agudelo y Gonzaga, and that he obtained
the loans mentioned in the aforesaid mortgage deeds and constituted said
mortgages as security for the payment of said loans, for the account and at
the request of said Amparo A. Garrucho and Paz Agudelo y Gonzaga. The
above-quoted phrases which simply described his legal personality, did not
mean that Mauro A. Garrucho obtained the said loans and constituted the
mortgages in question for the account, and at the request, of his principals.
From the titles as well as from the signatures therein, Mauro A. Garrucho,
appears to have acted in his personal capacity. In the aforesaid mortgage
deeds, Mauro A. Garrucho, in his capacity as mortgage debtor, appointed the
mortgage creditor Philippine National Bank as his attorney in fact so that it
might take actual and full possession of the mortgaged properties by means
of force in case of violation of any of the conditions stipulated in the
respective mortgage contracts. If Mauro A. Garrucho acted in his capacity as
mere attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga,
he could not delegate his power, in view of the legal principle of "delegata
potestas delegare non potest" (a delegated power cannot be delegated),
inasmuch as there is nothing in the records to show that he has been
expressly authorized to do so.
He executed the promissory notes evidencing the aforesaid loans, under his
own signature, without authority from his principal and, therefore, were not
binding upon the latter (2 Corpus Juris, pp. 630-637, par. 280). Neither is
there anything to show that he executed the promissory notes in question for
the account, and at the request, of his respective principals (8 Corpus Juris,
pp. 157-158).
Furthermore, it is noted that the mortgage deeds, Exhibits C and J, were
cancelled by the documents, Exhibits I and L, on July 15, 1922, and in their
stead the mortgage deed, Exhibit C, was executed, in which there is
absolutely no mention of Mauro A. Garrucho being attorney in fact of
anybody, and which shows that he obtained such credit fro himself in his
personal capacity and secured the payment thereof by mortgage constituted
by him in his personal capacity, although on properties belonging to his
principal Paz Agudelo y Gonzaga.
Furthermore, the promissory notes executed by Mauro A. Garrucho in favor
of the Philippine National Bank, evidencing loans of P6,000 and P16,000
have been novated by the promissory notes for P21,000 (Exhibit B) executed
by Mauro A. Garrucho, not only without express authority from his principal
Paz Agudelo y Gonzaga but also under his own signature.
In the case of National Bank vs. Palma Gil (55 Phil., 639), this court laid
down the following doctrine:
A promissory note and two mortgages executed by the agent for and
on behalf of his principal, in accordance with a power of attorney
executed by the principal in favor of the agent, are valid, and as
provided by article 1727 of contracted by the agent; but a mortgage
on real property of the principal not made and signed in the name of
the principal is not valid as to the principal.
It has been intimated, and the trial judge so stated. that it was the intention of
the parties that Mauro A. Garrucho would execute the promissory note,
Exhibit B, and the mortgage deed, Exhibit C, in his capacity as attorney in
facts of Paz Agudelo y Gonzaga, and that although the terms of the aforesaid
documents appear to be contrary to the intention of the parties, such
intention should prevail in accordance with article 1281 of the Civil Code.
Commenting on article 1281 of the Civil Code, Manresa, in his
Commentaries to the Civil Code, says the following:
IV. Intention of the contracting parties; its appreciation. In order
that the intention may prevail, it is necessary that the question of
interpretation be raised, either because the words used appear to be
contrary thereto, or by the existence of overt acts opposed to such
words, in which the intention of the contracting parties is made
manifest. Furthermore, in order that it may prevail against the terms
of the contract, it must be clear or, in other words, besides the fact
that such intention should be proven by admissible evidence, the
latter must be of such charter as to carry in the mind of the judge an
unequivocal conviction. This requisite as to the kind of evidence is
laid down in the decision relative to the Mortgage Law of September
30, 1891, declaring that article 1281 of the Civil Code gives
preference to intention only when it is clear. When the aforesaid
circumstances is not present in a document, the only thing left for the
register of deeds to do is to suspend the registration thereof, leaving
the solution of the problem to the free will of the parties or to the
decision of the courts.
acknowledge the said mortgage. Therefore, the only liability of the defendantappellant Paz Agudelo y Gonzaga is that which arises from the aforesaid
acknowledgment, but only with respect to the lien and not to the principal
obligation secured by the mortgage acknowledged by her to have been
constituted on said lot No. 878 of the cadastral survey of Murcia, Occidental
Negros. Such liability is not direct but a subsidiary one.
Having reach this contention, it is unnecessary to pass upon the other
questions of law raised by the defendant- appellant in her brief and upon the
law cited therein.
In view of the foregoing consideration, we are of the opinion and so hold that
when an agent negotiates a loan in his personal capacity and executes a
promissory note under his own signature, without express authority from his
principal, giving as security therefor real estate belonging to the letter, also in
his own name and not in the name and representation of the said principal,
the obligation do constructed by him is personal and does not bind his
aforesaid principal.
Wherefore, it is hereby held that the liability constructed by the aforesaid
defendant-appellant Paz Agudelo y Gonzaga is merely subsidiary to that of
Mauro A. Garrucho, limited lot No. 878 of the cadastral survey of Murcia,
Occidental Negros, described in Torrens title No. 2415. However, inasmuch
as the principal obligator, Mauro A. Garrucho, has been absolved from the
complaint and the plaintiff- appellee has not appealed from the judgment
absolving him, the law does not afford any remedy whereby Paz Agudelo y
Gonzaga may be required to comply with the said subsidiary obligation in
view of the legal maxim that the accessory follows the principal. Wherefore,
the defendant herein should also be absolved from the complaint which is
hereby dismissed, with the costs against the appellee. So ordered.
EN BANC
G.R. No. L-13471
January 12, 1920
VICENTE SY-JUCO and CIPRIANA VIARDO, plaintiffs-appellants,
vs.
SANTIAGO V. SY-JUCO, defendant-appellant.
Sumulong and Estrada for plaintiffs and appellants.
Delgado and Delgado for defendant and appellant.
AVANCEA, J.:
that the defendant has acquired for himself the ownership of the launch, it
would be equivalent to sanctioning this violation and accepting its
consequences. But not only must the consequences of the violation of this
agency not be accepted, but the effects of the agency itself must be sought.
If the defendant contracted the obligation to but the launch for the plaintiffs
and in their representation, but virtue of the agency, notwithstanding the fact
that he bought it in his own name, he is obliged to transfer to the plaintiffs the
rights he received from the vendor, and the plaintiffs are entitled to be
subrogated in these rights.
There is another point of view leading us to the same conclusion. From the
rule established in article 1717 of the Civil Code that, when an agency acts in
his own name, the principal shall have no right of action against the person
with whom the agent has contracted, cases involving things belonging to the
principal are excepted. According to this exception (when things belonging to
the principal are dealt with) the agent is bound to the principal although he
does not assume the character of such agent and appears acting in his own
name (Decision of the Supreme Court of Spain, May 1, 1900). This means
that in the case of this exception the agent's apparent representation yields
to the principal's true representation and that, in reality and in effect, the
contract must be considered as entered into between the principal and the
third person; and, consequently, if the obligations belong to the former, to him
alone must also belong the rights arising from the contract. The money with
which the launch was bough having come from the plaintiff, the exception
established in article 1717 is applicable to the instant case.
Concerning the casco No. 2584, the defendant admits it was constructed by
the plaintiff himself in the latter's ship-yard. Defendant's allegation that it was
constructed at his instance and with his money is not supported by the
evidence. In fact the only proof presented to support this allegation is his own
testimony contradicted, on the on hand, by the plaintiffs' testimony and, on
the other hand, rebutted by the fact that, on the date this casco was
constructed, he did not have sufficient money with which to pay the expense
of this construction.
As to the automobile No. 2060, there is sufficient evidence to show that its
prices was paid with plaintiffs' money. Defendant's adverse allegation that it
was paid with his own money is not supported by the evidence. The
circumstances under which, he says, this payment has been made, in order
to show that it was made with his own money, rather indicate the contrary. He
presented in evidence his check-book wherein it appears that on March 24,
1916, he issued a check for P300 and on the 27th of same month another for
P400 and he says that the first installment was paid with said checks. But it
results that, in order to issue the check for P300 on March 24 of that year, he
had to deposit P310 on that same day; and in order to issue the other check
for P400 on the 27th of the same month, he deposited P390 on that same
day. It was necessary for the defendant to make these deposits for on those
dates he had not sufficient money in the bank for which he could issue those
checks. But, in order to pay for the price of the automobile, he could have
made these payments directly with the money he deposited without the
necessity of depositing and withdrawing it on the same day. If this action
shows something, it shows defendant's preconceived purpose of making it
appear that he made the payment with his own funds deposited in the bank.
The plaintiffs, in turn, assign in this instance the following three errors alleged
to have been committed by the lower court:
1. The court erred in not declaring that the plaintiffs did not sell to the
defendant the casco No. 2545 and that they were its owners until it
was sunk in June, 1916.
2. The court erred in absolving the defendant from his obligation to
render an account of his administration to the plaintiffs, and to pay to
the latter the amount of the balance due in their favor.
3. The court erred in not condemning the defendant to pay to the
plaintiffs the value of the woods, windows and doors taken from their
lumber-year by the defendant and used in the construction of the
house on calle Real of the barrio of La Concepcion, municipality of
Malabon, Rizal.
Concerning the casco No. 2545, the lower court refrained from making any
declaration about its ownership in view of the fact that this casco had been
leased and was sunk while in the lessee's hands before the complaint in this
case was filed. The lower court, therefore, considered it unnecessary to pass
upon this point. We agree with the plaintiffs that the trial court should have
made a pronouncement upon this casco. The lessee may be responsible in
damages for its loss, and it is of interest to the litigants in this case that it be
determined who is the owner of said casco that may enforce this
responsibility of the lessee.
Upon an examination of the evidence relative to this casco, we find that it
belonged to the plaintiffs and that the latter sold it afterwards to the
defendant by means of a public instrument. Notwithstanding plaintiffs'
allegation that when they signed this instrument they were deceived,
Early in the month of September, 1924, the plaintiff, doing business in the
Philippine Islands under the name of E. Awad & Co., delivered certain
merchandise of the invoice value of P11,140 to Chua Lioc, a merchant
operating under the name of Hang Chua Co. in Manila, said merchandise to
be sold on commission by Chua Lioc. Representing himself as being the
owner of the merchandise, Chua Lioc, on September 8, 1924, sold it to the
defendant for the sum of P12,155.60. He owed the Philippine Manufacturing
Co., the sum of P3,480, which the defendant agreed to pay, and was also
indebted to the defendant itself in the sum of P2,017.98. The total amount of
the two debts, P5,497.98, was deducted from the purchase price, leaving a
balance of P6,657.52 which the defendant promised to pay to Chua Lioc on
or before October 9, 1924.
The merchandise so purchased on September 9, was delivered to the
defendant, who immediately offered it for sale. Three days later D. J. Awad,
the representative of the plaintiff in the Philippine Islands; having ascertained
that the goods entrusted to Chua Lioc was being offered for sale by the
defendant, obtained authorization from Chua Lioc to collect the sum of
P11,707 from said defendant and informed the latter's treasurer of the facts
above set forth. On September 15, D. J. Awad, in behalf of E. Awad & Co.,
wrote a letter to the defendant corporation advising it that, inasmuch as the
merchandise belonged to E. Awad & Co., the purchase price should be paid
to them, to which letter, the defendant, on September 18, 1924, made the
following answer:
Messrs. E. AWAD & CO.
435 Juan Luna Manila.
GENTLEMEN: We are in receipt of your letter of September 15, 1924, in
which you state that certain blankets and shirts were brought from you by the
Chinaman Chua Lioc under false pretenses on consignment, basis, and in
which you say that the merchandise is yours and we should make payment
to you for said merchandise. In answer to your letter, we beg to say to you
that the blankets and shirts in question, together with other merchandise,
were purchased and received by us from the Chinaman Chua Lioc on
September 9, 1924, in the ordinary course of business, and that there is now
due from us to the said Chinaman a balance of P6,657.52, which is payable
on October 9, 1924. In view of these facts, we are unable to comply with your
request, and would advise you, in case this Chinaman is indebted to you for
said merchandise, to take the necessary steps through the Court to secure
the payment of this balance due to him to your firm, inasmuch as if you do
not do so, we shall be obliged to pay the balance which we owe for said
merchandise directly to him.
Yours respectfully,
FILMA MERCHANTILE CO. INC.
On the same date, September 18, 1924, the Philippine Trust Company,
brought an action, civil case No. 26934, against Chua Lioc for the recovery of
the sum of P1,036.36 and under a writ of attachment garnished the balance
due Chua Lioc from the defendant. On October 7, E. Awad also brought an
action, civil case No. 27016, against Chua Lioc for the recovery of the sum of
P11,140, the invoice value of the merchandise above-mentioned and also
obtained a writ of attachment under which notice of garnishment of the said
aforesaid balance we served upon the herein defendant.
