1.
BORDADOR V LUZ It was grossly and inexcusably negligent of petitioner to entrust to Deganos, not once or twice but on at
FACTS:
Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida Luz,
also known as Aida Luz, was their regular customer.
On several occasions, respondent Deganos, brother of Luz, received several pieces of gold and jewelry
from petitioners amounting to P382, 816. These items and their prices were indicated in seventeen
receipts covering the same. 11 of the receipts stated that they were received for a certain Aquino, a niece
of Deganos, and the remaining 6 receipts indicated that they were received for Luz.
Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the
unsold items to Bordador. Deganos remitted only the sum of P53, 207. He neither paid the balance of
the sales proceeds, nor did he return any unsold item to petitioners.
The total of his unpaid account to Bordador, including interest, reached the sum of P725, 463.98.
Petitioners eventually filed a complaint in the barangay court against Deganos to recover said amount.
In the barangay proceedings, Luz, who was not impleaded in the caes, appeared as a witness for
Deganos and ultimately, she and her husband, together with Deganos signed a compromise agreement
with petitioners.
In that compromise agreement, Deganos obligated himself to pay petitioners, on installment basis , the
balance of his account plus interest thereon. However, he failed to comply with his aforestated
undertakings.
Petitioners instituted a complaint for recovery of sum of money and damages, with an application for
preliminary attachment against Deganos and Luz.
Deganos and Luz was also charged with estafa.
During the trial of the civil case, petitioners claimed that Deganos acted as agent of Luz when received
the subject items of jewelry, and because he failed to pay for the same, Luz, as principal, and her spouse
are solidarily liable with him
Trial court ruled that only Deganos was liable to Bordador for the amount and damages claimed. It held
that while Luz did have transactions with petitioners in the past, the items involved were already paid for
and all that Luz owed Bordador was the sum or P21, 483 representing interest on the principal account
which she had previously paid for.
CA affirmed TCs decision.
ISSUE:
W/N Luz are liable to petitioners for the latters claim for money and damages in the sum of P725,463.98,
plus interests and attorneys fees, despite the fact that the evidence does not show that they signed any
of the subject receipts or authorized Deganos to receive the items of jewelry on their behalf
RULING: No
Evidence does not support the theory of Bordador that Deganos was an agent of Luz and that the latter
should consequently be held solidarily liable with Deganos in his obligation to petitioners.
The basis for agency is representation. Here, there is no showing that Luz consented to the acts of
Deganos or authorized him to act on her behalf, much less with respect to the particular transactions
involved.
least six occasions as evidenced by 6 receipts, several pieces of jewelry of substantial value without
requiring a written authorization from his alleged principal.
A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the
agent.
Records show that neither an express nor an implied agency was proven to have existed between
Deganos and Luz. Evidently, Bordador 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
2. Equitable PCI v Ku
March 26, 2001
EQUITABLE PCI BANK, formerly EQUITABLE BANKING CORPORATION vs. ROSITA KU
KAPUNAN, J.
SUMMARY: Litigation ensued between Rosita Ku and Equitable. When CA ruled in favor of Rosita,
Equitable filed a motion for an extension of 30 days to file its petition for review as it allegedly received
the CA decision on April 25, 2000. However, Rosita argues that the petition is defective because Bank
actually received CA decision on April 24, 2000 when Joel Rosales, an employee of Banks law firm
received it from the Post office and thus Equitable should have filed motion for extension on May 9, 2000
not May 10. Equitable replied that Joel is not an agent of the bank as expressly mentioned in his affidavit.
HELD: Bank filed petition beyond reglementary period. There was perfection of the agency as Joel
Rosales averred in his affidavit that on occasions when I receive mail matters for said law office, it is
only to help them receive their letters promptly, implying that counsel had allowed the practice of Rosales
receiving mail in behalf of the former. There is no showing that counsel had objected to this practice or
took steps to put a stop to it. However, in the interest of justice, the petition was still given due course.
DOCTRINE:
PERFECTION FROM SIDE OF PRINCIPAL: An agency may be express but it may also be implied
from the acts of the principal, from his silence, or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.
PERFECTION FROM SIDE OF AGENT: Likewise, acceptance by the agent may also be express,
although it may also be implied from his acts which carry out the agency, or from his silence or
inaction according to the circumstances (Art. 1870).
FACTS:
Noddy Dairy Products Inc. incurred a loan from Equitable Banking Corporation (now Equitable PCI
Bank)
As security, Rosita Ku, treasurer of Noddy, Inc., and Ku GiokHeng, VP/GM of Noddy Inc. and
Rositas father, mortgaged a residential house and lot located in La Vista, QC which is registered in
Rositas name
When Noddy, Inc. failed to pay the loan, Equitable foreclosed the property extrajudicially and was
issued a certificate of sale after winning in the foreclosure sale. Rosita failed to redeem the property
so the Register of Deeds canceled the TCT in her name and a new one was issued in Equitables
name.
May 10, 89: Equitable instituted an action for ejectment before MeTC QC against Rositas father Ku
GiokHeng.
o It allowed Ku GiokHeng to remain in the property on the condition that the latter pay
rent. However, Ku GiokHengs failed to pay rent thus this action.
Ku GiokHeng denied that there was any lease agreement over the property.
MeTC (Dec. 8, 94): In favor of Equitable and ordered Ku Giok Heng to vacate the premises.
 o No right for his continued possession of or stay as title had been duly transferred to
Equitable. Buyer in foreclosure sale becomes the absolute owner of the property
purchased if it is not redeemed during the period of 1 year after the registration of the sale
Ku GiokHeng did not appeal the decision of the MeTC.
Dec. 20, 94: Instead, he and Rosita Ku, filed an action before RTC QC to nullify the decision of the
MeTC.
RTC (Sept. 13, 99): No merit; Dismissed complaint and ordered the execution of the MeTC decision.
Rosita filed in CA a special civil action for certiorari assailing the decision of the RTC as she was
not made a party to the ejectment suit and was, therefore, deprived of due process.
CA (Mar. 31, 2000): Agreed with Rosita. Enjoined the eviction of Rosita from the premises.
May 10, 2000: Equitable filed in SC 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 as the Bank has received the CA
decision on April 25, 2000.
o April 25, 2000 Received CA Decision (15 days reglementary period to file petition for
review OR file motion for extension)
o May 10,2000 Filed motion for extension for 30 days
o June 9, 2000 w/n 30 days
SC: 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.
June 13, 2000: Equitable Bank filed its petition, contending that there was no need to name 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.
o FOOTNOTE: The last day to file the petition was on June 9, 2000 but because of the
Courts 99th Anniversary Celebration, business transactions were suspended on said date
per Memorandum Circular No. 03-2000.
Rosita argues that the petition is defective because of non-compliance with reglementary period.
o Bank received CA decision not on April 25, 2000 but on April 24, 2000
o April 24, 2000 - copy was duly delivered to and received by Joel Rosales (Authorized
Representative) as evidenced by a Certification issued by the Manila Central Post
Office
o May 10, 2000 When Equitable filed its motion for extension to file petition for review, it
was 1 day beyond the reglementary period for filing the petition for review OR motion to
extend w/c must be filed on May 9, 2000 - 15 days from the receipt of CA decision
Banks Reply: Reiterates its honest representation of having received a copy of CA decision on
April 25, 2000. Receipt on April 24, 2000 by Joel Rosales, who was not an agent of its counsels
law office cannot be considered receipt of the CA Decision by the Bank (or its counsel).
Rosales Affidavit
o Employee of Unique Industrial & Allied Services, Inc. and assigned with the Equitable PCI
Bank, Mail and Courier Department w/ official duty and responsibility to receive and pick-
up from the Manila Central Post Office the various mails, letters, correspondence, and
other mail matters intended for the banks various departments and offices at Equitable
Bank Building
o I am not the constituted agent of Curato-Divina-Mabilog-Nedo-Magturo-Pagaduan
Law Office 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.
o April 24, 2000: Received CA Decision together with other mail matters, and brought them
to the Mail and Courier Department;
o April 25, 2000: After sorting out mail matters, erroneously recorded them on page 422 of
logbook as having been received on April 25, 2000
o April 27, 2000: Decision was sent by the Mail and Courier Department to said Law Office
whose receiving clerk opened the letter and stamped on the Notice of Judgment their
actual date of receipt: April 27, 2000
o May 8, 2000: Atty. Roland A. Niedo of said law office inquired as to actual date of receipt
of letter, and informed him that based on logbook, it was received on April 25, 2000.
o Error was caused by an honest mistake.
Bank also argues such receipt did not constitute notice to its counsel, as required by Sec. 2 and 10,
Rule 13 of ROC. CA decision actually received on April 27, 2000.
o SEC. 2. Filing and service defined. Filing is the act of presenting the pleading or other
paper of the clerk of court. Service is the act of providing a party with a copy of the pleading
or paper concerned. If any party has appeared by counsel, service upon him shall be
made upon his counsel or one of them, unless service upon the party himself is ordered
by the court. Where one counsel appears for several parties, he shall only be entitled to
one copy of any paper served upon him by the opposite side.
o PLDT vs. NLRC: It was only when the Legal Services Division actually received a copy
of the decision that a proper and valid service may be deemed to have been made.
o Actual receipt by its counsel was actually on April 27, 2000, not April 25, 2000. The
motion for extension to file the petition for review was even filed 2 days before the lapse
of the 15-day reglementary period
Assuming the motion for extension was indeed one day late, Bank urges SC to suspend its rules
and admit the petition in the interest of justice.
ISSUES:
1) Whether Joel Rosales can be considered the agent of Banks counsel and thus service to him was
considered service to Bank? (YES) [Whether the act of the law firm in allowing its employee to
occasionally receive its mail can be construed to mean an agency relationship? YES]
2) Whether, in the interest of justice, the rules on reglementary periods can be suspended in this case?
(YES)
3) Whether a person can be evicted by virtue of a decision rendered in an ejectment case where she was
not joined as a party? (YES)
RATIO:
1) Joel Rosales is an agent of Banks counsel.
Although the Affidavit of Joel Rosales states that he is not the constituted agent of Curato-Divina-
Mabilog-Nedo-Magturo-Pagaduan Law Office, an agency may be express but it may also be
implied from the acts of the principal, from his silence, or lack of action, or his failure to repudiate
the agency, knowing that another person is acting on his behalf without authority. (Art. 1869)
Likewise, acceptance by the agent may also be express, although it may also be implied from his
acts which carry out the agency, or from his silence or inaction according to the circumstances (Art.
1870).
CASE AT BAR: Joel Rosales averred that on occasions when I receive mail matters for said law
office, it is only to help them receive their letters promptly, implying that counsel had allowed the
practice of Rosales receiving mail in behalf of the former. There is no showing that counsel
had objected to this practice or took steps to put a stop to it.
2) Court gives due course to petition in spite of noncompliance with periods in light of the merits of the
petition.
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 (6 days; 13 days; 1 day; 7 days; 2 days; tardy appeal).
3) Even if Rosita were a resident of the property, she is nevertheless bound by the judgment of the MeTC
in the action for ejectment despite her being a non-party thereto as the daughter of Ku GiokHeng, the
defendant in the action for ejectment.
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. (Matuguina vs. CA) 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:
o a) trespassers, squatters or agents of the defendant fraudulently occupying the property
to frustrate the judgment;
o b) guests or other occupants of the premises with the permission of the defendant;
o c) transferees pendente lite;
o d) sub-lessees;
o e) co-lessees; or
o f) members of the family, relatives and other privies of the defendant. (Oro Cam
Enterprises, Inc. vs. CA)
DISPOSITIVE: Petition GIVEN DUE COURSE and GRANTED. CA decision REVERSED.
3. YUN KWAN BYUNG vs. PHILIPPINE AMUSEMENT AND GAMING CORPORATION
FACTS
PAGCOR launched its Foreign Highroller Marketing Program. The Program aims to invite patrons from
foreign countries to play at the dollar pit of designated PAGCOR-operated casinos under specified terms
and conditions and in accordance with industry practice. Petitioner, a Korean national, alleges that he
came to the Philippines four times to play for high stakes at the Casino Filipino; that in the course of the
games, he was able to accumulate gambling chips worth US$2.1 million. Petitioner contends that when
he presented the gambling chips for encashment with PAGCORs employees or agents, PAGCOR
refused to redeem them.
PAGCOR claims that petitioner, who was brought into the Philippines by ABS Corporation, is a junket
player who played in the dollar pit exclusively leased by ABS Corporation for its junket players. PAGCOR
alleges that it provided ABS Corporation with distinct junket chips. ABS Corporation distributed these
chips to its junket players. At the end of each playing period, the junket players would surrender the chips
to ABS Corporation. Only ABS Corporation would make an accounting of these chips to PAGCORs
casino treasury.
ISSUE
Whether the CA erred in holding that PAGCOR is not liable to petitioner, disregarding the doctrine of
implied agency, or agency by estoppels
RULING
Petitioner alleges that there is an implied agency. Alternatively, petitioner claims that even assuming that
no actual agency existed between PAGCOR and ABS Corporation, there is still an agency by estoppel
based on the acts and conduct of PAGCOR showing apparent authority in favor of ABS Corporation.
Petitioners argument is clearly misplaced. The basis for agency is representation, that is, the agent acts
for and on behalf of the principal on matters within the scope of his authority and said acts have the same
legal effect as if they were personally executed by the principal. On the part of the principal, there must
be an actual intention to appoint or an intention naturally inferable from his words or actions, while on the
part of the agent, there must be an intention to accept the appointment and act on it. Absent such mutual
intent, there is generally no agency.
There is no implied agency in this case because PAGCOR did not hold out to the public as the principal
of ABS Corporation. PAGCORs actions did not mislead the public into believing that an agency can be
implied from the arrangement with the junket operators, nor did it hold out ABS Corporation with any
apparent authority to represent it in any capacity. The Junket Agreement was merely a contract of lease
of facilities and services.
4. German and Co. Vs Donaldson, Sim and Co. 1 Phil. 63
FACTS
Fernando Kammerzel was appointed manager of a business concern under a power of attorney which
confers the authority to exact payment of sums of money by legal means
ISSUE
Does the authority include the power to file actions in court for the purpose of recovering a sum of money?
HELD
Yes, the authority includes the power to file suits to recover sums of money due to the business concern,
for it cannot be supposed in the absence of very clear language to that effect, that it was the intention of
the principal to withhold from the agent essential to efficient management of the business entrusted to
his control.
GERMANN & CO., plaintiff-appellees, vs. DONALDSON, SIM & CO., defendants-appellants.
FACTS: Max Leonard Tornow, the sole owner of the business carried on in Berlin and Manila under the
name of Gemann & Co. executed an instrument in Berlin, Germany giving Kammerzell, his "true and
lawful attorney with full power to enter the firm name of Germann & Co. in the Commercial Registry of
the city of Manila as a branch of the house of Germann & Co.in Berlin.
The first-named instrument was authenticated by a notary with the formalities required by the domestic
laws. The other was not so authenticated. Both Tornow and Kammerzell are citizens of Germany. Tornow
is a resident of Berlin and Kammerzell of Manila.
By this instrument, the purpose of this power to invest said attorney will full legal powers and authorization
to direct and administer in the city of Manila for us and in our name a branch of our general commercial
business of important and exportation, for which purpose he may make contracts of lease and employ
suitable assistants, as well as sign every kind of documents, accounts, and obligations connected with
the business which may be necessary, take charge in general of the receipt and delivery of merchandise
connected with the business, sign all receipts for sums of money and collect them and exact their payment
by legal means, and in general execute all the acts and things necessary for the perfect carrying on of
the business committed to his charge in the same manner as we could do ourselves if we were present
in the same place.
The defendants claim that the original power is invalid under article 1280, No. 5, of the Civil Code, which
provides that powers for suits must be contained in a public instrument. No claim is made that the
document was not executed with the formalities required by the German law in the case of such an
instrument. He also claims that the original power cannot be construed as conferring upon Kammerzell
authority to institute or defend suits, from which contention, if correct, it would of course follow that the
delegated power is invalid.
In support of this contention reliance is placed upon article 1713 of the Civil Code, by which it is provided
that "an agency stated in general terms only includes acts of administration," and that "in order to
compromise, alienate, mortgage, or to execute any other act of strict ownership, an express commission
is required.
"Plaintiff argued that these provisions of the domestic law are not applicable to the case of an agency
conferred by one foreigner upon another in an instrument executed in the country of which both were
citizens. It appears that this case was brought to collect a claim accruing in the ordinary course of the
plaintiff's business, as properly belonging to the class of acts described in article 1713 of the Civil Code
as acts "of strict ownership." It seems rather to be something which is necessarily a part of the mere
administration of such a business as that described in the instrument in question and only incidentally, if
at all, involving a power to dispose of the title to property.
Issue: Whether regarded as an act of strict ownership or not.