The complaint in the present action was filed on November 26, 1924, the
plaintiff demanding payment of the same sum of P11,140 for which action
had already been brought against Chua Lioc. The defendant, its answer, set
up as special defense that it brought the merchandise in good faith and
without any knowledge whether of the person from whom or the condition
under which the said merchandise had been acquired by Chua Lioc or Hang
Chuan Co.; that the defendant therefore had acquired title to the
merchandise purchased; that the balance of P6,657.52, now in the hands of
the defendant had been attached in the two actions brought on September
18, and October 7, respectively, and garnishment served upon the
defendant, who therefore, holds the money subject to the orders of the court
in the cases above-mentioned, but which sum the defendant is able and
willing to pay at any time when the court decides to whom the money lawfully
pertains.1awphil.net
Upon trial, the court below dismissed the case without costs on the ground
that the plaintiff was only entitled to payment of the sum of P6,657.52, but
which sum the defendant had the right to retain subject to the orders of the
court in cases Nos. 26134 and 27016. From this judgment the plaintiff
appealed.
The law applicable to the case is well settled. Article 246 of the Code of
Commerce reads 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 rule laid down in the article quoted is contrary to the general rule in the
United States as to purchases of merchandise from agents with undisclosed
principal, but it has been followed in a number of cases and is the law in its
jurisdiction. (Pastells & Regordosa vs. Hollman & Co., 2 Phil., 235; Castle
Bros., Wolf & Sons vs. Go-Juno, & Phil., 144; Lim Tiu vs. Ruiz y Rementeria,
15 Phil., 367.) But the appellant points out several circumstances which, in
his opinion, indicate that the defendant-appellee was aware of the condition
under which the merchandise was entrusted to the agent Chua Lioc and
therefore did not purchase the goods in good faith. This, if true, would, of
course, lead to a decision of the case in favor of the plaintiff, but there is, in
our opinion, nothing conclusive about the circumstances referred to and they
are not sufficient to overcome the presumption of good faith.
The appealed judgment is in accordance with the law and the facts and is
affirmed with the costs against the appellant. So ordered.
of the present case, petitioner Equitable PCI Bank begs to differ. Hence, this
petition.
On February 4, 1982, respondent Rosita Ku, as treasurer of Noddy
Dairy Products, Inc., and Ku Giok Heng, as Vice-President/General Manager
of the same corporation, mortgaged the subject property to the Equitable
Banking Corporation, now known as Equitable PCI Bank to secure Noddy
Inc.s loan to Equitable. The property, a residential house and lot located in La
Vista, Quezon City, was registered in respondents name.
Noddy, Inc. subsequently failed to pay the loan secured by the
mortgage, prompting petitioner to foreclose the property extrajudicially. As
the winning bidder in the foreclosure sale, petitioner was issued a certificate
of sale. Respondent failed to redeem the property. Thus, on December 10,
1984, the Register of Deeds canceled the Transfer Certificate of Title in the
name of respondent and a new one was issued in petitioners name.
On May 10, 1989, petitioner instituted an action for ejectment before the
Quezon City Metropolitan Trial Court (MeTC) against respondents father Ku
Giok Heng. Petitioner alleged that it allowed Ku Giok Heng to remain in the
property on the condition that the latter pay rent. Ku Giok Hengs failure to
pay rent prompted the MeTC to seek his ejectment. Ku Giok Heng denied
that there was any lease agreement over the property.
On December 8, 1994, the MeTC rendered a decision in favor of
petitioner and ordered Ku Giok Heng to, among other things, vacate the
premises. It ruled:
x x x for his failure or refusal to pay rentals despite proper demands, the
defendant had not established his right for his continued possession of or
stay in the premises acquired by the plaintiff thru foreclosure, the title of
which had been duly transferred in the name of the plaintiff. The absence of
lease agreement or agreement for the payment of rentals is of no moment in
the light of the prevailing Supreme Court ruling on the matter. Thus: It is
settled that the buyer in foreclosure sale becomes the absolute owner of the
property purchased if it is not redeemed during the period of one (1) year
after the registration of the sale is as such he is entitled to the possession of
the property and the demand at any time following the consolidation of
ownership and the issuance to him of a new certificate of title. The buyer can,
in fact, demand possession of the land even during the redemption period
except that he has to post a bond in accordance with Section 7 of Act No.
3155 as amended. Possession of the land then becomes an absolute right of
the purchaser as confirmed owner. Upon proper application and proof of title,
the issuance of a writ of possession becomes a ministerial duty of the
court. (David Enterprises vs. IBAA[,] 191 SCRA 116).[1]
Ku Giok Heng did not appeal the decision of the MeTC. Instead, he and
his daughter, respondent Rosita Ku, filed on December 20, 1994, an action
before the Regional Trial Court (RTC) of Quezon City to nullify the decision of
the MeTC. Finding no merit in the complaint, the RTC on September 13,
1999 dismissed the same and ordered the execution of the MeTC decision.
Respondent filed in the Court of Appeals (CA) a special civil action
for certiorari assailing the decision of the RTC. She contended that she was
not made a party to the ejectment suit and was, therefore, deprived of due
process. The CA agreed and, on March 31, 2000, rendered a decision
enjoining the eviction of respondent from the premises.
On May 10, 2000, Equitable PCI Bank filed in this Court a motion for an
extension of 30 days from May 10, 2000 or until June 9, 2000 to file its
petition for review of the CA decision. The motion alleged that the Bank
received the CA decision on April 25, 2000.[2] The Court granted the motion
for a 30-day extension counted from the expiration of the reglementary
period and conditioned upon the timeliness of the filing of [the] motion [for
extension].[3]
On June 13, 2000,[4] Equitable Bank filed its petition, contending that
there was no need to name respondent Rosita Ku as a party in the action for
ejectment since she was not a resident of the premises nor was she in
possession of the property.
The petition is meritorious.
Generally, no man shall be affected by any proceeding to which he is a
stranger, and strangers to a case are not bound by judgment rendered by the
court.[5] Nevertheless, a judgment in an ejectment suit is binding not only
upon the defendants in the suit but also against those not made parties
thereto, if they are:
a) trespassers, squatters or agents of the defendant fraudulently
occupying the property to frustrate the judgment;
b) guests or other occupants of the premises with the permission of the
defendant;
(2) Under the contract of services between the Bank and Unique, it is my
official duty and responsibility to receive and pick-up from the Manila Central
Post Office (CPO) the various mails, letters, correspondence, and other mail
matters intended for the banks various departments and offices at Equitable
Bank Building, 262 Juan Luna St., Binondo, Manila. This building, however,
also houses various other offices or tenants not related to the Bank.
(3) I am not the constituted agent of Curato Divina Mabilog Niedo Magturo
Pagaduan Law Office whose former address is at Rm. 405 4/F Equitable
Bank Bldg., 262 Juan Luna St., Binondo, Manila, for purposes of receiving
their incoming mail matters; neither am I any such agent of the various other
tenants of the said Building. On occasions when I receive mail matters for
said law office, it is only to help them receive their letters promptly.
(4) On April 24, 2000, I received the registered letter sent by the Court of
Appeals, covered by Registry Receipt No. 125234 and Delivery No. 4880
(copy of envelope attached as Annex A) together with other mail matters, and
brought them to the Mail and Courier Department;
(5) After sorting out these mail matters, on April 25, 2000, I erroneously
recorded them on page 422 of my logbook as having been received by me
on said dated April 25, 2000 (copy of page 422 is attached as Annex B).
(6) On April 27, 2000, this letter was sent by the Mail and Courier Department
to said Law Office whose receiving clerk Darwin Bawar opened the letter and
stamped on the Notice of Judgment their actual date of receipt: April 27,
2000 (copy of the said Notice with the date so stamped is attached as Annex
C).
(7) On May 8, 2000, Atty. Roland A. Niedo of said law office inquired from me
as to my actual date of receipt of this letter, and I informed him that based on
my logbook, I received it on April 25, 2000.
(8) I discovered this error only on September 6, 2000, when I was informed
by Atty. Niedo that Postmaster VI Alfredo C. Mabanag, Jr. of the Central Post
Office, Manila, issued a certification that I received the said mail on April 24,
2000.
(9) I hereby confirm that this error was caused by an honest mistake.
Petitioner argues that receipt on April 25, 2000 by Joel Rosales, who
was not an agent of its counsels law office, did not constitute notice to its
Assuming the motion for extension was indeed one day late, petitioner
urges the Court, in any event, to suspend its rules and admit the petition in
the interest of justice. Petitioner invokes Philippine National Bank vs. Court
of Appeals,[15] where the petition was filed three (3) days late. The Court held:
It has been said time and again that the perfection of an appeal within the
period fixed by the rules is mandatory and jurisdictional. But, it is always in
the power of this Court to suspend its own rules, or to except a particular
case from its operation, whenever the purposes of justice require it. Strong
compelling reasons such as serving the ends of justice and preventing a
grave miscarriage thereof warrant the suspension of the rules.
The Court proceeded to enumerate cases where the rules on
reglementary periods were suspended. Republic vs. Court of
Appeals[16] involved a delay of six days; Siguenza vs. Court of Appeals,
[17]
thirteen days; Pacific Asia Overseas Shipping Corporation vs. NLRC,
[18]
one day; Cortes vs. Court of Appeals,[19] seven days; Olacao vs. NLRC,
[20]
two days; Legasto vs. Court of Appeals,[21] two days; andCity Fair
Corporation vs. NLRC,[22] which also concerned a tardy appeal.
The Court finds these arguments to be persuasive, especially in light of
the merits of the petition.
WHEREFORE, the petition is GIVEN DUE
COURSE and GRANTED. The decision of the Court of Appeals
is REVERSED.
SO ORDERED.
III
THE RESPONDENT COURT FAILED TO APPLY IN THIS CASE THE
PRINCIPLE ENUNCIATED BY THIS HONORABLE COURT TO THE
EFFECT THAT ACCUSATION IS NOT, ACCORDING TO THE
FUNDAMENTAL LAW, SYNONYMOUS WITH GUILT: THE PROSECUTION
MUST OVERTHROW THE PRESUMPTION OF INNOCENCE WITH PROOF
OF GUILT BEYOND REASONABLE DOUBT. TO MEET THIS STANDARD,
THERE IS NEED FOR THE MOST CAREFUL SCRUTINY OF THE
TESTIMONY OF THE STATE, BOTH ORAL AND DOCUMENTARY,
INDEPENDENTLY OF WHATEVER DEFENSE IS OFFERED BY THE
ACCUSED. ONLY IF THE JUDGE BELOW AND THE APPELLATE
TRIBUNAL COULD ARRIVE AT A CONCLUSION THAT THE CRIME HAD
BEEN COMMITTED PRECISELY BY THE PERSON ON TRIAL UNDER
SUCH AN EXACTING TEST SHOULD SENTENCE THUS REQUIRED THAT
EVERY INNOCENCE BE DULY TAKEN INTO ACCOUNT. THE PROOF
AGAINST HIM MUST SURVIVE THE TEST OF REASON, THE
STRONGEST SUSPICION MUST NOT BE PERMITTED TO SWAY
JUDGMENT. (People v. Austria, 195 SCRA 700)[5]
Herein the pertinent facts as alleged by the prosecution.
On or about October 8, 1987, petitioner Rosa Lim who had come from
Cebu received from private respondent Victoria Suarez the following two
pieces of jewelry: one (1) 3.35 carat diamond ring worth P169,000.00 and
one (1) bracelet worth P170,000.00, to be sold on commission basis. The
agreement was reflected in a receipt marked as Exhibit A[6] for the
prosecution. The transaction took place at the Sir Williams Apartelle in Timog
Avenue, Quezon City, where Rosa Lim was temporarily billeted.
On December 15, 1987, petitioner returned the bracelet to Vicky
Suarez, but failed to return the diamond ring or to turn over the proceeds
thereof if sold. As a result, private complainant, aside from making verbal
demands, wrote a demand letter[7] to petitioner asking for the return of said
ring or the proceeds of the sale thereof. In response, petitioner, thru counsel,
wrote a letter[8] to private respondents counsel alleging that Rosa Lim had
returned both ring and bracelet to Vicky Suarez sometime in September,
1987, for which reason, petitioner had no longer any liability to Mrs. Suarez
insofar as the pieces of jewelry were concerned. Irked, Vicky Suarez filed a
complaint for estafa under Article 315, par. 1(b) of the Revised Penal Code
for which the petitioner herein stands convicted.
The testator or the person requested by him to write his name and the
instrumental witnesses of the will, shall also sign, as aforesaid, each and
every page thereof, except the last, on the left margin x x x.
In the case before us, the parties did not execute a notarial will but a
simple contract of agency to sell on commission basis, thus making the
position of petitioners signature thereto immaterial.
Petitioner insists, however, that the diamond ring had been returned to
Vicky Suarez through Aurelia Nadera, thus relieving her of any liability. Rosa
Lim testified to this effect on direct examination by her counsel:
Q: And when she left the jewelries with you, what did you do
thereafter?
A: On October 12, I was bound for Cebu. So I called up Vicky
through telephone and informed her that I am no longer
interested in the bracelet and ring and that 1 will just return it.
Q: And what was the reply of Vicky Suarez?
A: She told me that she could not come to the apartelle since she
was very busy. So, she asked me if Aurelia was there and
when I informed her that Aurelia was there, she instructed me
to give the pieces of jewelry to Aurelia who in turn will give it
back to Vicky.
Q: And you gave the two (2) pieces of jewelry to Aurelia Nadera?
A: Yes, Your Honor.[14]
This was supported by Aurelia Nadera in her direct examination by
petitioners counsel:
Q: Do you know if Rosa Lim in fact returned the jewelries ?