Held: It appears to be expressly and specially authorized by the clause conferring the power to "exact the
payment" of sums of money "by legal means." This must mean the power to exact the payment of debts
due the concern by means of the institution of suits for their recovery. The main object of the instrument
is clearly to make Kammerzell the manager of the Manila branch of the plaintiff's business, with the same
general authority with reference to its conduct which his principal would himself possess if he were
personally directing it. It cannot be reasonably supposed, in the absence of very clear language to that
effect, that it was the intention of the principal to withhold from his agent a power so essential to the
efficient management of the business entrusted to his control as that to sue for the collection of debts.
5. LINAN VS PUNO
FACTS:
* Plaintiff, was the owner of a certain parcel of land
* Plaintiff executed the following document, which conferred upon the defendant Marcos Puno
the power, duties, and obligations
* Contract provides that: Linan, plaintiff, confers sufficient power upon Marcos Puno,
respondent, to represent him in administering his interest that the former possess within the municipality
of Tarlac, purchase, sell, as well as sue and be sued before any authority, appear before the courts of
justice and administrative officers in any proceeding or business concerning the good administration and
advancement of my interests and may, in necessary cases, appoint attorneys at law or attorneys in fact
to represent him
* Puno, for the sum of P800 sold and delivered parcel of land to the other defendants
* Plaintiff alleges that the said document did not confer upon Puno the power to sell the land
and prayed that the sale be set aside and that the land be returned to him and with damages
ISSUE: W/N Puno is an agent of the plaintiff and the sale made by the former in favor of other defendants
binds the principal/plaintiff
RULING: Puno is an agent but and has authority to sell the land, binds principal
The Document presented did not give Puno authority to sell the land; that the sale was illegal
and void; that defendants should return the land to the plaintiff; and that defendants should pay plaintiff
the sum of P1,000 as damages, P400 of which Puno should be responsible for, and to pay the costs.
Puno had no authority to sell the land but only to administer the land
Contracts of agency as well as general powers of attorney must be interpreted in accordance
with the language used by the parties. The real intention of the parties is primarily to be determined from
the language used. The intention is to be gathered from the whole instrument. In case of doubt, resort
must be had to the situation, surroundings and relations of the parties.
Whenever it is possible, effect is to be given to every word and clause used by the parties. It is
to be presumed that the parties said what they intended to say and that they used each word or clause
with some purpose and that purpose, if possible to be ascertained and enforced. The intention of the
parties must be sustained rather than defeated.
If the contract be open to two constructions, one of which would uphold while the other would
overthrow it, the former is to be chosen. So, if by one construction the contract would be illegal, and by
another equally permissible construction it would be lawful, the latter must be adopted. The acts of the
parties in carrying out the contract will presumed to be done in good faith. The acts of the parties will be
presumed to have been done in conformity with and not contrary to the intent of the contract
SC: The words administer, sell, purchase etc used in the contract seem to be used
coordinately. Each has equal force with the other. There seems to be no good reason for saying that
Puno had authority to administer and not to sell when to sell was as advantageous to the plaintiff in the
administration of his affairs as to administer. To hold that the power was to administer only when the executed the contract for and on behalf of the defendant, as its agent, and as its act and deed, and for
power to sell was equally conferred would be to give effect to a portion of the contract only. That would
give to special words of the contract a special and limited meaning to the exclusion of other general words
of equal import
*SC: No proof that Puno acted in bad faith or fraudulently in selling the land. It will be presumed
that he acted in good faith and in accordance with his power as he understood it. That his interpretation
of his power is tenable cannot be successfully denied.
SC: defendants should be relieved from liabilty
6. ROBINSON, FLEMING & CO VS CRUZ & TAN CHONG SAY
FACTS:
* Plaintiff is a partnership organized and existing under the laws of Great Britain, with a resident
attorney-in-fact in the Phil. Islands
* The defendant is a domestic partnership doing business in the city of Manila, and it is alleged
that it is represented in London, England, by a duly appointed agent and attorney-in-fact.
* Plaintiff claims that under a written contract executed about April 1921, it bought from Cruz & Tan 500
bales of Manila hemp grade J at 40 pounds less 1%, equivalent, in Philippine pesos to P364.66, per ton
of 20 cwt. Net landed weight.
* Pursuant to the contract, Cruz & Tan shipped in 2 parcels from Manila to London, for delivery to
Robinson, the 500 bales of Manila hemp grade JDC/J, freight and f.p.a. insurance for the account of
Cruz, which hemp upon being weighed in London, and deducting the tare, as provided for in the contract,
amounted to 1182 cwt-2 qtrs10 pounds equivalent to 59.13 tons of 20 cwt. Net weight, and after
deducting freight, commission, and insurance, as the contract provides, it had an invoice value of 1872
pounds equivalent to P17,241.48, Phil currency
* That at the time of the shipment, Cruz drew upon Robinson for P18,417.27, which draft the latter paid
by means of a letter of credit, thus leaving a balance due and owing the plaintiff of P1,175.59
* when the hemp arrived in London, it was not in merchantable condition, and was not so when it was
shipped from Manila
* After the shipment, Cruz did not, without undue delay, provide plaintiff with Government graders
certificates for the hemp, and by reason thereof, plaintiff was obliged to lighter and store 250 bales of it
pending the arrival of the Government graders certificates at a cost of P135.87
* By reason of such acts, Cruz became indebted to plaintiff in the sum of P14,461.20, no part of which
has been paid, except the sum of 11,687.87 which was the net value of 450 bales of Manila hemp grade
J shipped by Cruz to plaintiff leaving a balance then due and owing from defendant to plaintiff, on its first
cause of action, of P2,539.09 for which demand has been made and payment refused.
ISSUE: W/N the trial court erred in ruling that Messrs. H.E. Marchant and Francis Adams had been
agents of the defendant in London for the purpose of selling and disposing of its hemp, the nature,
character, and scope of such agency not appearing to have been limited
RULING: NO
This action is founded upon an alleged written contract which the plaintiff claims was executed
by and between it and the defendant, acting by and through its authorized agent, H. Merchant, now
deceased, who was then in London and who 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 (London) 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 slae
SC: Marchant was the London agent of Cruz & Tan, and in the ordinary course of business,
such reason, the defendant is bound by the contract.
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
 SC: Contract 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 the contract was legally ratified and approved by the subsequent acts and conduct of the
defendant.
The contract was executed in the ordinary course of business and Marchant was acting within
the scope of his authority as agent of Cruz and Tan
7. PAHUD VS. CA
FACTS: During their lifetime, spouses Pedro San Agustin and Agatona Genil were able to acquire a 246-
square meter parcel of land situated in Barangay Anos, Los Banos, Laguna. Both died intestate, survived
by their eight (8) children: respondents Eufemia, Raul, Ferdinand, Zenaida, Milagros, Minerva, Isabelita
and Virgilio.
Sometime in 1992, Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of Undivided Shares
conveying in favor of petitioners (the Pahuds, for brevity) their respective shares from the lot they inherited
from their deceased parents for P525,000.00.
Eufemia also signed the deed on behalf of her four (4) other co-heirs, namely: Isabelita on the basis of a
special power of attorney, and also for Milagros, Minerva, and Zenaida but without their apparent written
authority. The deed of sale was also not notarized.
On July 21, 1992, the Pahuds paid P35,792.31 to the Los Banos Rural Bank where the subject property
was mortgaged. The bank issued a release of mortgage and turned over the owner' s copy of the OCT
to the Pahuds. Over the following months, the Pahuds made more payments to Eufemia and her siblings
totaling to P350,000.00. They agreed to use the remaining P87,500.00 to defray the payment for taxes
and the expenses in transferring the title of the property. When Eufemia and her co-heirs drafted an extra-
judicial settlement of estate to facilitate the transfer of the title to the Pahuds, Virgilio refused to sign it.
Virgilio's co-heirs filed a complaint for judicial partition of the subject property before the RTC of Calamba,
Laguna. In the course of the proceedings for judicial partition, a Compromise Agreement was signed with
seven (7) of the co- heirs agreeing to sell their undivided shares to Virgilio forP700,000.00.
The compromise agreement was, however, not approved by the trial court because Atty. Dimetrio Hilbero,
lawyer for Eufemia and her six (6) co-heirs, refused to sign the agreement because he knew of the
previous sale made to the Pahuds. Eufemia acknowledged having received P700,000.00 from Virgilio.
Virgilio then sold the entire property to spouses Isagani Belarmino and Leticia Ocampo (Belarminos)
sometime in 1994. The Belarminos immediately constructed a building on the subject property. Alarmed
and bewildered by the ongoing construction on the lot they purchased, the Pahuds immediately
confronted Eufemia who confirmed to them that Virgilio had sold the property to the Belarminos.
Aggrieved, the Pahuds filed a complaint in intervention in the pending case for judicial partition. After trial,
the RTC upheld the validity of the sale to petitioners. Not satisfied, respondents appealed the decision to
the CA arguing, in the main, that the sale made by Eufemia for and on behalf of her other co-heirs to the
Pahuds should have been declared void and inexistent for want of a written authority from her co-heirs.
The CA yielded and set aside the findings of the trial court.
ISSUE: Whether the sale of the subject property by Eufemia and her co-heirs to the Pahuds is valid and
enforceable
HELD: Yes, with respect to 7/8 portions of the land subject property. Pertinent provisions: Article 1874,
Article 1878, and Article 1431.
Sale of Eufemia, Ferdinand, Raul, and Isabelita s share to the Pahuds - VALID The authority of an
agent to execute a contract of sale of real estate must be conferred in writing and must give him specific
authority, either to conduct the general business of the principal or to execute a binding contract
containing terms and conditions which are in the contract he did execute.
A special power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express
mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be
one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned.
For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express
the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that
the language so used conveys such power, no such construction shall be given the document.
In several cases, we have repeatedly held that the absence of a written authority to sell a piece of land
is, ipso jure, void, precisely to protect the interest of an unsuspecting owner from being prejudiced by the
unwarranted act of another. Based on the foregoing, it is not difficult to conclude, in principle, that the
sale made by Eufemia, Isabelita and her two brothers to the Pahuds sometime in 1992 should be valid
with respect to the 4/8 portion of the subject property.
Sale of Milagros, Minerva, and Zenaida s share to the Pahuds - VALID While the sale with respect to
the 3/8 portion (Milagros, Minerva, and Zenaida) is void by express provision of law and not susceptible
to ratification, we nevertheless uphold its validity on the basis of the common law principle of estoppel.
True, at the time of the sale to the Pahuds, Eufemia was not armed with the requisite special power of
attorney to dispose of the 3/8 portion of the property. Initially, in their answer to the complaint in
intervention, Eufemia and her other co-heirs denied having sold their shares to the Pahuds.
During the pre- trial conference, however, they admitted that they had indeed sold 7/8 of the property to
the Pahuds sometime in 1992. Thus, the previous denial was superseded, if not accordingly amended,
by their subsequent admission. Moreover, in their Comment, the said co-heirs again admitted the sale
made to petitioners. Interestingly, in no instance did the three (3) heirs concerned assail the validity of
the transaction made by Eufemia to the Pahuds on the basis of want of written authority to sell. They
could have easily filed a case for annulment of the sale of their respective shares against Eufemia and
the Pahuds. Instead, they opted to remain silent and left the task of raising the validity of the sale as an
issue to their co-heir, Virgilio, who is not privy to the said transaction. They cannot be allowed to rely on
Eufemia, their attorney-in-fact, to impugn the validity of the first transaction because to allow them to do
so would be tantamount to giving premium to their sister s dishonest and fraudulent deed.
Undeniably, therefore, the silence and passivity of the three co-heirs on the issue bar them from making
a contrary claim. It is a basic rule in the law of agency that a principal is subject to liability for loss caused
to another by the latter' s reliance upon a deceitful representation by an agent in the course of his
employment (1) if the representation is authorized; (2) if it is within the implied authority of the agent to
make for the principal; or (3) if it is apparently authorized, regardless of whether the agent was authorized
by him or not to make the representation. By their continued silence, Zenaida, Milagros and Minerva have
caused the Pahuds to believe that they have indeed clothed Eufemia with the authority to transact on
their behalf. Clearly, the three co-heirs are now estopped from impugning the validity of the sale from
assailing the authority of Eufemia to enter into such transaction. Sale to Virgilio VOID (with respect
to the 7/8 portion) The subsequent sale made by the seven co-heirs to Virgilio was void because they no
longer had any interest over the subject property which they could alienate at the time of the second
transaction. Nemo dat quod non habet. Virgilio, however, could still alienate his 1/8 undivided share to
the Belarminos. Belarminos acted IN BAD FAITH The Belarminos, for their part, cannot argue that they
purchased the property from Virgilio in good faith. As a general rule, a purchaser of a real property is not
required to make any further inquiry beyond what the certificate of title indicates on its face. But the rule
excludes those who purchase with knowledge of the defect in the title of the vendor or of facts sufficient
to induce a reasonable and prudent person to inquire into the status of the property. Such purchaser
cannot close his eyes to facts which should put a reasonable man on guard, and later claim that he acted
in good faith on the belief that there was no defect in the title of the vendor. His mere refusal to believe
that such defect exists, or his obvious neglect by closing his eyes to the possibility of the existence of a
defect in the vendor's title, will not make him an innocent purchaser for value, if afterwards it turns out
that the title was, in fact, defective.
In such a case, he is deemed to have bought the property at his own risk, and any injury or prejudice
occasioned by such transaction must be borne by him. In the case at bar, the Belarminos were fully aware
that the property was registered not in the name of the immediate transferor, Virgilio, but remained in the
name of Pedro San Agustin and Agatona Genil. This fact alone is sufficient impetus to make further
inquiry and, thus, negate their claim that they are purchasers for value in good faith. They knew that the
property was still subject of partition proceedings before the trial court, and that the compromise
agreement signed by the heirs was not approved by the RTC following the opposition of the counsel for
Eufemia and her six other co- heirs. The Belarminos, being transferees pendente lite, are deemed buyers
in mala fide, and they stand exactly in the shoes of the transferor and are bound by any judgment or
decree which may be rendered for or against the transferor. Furthermore, had they verified the status of
the property by asking the neighboring residents, they would have been able to talk to the Pahuds who
occupy an adjoining business establishment and would have known that a portion of the property had
already been sold. All these existing and readily verifiable facts are sufficient to suggest that the
Belarminos knew that they were buying the property at their own risk.
8. COSMIC LUMBER CORPORATION V CA
FACTS
* Cosmic Corporation, through its General Manager executed a Special Power of Attorney
appointing Paz G. Villamil-Estrada as attorney-in-fact to initiate, institute and file any court action for the
ejectment of third persons and/or squatters of the entire lot 9127 and 443 for the said squatters to remove
their houses and vacate the premises in order that the corporation may take material possession of the
entire lot
* Paz G. Villamil Estrada, by virtue of her power of attorney, instituted an action for the
ejectment of private respondent Isidro Perez and recover the possession of a portion of lot 443 before
the RTC
* Estrada entered into a Compromise Agreement with Perez, the terms and conditions such
as:
In order for Perez to buy the said lot he is presently occupying, he has to pay to plaintiff through Estada
the sum of P26,640 computed at P80/square meter and that Cosmic Lumber recognizes ownership and
possession of Perez by virtue of this compromise agreement over said portion of 333 sqm of lot 443 and
whatever expenses of subdivision, registration and other incidental expenses shall be shouldered by
Perez
* although the agreement was approved by the trial court and the decision became final and executory it
was not executed within the 5 year period from date of its finality allegedly due to the failure of Cosmic
Lumber to produce the owners duplicate copy of title needed to segregate from lot 443 the portion sold
by the attorney-in-fact, Paz Estrada to Perez under the compromise agreement
ISSUE: W/N there is a contract of agency between Cosmic Lumber, principal and Paz Estrada, agent
thus binding the principal over the compromise agreement made by the agent to a third person, Perez in
selling the portion of the said property
RULING: No
The authority granted Villamil-Estrada under the special power of attorney was explicit and
exclusionary: for her to institute any action in court to eject all persons found on lots number 9127 and
443 so that Cosmic Lumber could take material possession thereof and for this purpose, to appear at the
pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this was
protective of the rights and interests of Cosmic Lumber in the property
Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any power to
sell the subject property nor a portion thereof
Neither can a conferment of the power to sell be validly inferred from the specific authority to
enter into a compromise agreement because of the explicit limitation fixed by the grantor that the
compromise entered into shall only be so far as it shall protect the rights and interest of the corporation
in the aforementioned lots.
In the context of special investiture of powers to Villamil-Estrada, alienation by sale of an
immovable certainly cannot be deemed protective of the right of Cosmic Lumber to physically possess
the same, more so when the land was being sold for a price of P80/sqm , very much less than its assessed
value of P250/sqm and considering further that plaintiff never received the proceeds of the sale
When the sale of a piece of land or any interest thereon is through an agent, the authority of
the latter shall be in writing; otherwise, the sale should be void. Thus, the authority of an agent to execute
a contract for the sale of real estate must be conferred in writing and must give him specific authority,
either to conduct the general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute
For the principal to confer the right upon an agent to sell real estate, a power of attorney must
so express the powers of the agent in clear and unmistakable language
It is therefore clear that by selling to Perez a portion of Cosmic Lumbers land through a
compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso jure is
consequently void and so is the compromise agreement. This being the case, the judgment based
thereon is necessarily void
When an agent is engaged in the perpetration of a fraud upon his principal for his own exclusive
benefit, he is not really acting for the principal but is really acting for himself, entirely outside the scope of
his agency.