A: She gave the jewelries to me.
the credibility of witnesses, unless there appears in the record some fact or
circumstance of weight and influence which has been overlooked or the
significance of which has been misinterpreted. The reason is that the trial
court is in a better position to determine questions involving credibility having
heard the witnesses and having observed their deportment and manner of
testifying during the trial.[18]
Article 315, par. 1(b) of the Revised Penal Code provides:
[15]
ART. 315. Swindling (estafa). - Any person who shall defraud another by any
of the means mentioned hereinbelow shall be punished by:
xxx xxx xxx
(b) By misappropriating or converting, to the prejudice of another, money,
goods, or any other personal property received by the offender in trust or on
commission, or for administration, or under any other obligation involving the
duty to make delivery of or to return the same, even though such obligation
be totally or partially guaranteed by a bond; or by denying having received
such money, goods, or other property.
xxx xxx xxx
The elements of estafa with abuse of confidence under this subdivision
are as follows: (1) That money, goods, or other personal property be received
by the offender in trust, or on commission, or for administration, or under any
other obligation involving the duty to make delivery of, or to return, the same;
(2) That there be misappropriation or conversion of such money or property
by the offender or denial on his part of such receipt; (3) That such
misappropriation or conversion or denial is to the prejudice of another; and
(4) That there is a demand made by the offended party to the offender (Note:
The 4th element is not necessary when there is evidence of misappropriation
of the goods by the defendant).[19]
All the elements of estafa under Article 315, Paragraph 1(b) of the
Revised Penal Code, are present in the case at bench. First, the receipt
marked as Exhibit A proves that petitioner Rosa Lim received the pieces of
jewelry in trust from Vicky Suarez to be sold on commission basis. Second,
petitioner misappropriated or converted the jewelry to her own use; and,
third, such misappropriation obviously caused damage and prejudice to the
private respondent.
4. All advances made under sections (1) and (3) shall bear interest at
10 per cent a year, counting by the sale of the goods shipped or
remittance of the amount thereof.
5. A commission of 2 per cent will be collected on the amount
realized from the sale of the goods shipped.
6. A Payment will be made immediately after collection of the price of
the goods shipped.
7. Orders will be taken for the purchase of general merchandise,
ship-stores, cloths, etc., upon remittance of the amount with the
commission of 2 per cent on the total value of the goods bought.
Expenses of freight, hauling, and everything necessary for properly
executing the commission will be charged to the consignor.
8. The consignor of the good may not fix upon the consignee a
longer period than four months, counting from the date of receipt, for
selling the same; with the understanding that after such period the
consignee is authorized to make the sale, so as to prevent the
advance and cost of storage from amounting to more than the actual
value of said goods, as has often happened.
9. The shipment to the consignors of the goods ordered on account
of the amount realized from the sale of the goods consigned and of
the goods bought on remittance of the value thereof, under sections
(1) and (3), will not be insured against risk by sea and land except on
written order of the interested parties.
10. On all consignments of goods not insured according to the next
preceding section, the consignors will bear the risk.
11. All the foregoing conditions will take effect only after this office
has acknowledged the consignor's previous notice.
12. All other conditions and details will be furnished at the office of
the undersigned.
If you care to favor me with your patronage, my office is at No. 163
Muelle de la Reinna, Binondo, Manila, P. I., under the name of
"Teodoro R. Yangco." In this connection it gives me great pleasure to
introduce to you Mr. Florentino Collantes, upon whom I have
agent and having given them a special invitation to deal with such agent, it
was the duty of the defendant on the termination of the relationship of
principal and agent to give due and timely notice thereof to the plaintiffs.
Failing to do so, he is responsible to them for whatever goods may have
been in good faith and without negligence sent to the agent without
knowledge, actual or constructive, of the termination of such relationship.
For these reasons the judgment appealed from is confirmed, without special
finding as to costs.
The established facts, as found by the Court of Appeals, show that on 7 April
1938. Margarita Conde, Bernardo Conde and the petitioner Dominga Conde,
as heirs of Santiago Conde, sold with right of repurchase, within ten (10)
years from said date, a parcel of agricultural land located in Maghubas
Burauen Leyte, (Lot 840), with an approximate area of one (1) hectare, to
Casimira Pasagui, married to Pio Altera (hereinafter referred to as the
Alteras), for P165.00. The "Pacto de Retro Sale" further provided:
... (4) if at the end of 10 years the said land is not repurchased, a
new agreement shall be made between the parties and in no case
title and ownership shall be vested in the hand of the party of the
SECOND PART (the Alteras).
On 17 April 1941, the Cadastral Court of Leyte adjudicated Lot No. 840 to the
Alteras "subject to the right of redemption by Dominga Conde, within ten (10)
years counting from April 7, 1983, after returning the amount of P165.00 and
the amounts paid by the spouses in concept of land tax ... " (Exhibit "1").
Original Certificate of Title No. N-534 in the name of the spouses Pio Altera
and Casimira Pasagui, subject to said right of repurchase, was transcribed in
the "Registration Book" of the Registry of Deeds of Leyte on 14 November
1956 (Exhibit "2").
On 28 November 1945, private respondent Paciente Cordero, son-in-law of
the Alteras, signed a document in the Visayan dialect, the English translation
of which reads:
MEMORANDUM OF REPURCHASE OVER A PARCEL OF LAND
SOLD WITH REPURCHASE WHICH DOCUMENT GOT LOST
WE, PIO ALTERA and PACIENTE CORDERO, both of legal age, and
residents of Burauen Leyte, Philippines, after having been duly
sworn to in accordance with law free from threats and intimidation,
do hereby depose and say:
WITNESSES:
To be noted is the fact that neither of the vendees-a-retro, Pio Altera nor
Casimira Pasagui, was a signatory to the deed. Petitioner maintains that
because Pio Altera was very ill at the time, Paciente Cordero executed the
deed of resale for and on behalf of his father-in-law. Petitioner further states
that she redeemed the property with her own money as her co-heirs were
bereft of funds for the purpose.
On appeal, the Court of Appeals upheld the findings of the Court a quo that
petitioner had failed to validly exercise her right of repurchase in view of the
fact that the Memorandum of Repurchase was signed by Paciente Cordero
and not by Pio Altera, the vendee-a-retro, and that there is nothing in said
document to show that Cordero was specifically authorized to act for and on
behalf of the vendee a retro, Pio Altera.
On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon
Conde and Catalina T. Conde, who are also private respondents herein.
Their relationship to petitioner does not appear from the records. Nor has the
document of sale been exhibited.
Contending that she had validly repurchased the lot in question in 1945,
petitioner filed, on 16 January 1969, in the Court of First Instance of Leyte,
Branch IX, Tacloban City, a Complaint (Civil Case No. B-110), against
Paciente Cordero and his wife Nicetas Altera, Ramon Conde and his wife
Catalina T. Conde, and Casimira Pasagui Pio Altera having died in 1966), for
quieting of title to real property and declaration of ownership.
Petitioner's evidence is that Paciente Cordero signed the Memorandum of
Repurchase in representation of his father-in-law Pio Altera, who was
seriously sick on that occasion, and of his mother-in-law who was in Manila
at the time, and that Cordero received the repurchase price of P65.00.
Private respondents, for their part, adduced evidence that Paciente Cordero
signed the document of repurchase merely to show that he had no objection
to the repurchase; and that he did not receive the amount of P165.00 from
petitioner inasmuch as he had no authority from his parents-in-law who were
the vendees-a-retro.
After trial, the lower Court rendered its Decision dismissing the Complaint
and the counterclaim and ordering petitioner "to vacate the property in
dispute and deliver its peaceful possession to the defendants Ramon Conde
and Catalina T. Conde".
the right of repurchase within 10 years from 1938. Although the ten-year
period had lapsed in 1965 and there was no annotation of any repurchase by
petitioner, neither had the title been cleared of that encumbrance. The
purchasers were put on notice that some other person could have a right to
or interest in the property. It behooved Ramon Conde and Catalina Conde to
have looked into the right of redemption inscribed on the title, and particularly
the matter of possession, which, as also admitted by them at the pre-trial,
had been with petitioner since 1945.
Private respondent must be held bound by the clear terms of the
Memorandum of Repurchase that he had signed wherein he acknowledged
the receipt of P165.00 and assumed the obligation to maintain the
repurchasers in peaceful possession should they be "disturbed by other
persons". It was executed in the Visayan dialect which he understood. He
cannot now be allowed to dispute the same. "... If the contract is plain and
unequivocal in its terms he is ordinarily bound thereby. It is the duty of every
contracting party to learn and know its contents before he signs and delivers
it." 4
There is nothing in the document of repurchase to show that Paciente
Cordero had signed the same merely to indicate that he had no objection to
petitioner's right of repurchase. Besides, he would have had no personality to
object. To uphold his oral testimony on that point, would be a departure from
the parol evidence rule 5 and would defeat the purpose for which the doctrine
is intended.
... The purpose of the rule is to give stability to written
agreements, and to remove the temptation and possibility of
perjury, which would be afforded if parol evidence was
admissible. 6
In sum, although the contending parties were legally wanting in their
respective actuations, the repurchase by petitioner is supported by the
admissions at the pre-trial that petitioner has been in possession since the
year 1945, the date of the deed of repurchase, and has been paying land
taxes thereon since then. The imperatives of substantial justice, and the
equitable principle of laches brought about by private respondents' inaction
and neglect for 24 years, loom in petitioner's favor.
WHEREFORE, the judgment of respondent Court of Appeals is hereby
REVERSED and SET ASIDE, and petitioner is hereby declared the owner of
the disputed property. If the original of OCT No. N-534 of the Province of
Leyte is still extant at the office of the Register of Deeds, then said official is
hereby ordered to cancel the same and, in lieu thereof, issue a new Transfer
Certificate of Title in the name of petitioner, Dominga Conde.
No costs.
SO ORDERED.
EN BANC
G.R. No. L-2827
October 3, 1907
MARIA LOPEZ Y VILLANUEVA, plaintiff-appellant,
vs.
TAN TIOCO, defendant-appellee.
Ruperto Montinola for appellant.
Smith & Hargis for appellee.
CARSON, J.:
The trial court was of opinion that the evidence sustained the contention of
the defendant, and gave judgment in favor of the plaintiff for 1,082.95 which
the defendant admitted to be due on account. From this judgment the plaintiff
appeals and prays that the judgment of the trial court be served and that
judgment be rendered in her favor for the balance due, after crediting the
plaintiff with the market value of the sugar of the day of the filing of the
complaint.
The plaintiff positively denies the defendant's allegation that she had given
him authority to sell the sugar on the 26th of March, 1904. There is a direct
conflict in the testimony as to this point. The defendant affirms, the plaintiff
denies, and, other than their contradictory, statements, there is no
satisfactory evidence in the record upon which to base a finding.
Maria Lopez, the plaintiff, alleges that she entered into a verbal contract
which the defendant to deliver to him certain sugar, which he obligated
himself to store in Iloilo until he received instructions from her to sell,
whereupon he was to credit her account with its market value in Iloilo on the
day upon which such instructions were communicated to him; that in
accordance with the terms of the agreement she delivered to the defendant
7,713.99 piculs of sugar; that she gave instructions to sell on the 29th of
September, 1904; that on the 29th day of September, 1904, the market value
of the sugar she thus delivered was as follows: 1,085.13 piculs of No. 1, at
5.35 pesos, Mexican currency; 1,741.56 piculs of No. 2, at 5.12 pesos,
Mexican currency; 4,823.67 piculs of No. 3. at 4.87 pesos, Mexican
currency; 16.23 piculs of la clase humeda, at 3.37 at 3 pesos, Mexican
currency; and 47.40 piculs of coriente, at 3 pesos, Mexican currency; that
had the sugar been sold on the 1st of December, 1904, the date on which the
complaint was filed, it would have brought a still higher price, and that
crediting her with the market value of the sugar on the 1st day of December,
1904, the balance due on account would be 22,638.94 pesos, Mexican
currency.
The defendant, Tan Tioco, admits the truth of the foregoing, allegations, but
insists that he received authority to sell the sugar on the 26th of March, 1904,
when the market price in Iloilo was much lower than on the 29th of
September, 1904, or the 1st of December, 1904, and that crediting the
plaintiff with the market value of the sugar as of the 26th of March, 1904, the
balance due the plaintiff would amount to but 1,082.95 pesos, Mexican
that when he informed her of that "she didn't say anything; she said she
would go down to the office of Tan Tioco." while it may be true, as claimed by
the defendant, that he was anxious to have the sugar sold on the 26th day of
March, and that he requested the plaintiff on various occasions to authorize
into to make such sale, and that he pointed her that the sale had actually
been made, these facts in no wise tend to prove that Maria Lopez did, in fact,
grant him to authorization which, as he alleges, he so urgently importuned.
The plaintiff, in support of her contention, produced the receipts issued by the
defendant for the delivery of the sugar, and her counsel insists that the mere
fact that there receipt were in her hands at the time of the trial, and had not
been delivered to the defendant, was sufficient to establish her contention
that she had never given the defendant authority to sell. Since the defendant
alleges that this authority was granted verbally, and that it was understood
that after the sale had been made there was to be a settlement of accounts
which did not take place because the plaintiff refused to come to the office for
that purpose, we do not think that the possession of these receipts casts very
much light upon the disputed point. lawphil.net
As stated before, the relevant testimony in this case substantially amounts to
the unsupported statement of the defendant that authority was granted him to
sell the sugar on the 26th day of March, 1904, and the unsupported denial of
the plaintiff. It becomes important, therefore, to ascertain upon whom rests
the burden of proof as to this point.