9. HODGES V. SALAS AND SALAS
FACTS: In 1923, defendants executed a power of attorney in favor of their brother-in-law, Felix Yulo, to
enable him to obtain a loan and secure it with a mortgage on real property. Acting under said power of
attorney, Yulo obtained a loan of P28,000 from Hodges, binding his principals jointly and severally to pay
it within 10 years with 12% interest p.a. This loan is secured with a mortgage over a real property.
However, the P28,000 loan was not delivered to agent Yulo. Instead, an agreement between him and
Hodges indicate that the P28,000 loan was applied to pay his personal debts to Hodges, amounting to
P10,188.29. Defendants failed to pay the interests at maturity, which should have been paid one year in
advance. Hodges, now seeks to have the property subject of mortgage foreclosed.
ISSUE: W/N agent Yulo was authorized to borrow money and invest it as he wished, without being obliged
to apply it necessarily for the benefit of the principals, by virtue of the authority conferred by the
defendants
HELD: NO. The terms of the power of attorney are limited. The agent was thereby authorized only to
borrow any amount of money, which he deemed necessary. There is nothing, however, to indicate that
the defendants had authorized him to convert the money obtained by him to his personal use. With
respect to a power of attorney of a special character, it cannot be interpreted as authorizing the agent to
use the money as he pleased, particularly when it does not appear that such was the intention of the
principals, and in applying such funds to pay his personal obligations, he exceeded his authority.
Moreover, there is nothing in the document, which implied that the defendants ratified or approved the
agents acts, contrary to what the Hodges contended. As to the payment of the loan, the Court ordered
that defendants pay Hodges the balance of P17,811.71, since P10,188.29 was applied by agent Yulo to
the payment of his personal debt to Hodges. As to the interest, since defendants already paid to Hodges
a total of P18,138.77, which includes a usurious interest, they are still indebted to pay P4,321.79
(defendants have to pay P22, 460.56 interest12% p.a. from 1926 to 1936less P3,000 attorneys fees.
10. BA FINANCE VS. CA
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.
Facts: Spouses Manuel and Lilia Cuady obtained from Supercars, Inc. bought a Ford Escort 1300, four-
door sedan in installments. To secure the faithful and prompt compliance of the obligation under the said
promissory note, the Cuady spouses constituted a chattel mortgage on the aforementioned motor vehicle.
Supercars, Inc. assigned the promissory note, together with the chattel mortgage, to B.A. Finance
Corporation. The Cuadys made partial payment leaving an un paid balance.In addition thereto, the
Cuadys owe B.A. Finance .B.A. Finance Corporation, as the assignee of the mortgage lien obtained the
renewal of the insurance coverage over the aforementioned motor vehicle for the with Zenith Insurance
Corporation, when the Cuadys failed to renew said insurance coverage themselves. Under the terms and
conditions of the said insurance coverage, any loss under the policy shall be payable to the B.A. Finance
Corporation.
The motor vehicle figured in an accident and was badly damaged. The unfortunate happening was
reported to the B.A. Finance Corporation and to the insurer, Zenith Insurance Corporation. The Cuadys
asked the B.A. Finance Corporation to consider the same as a total loss, and to claim from the insurer
the face value of the car insurance policy and apply the same to the payment of their remaining account
and give them the surplus thereof, if any. But instead of heeding the request of the Cuadys, B.A. Finance
Corporation prevailed upon the former to just have the car repaired. Not long thereafter, however, the car
bogged down. The Cuadys wrote B.A. Finance Corporation requesting the latter to pursue their prior
instruction of enforcing the total loss provision in the insurance coverage. When B.A. Finance Corporation
did not respond favorably to their request, the Cuadys stopped paying their monthly installments on the
promissory note. In view of the failure of the Cuadys to pay the remaining installments on the note, B.A.
Finance Corporation sued them.
B.A. Finance Corporation contended 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.
Issue: Whether or not BA Finance ca still collect on the deficiency of the Chattel Mortgage.
Held: In granting B.A. Finance Corporation the aforementioned powers and prerogatives, the Cuady
spouses created in the formers 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;
in such case, the assignee of the mortgage agreement is bound by the same stipulation and if the
assignee failed to file and prosecute the insurance claim when the car was damaged totally, the
mortgagor is relieved from his obligation to pay as he suffered a loss because of the failure of the
mortgagee to file the claim.
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.
11. BRITISH AIRWAYS VS CA
FACTS:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. He asked Mr. Gumar to prepare
his travel plans. Mr. Gumar purchased a ticket from British Airways (BA).
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL,
and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA. Before
departure, Mahtani checked in at PAL counter his two pieces of luggage containing his clothings and
personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight
bound for Bombay.
When Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from
the BA representatives, he was told that the same might have been diverted to London. After waiting for
1 week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report. In the
Philippines, on June 11, 1990.
Mahtani filed his complaint for damages and attorney's fees against BA and Mr.Gumar before the RTC.
BA filed a third party complaint against PAL alleging that the reason for the non-transfer of the luggage
was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the proper transfer of
Mahtani's luggage to the BA aircraft bound for Bombay.
TC dismissed the third party complaint of BA to PAL, CA sustain the trial court's ruling dismissing
appellant's third-party complaint against PAL.
The contract of air transportation in this case pursuant to the ticket issued by appellant to plaintiff-appellee
was exclusively between the plaintiff Mahtani and defendant-appellant BA. When plaintiff boarded the
PAL plane from Manila to Hongkong, PAL was merely acting as a subcontractor or agent of BA. This is
shown by the fact that in the ticket issued by appellant to plaintiff-appellee, it is specifically provided on
the "Conditions of Contract," paragraph 4 thereof that:
4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single
operation.
The rule that carriage by plane although performed by successive carriers is regarded as a single
operation and that the carrier issuing the passenger's ticket is considered the principal party and the other
carrier merely subcontractors or agent, is a settled issue.
ISSUE: WON BA, being the principal, had no cause of action against PAL, its agent or sub-contractor.
RULING: No.
Court held that the third-party complaint is, therefore, a procedural device whereby a "third party" who is
neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the case
with leave of court, by the defendant, who acts, as third-party plaintiff to enforce against such third-party
defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's
claim. The third-party complaint is actually independent of and separate and distinct from the plaintiff's
complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently and
separately from the original complaint by the defendant against the third-party. But the Rules permit
defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of action in
respect of plaintiff's claim against a third-party in the original and principal case with the object of avoiding
circuitry of action and unnecessary proliferation of law suits and of disposing expeditiously in one litigation
the entire subject matter arising from one particular set of facts.
Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract
of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter
naturally denies. In other words, BA and PAL are blaming each other for the incident.
In resolving this issue, it is worth observing that the contract of air transportation was exclusively between
Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the former's journey to PAL,
as its subcontractor or agent. In fact, the fourth paragraph of the "Conditions of Contracts" of the ticket
issued by BA to Mahtani confirms that the contract was one of continuous air transportation from Manila
to Bombay.
4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single
operation.
Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to
Hongkong acted as the agent of BA.
Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is
also responsible for any negligence in the performance of its function and is liable for damages which the
principal may suffer by reason of its negligent act. Hence, the Court of Appeals erred when it opined that
BA, being the principal, had no cause of action against PAL, its agent or sub-contractor.
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. 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. 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.
In rejecting Lufthansa's argument, we ruled:
In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with
Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed
by various carriers. The issuance of confirmed Lufthansa ticket in favor of Antiporda covering his entire
five-leg trip abroad successive carriers concretely attest to this.
Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone,
and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is
relieved from any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals,
while not exactly in point, the case, however, illustrates the principle which governs this particular
situation. In that case, we recognized that a carrier (PAL), acting as an agent of another carrier, is also
liable for its own negligent acts or omission in the performance of its duties.
G.R. No. L-20274 October 30, 1969
12. ELOY MIGUEL and DEMETRIO MIGUEL, petitioners, vs.
THE COURT OF APPEALS and ANACLETA M. VDA. DE REYES, respondents.
Silvestre Br. Bello for petitioners.
Teofilo A. Leonin for respondent.