Section 297 of the Code of Civil Procedure is as follows:
Each party must prove his own affirmative allegations. Evidence
need not be given in support of a negative allegation except when
such negative allegation is an essential part of the statement of the
right or title on which the cause of action or defense is founded, nor
even in such case when the allegation is a denial of the existence of
a document the custody of which belongs to the opposite party.
This provision is partially the same as the rule embodied in the
maximum semper necessitas probandi incumbit illi qui agit.
Under the terms of the agreement the plaintiff would be entitled to a
judgment upon proof of the allegations in her complaint. The defendant
practically admits the truth of these allegations, but in his defense sets up
new matter by way of an affirmative allegation, and it is therefore his duty to
support this allegations by a preponderance of evidence.
the balance in favor of the plaintiff and for which judgment should be given
amounts to 8,712.53 pesos, Mexican currency.
After twenty days let judgment be entered reversing the judgment of the trial
court, and ten days thereafter let the record be turned to the trial court, where
judgment will be entered in favor of the plaintiff for the equivalent in
Philippine currency of 8,712.53 pesos, Mexican currency, with interest at the
legal rate from the date of the filing of the complaint as prayed therein, and
without special condemnation of costs in this instance. So ordered.
P433,237.75
8,170.45
P235,007.85
On the other hand, the claim of the plaintiff totalled P545,394.24 based on
1,521 bills of lading examined by him of which 267 were signed by defendant
We find that the Court a quo erred in rejecting the bins of lading signed by
"Perry" where defendant appeared shipper or consignee, those signed by
"Perry" where persons other than defendant-appellant as shipper and the
bills of lading unsigned by defendant.
With regards to the 91 controverted bills of lading signed by "Perry" with
Limson as shipper or consignee in the total amount of P61,981.50, witness
Cabling testified that the signatures therein are those of Cipriano Magtibay
alias "Perry" who took delivery of the cargoes stated therein after signing the
delivery receipts. He testified thus:
These are all the signatures of Perry. I know it to be his because
oftentimes he goes there to get the deliver y orders and he signed as
"Perry" in my presence. His real name is Cipriano Magtibay. I
allowed delivery of the Cargoes to him because he was the regular
representative of Mr. Limson." (t.s.n., pp. 12-13, Nov. 19, 1964)
On the other hand, Nolasco Cruz Ilagan, delivery order clerk of Compania
Maritima, testified to this wise:
In issuing these delivery orders, I get the data from the manifests or
from the bills of lading. I know the defendant Limson in this case. He
is now in the Court room. I knew him since the middle of 1956 up to
1961 when I was assigned in the Terminal Office of Maritima. I came
to know him because Mr. Cabling introduced to us that he is a
representatives that signed the delivery receipts and took delivery of the
cargoes thereof were Limson's agents. Ilagan testified thus:
In all occasions that I withdrew the cows and carabaos of Mr. Tinoco
for which I signed the delivery receipts there were corresponding
original bills of lading or copies of the bills of lading which were made
even if the original bills could not be produced (t.s.n. pp. 2-3, May 6,
1966). Mr. Limson signed these bills of lading that I have presented
to him. Those that were not, I was the one who signed it, When the
unloading takes place at nights I just call him up by telephone. (t.s.n.,
p. 3, Id).
For the shipments of Mr. Marcelino Tinoco, I was the one who gets
the delivery order. But if I am not around, my companions get them.
However, if he is there at the pier, he himself receives his shipments.
(t.s.n. pp. 9-11, Id.) All shipments of Mr. Tinoco are vales of Mr.
Limson. If I do not have the bills of lading, that were signed by Mr.
Limson, I can still get the delivery in this manner. If the shipments
takes place at night and I could not get the signature of Mr. Limson, I
simply call him up thru the telephone who in turn directs me to call on
Mr. Cabling and Mr. Cabling used to tell me to sign the bills of lading
because he and Mr. Limson had already an arrangement. " (t.s.n. pp.
17-18, Id.)
Plaintiff also presented Exhibits B-276 to 1018 in the total amount of
P81,462.92, bills of lading not in the name of defendant Limson, but which
Limson himself signed, thereby proving that defendant took delivery of
shipments in the names of others, shipper or consignee, and which the
corresponding charges were debited to his account.
The simpler way to determine how much is the total claim of plaintiff against
defendant is to compute the amount of the freight on the face of the bills of
lading supporting the statement of account attached to the complaint and
deducting therefrom the rebates to which defendant is entitled to under the
special arrangement made between defendant and Mr. F.J. Garay of
Compania Maritima dated March 27, 1957. According to the statement of
account submitted by plaintiff and attached to the complaint, the total of
freight charges due from defendant is P698,159.14 (Annex "A" Complaint).
This is the amount due based on what is charged in the bills of lading. It did
not reflect the rebates because said bills of lading were prepared in the field
offices of plaintiff where the special arrangement entitling defendant to rebate
had not been transmitted.
According to the report of the Commissioner, the total rebate to which
defendant will be entitled to is P127,418.89 (Supplementary Report dated
January 27, 1964, Exhibit 7-B). According to said Commissioner, he arrived
at such amount in the following manner:
I selected the freightage from Davao comprised of 340 shipments
from October 15, 1957, up to February 11, 1961. 340 shipments, and
I used P4.50 as the freightage from Davao to Manila. Now I used the
P5.00 as you requested, and that is the difference.
could not be surrendered because they have not yet been received by the
consignee, the delivery of the cargo was nevertheless authorized and a
delivery receipt was prepared on the basis of the ship's cargo manifests or
the ship's copy of the bills of lading. This only shows that the ship's cargo
manifests or the ship's copy of the bills of lading can be accepted as
evidence of shipments made by defendant since he was allowed to accept
delivery of said shipments even without presented his copy of the bill of
lading.
By way of recapitulation, the total of freight charges due plaintiff
based on the freight charges appearing on the face of the bills of
lading supporting the statement of account attached to the complaint
is P698,159.14. Deduct from said
amount the following:
(1) Rebate................................................................... P111,291.18
(2) Cash payments made by defendant................. 235,007.85
(3) Freight adjustment.............................................. 1,138.45
(4) Cost of foodstuffs purchased from defendant..411,982.35
Total.......................... P759,419.83
would show a balance in favor of defendant of P61,260.69.
Presented otherwise, the total freight charges due plaintiff after deducting the
rebate to which defendant is entitled to is P586,867.96. (.698,159.14 minus
P111,291.18).
Against said freight charges of P586,867.96 defendant should be credited:
(1) Cash payment............................... P235,007.85
(2) Freight adjustment........................ 1,138.45
(3) Cost of foodstuffs........................ P411,982.35
Total............................. P648,128.65
giving a balance in favor of defendant of P61,260.69.
WHEREFORE, the decision of the Court a quo is hereby MODIFIED and
judgment rendered against plaintiff on defendant's counterclaim for the
amount of P61,260.69. In an other respects, the appealed decision is hereby
AFFIRMED. No pronouncement as to cost.
SO ORDERED.
That during the period from February 22, to February 26, 1975, in the
Municipality of Malolos, Province of Bulcan, Philippines, and within
the jurisdiction of this Honorable Court, the said accused Cecilia Que
Yabut, as treasurer of the Yabut Transit Line, by means of false
pretenses and pretending to have sufficient funds in the Merchants
Banking Corporation, located and doing business in Caloocan City,
prepared issued and make out Check Nos. CB-19035 B, CB-190396
and CB-190397, dated February 22, 1975, February 24, 1975 and
February 26, 1975, in the total sum of P6,568.94, drawn against the
Merchants Banking Corporation, payable to Freeway Tires Supply,
owned and operated by Alicia P. Andan, in payment of articles and
merchandise delivered to and received by said accused, gave and
delivered the said checks to the said Freeway Tires Supply, the said
accused Cecilia Que Yabut well knowing that at the time there was
no or insufficient funds in the said Merchants Banking Corporation,
and upon presentation of the said checks to the bank, the checks
were dishonored and inspite of repeated demands by the owner of
the Freeway Tires Supply to deposit the necessary funds to cover
the checks within the reglementary period enjoined by law, failed and
refused to do so, to the damage and prejudice of Alicia P. Andan,
owner and operator of the Freeway Tires Supply, in the total amount
of P6,568.94.
Instead of entering a plea, respondent Cecilia Que Yabut filed a motion to
quash on September 1, 1975, contending that the acts charged do not
constitute the offense as there is no allegation that the postdated checks
were issued and delivered to the complainant prior to or simultaneously with
the delivery of the merchandise, the crime of estafa not being indictable
,when checks are postdated or issued in payment of pre-existing obligation;
and the venue was improperly laid in Malolos, Bulacan, because the
postdated checks were issued and delivered to, and received by, the
complainant in the City of Caloocan, where she (respondent Que Yabut)
holds office.
An opposition was interposed by the People, maintaining that the new law on
checks (Rep. Act 4885, amending Art. 315, par. 2 (d), Revised Penal Code),
penalizes the postdating or issuance thereof in payment of pre-existing
obligation and that the Malolos court can exercise jurisdiction over the case,
since the last ingredient of the offense, i.e., damage, transpired in Bulacan
(residence of complainant) after the dishonor of the checks for lack of funds.
Judge Jesus de Vega quashed the information, as prayed for by respondent
Que Yabut, on November 10, 1975 for the reason "that the proper venue in
this case is Caloocan City and not Bulacan." Whether estafa lies for
postdating or issuing a check in payment of a pre-existing obligation was not
by respondent Judge.
The People's motion for reconsideration of this dismissal order was denied
on January 12, 1976.
The other private respondent, Germiniano Yabut, Jr. (L-42902), husband of
respondent Cecilia Que Yabut, stood charged in criminal case 1405-M before
the Court of First Instance of Bulacan, presided over by Judge Edgardo L.
Paras, of the crime of estafa under Art. 315, par. 2 (d) of the Revised Penal
Code in that:
(D)uring the period from February 23 to April 9, 1975, in the
municipality of Malolos, Province of Bulacan, Philippines, and within
the jurisdiction of this Honorable Court, the said accused Geminiano
Yabut, Jr., as presided of the Yabut Transit Line, by means of false
pretenses and pretending to have sufficient funds in the Merchants
Banking Corporation and Manufacturers Bank and Trust Company,
located and doing business in Caloocan City, prepared, issued and
make out Check Nos. CB-192042 B, CB-192043 B, 423123, CB191988 B, 423124, CB-192044 B, CB-192045 B, CB-193737 B, CB193738 B, CB-193739 B, CB-199953 B, CB-199954 B, CB-199955
B, and CB-199956 B, dated February 23, 26, 27, March 1, 3, 10, 11,
12, April 4, 7, 8 and 9, 1975 in the total sum of P37,206.00,drawn
against the Merchants Banking Corporation and Manufacturers Bank
and Trust Company, payable to the Free Tires Supply and Free
Caltex Station, owned and operated by Alicia P. Andan, in payment
articles and merchandise delivered to and received by said accused,
gave and delivered the said checks to said Freeway Tires Supply
and Freeway Caltex Station, the said accused Geminiano Yabut, Jr.
well knowing that at the time there was no or insufficient funds in the
said Merchants Banking Corporation and Manufacturers Bank and
Trust Company, and upon presentation of the said checks to the
bank, the checks were dishonored and inspite of repeated demands
by the owner of the Freeway Tires Supply and Freeway Caltex
Station to deposit the necessary funds to cover the cheeks within the
reglementary period enjoined by law, failed and refused to do so, to
the damage and Prejudice of Alicia P. Andan, owner and operator of
the Freeway Tires Supply and Freeway Caltex Station in the total
sum of P37,206.00.
Like his wife, respondent Geminiano Jr. moved to quash the information on
two grounds: (1) the facts recited do not constitute an offense because the
checks were issued in payment of a pre-existing obligation; and (2) the
venue was improperly laid, considering that the postdated checks were
issued and delivered to and received by the complainant in City of Caloocan,
where respondent holds office.
On October 13, 1975, Judge Paras quashed the information because "(t)he
elements of the crime (issuance of the rubber check, attempted encashment,
and refusal to honor) alleged in the Information all took place within the
territorial jurisdiction, not of Bulacan, but of Caloocan City."
The People moved for reconsideration, but on February 9, 1976, the motion
was denied.
Hence, the two petitions for review on certiorari were filed by the People of
the Philippines.
We find both petitions to be impressed with merits.
1. Estafa by postdating or issuing a bad check under Art. 315, par. 2 (d) of
the Revised Penal Code may be a transitory or continuing offense. 1 Its basic
elements of deceit and damage 2 may independently arise in separate
places. In the event of such occurrence, the institution of the criminal action
in either place is legally allowed. Section 14(a), Rule 110 of the Revised
Rules of Court provides: "In all criminal prosecutions the action shall be
instituted and tried in the Court of the municipality or province wherein the
offense was committed or any one of the essential ingredients thereof took
place." The theory is that a person indicted with a transitory offense may be
validly tried in any jurisdiction where the offense was in part
committed. 3 However, if all the acts material and essential to the crime and
requisite of its consummation occurred in one municipality or province, the
court of that municipality or province has the sole jurisdiction to try the case.
The estafa charged in the two informations involved in the case before Us
appears to be transitory or continuing in nature. Deceit has taken place in
Malolos, Bulacan, while the damage in Caloocan City, where the checks
were dishonored by the drawee banks there. Jurisdiction can, therefore, be
entertained by either the Malolos court or the Caloocan court. While the
subject checks were written, signed, or dated in Caloocan City, they were not
completely made or drawn there, but in Malolos, Bulacan, where they were
uttered and delivered. That is the place of business and residence of the
payee. The place where the bills were written, signed, or dated does not
necessarily fix or determine the place where they were executed. What is of
decisive importance is the delivery thereof. The delivery of the instrument is
the final act essential to its consummation as an obligation. 4 An undelivered
bill or note is inoperative. Until delivery, the contract is revocable. 5 And the
issuance as well as the delivery of the check must be to a person who takes
it as a holder, which means "(t)he payee or indorsee of a bill or note, who is
in possession of it, or the bearer thereof." 6 Delivery of the check signifies
transfer of possession, whether actual or constructive, from one person to
another with intent to transfer title thereto. 7 Thus, the penalizing clause of
the provision of Art. 315, par. 2 (d) states: "By postdating a check, or issuing
a check in payment of an obligation when the offender had no funds in the
bank, or his funds deposited therein were not sufficient to cover the amount
of the check." Clearly, therefore, the element of deceit thru the issuance and
delivery of the worthless checks to the complainant took place in Malolos,
Bulcan, conferring upon a court in that locality jurisdiction to try the case.
Modesto Yambao's receipt of the bad checks from Cecilia Que Yabut or
Geminiano Yabut Jr. in Caloocan City cannot, contrary to the holding of the
respodent Judges, be licitly taken as delivery of the checks to the
complainant Alicia P. Andan at Caloocan City to fix the venue there. He did
not take delivery of the checks as holder, i.e., as "payee" or "indorse". And
there appears to be no contract of agency between Yambao and Andan so as
to bind the latter for the acts of the former. Alicia P. Andan declared in that
sworn testimony before the investigating fiscal that Yambao is but her
"messenger"
or
"part-time
employee." 8 There
was
no special
fiduciaryrelationship that permeated their dealings. For a contract of agency
to exist, the consent of both parties is essential, the principal consent of both
parties is essential, the principal consents that the other party, the agent,
shall act on his behalf, and the agent consents so to act. 9 It must exist as
a fact. The law makes no presumption thereof. The person alleging it has the
burden of proof to show, not only the fact of its existence, but also its nature
and extent. 10 This is more imperative when it is considered that the
transaction dealt with involves checks, which are not legal tender, and
the creditor may validly refuse the same as payment of obligation. 11
Furthermore, the place of business of the offended party, the Freeway Tires
Supply and Freeway Caltex Station, is at Malolos, Bulacan, from where the
tire and gas purchases were amade by the two private respondents. As a
consequence, payment thereof should be considered effected at Malolos,
Bulacan. "(I)f the undertaking is to deliver a determinate thing, the payment
shall be made wherever the thing might be at the moment the obligation was
constituted. 12 The receipt by the two private respondents at Caloocan City of
the tires and gas supplies from Malolos, Bulacan, signifies but the
consummation of the contract between the parties. It was the result of an
obligationpreviously contracted at Malolos, Bulacan. 13 The averments in the
informations do not indicate that the complainant is an ambulant peddler of
tires and gas, but maintains a fixed and determinate place of business at
Malolos, Bulacan. Obligations, therefore, contracted as regards her business
must presumptively be at her place of business.
2. In general terms, a prosecution for issuing a worthless check with intent to
defraud is in the county where the check was uttered and delivered. 14 Thus,
where a check was drawn in Merced County and made payable at a Merced
County bank, but delivered to a merchant in Sacramento County by the
drawer's agent, the Sacramento County courts and had jurisdiction of a
prosecution against the drawer for uttering a check without funds or credit
with intent to defraud. 15 The venue of the offense lies at the place where the
check was executed and delivered to the payee. 16 Since in the instant case it
was in Malolos, Bulacan where the checks were uttered and delivered to
complaint Andan, at which place, her business and residence were also
located, the criminal prosecution of estafa may be lodged therein. 17 As earlier
pointed out, the giving of the checks by the two private respondents in
Caloocan City to Modesto Yambo cannot be treated as valid delivery of the
checks, because Yambo is a mere "messenger" or "part-time employee" and
not an agent of complaint Alicia P. Andan.
3. The next point of inquiry is whether or not the postdating or issuing of a
worthless check in payment of a pre-existing obligation constitutes estafa
under Art. 315, par. 2 (d) of the Revised Penal Code. We feel, however, that
due to the absence of concrete evidence on the specific nature of the
obligation assumed or supposedly discharged by the issuance of the bad
checks, resolution of this controversial issue on the basis of the averments in
the criminal informations alone is not yet ripe. As revealed by the pleadings,
the parties are at divergence on the character of the obligation for which the
private respondents issued the checks intended as payment thereof. Private
respondents maintain that the obligation is a pre-existing one. The
prosecution, on the other hand, represented to the trial courts in its
Opposition to the Motions to Quash: "We will prove by our evidence that said
checks are not in payment of a pre-existing obligation." 18 The deferment of
the resolution becomes more imperative when it is considered that the
question raised is one of first impression and of consequential far-ranging
effects on transactions in checks.
4. Ad interim, We hold that the facts charged in the informations against
private respondents, contrary to their claim, constitute estafa under Art. 315,
par. 2 (d) of the Revised Penal Code. In considering a motion to quash based
on the ground "(t)hat the facts charged do not constitute an offense," 19 the
point of resolution is whether the facts alleged, if hypothetically admitted,
would meet the essential elements of the offense as defined in the law. 20 The
facts alleged in the criminal charge should be taken as they are. 21 An
analysis of the two informations involved in the present case convinces Us
that the facts charged therein substantially constitute the integral elements of
the offense as defined in the law. And the averments in the two informations
sufficiently inform the two private respondents of the nature and cause of the
accusations against them, thereby defeating any constitutional objection of
lack of notice. 22
ACCORDINGLY, the appealed orders of the respondent trial courts ordering
the quashal of the estafa informations against the two private respondents in
the petitions at bar are hereby reversed and set aside. The informations, as
they are, substantially conform with the crime charged as defined in the law.
Let the arraignment of the private respondents in the criminal cases below be
set at the earliest date and, thereafter, the trial on the merits to proceed
immediately. No costs.
SO ORDERED.
Makasiar, and Antonio JJ., concur.
Muoz Palma, J., concur in the results.
EN BANC
G.R. No. L-19001
any plant that he could sell or any customer that he could find he would be
paid a commission of 10 per cent for his services, if the sale was
consummated. Among other persons. Montelibano interviews the defendant,
and, through his efforts, one of the "Matthews" plants was sold by the plaintiff
to the defendant, and was shipped from Manila to Iloilo, and later installed on
defendant's premises after which, without the knowledge of the plaintiff, the
defendant paid the purchase price to Montelibano. As a result, plaintiff
commenced this action against the defendant, alleging that about August 18,
1920, it sold and delivered to the defendant the electric plant at the agreed
price of P2,513.55 no part of which has been paid, the demands judgment for
the amount with interest from October 20, 1920.
For answer, the defendant admits the corporation of the plaintiff, and denies
all other material allegations of the complaint, and, as an affirmative defense,
alleges "that on or about the 18th of August, 1920, the plaintiff sold and
delivered to the defendant a certain electric plant and that the defendant paid
the plaintiff the value of said electric plant, to wit: P2,513.55."
Upon such issues the testimony was taken, and the lower court rendered
judgment for the defendant, from which the plaintiff appeals, claiming that the
court erred in holding that the payment to A. C. Montelibano would discharge
the debt of defendant, and in holding that the bill was given to Montelibano
for collection purposes, and that the plaintiff had held out Montelibano to the
defendant as an agent authorized to collect, and in rendering judgment for
the defendant, and in not rendering judgment for the plaintiff.
JOHNS, J.:
The testimony is conclusive that the defendant paid the amount of plaintiff's
claim to Montelibano, and that no part of the money was ever paid to the
plaintiff. The defendant, having alleged that the plaintiff sold and delivered
the plant to him, and that he paid the plaintiff the purchase price, it devolved
upon the defendant to prove the payment to the plaintiff by a preponderance
of the evidence.
It appears from the testimony of H. E. Keeler that he was president of the
plaintiff and that the plant in question was shipped from Manila to Iloilo and
consigned to the plaintiff itself, and that at the time of the shipment the
plaintiff sent Juan Cenar, one of its employees, with the shipment, for the
purpose of installing the plant on defendant's premises. That plaintiff gave
Cenar a statement of the account, including some extras and the expenses
of the mechanic, making a total of P2,563,95. That Montelibano had no
authority from the plaintiff to receive or receipt for money. That in truth and in
fact his services were limited and confined to the finding of purchasers for the
"Matthews" plant to whom the plaintiff would later make and consummate the
sale. That Montelibano was not an electrician, could not install the plant and
did not know anything about its mechanism.
Cenar, as a witness for the plaintiff, testified that he went with shipment of the
plant from Manila to Iloilo, for the purpose of installing, testing it, and to see
that everything was satisfactory. That he was there about nine days, and that
he installed the plant, and that it was tested and approved by the defendant.
He also says that he personally took with him the statement of account of the
plaintiff against the defendant, and that after he was there a few days, the
defendant asked to see the statement, and that he gave it to him, and the
defendant said, "he was going to keep it." I said that was all right "if you
want." "I made no effort at all to collect the amount from him because Mr.
Rodriguez told me he was going to pay for the plant here in Manila." That
after the plant was installed and approved, he delivered it to the defendant
and returned to Manila.
The only testimony on the part of the defendant is that of himself in the form
of a deposition in which he says that Montelibano sold and delivered the
plant to him, and "was the one who ordered the installation of that electrical
plant," and he introduced in evidence as part of his deposition a statement
and receipt which Montelibano signed to whom he paid the money. When
asked why he paid the money to Montelibano, the witness says:
Because he was the one who sold, delivered, and installed the
electrical plant, and he presented to me the account, Exhibits A and
A-I, and he assured me that he was duly authorized to collect the
value of the electrical plant.
The receipt offered in evidence is headed:
STATEMENT
The answer alleges and the receipt shows upon its face that the plaintiff sold
the plant to the defendant, and that he bought it from the plaintiff. The receipt
is signed as follows:
Received payment
HARRY E. KEELER ELECTRIC CO. Inc.,
Recibi
(Sgd.) A. C. MONTELIBANO.
There is nothing on the face of this receipt to show that Montelibano was the
agent of, or that he was acting for, the plaintiff. It is his own personal receipt
and his own personal signature. Outside of the fact that Montelibano
received the money and signed this receipt, there is no evidence that he had
any authority, real or apparent, to receive or receipt for the money. Neither is
there any evidence that the plaintiff ever delivered the statement to
Montelibano, or authorized anyone to deliver it to him, and it is very apparent
that the statement in question is the one which was delivered by the plaintiff
to Cenar, and is the one which Cenar delivered to the defendant at the
request of the defendant.
The evidence of the defendant that Montelibano was the one who sold him
the plant is in direct conflict with his own pleadings and the receipt statement
which he offered in evidence. This statement also shows upon its face that
P81.60 of the bill is for:
To Passage round trip, 1st Class @
P40.80 a trip ........................................... P81.60.
Plus Labor @ P5.00 per day
Machine's transportation ................. 9.85.
This claim must be for the expenses of Cenar in going to Iloilo from Manila
and return, to install the plant, and is strong evidence that it was Cenar and
not Montelibano who installed the plant. If Montelibano installed the plant, as
defendant claims, there would not have been any necessity for Cenar to
make this trip at the expense of the defendant. After Cenar's return to Manila,
the plaintiff wrote a letter to the defendant requesting the payment of its
account, in answer to which the defendant on September 24 sent the
following telegram:
The person dealing with the agent must also act with ordinary
prudence and reasonable diligence. Obviously, if he knows or has
good reason to believe that the agent is exceeding his authority, he
cannot claim protection. So if the suggestions of probable limitations
be of such a clear and reasonable quality, or if the character
assumed by the agent is of such a suspicious or unreasonable
nature, or if the authority which he seeks to exercise is of such an
unusual or improbable character, as would suffice to put an ordinarily
prudent man upon his guard, the party dealing with him may not shut
his eyes to the real state of the case, but should either refuse to deal
with the agent at all, or should ascertain from the principal the true
condition of affairs. (Mechem on Agency, vol. I, sec 752.)
And not only must the person dealing with the agent ascertain the
existence of the conditions, but he must also, as in other cases, be
able to trace the source of his reliance to some word or act of the
principal himself if the latter is to be held responsible. As has often
been pointed out, the agent alone cannot enlarge or extend his
authority by his own acts or statements, nor can he alone remove
limitations or waive conditions imposed by his principal. To charge
the principal in such a case, the principal's consent or concurrence
must be shown. (Mechem on Agency, vol. I, section 757.)
This was a single transaction between the plaintiff and the defendant.lawph!
l.net
Applying the above rules, the testimony is conclusive that the plaintiff never
authorized Montelibano to receive or receipt for money in its behalf, and that
the defendant had no right to assume by any act or deed of the plaintiff that
Montelibano was authorized to receive the money, and that the defendant
made the payment at his own risk and on the sole representations of
Montelibano that he was authorized to receipt for the money.