CASTRO, J.:
Petition for review on certiorari of the decision and the two resolutions of the Court of Appeals
promulgated on May 10, July 23, and September 5, all in the year 1962, in CA-G.R.-16497-R, entitled
"Eloy Miguel and Demetrio Miguel, plaintiffs-appellees vs. Anacleta M. Vda. de Reyes, defendant-
appellant."
During the Spanish regime and prior to July 26, 1894, Eloy Miguel, then single and resident of Laoag,
Ilocos Norte, went to Isabela and for some appreciable period of time stayed with his kinsman Juan Felipe
in Barrio Ingud Norte, Municipality of Angadanan. There he spotted an uncultivated parcel of land, one
hectare of which he forthwith occupied, and then cleared and planted to corn. After the Philippine
Revolution, he returned to Laoag, Ilocos Norte and took a wife. In the early years of the ensuing American
regime, Eloy Miguel returned to Ingud Norte with his family, resettled on the same land, cultivated and
planted it to rice, declared it for taxation purposes, and paid the annual realty taxes thereon.
During the year 1932, Leonor Reyes, an ambulatory notary public and husband of the private respondent
Anacleta M. Reyes, used to visit Barrio Ingud Norte, looking for documents to notarize. He and Eloy
Miguel became acquaintances. Later, Leonor Reyes asked Miguel if he wanted to secure expeditiously
a title to his landholding. Having received an affirmative answer and after Eloy Miguel had handed to him
the tax declaration and tax receipts covering the land, Leonor Reyes prepared and filed a homestead
application in the name of Eloy Miguel and, furthermore, promised to work for the early approval of the
said application. Reyes handed to Miguel the receipt for the filing fee (exh. A) corresponding to the
homestead application, advising the latter to keep it, but he (Reyes) withheld other papers including the
tax declaration and tax receipts, assuring Miguel that he would return them as soon as the homestead
patent was issued in Miguel's name. Reyes likewise advised Miguel to cease paying the land taxes until
the patent shall have been issued by the Bureau of Lands.
After a long wait and becoming impatient about the issuance of the promised title, Eloy Miguel inquired
from Leonor Reyes about the status of his application. Reyes promised to send a letter-tracer to the
Bureau of Lands, and, in fact, asked Eloy Miguel to affix his thumbmark to a blank paper upon which was
supposed to be written a letter-tracer. However, World War II broke out in the Pacific, and Miguel did not
hear of and about his homestead application; after the war he had no way of ascertaining the outcome of
his application because Leonor Reyes had died meanwhile during the Japanese occupation of the
Philippines.
For the services rendered and still to be rendered by Leonor Reyes in preparing the homestead
application and in securing the issuance of the correspondent patent, Miguel gave the former 1/5 of his
yearly harvest from the land. After the death of Leonor Reyes Miguel continued to deliver an equal number
of cavanes of palay to the former's widow, Anacleta M. Vda. de Reyes, who likewise promised to help
him secure the necessary homestead patent.
Meanwhile, Demetrio Miguel helped his father, Eloy Miguel, clear and cultivate the land. Sometime in
1932, on the occasion of the marriage of Demetrio, Eloy Miguel ceded to Demetrio 14 hectares of the
southern portion of the land as a gift propter nuptias. Demetrio forthwith declared the said portion for
taxation purposes in his name, as evidenced by tax declaration 7408 (exh. G).
However, unknown to Eloy and Demetrio Miguel, Leonor Reyes on June 25, 1935 filed sales application
20240 in the name of his wife, Anacleta M. Vda. de Reyes (hereinafter referred to as the private
respondent), covering the same parcel of land occupied and cultivated by the Miguels and the subject of
Eloy Miguel's homestead-application. The sales application was duly acknowledged by the Bureau of
Lands on June 29, 1935, and a sale at public auction took place on August 3, 1939 whereat the private
respondent was the sole bidder. The Director of lands awarded the land to her on March 7, 1940, the
value of which was to be paid on installments.
Sometime in 1950, the private respondent had the land surveyed by Maximo Lorenzo who, in the course
of the survey, assured Eloy Miguel that the land was being surveyed in the latter's name. The private
respondent, who was present during the survey, made the same assurance to Eloy Miguel. However,
because his suspicions were aroused by the act of the private respondent of having the land surveyed,
Eloy Miguel directed his son, Demetrio, to inquire from the office of the district land officer of Ilagan,
Isabela, about the status of his (Eloy's) homestead application. Demetrio discovered that their land was
covered by the sales application of the private respondent. Eloy Miguel forthwith filed on February 16,
1950 a protest with the Bureau of Lands against sales application 20240 of the private respondent.
Consequently, on February 21, 1950, the Director of Lands ordered an investigation. Hearing of the
protest was scheduled for May 26, 1950 by deputy public lands inspector Alejandro Ramos of Land
District 4, Bureau of Lands, Ilagan, Isabela, but was postponed at the instance of the private respondent.
The hearing was then reset for February 10, 1951, by assistant public lands inspector Hilarion Briones.
However, the Miguels had in the interim discovered that notwithstanding their protest and the
investigation ostensibly being conducted by the administrative branch of the Government, sales patent
V-522 and original certificate of title P-1433, covering the parcel of land in question, were granted and
issued to the private respondent on January 10, 1951 and January 22, 1951, respectively.

Consequently, on February 17, 1951 Eloy and Demetrio Miguel lodged a complaint with the Court of First
Instance of Isabela against the private respondent, Anacleta M. Vda. de Reyes, the Director of Lands,
and the Register of Deeds of Isabela, for the annulment of sales patent V-522 and the cancellation of
original certificate of title P-1433. That case, docketed as civil case 315 of the Court of First Instance of
Isabela, was dismissed by that court on grounds that the plaintiffs did not have personality to institute the
action, and that it was prematurely filed the Miguels not having exhausted all administrative remedies,
more specifically not appealing to the Secretary of Agriculture and Natural Resources from the grant by
the Director of Land of the patent to the private respondent. On appeal to this Court, the dismissal was
affirmed on the second ground (G.R. No. L-4851, promulgated July 31, 1953).
On September 7, 1953, Eloy and Demetrio Miguel commenced the action (civil case 616) in the Court of
First Instance of Isabela against the private respondent to compel her to reconvey to them the land
covered by the abovementioned patent and title. After due hearing, the trial court found that Eloy Miguel
"has always been, and up to this time, in physical possession of the whole tract of land in question under
claim of ownership thru occupancy, he having occupied and cultivated the land since the Spanish
regime;" that he was a homestead applicant way back in 1932 for the land possessed by him; that there
exists a trust relationship Eloy Miguel would himself have personally attented to his own application; and
that, through fraud and misrepresentations, Leonor Reyes caused the filing and approval of an application
and the issuance by the Bureau of Lands of a sales patent covering the property in the name of his wife,
the private respondent, without the consent and knowledge of the Miguels. The lower court, however,
held that reconveyance is not proper because the land in question is not the private property of the
Miguels since time immemorial but remains a part of the public domain, and instead declared that Eloy
Miguel "should be given priority to acquire the land under the foregoing premises, the court a quo
rendered judgment ordering (1) the Director of Land to cancel patent V-522 issued in the name of
Anacleta M. Vda. de Reyes, (2) the Registrar of Deeds of Isabela to cancel original certificate of title P-
1433 in the name of Anacleta M. Vda. de Reyes and to return Patent V-522 to the Bureau of Lands, and
(3) the Director of Lands to give due course to the homestead application of Eloy Miguel over the land.
The private respondent appealed to the Court of Appeals (hereafter referred to as the respondent Court)
which dismissed the complaint upon the ground that the judgment appealed from could not and did not
bind the Director of Lands and the Registrar of Deeds of Isabela who were not parties thereto. Eloy and,
Demetrio Miguel (hereafter referred to as the petitioners) filed a motion for reconsideration, wherein they
argued that while the trial court might have incurred error in the legal conclusions drawn from its own
findings of fact, the respondent Court was not legally precluded by the Rules of Court and applicable
jurisprudence to modify the judgment of the trial court, so as to make it conform to the evidence, and to
grant the relief of reconveyance sought in the action, in which action the Director of Land and the Register
of Deeds of Isabela are not proper or necessary parties. The motion for reconsideration wag denied in
an extended resolution of the respondent Court Promulgated on July 23, 1962, which ruled that the
petitioners should have appealed from the decision of the trial court. A second motion for reconsideration
was denied in a minute resolution dated September 5, 1962.
The petitioners are now before us on appeal by certiorari, assigning as errors (1) the Court of Appeals'
holding that they should have appealed from the decision of the trial court, and (2) its finding that,
assuming that reconveyance in favor of the petitioners as mere appellees is still proper, the cases cited
in the latter's first motion for reconsideration are not in point.