The judgment of the lower court is reversed, and one will be entered here in
favor of the plaintiff and against the defendant for the sum of P2,513.55 with
interest at the legal rate from January 10, 1921, with costs in favor of the
appellant. So ordered.
On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the
Regional Trial Court of Malolos, Bulacan against Deganos and Brigida D. Luz
for recovery of a sum of money and damages, with an application for
preliminary attachment.[4] Ernesto Luz was impleaded therein as the spouse
of Brigida.
Four years later, or on March 29, 1994, Deganos and Brigida D. Luz
were charged with estafa[5] in the Regional Trial Court of Malolos, Bulacan,
which was docketed as Criminal Case No. 785-M-94. That criminal case
appears to be still pending in said trial court.
During the trial of the civil case, petitioners claimed that Deganos acted
as the agent of Brigida D. Luz when he received the subject items of jewelry
and, because he failed to pay for the same, Brigida, as principal, and her
spouse are solidarily liable with him therefor.
On the other hand, while Deganos admitted that he had an unpaid
obligation to petitioners, he claimed that the same was only in the sum
of P382,816.00 and not P725,463.98. He further asserted that it was he
alone who was involved in the transaction with the petitioners; that he neither
acted as agent for nor was he authorized to act as an agent by Brigida D.
Luz, notwithstanding the fact that six of the receipts indicated that the items
were received by him for the latter. He further claimed that he never delivered
any of the items he received from petitioners to Brigida.
Brigida, on her part, denied that she had anything to do with the
transactions between petitioners and Deganos. She claimed that she never
authorized Deganos to receive any item of jewelry in her behalf and, for that
matter, neither did she actually receive any of the articles in question.
After trial, the court below found that only Deganos was liable to
petitioners for the amount and damages claimed. It held that while Brigida D.
Luz did have transactions with petitioners in the past, the items involved were
already paid for and all that Brigida owed petitioners was the sum
Both the Court of Appeals and the trial court, however, found as a fact
that the aforementioned letters concerned the previous obligations of Brigida
to petitioners, and had nothing to do with the money sought to be recovered
in the instant case. Such concurrent factual findings are entitled to great
weight, hence, petitioners cannot plausibly claim in this appellate review that
the letters were in the nature of acknowledgments by Brigida that she was
the principal of Deganos in the subject transactions.
On the other hand, with regard to the testimony of Brigida admitting
delivery of the gold to her, there is no showing whatsoever that her statement
referred to the items which are the subject matter of this case. It cannot,
therefore, be validly said that she admitted her liability regarding the same.
Petitioners insist that Deganos was the agent of Brigida D. Luz as the
latter clothed him with apparent authority as her agent and held him out to
the public as such, hence Brigida can not be permitted to deny said authority
to innocent third parties who dealt with Deganos under such
belief. [13] Petitioners further represent that the Court of Appeals recognized in
its decision that Deganos was an agent of Brigida.[14]
The evidence does not support the theory of petitioners that Deganos
was an agent of Brigida D. Luz and that the latter should consequently be
held solidarily liable with Deganos in his obligation to petitioners. While the
quoted statement in the findings of fact of the assailed appellate decision
mentioned that Deganos ostensibly acted as an agent of Brigida, the actual
conclusion and ruling of the Court of Appeals categorically stated that,
(Brigida Luz) never authorized her brother (Deganos) to act for and in her
behalf in any transaction with Petitioners xx x. [15] It is clear, therefore, that
even assuming arguendo that Deganos acted as an agent of Brigida, the
latter never authorized him to act on her behalf with regard to the
transactions subject of this case.
The Civil Code provides:
Art. 1868. By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with the
consent or authority of the latter.
The basis for agency is representation. Here, there is no showing that
Brigida consented to the acts of Deganos or authorized him to act on her
behalf, much less with respect to the particular transactions
render academic or preempt the same or, worse, create two conflicting
rulings. [18]
The records show that neither an express nor an implied agency was
proven to have existed between Deganos and Brigida D. Luz. Evidently,
petitioners, who were negligent in their transactions with Deganos, cannot
seek relief from the effects of their negligence by conjuring a supposed
agency relation between the two respondents where no evidence supports
such claim.
It is worth noting that this civil case was instituted four years before the
criminal case for estafa was filed, and that although there was a move to
consolidate both cases, the same was denied by the trial
court. Consequently, it was the duty of the two branches of the Regional Trial
Court concerned to independently proceed with the civil and criminal
cases. It will also be observed that a final judgment rendered in a civil action
absolving the defendant from civil liability is no bar to a criminal action. [19]
Petitioners next allege that the Court of Appeals erred in ignoring the
fact that the decision of the court below, which it affirmed, is null and void as
it contradicted its ruling in CA-G.R. SP No. 39445 holding that there is
sufficient evidence/proof against Brigida D. Luz and Deganos for estafa in
the pending criminal case. They further aver that said appellate court erred in
ruling against them in this civil action since the same would result in an
inevitable conflict of decisions should the trial court convict the accused in
the criminal case.
Petitioners surprisingly postulate that the Court of Appeals had lost its
jurisdiction to issue the denial resolution dated August 18, 1997, as the same
was tainted with irregularities and badges of fraud perpetrated by its court
officers. [21] They charge that said appellate court, through conspiracy and
fraud on the part of its officers, gravely abused its discretion in issuing that
resolution denying their motion for reconsideration. They claim that said
resolution was drafted by the ponente, then signed and issued by the
members of the Eleventh Division of said court within one and a half days
from the elevation thereof by the division clerk of court to the office of
the ponente.
It is the thesis of petitioners that there was undue haste in issuing the
resolution as the same was made without waiting for the lapse of the ten-day
period for respondents to file their comment and for petitioners to file their
reply. It was allegedly impossible for the Court of Appeals to resolve the issue
in just one and a half days, especially because its ponente, the late Justice
City. The term of the lease was for one (1) year commencing from May 16,
1974 up to May 15, 1975. During this period, private respondent was granted
an option to purchase for the amount of P3,000.00 per square
meter. Thereafter, the lease shall be on a per month basis with a monthly
rental of P3,000.00.
For failure of private respondent to pay the increased rental
of P8,000.00 per month effective June 1976, petitioners filed an action for
ejectment (Civil Case No. VIII-29155) on November 10, 1976 before the then
City Court (now Metropolitan Trial Court) of Quezon City, Branch VIII. On
November 22, 1982, the City Court rendered judgment [2] ordering private
respondent to vacate the leased premises and to pay the sum
of P624,000.00 representing rentals in arrears and/or as damages in the
form of reasonable compensation for the use and occupation of the premises
during the period of illegal detainer from June 1976 to November 1982 at the
monthly rental of P8,000.00, less payments made, plus 12% interest per
annum from November 18, 1976, the date of filing of the complaint, until fully
paid, the sum of P8,000.00 a month starting December 1982, until private
respondent fully vacates the premises, and to pay P20,000.00 as and by way
of attorney's fees.
Private respondent filed a certiorari petition praying for the issuance of a
restraining order enjoining the enforcement of said judgment and dismissal of
the case for lack of jurisdiction of the City Court.
On September 26, 1984, the then Intermediate Appellate Court [3] (now
Court of Appeals) rendered a decision[4] stating that:
"x x x, the alleged question of whether petitioner was granted an
extension of the option to buy the property; whether such option, if
any, extended the lease or whether petitioner actually paid the
alleged P300,000.00 to Fidela Dizon, as representative of private
respondents in consideration of the option and, whether petitioner
thereafter offered to pay the balance of the supposed purchase price,
are all merely incidental and do not remove the unlawful detainer
case from the jurisdiction of respondent court. In consonance with
the ruling in the case of Teodoro, Jr. vs. Mirasol (supra), the above
matters may be raised and decided in the unlawful detainer suit as,
to rule otherwise, would be a violation of the principle prohibiting
multiplicity of suits. (Original Records, pp. 38-39)."
receipt was issued, was the operative act that gave rise to a perfected
contract of sale, and that for failure of petitioners to deny receipt thereof,
private respondent can therefore assume that Alice A. Dizon, acting as agent
of petitioners, was authorized by them to receive the money in their
behalf. The Court of Appeals went further by stating that in fact, what was
entered into was a "conditional contract of sale" wherein ownership over the
leased property shall not pass to the private respondent until it has fully paid
the purchase price. Since private respondent did not consign to the court the
balance of the purchase price and continued to occupy the subject premises,
it had the obligation to pay the amount of P1,700.00 in monthly rentals until
full payment of the purchase price. The dispositive portion of said decision
reads:
"WHEREFORE, the appealed decision in Case No. 46487 is
AFFIRMED. The appealed decision in Case No. 45541 is, on the
other hand, ANNULLED and SET ASIDE. The defendants-appellees
are ordered to execute the deed of absolute sale of the property in
question, free from any lien or encumbrance whatsoever, in favor of
the plaintiff-appellant, and to deliver to the latter the said deed of
sale, as well as the owner's duplicate of the certificate of title to said
property upon payment of the balance of the purchase price by the
plaintiff-appellant. The plaintiff-appellant is ordered to payP1,700.00
per month from June 1976, plus 6% interest per annum, until
payment of the balance of the purchase price, as previously agreed
upon by the parties.
SO ORDERED."
Upon denial of the motion for partial reconsideration (Civil Case No. Q45541) by respondent Court of Appeals, [10] petitioners elevated the
case via petition for certiorari questioning the authority of Alice A. Dizon as
agent of petitioners in receiving private respondent's partial payment
amounting to P300,000.00 pursuant to the Contract of Lease with Option to
Buy. Petitioners also assail the propriety of private respondent's exercise of
the option when it tendered the said amount on June 20, 1975 which
purportedly resulted in a perfected contract of sale.
G. R. NO. 124741:
Petitioners filed with respondent Court of Appeals a motion to remand
the records of Civil Case No. 38-29155 (ejectment case) to the Metropolitan
Trial Court (MTC), then City Court of Quezon City, Branch 38, for execution
such case, a demand to vacate is not even necessary for judicial action after
the expiration of every month.[20]
When private respondent failed to pay the increased rental of P8,000.00
per month in June 1976, the petitioners had a cause of action to institute an
ejectment suit against the former with the then City Court. In this regard, the
City Court (now MTC) had exclusive jurisdiction over the ejectment suit. The
filing by private respondent of a suit with the Regional Trial Court for specific
performance to enforce the option to purchase did not divest the then City
Court of its jurisdiction to take cognizance over the ejectment case. Of note is
the fact that the decision of the City Court was affirmed by both the
Intermediate Appellate Court and this Court.
Second. Having failed to exercise the option within the stipulated oneyear period, private respondent cannot enforce its option to purchase
anymore. Moreover, even assuming arguendo that the right to exercise the
option still subsists at the time private respondent tendered the amount on
June 20, 1975, the suit for specific performance to enforce the option to
purchase was filed only on October 7, 1985 or more than ten (10) years after
accrual of the cause of action as provided under Article 1144 of the New Civil
Code.[21]
In this case, there was a contract of lease for one (1) year with option to
purchase. The contract of lease expired without the private respondent, as
lessee, purchasing the property but remained in possession thereof. Hence,
there was an implicit renewal of the contract of lease on a monthly basis. The
other terms of the original contract of lease which are revived in the implied
new lease under Article 1670 of the New Civil Code[22] are only those terms
which are germane to the lessees right of continued enjoyment of the
property leased.[23] Therefore, an implied new lease does not ipso facto carry
with it any implied revival of private respondent's option to purchase (as
lessee thereof) the leased premises. The provision entitling the lessee the
option to purchase the leased premises is not deemed incorporated in the
impliedly renewed contract because it is alien to the possession of the
lessee. Private respondents right to exercise the option to purchase expired
with the termination of the original contract of lease for one year. The
rationale of this Court is that:
This is a reasonable construction of the provision, which is based on the
presumption that when the lessor allows the lessee to continue enjoying
possession of the property for fifteen days after the expiration of the contract
he is willing that such enjoyment shall be for the entire period corresponding
to the rent which is customarily paid in this case up to the end of the month
because the rent was paid monthly.Necessarily, if the presumed will of the
parties refers to the enjoyment of possession the presumption covers the
other terms of the contract related to such possession, such as the amount of
rental, the date when it must be paid, the care of the property, the
responsibility for repairs, etc. But no such presumption may be indulged in
with respect to special agreements which by nature are foreign to the right of
occupancy or enjoyment inherent in a contract of lease. [24]
Third. There was no perfected contract of sale between petitioners and
private respondent. Private respondent argued that it delivered the check
of P300,000.00 to Alice A. Dizon who acted as agent of petitioners pursuant
to the supposed authority given by petitioner Fidela Dizon, the payee
thereof. Private respondent further contended that petitioners filing of the
ejectment case against it based on the contract of lease with option to buy
holds petitioners in estoppel to question the authority of petitioner Fidela
Dizon. It insisted that the payment of P300,000.00 as partial payment of the
purchase price constituted a valid exercise of the option to buy.