It has been postulated and, we think, correctly that the Supreme Court is vested with ample authority
to review matters not assigned as errors in an appeal, if it finds that their consideration and resolution are
indispensable or necessary in arriving at a just decision in a given case.1 Thus, before passing upon the
foregoing assigned errors, we shall first resolve in seriatim the matters raised in both the appealed
decision and resolutions of the respondent Court because to do so is imperative in arriving at a fair and
equitable adjudication of this case.
1. The respondent Court points up the failure of the petitioners to present a petition for judicial
confirmation of imperfect title, if they indeed had been in possession of the land since July 26, 1894, in
accordance with the Public Land Act. Eloy Miguel should not, however, be expected to file such a petition
because all along he was relying on the solemn assurances of Leonor Reyes and later his wife, the
private respondent, that they were in the process of securing a homestead patent for him.
2. The respondent Court observed in its decision that the evidence on the allegation that Leonor
Reyes acted fraudulently in applying for the purchase of the land and later transferring his right to his
wife, is sharply conflicting, and that even granting that there was fraud in the obtention of the issuance of
the patent, any objection based on that ground should have been interposed within one year from the
date of its issuance.
We cannot give our approval to this view. As found by the court below, the petitioners have proven by
preponderance of evidence the fraud perpetrated by the private respondent and her husband on Eloy
Miguel. The weight of evidence leans heavily in favor of the fact of occupation by Eloy Miguel of the land
from prior to July 26, 1894. This was the finding of the lower court which belies the private respondent's
allegation that Eloy Miguel entered as her tenant only in 1935. There is also the receipt, exh. A, evidencing
the payment of a filing fee for a homestead application, which receipt, in the session of Eloy Miguel, raises
at least the presumption that he had filed a homestead application. That the records of the Bureau of
Lands or of any of its units, particularly the district land office at Ilagan, Isabela, do not show that such
application was ever filed, supports the petitioners' thesis, concurred in by the trial court, that the blank
paper which Eloy Miguel thumbmarked at the behest of Leonor Reyes was used by the latter to withdraw
the formers application instead of to trace the application. Finally, there is the private respondent's and
her husband's act of misleading the Bureau of Lands by falsely stating in their application for a sales
patent that there was no improvement on the land, when, as found by the lower court, the land had
already been cultivated and improved by Eloy Miguel since 1932, by the latest. (This misleading
statement, noted by the court a quo on exh. 15 dated March 28, 1939 of the private respondent,
significantly, is not impugned by the latter.) In fact, the lower court observed that the private respondent
herself affirmed on the witness stand that Eloy Miguel was in 1935 already working on the land, although
supposedly as her tenant. Therefore, at the time the private respondent's sales patent application was
filed in 1935, Leonor Reyes and she led the Bureau of Lands to believe that the land was uncultivated
and unoccupied by other claimants. The very relevant question arises: Why did the Reyes spouses
conceal from the Bureau of Lands the fact that the land was occupied and being cultivated by the Miguels,
when there existed no prohibition against having the land cultivated for them by tenants? There are only
two logical reasons for the mysterious conduct of the Reyes spouses. First, had they stated in their sales
application that the whole parcel of land was under cultivation by the petitioners, the Director of Lands
would have in all probability discovered that the land applied for was covered by the prior homestead
application of Eloy Miguel and most likely would have disapproved the sales application of the private
respondent. Second, had a survey of the land been conducted earlier, this would have aroused the
suspicions of Eloy Miguel earlier and enabled him to discover much sooner the fraud perpetrated by
Leonor Reyes before the sales application of the private respondent was given due course. Indeed, the
private respondent waited until she had just about paid all the installments on the land before ordering a
final survey thereof. It was this survey which aroused Eloy Miguel's suspicions and enabled him and his
son to discover the fraud perpetrated upon them.
The respondent Court's holding that any objection based on fraud should have been interposed within
one year from the date the issuance of the sales patent has no relevance to the case at bar. This is an
action for the enforcement of a constructive trust the ultimate object of which is the reconveyance of
property lost through breach of fiduciary relations and/or fraud. Therefore, it can be filed within four years
from the discovery of the fraud.2 And since the petitioners discovered the fraud committed against them
by the Reyes spouses in 1950, they had until 1954 within which to bring this action. This action was
seasonably instituted because the complaint was filed on September 7, 1953.
3. The respondent Court also held that the only remedy available at the time the action below was
instituted was for the Government (through the Solicitor General) to file an action for the reversion of the
land to the public domain based on the illegality of the grant a suit which a private person is not
authorized to file. The foregoing rule is correct but inapplicable in this case, which, as earlier mentioned,
is an action for reconveyance of a piece of land through enforcement of a constructive trust. For this same
reason, the provision of Land Administrative Order 6 of the Secretary of Agriculture and Natural
Resources, cited in the respondent court's decision, is likewise inapt.
4. The respondent Court attributes error to the lower court's finding that Eloy Miguel filed a
homestead application for the land in question, stating that no other evidence was presented to show that
such application was filed except the testimony of Eloy Miguel and the receipt for the filing fee of a
homestead application; and that if such application was really filed, some trace or tell-tale evidence of it
would be extant, and the application could have been easily reconstituted after the liberation in 1945
when the Government adopted a policy to enable all public land applicants to reconstitute their
applications. It is too well-settled to require any citation of authority that the lower Court's findings of fact
are entitled to considerable weight, especially with respect to the appreciation of the testimony of
witnesses on the stand, since it was in the best position to observe the demeanor of the witnesses. The
testimony of Eloy Miguel regarding his filing of a homestead application over the parcel of land as
found by the lower court should not therefore lightly be brushed aside. The receipt, exh. A, for the filing
of the homestead application raises a presumption in favor of Eloy Miguel's having filed such an
application. As earlier explained, if no trace of the said application could be found among the records of
the Bureau of Lands or of any of its units particularly the district land office at Ilagan, Isabela, it is because
through fraud i.e., by asking Eloy Miguel to thumbmark a blank piece of paper Leonor Reyes
succeeded in withdrawing the application of Miguel. And he did this to pave the way for his wife, the
private respondent herein, herself to apply for the land under a sales application. Of course, having relied
on the assurances of the Reyes spouses that they would help him secure a homestead patent, Eloy
Miguel found no need to reconstitute his homestead application. It is not even farfetched to suppose that
Miguel, being illiterate, never even came to learn of the Government's policy of enabling public land
applicants to reconstitute their applications.
5. Coming now to the assigned errors, the respondent Court's view is not correct that it cannot
grant the relief of reconveyance because the petitioners did not appeal from the decision of the lower
court. There exist sufficient bases, hereinafter to be discussed, for the respondent Court to award said
relief in the exercise of its broad appellate powers to affirm, reverse or modify the judgment or order
appealed from.
To start with, the petitioners cannot entirely be blamed if they thought it the better part of prudence not to
appeal. For although it did not incorporate a decree of reconveyance, still the decision of the court below
was favorable to them because it vindicated their actual possession of the land under a bona fide claim
of ownership since the Spanish regime, and adjudged them as having a better right to the land and the
priority to own it under the Public Land Act. Besides, it was their legitimate desire to avoid incurring
additional expenses incident to the bringing of an appeal.
However, as appellees in the Court of Appeals, the petitioners pointedly called the attention of the
respondent Court in their brief to several questions decided against them in the court below. Thus,
working on the theory that it was plain error for the trial court to order the Director of Lands and the
Register of Deeds of Isabela to implement its decision, the petitioners called the attention of the
respondent Court to the precise nature of the action below in which the Director of Lands and the Register
of Deeds of Isabela need not be impleaded.
... The action in this case is reconveyance, the purpose of which is to compel the defendant to return to
the plaintiffs-appellees the land in question which she has acquired through fraudulent means. Such
being the case, it would have been utterly improper for the plaintiffs to have impleaded the Director of
Lands or the Register of Deeds of Isabela inasmuch as the action is personal in nature directed against
the person of the defendant." .
The petitioners likewise called the attention of the respondent Court to the trust relationship existing
between them, on one hand, and the Reyes spouses, on the other, which was breached by the latter.
Thus, to justify the reconveyance to them of the property, they stated that:
Moreover, a situation of trust has been created in the instant case between the plaintiff and the defendant-
appellant deceased husband upon whom the plaintiff Eloy Miguel relied through his (Reyes')
representations that the corresponding title to said land would be secured in favor of the plaintiff Eloy
Miguel. The evidence likewise shows that the defendant Vda. de Reyes promised the plaintiff to continue
the work begun by her late husband with the ultimate result of securing the said homestead patent and
title in favor of the plaintiff Eloy Miguel. Inasmuch as the said promise was violated by the defendant who
secretly worked toward the acquisition of the said land for her own self, fraudulently and stealthily, no
prescription can run as against plaintiffs' right to claim ownership of the said property.