Under Article 1475 of the New Civil Code, the contract of sale is
perfected at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price. From that moment, the parties
may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts. Thus, the elements of a contract of sale are
consent, object, and price in money or its equivalent. It bears stressing that
the absence of any of these essential elements negates the existence of a
perfected contract of sale. Sale is a consensual contract and he who alleges
it must show its existence by competent proof.[25]
In an attempt to resurrect the lapsed option, private respondent
gave P300,000.00 to petitioners (thru Alice A. Dizon) on the erroneous
presumption that the said amount tendered would constitute a perfected
contract of sale pursuant to the contract of lease with option to buy. There
was no valid consent by the petitioners (as co-owners of the leased
premises) on the supposed sale entered into by Alice A. Dizon, as petitioners
alleged agent, and private respondent. The basis for agency is
representation and a person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent. [26] As provided in
Article 1868 of the New Civil Code, [27] there was no showing that petitioners
consented to the act of Alice A. Dizon nor authorized her to act on their
behalf with regard to her transaction with private respondent. The most
prudent thing private respondent should have done was to ascertain the
extent of the authority of Alice A. Dizon. Being negligent in this regard, private
respondent cannot seek relief on the basis of a supposed agency.
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.
EN BANC
G.R. No. 2962
A written contract dated May 25, 1904, was introduced in evidence, from
which it appears that one Galmes, the former owner of the business now
know as the "Washington Cafe," subrented the building wherein the business
was conducted, to the defendant for a period of one year, for the purpose of
carrying on that business, the defendant obligating himself not to sublet or
subrent the building or the business without the consent of the said Galmes.
This contract was signed by the defendant and the name of Ricardo Flores
appears thereon as a witness, and attached thereto is an inventory of the
furniture and fittings which also is signed by the defendant with the word
"sublessee" (subarrendatario) below the name, and at the foot of this
inventory the word "received" (recibo) followed by the name "Ricardo Flores,"
with the words "managing agent" (el manejante encargado) immediately
following his name.
Galmes was called to the stand and identified the above- described
document as the contract and inventory delivered to him by the defendant,
and further stated that he could not tell whether Flores was working for
himself or for some one else that it to say, whether Flores was managing
the business as agent or sublessee.
The defendant did not go on the stand nor call any witnesses, and relies
wholly on his contention that the foregoing facts are not sufficient to establish
the fact that he received the goods for which payment is demanded.
In the absence of proof of the contrary we think that this evidence is sufficient
to sustain a finding that Flores was the agent of the defendant in the
management of the bar of the Washington Cafe with authority to bind the
defendant, his principal, for the payment of the goods mentioned in the
complaint.
The contract introduced in evidence sufficiently establishes the fact that the
defendant was the owner of business and of the bar, and the title of
"managing agent" attached to the signature of Flores which appears on that
contract, together with the fact that, at the time the purchases in question
were made, Flores was apparently in charge of the business, performing the
duties usually entrusted to managing agent, leave little room for doubt that he
was there as authorized agent of the defendant. One who clothes another
apparent authority as his agent, and holds him out to the public as such, can
not be permitted to deny the authority of such person to act as his agent, to
the prejudice of innocent third parties dealing with such person in good faith
and in the following preassumptions or deductions, which the law expressly
directs to be made from particular facts, are deemed conclusive:
(1) "Whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true,
and to act upon such belief, he can not, in any litigation arising out such
declaration, act, or omission, be permitted to falsify it" (subsec. 1, sec. 333,
Act no. 190); and unless the contrary appears, the authority of an agent must
be presumed to include all the necessary and usual means of carrying his
agency into effect. (15 Conn., 347; 90 N. C. 101; 15 La. Ann, 247; 43 Mich.,
364; 93 N. Y., 495; 87 Ind., 187.)
That Flores, as managing agent of the Washington Cafe, had authority to buy
such reasonable quantities of supplies as might from time to time be
necessary in carrying on the business of hotel bar may fairly be presumed
from the nature of the business, especially in view of the fact that his
principal appears to have left him in charge during more or less prolonged
periods of absence; from an examination of the items of the account attached
to the complaint, we are of opinion that he was acting within the scope of his
authority in ordering these goods are binding on his principal, and in the
absence of evidence to the contrary, furnish satisfactory proof of their
delivery as alleged in the complaint.
The judgment of the trial court is affirmed with the costs of his instance
against the appellant. After expiration of twenty days judgment will be
rendered in accordance herewith, and ten days thereafter the case
remanded to the lower court for proper action. So ordered.
August 1980) for the amount of Ninety Five Thousand Pesos (P95,000.00),
which was earlier issued to Naguiat by the Corporate Resources Financing
Corporation. She also issued her own Filmanbank Check No. 065314, to the
order of Queao, also dated 11 August 1980 and for the amount of Ninety Five
Thousand Pesos (P95,000.00). The proceeds of these checks were to
constitute the loan granted by Naguiat to Queao. [3]
To secure the loan, Queao executed a Deed of Real Estate
Mortgage dated 11 August 1980 in favor of Naguiat, and surrendered to the
latter the owners duplicates of the titles covering the mortgaged properties.
[4]
On the same day, the mortgage deed was notarized, and Queao issued to
Naguiat a promissory note for the amount of TWO HUNDRED THOUSAND
PESOS (P200,000.00), with interest at 12% per annum, payable on 11
September 1980.[5] Queao also issued a Security Bank and Trust Company
check, postdated 11 September 1980, for the amount of TWO HUNDRED
THOUSAND PESOS (P200,000.00) and payable to the order of Naguiat.
[G.R. No. 118375. October 3, 2003]
CELESTINA T. NAGUIAT, petitioner, vs. COURT OF APPEALS and
AURORA QUEAO, respondents.
DECISION
TINGA, J.:
Before us is a Petition for Review on Certiorari under Rule 45, assailing
the decision of the Sixteenth Division of the respondent Court of Appeals
promulgated on 21 December 1994 [1], which affirmed in toto the decision
handed down by the Regional Trial Court (RTC) of Pasay City.[2]
The case arose when on 11 August 1981, private respondent Aurora
Queao (Queao) filed a complaint before the Pasay City RTC for cancellation
of a Real Estate Mortgage she had entered into with petitioner Celestina
Naguiat (Naguiat). The RTC rendered a decision, declaring the
questioned Real Estate Mortgage void, which Naguiat appealed to the Court
of Appeals. After the Court of Appeals upheld the RTC decision, Naguiat
instituted the present petition.
The operative facts follow:
Queao applied with Naguiat for a loan in the amount of Two Hundred
Thousand Pesos (P200,000.00), which Naguiat granted. On 11 August 1980,
Naguiat indorsed to Queao Associated Bank Check No. 090990 (dated 11
Upon presentment on its maturity date, the Security Bank check was
dishonored for insufficiency of funds. On the following day, 12 September
1980, Queao requested Security Bank to stop payment of her postdated
check, but the bank rejected the request pursuant to its policy not to honor
such requests if the check is drawn against insufficient funds. [6]
On 16 October 1980, Queao received a letter from Naguiats lawyer,
demanding settlement of the loan. Shortly thereafter, Queao and one Ruby
Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, Queao told
Naguiat that she did not receive the proceeds of the loan, adding that the
checks were retained by Ruebenfeldt, who purportedly was Naguiats agent. [7]
Naguiat applied for the extrajudicial foreclosure of the mortgage with the
Sheriff of Rizal Province, who then scheduled the foreclosure sale on 14
August 1981. Three days before the scheduled sale, Queao filed the case
before the Pasay City RTC,[8] seeking the annulment of the mortgage
deed. The trial court eventually stopped the auction sale.[9]
On 8 March 1991, the RTC rendered judgment, declaring the Deed of
Real Estate Mortgage null and void, and ordering Naguiat to return to Queao
the owners duplicates of her titles to the mortgaged lots. [10] Naguiat appealed
the decision before the Court of Appeals, making no less than eleven
assignments of error. The Court of Appeals promulgated the decision now
assailed before us that affirmed in toto the RTC decision. Hence, the present
petition.
exchange and mercantile documents such as checks shall produce the effect
of payment only when they have been cashed. [20] It is only after the checks
have produced the effect of payment that the contract of loan may be
deemed perfected. Art. 1934 of the Civil Code provides:
Signed
Mr. Primitive Siasat
Owner and Gen. Manager
On October 16, 1974, the first delivery of 7,933 flags was made by the United
Flag Industry. The next day, on October 17, 1974, the respondent's authority
to represent the United Flag Industry was revoked by petitioner Primitivo
Siasat.
According to the findings of the courts below, Siasat, after receiving the
payment of P469,980.00 on October 23, 1974 for the first delivery, tendered
the amount of P23,900.00 or five percent (5%) of the amount received, to the
respondent as payment of her commission. The latter allegedly protested.
She refused to accept the said amount insisting on the 30% commission
agreed upon. The respondent was prevailed upon to accept the same,
however, because of the assurance of the petitioners that they would pay the
commission in full after they delivered the other half of the order. The
respondent states that she later on learned that petitioner Siasat had already
received payment for the second delivery of 7,833 flags. When she
confronted the petitioners, they vehemently denied receipt of the payment, at
the same time claiming that the respondent had no participation whatsoever
with regard to the second delivery of flags and that the agency had already
been revoked.
The respondent originally filed a complaint with the Complaints and
Investigation Office in Malacaang but when nothing came of the complaint,
she filed an action in the Court of First Instance of Manila to recover the
following commissions: 25%, as balance on the first delivery and 30%, on the
second delivery.
The trial court decided in favor of the respondent. The dispositive portion of
the decision reads as follows:
The decision was affirmed in toto by the Intermediate Appellate Court. After
their motion for reconsideration was denied, the petitioners went to this Court
on a petition for review on August 6, 1984.
In assailing the appellate court's decision, the petition tenders the following
arguments: first, the authorization making the respondent the petitioner's
representative merely states that she could deal with any entity in connection
with the marketing of their products for a commission of 30%. There was no
specific authorization for the sale of 15,666 Philippine flags to the
Department; second, there were two transactions involved evidenced by the
separate purchase orders and separate delivery receipts, Exhibit 6-C for the
purchase and deliver on October 16, 1974, and Exhibits 7 to 7-C, for the
One does not have to undertake a close scrutiny of the document embodying
the agreement between the petitioners and the respondent to deduce that
the 'latter was instituted as a general agent. Indeed, it can easily be seen by
the way general words were employed in the agreement that no restrictions
were intended as to the manner the agency was to be carried out or in the
place where it was to be executed. The power granted to the respondent was
so broad that it practically covers the negotiations leading to, and the
execution of, a contract of sale of petitioners' merchandise with any entity or
organization.
There is no merit in petitioners' allegations that the contract of agency
between the parties was entered into under fraudulent representation
because respondent "would not disclose the agency with which she was
supposed to transact and made the petitioner believe that she would be
dealing with The Visayas", and that "the petitioner had known of the
transactions and/or project for the said purchase of the Philippine flags by the
Department of Education and Culture and precisely it was the one being
followed up also by the petitioner."
If the circumstances were as claimed by the petitioners, they would have
exerted efforts to protect their interests by limiting the respondent's authority.
There was nothing to prevent the petitioners from stating in the contract of
agency that the respondent could represent them only in the Visayas. Or to
state that the Department of Education and Culture and the Department of
National Defense, which alone would need a million pesos worth of flags, are
outside the scope of the agency. As the trial court opined, it is incredible that
they could be so careless after being in the business for fifteen years.
A cardinal rule of evidence embodied in Section 7 Rule 130 of our Revised
Rules of Court states that "when the terms of an agreement have been
reduced to writing, it is to be considered as containing all such terms, and,
therefore, there can be between the parties and their successors-in-interest,
no evidence of the terms of the agreement other than the contents of the
writing", except in cases specifically mentioned in the same rule. Petitioners
have failed to show that their agreement falls under any of these exceptions.
The respondent was given ample authority to transact with the Department in
behalf of the petitioners. Equally without merit is the petitioners' proposition
that the transaction involved two separate contracts because there were two
purchase orders and two deliveries. The petitioners' evidence is overcome by
other pieces of evidence proving that there was only one transaction.
The indorsement of then Assistant Executive Secretary Roberto Reyes to the
Budget Commission on September 3, 1974 (Exhibit "C") attests to the fact
that out of the total budget of the Department for the fiscal year 1975,
"P1,000,000.00 is for the purchase of national flags." This is also reflected in
the Financial and Work Plan Request for Allotment (Exhibit "F") submitted by
Secretary Juan Manuel for fiscal year 1975 which however, divided the
allocation and release of the funds into three, corresponding to the second,
third, and fourth quarters of the said year. Later correspondence between the
Department and the Budget Commission (Exhibits "D" and "E") show that the
first allotment of P500.000.00 was released during the second quarter.
However, due to the necessity of furnishing all of the public schools in the
country with the Philippine flag, Secretary Manuel requested for the
immediate release of the programmed allotments intended for the third and
fourth quarters. These circumstances explain why two purchase orders and
two deliveries had to be made on one transaction.
The petitioners' evidence does not necessarily prove that there were two
separate transactions. Exhibit "6" is a general indorsement made by
Secretary Manuel for the purchase of the national flags for public schools. It
contains no reference to the number of flags to be ordered or the amount of
funds to be released. Exhibit "7" is a letter request for a "similar authority" to
purchase flags from the United Flag Industry. This was, however, written by
Dr. Narciso Albarracin who was appointed Acting Secretary of the
Department after Secretary Manuel's tenure, and who may not have known
the real nature of the transaction.
If the contracts were separate and distinct from one another, the whole or at
least a substantial part of the government's supply procurement process
would have been repeated. In this case, what were issued were mere
indorsements for the release of funds and authorization for the next
purchase.
Since only one transaction was involved, we deny the petitioners' contention
that respondent Nacianceno is not entitled to the stipulated commission on
the second delivery because of the revocation of the agency effected after
the first delivery. The revocation of agency could not prevent the respondent
from earning her commission because as the trial court opined, it came too
late, the contract of sale having been already perfected and partly executed.
In Macondray & Co. v. Sellner (33 Phil. 370, 377), a case analogous to this
one in principle, this Court held:
We do not mean to question the general doctrine as to the power of a
principal to revoke the authority of his agent at will, in the absence of a
contract fixing the duration of the agency (subject, however, to some well
defined exceptions). Our ruling is that at the time fixed by the manager of the
plaintiff company for the termination of the negotiations, the defendant real
estate agent had already earned the commissions agreed upon, and could
The principal cannot deprive his agent of the commission agreed upon by
cancelling the agency and, thereafter, dealing directly with the buyer. (Infante
v. Cunanan, 93 Phil. 691).
The appellate courts citation of its previous ruling in Heimbrod et al. v.
Ledesma (C.A. 49 O.G. 1507) is correct:
The appellee is entitled to recovery. No citation is necessary to show that the
general law of contracts the equitable principle of estoppel. and the expense
of another, uphold payment of compensation for services rendered.
The court stated that in thirteen documents presented as exhibits, the private
respondent signed her name as "Tessie Nacianceno" while in this particular
instance, she signed as "T. Nacianceno."
The stated basis is inadequate to sustain the respondent's allegation of
forgery. A variance in the manner the respondent signed her name can not
be considered as conclusive proof that the questioned signature is a forgery.
The mere fact that the respondent signed thirteen documents using her full
name does not rule out the possibility of her having signed the notation "Fully
Paid", with her initial for the given came and the surname written in full. What
she was signing was a mere acknowledgment.
This leaves the expert testimony as the sole basis for the verdict of forgery.
In support of their allegation of full payment as evidenced by the signed
authorization letter (Exhibit "5-A"), the petitioners presented as witness Mr.
Francisco Cruz. Jr., a senior document examiner of the Philippine
Constabulary Crime laboratory. In rebuttal, the respondent presented Mr.
Arcadio Ramos, a junior document examiner of the National Bureau of
Investigation.
While the experts testified in a civil case, the principles in criminal cases
involving forgery are applicable. Forgery cannot be presumed. It must be
proved.
In Borromeo v. Court of Appeals (131 SCRA 318, 326) we held that:
xxx xxx xxx
... Where the evidence, as here, gives rise to two probabilities, one
consistent with the defendant's innocence and another indicative of his guilt,
that which is favorable to the accused should be considered. The
constitutional presumption of innocence continues until overthrown by proof
of guilt beyond reasonable doubt, which requires moral certainty which
convinces and satisfies the reason and conscience of those who are to act
upon it. (People v. Clores, et al., 125 SCRA 67; People v. Bautista, 81 Phil.
78).
We ruled in another case that where the supposed expert's testimony would
constitute the sole ground for conviction and there is equally convincing
expert testimony to the contrary, the constitutional presumption of innocence
must prevail. (Lorenzo Ga. Cesar v. Hon. Sandiganbayan and People of the
Philippines, 134 SCRA 105). In the present case, the circumstances earlier
defendant, acting by and through its authorized agent, and an alleged copy
of which is in the record, and purports to have been executed by H.
Marchant, now deceased, who was then in London, and who, the defendant
admits in its own testimony, was at that time the London agent of the
defendant in the selling of its hemp.
In the very nature of things, an agent cannot sell hemp in a foreign country
without making some kind of a contract, and if he had power to sell, it would
carry with it the authority to make and enter into the usual and customary
contract for its sale.
As we analyze the evidence, Marchant was the London agent of the
defendant, and in the ordinary course of business, executed the contract
known in the record as Exhibit A, and on behalf of the defendant, as its
agent, and as its act and deed, and, for such reason, the defendants is
bound by the contract. This is confirmed by the further fact that the defendant
undertook to carry out and perform the terms and provisions of the contract,
and, by and under its terms, to ship and deliver the hemp, drew the draft, and
took and accepted the money for its payment.
We are clearly of the opinion that the contract in question is valid and binding
upon the defendant, and that Marchant, as the agent of the defendant, not
only had the authority to make and enter into it for and on behalf of the
defendant, but as a matter of fact that contract was legally ratified and
approved by the subsequent acts and conduct of the defendant. It is very
apparent that the contract was executed in the ordinary course of business,
and that in executing it, Marchant was acting within the scope of his authority
as the agent of the defendant. It will also be noted that under its terms and
provisions, the defendant was to deliver the hemp in London.
Clause 18 of the contract provides:
Arbitration. Any dispute arising out of this Contract, or in any way
relating to it or to its construction or fulfillment, shall be referred to
Arbitration in accordance with the By-Laws of the Manila Hemp
Association endorsed hereon, which shall be deemed to form part of
this Contract.
Clause 4 of the By-Laws of the Manila Hemp Association provides:
All questions and matters referred to arbitration pursuant to the
annexed contract shall be referred to the arbitration of Two Members
London agent, accepted and ratified the award of the arbitrators, and in legal
effect, plaintiff seeks to recover from the defendant on the findings and the
award made by the arbitrators.
It is clear that under the contract, and upon the proof in the record, plaintiff
was legally entitled to an arbitration. It is equally clear that, if an arbitration
was had and held in the manner and form provided by the contract, and that
the arbitrators made findings, and based thereon made the award, as plaintiff
alleges, plaintiff in this action would be entitled to recover from the defendant
the amount found due and owing by the arbitrators, subject only to the legal
right, and under a proper plea, of the defendant to defend upon the ground of
fraud or mistake in the arbitration. But in an action to recover founded upon
the award of the arbitrators, the plaintiff must both allege and prove, by
competent evidence, that the defendant had notice of the motion of the
plaintiff to arbitrate; that the arbitrators were selected in the manner and form
as provided for in the By-Laws of the Manila Hemp Association; that the
arbitrators met and performed their duties, and made and presented their
findings, based upon which, they made and signed their award; and that the
defendant was either legally a party to the arbitration or that it ratified and
approved the arbitration after it was made. Upon all of such questions, there
is a failure of proof. There is no competent evidence that arbitrators were
ever selected, as the By-Laws provides, who they were, or that they ever met
in the discharge of their duties, or of the time and place of their meeting, or
who was present. Neither is there any competent evidence that the
arbitrators ever made or signed any findings. Neither is there any competent
evidence that the defendant was ever notified of the proposed arbitration, or
that it book part in it, or that it ever ratified or approved the alleged findings.
The proof of an arbitration should conform to the spirit and intent of the ByLaws of the Manila Hemp Association.
Under the By-Laws, for certain specified reasons, either party has a legal
right to an arbitration, and each person has a legal right to select his own
arbitrator, and it is the duty of the person desiring an arbitration to notify the
adverse party, so that he can select his own arbitrator and be present or
represented in the arbitration, if he sees fit to do so. After the arbitrators have
been selected and a hearing is held and the investigation made, it is then the
duty of the arbitrators to make their findings, based upon which they make
their award, which should be in writing. The only competent evidence of all
such matters is the finding and award which is made by the arbitrators. In
other words, where a person seeks to recover a judgment upon the findings
and award of arbitrators, he must both allege and prove that all of the
conditions precedent, and that the necessary legal steps were taken to have
an arbitration, and submit to the court either the original or an authenticated
copy of the findings and the award of the arbitrators, or in the absence of
such preliminary proof, he must both allege and prove that the findings and
award of the arbitrators have been ratified and approved by the adverse
party.
There is no evidence of any one of those facts in the record. It is true that the
witness Sibley on behalf of the plaintiff testified that: "The defendants, by
their duly authorized attorney, Francis Adams, accepted and approved of the
award." That is not proof of any fact. It is nothing more than the legal opinion
of the witness. The question as to whether the defendant "accepted and
approved of the award" is one for the court to determine from the actual facts
as to how, when and in what manner the defendant "accepted and approved
of the award." What was said and done, by whom it was said, and when and
to whom it was said, and if it was in writing, the writing should be produced.
Upon the proof of the actual facts, it would then be for the court, and not for
the witness, to say whether or not the defendants "accepted and approved of
the award."
In the final analysis, where, as in this case, the plaintiff seeks to recover upon
the findings and the award of arbitrators, before it can recover, it must both
allege and prove a substantial compliance with all of the material provisions
of the By-Laws of the Manila Hemp Association, and without such proof, it is
not entitled to a judgment upon the findings and award of the arbitrators.
If it be a fact that the alleged findings and award of the arbitrators was made
in a substantial compliance with such "By-Laws," and competent proof of that
fact is submitted to the court, plaintiff would then be entitled to judgment as
prayed for in its complaint. In such a case, the award of the arbitrators could
only be modified or set aside for a mistake apparent on the face of the
record, or upon the ground of fraud in the arbitration, both of which must be
alleged in a proper plea and proven as any other fact, which could not be
done under a general denial.
Upon a mistake of fact, Corpus Juris, volume 5, p. 182, says:
Although an award cannot be avoided on account of a wrong
conclusion, drawn by the arbitrators from the facts before them,
which conclusion amounts to a mere mistake of judgment, a plain
misconception of the facts submitted, by reason of which it is made
to appear that the arbitrators must have rendered a different decision
had they proceeded in view of the true state of facts, about the
In the interest of justice, and so that the case may be tried and decided upon
its actual merits, the judgment of the lower court is reversed, and the case is
remanded, with leave to the plaintiff to submit competent evidence of the
arbitration and the findings and award of the arbitrators, and that the
arbitration was made in a substantial compliance with the By-Laws of the
Manila Hemp Association, and with leave to the defendant, in its discretion,
to amend its answer, and to both allege and prove that the arbitration was
fraudulent por that the arbitrators made a mistake, which is apparent on the
face of the record. Neither party to recover costs. So ordered.
EN BANC
G.R. No. L-38816
November 3, 1933
INSULAR DRUG CO., INC., plaintiff-appellee,
vs.
THE PHILIPPINE NATIONAL BANK, ET AL., defendants.
THE PHILIPPINE NATIONAL BANK, appellant.
Camus and Delgado for appellant.
Franco and Reinoso for appellee.
MALCOLM, J.:
This is an appeal taken by Philippine National Bank from a judgment of the
Court of First Instance of Manila requiring bank to pay to the Insular Drug
Co., Inc., the sum of P18,285.92 with legal interest and costs.
The record consists of the testimony of Alfred Von Arend, President and
Manager of the Insular Drug Co., Inc., and of exhibits obtained from the
Philippine National Bank showing transactions of U.E. Foerster with the
bank. The Philippine National Bank was content to submit the case without
presenting evidence in its behalf. The meagre record and the statement of
facts agreed upon by the attorneys for the contending parties disclose the
following facts:
The Insular Drug Co., Inc., is a Philippine corporation with offices in the City
of Manila. U.E. Foerster was formerly a salesman of drug company for the
Islands of Panay and Negros. Foerster also acted as a collector for the
company. He was instructed to take the checks which came to his hands for
the drug company to the Iloilo branch of the Chartered Bank of India,
Australia and China and deposit the amounts to the credit of the drug
company. Instead, Foerster deposited checks, including those of Juan
Llorente, Dolores Salcedo, Estanislao Salcedo, and a fourth party, with the
Iloilo branch of the Philippine National Bank. The checks were in that bank
placed in the personal account of Foerster. Some of the checks were drawn
against the Bank of Philippine National Bank. After the indorsement on the
checks was written "Received payment prior indorsement guaranteed by
his principal does not have the implied authority to indorse checks received
in payment. Any person taking checks made payable to a corporation, which
can act only by agent does so at his peril, and must same by the
consequences if the agent who indorses the same is without authority.
(Arcade Realty Co. vs. Bank of Commerce [1919], 180 Cal., 318; Standard
Steam Specialty Co., vs. Corn Exchange Bank [1917], 220 N.Y., 278; People
vs. Bank of North America [1879], 75 N.Y., 547; Graham vs. United States
Savings Institution [1870], 46 Mo., 186.) Further speaking to the errors
specified by the bank, it is sufficient to state that no trust fund was involved;
that the fact that bank acted in good faith does not relieve it from
responsibility; that no proof was adduced, admitting that Foerster had right to
indorse the checks, indicative of right of his wife and clerk to do the same ,
and that the checks drawn on the Bank of the Philippine Islands can not be
differentiated from those drawn on the Philippine National Bank because of
the indorsement by the latter.
In brief, this is a case where 132 checks made out in the name of the Insular
Drug Co., Inc., were brought to the branch office of the Philippine National
Bank in Iloilo by Foerster, a salesman of the drug company, Foerster's wife,
and Foerster's clerk. The bank could tell by the checks themselves that the
money belonged to the Insular Drug Co., Inc., and not to Foerster or his wife
or his clerk. When the bank credited those checks to the personal account of
Foerster and permitted Foerster and his wife to make withdrawals without
there being made authority from the drug company to do so, the bank made
itself responsible to the drug company for the amounts represented by the
checks. The bank could relieve itself from responsibility by pleading and
proving that after the money was withdrawn from the bank it passed to the
drug company which thus suffered no loss, but the bank has not done so.
Much more could be said about this case, but it suffices to state in conclusion
that bank will have to stand the loss occasioned by the negligence of its
agents.
Overruling the errors assigned, judgment of the trial court will be affirmed, the
costs of this instance to be paid by appellant.