We held in one case that appellants need not make specific assignment of errors provided they discuss
at length and assail in their brief the correctness of the trial court's findings regarding the matter. Said
discussion warrants the appellate court to rule upon the point because it substantially complies with sec.
7, Rule 51 of the Revised Rules of Court, intended merely to compel the appellant to specify the questions
which he wants to raise and be disposed of in his appeal. A clear discussion regarding an error allegedly
committed by the trial court accomplishes the purpose of a particular assignment of error.3
Reasoning a fortiori from the above-cited authority, an appellee who occupies a purely defensive position
and is not required to make assignments of errors, need only discuss or call the attention of the appellate
court in his brief to the issues erroneously decided against him by the trial court.4 Here the petitioners
(appellees in the Court of Appeals) stated quite explicitly in their brief that since the action was for
reconveyance, it was utterly improper to implead the Director of Lands and the Register of Deeds in
effect calling the attention of the respondent Court to a plain error committed by the trial court in ordering
the Director of Lands and the Register of Deeds to nullify the sales patent and original certificate of title
issued to the private respondent. And, in discussing the trust relationship between the Miguels and the
Reyes spouses which was breached by the latter, the petitioners (as appellees) also clearly brought to
the attention of the respondent Court a valid ground disregarded by the lower court as a basis for granting
the relief of reconveyance.
Moreover, the Rules of Court5 and jurisprudence authorize a tribunal to consider errors, although
unassigned, if they involve (1) errors affecting the lower court's jurisdiction over the subject matter, (2)
plain errors 6 not specified, and (3) clerical errors. Certainly, the mandate contained in the dispositive
portion of the lower court's decision and addressed to the Director of Lands and the Register of Deeds,
who were not parties to the case, is a plain error which the respondent Court properly corrected. As
aforenarrated, the petitioners (as appellees) brought this error to the attention of the respondent Court.
Another plain error which the respondent Court should have considered was the court a quo's conclusion
that the land in litigation was still part of the public domain, in the face of the parties' mutual allegations
to the contrary and despite the admitted fact that a sales patent and an original certificate of title over the
land had already been issued, thus segregating the land from the public domain and making it private
land.
It is noteworthy that the complaint for reconveyance was not dismissed by the trial court. What it denied
was merely the relief or remedy of reconveyance. However, in its decision, the trial court made certain
findings of fact which justified the relief of reconveyance e.g., that Eloy Miguel "has always been, and
up to this time, in physical possession of the whole tract of land in question under claim of ownership thru
occupancy, he having occupied and cultivated the land since the Spanish regime;" that there was a trust
relationship between Eloy Miguel and the Reyes spouses; and that the Reyes spouses have fraudulently
and in bad faith breached that trust. Hence, in reiterating their positions before the respondent Court on
the private nature of the land, on the impropriety of impleading the Director of Lands and the Register of
Deeds of Isabela, and on the existence of a trust relationship between the petitioners and the Reyes
spouses, the petitioners were in point of fact inviting the respondent Court's attention to questions
erroneously decided against them by the trial court, in the hope that the respondent Court would render
judgment in accordance with the facts adjudged by the trial court as proven.
If the complaint states a claim upon which any relief can be given, it is immaterial what the plaintiff has
asked for in his prayer or whether he has asked for the proper relief; the court will grant him the relief to
which he is entitled under the facts proven (Kansas City St. L. and C. R. Co. v. Alton R. Co., 5 Fed. Rules
Service, p. 638; U.S. Circuit Court of Appeals, Seventh Circuit, Dec. 18, 1941).
On appeal to the respondent Court by the private respondent, the suit was, as it has always been in the
court of origin, one for reconveyance. And of course, the petitioners did not ask the respondent Court for
an affirmative relief different from what was logically justified by the facts found by and proven in the court
a quo.
6. The respondent Court opined that the cases cited by the petitioners in their motion for
reconsideration (i.e., Republic of the Philippines v. Carle Heirs, L-12485, July 21, 1959, and Roco, et al.
v. Gimeda L-11651, Dec. 27, 1958) are not applicable because they involved properties which admittedly
belonged to the parties entitled to reconveyance, unlike the herein petitioners who are mere public land
applicants and have not acquired title under the Public Land Act. Assuming the respondent Court to be
correct, a legion of cases there are which can be cited in favor of the petitioners' position. Since the law
of trust has been more frequently applied in England and in the United States than it has been in Spain,
we may draw freely upon American precedents in determining the effects of trusts, especially so because
the trusts known to American and English equity jurisprudence are derived from the fidei commissa of
the Roman Law and are based entirely upon civil law principles.7 Furthermore, because the case
presents problems not directly covered by statutory provisions or by Spanish or local precedents, resort
for their solution must be had to the underlying principles of the law on the subject. Besides, our Civil
Code itself directs the adoption of the principles of the general law of trusts, insofar as they are not in
conflict with said Code, the Code of Commerce, the Rules of Court and special laws.8
In holding that the cases cited by the petitioners in their motion for reconsideration (i,e., Republic of the
Philippines v. Carle Heirs, supra, and Roco, et al. v. Gimeda, supra) are inapplicable, the respondent
Court advances the theory that an action for reconveyance based on constructive trust will prosper only
if the properties involved belong to the parties suing for and entitled to reconveyance. This is not entirely
accurate. In Fox v. Simons9 the plaintiff employed the defendant to assist him in obtaining oil leases in a
certain locality in Illinois, the former paying the latter a salary and his expenses. The defendant acquired
some leases for the plaintiff and others for himself. Whereupon, the plaintiff brought suit to compel the
defendant to assign the leases which he had acquired for himself. The court found for the plaintiff, holding
that it was a breach of the defendant's fiduciary duty to purchase for himself the kind of property which
he was employed to purchase for the plaintiff. 10
It is to be observed that in Fox v. Simons, supra, the plaintiff was not the original owner of the oil leases.
He merely employed the defendant to obtain them for him, but the latter obtained some for the plaintiff
and some for himself. Yet, despite the absence of this former-ownership circumstance, the court there
did not hesitate to order the defendant to assign or convey the leases he obtained for himself to the
plaintiff because of the breach of fiduciary duty committed by said defendant. Indeed, there need only be
a fiduciary relation and a breach of fiduciary duty before reconveyance may be adjudged. In fact, a
fiduciary may even be chargeable as a constructive trustee of property which he purchases for himself,
even though he has not undertaken to purchase it for the beneficiary if in purchasing it he was improperly
competing with the beneficiary.11
Parenthetically, a fiduciary relation arises where one man assumes to act as agent for another and the
other reposes confidence in him, although there is no written contract or no contract at all. If the agent
violates his duty as fiduciary, a constructive trust arises. It is immaterial that there was no antecedent
fiduciary relation and that it arose contemporaneously with the particular transaction. 12
In the case at bar, Leonor Reyes, the private respondent's husband, suggested that Eloy Miguel file a
homestead application over the land and offered his services in assisting the latter to secure a homestead
patent. Eloy Miguel accepted Leonor Reyes' offer of services, thereby relying, on his word and reposing
confidence in him. And in payment for the services rendered by Leonor Reyes in preparing and filing the
homestead application and those still to be rendered by him in securing the homestead patent, Eloy
Miguel delivered to Reyes 1/5 of his yearly harvest from the said land. When Leonor Reyes died, the
petitioners continued to deliver the same percentage of their annual harvest to the private respondent
who undertook to continue assisting the former to secure a homestead patent over said land. However,
in breach of their fiduciary duty and through fraud, Leonor Reyes and the private respondent filed a sales
application and obtained a sales patent and ultimately an original certificate of title over the same parcel
of land. Therefore, following the ruling in Fox v. Simons, supra, the private respondent can be compelled
to reconvey or assign to the petitioners the parcel of land in the proportion of nine hectares in favor of
Eloy Miguel and 14 hectares in favor of Demetrio Miguel, respectively.
The private respondent argues that there is no violation of trust relationship because the petitioners could
have participated in the public bidding. She avers that the alleged fraud supposedly committed upon the
petitioners, and on which the claim for reconveyance is founded, is clearly of no moment because the
sales patent in question was not the necessary consequence thereof, but rather, it was granted in
consideration of her being the highest bidder and the purchaser of the land. In refutation of the foregoing
argument, it must be observed, firstly, that the petitioners because of the fraud practised on them by
the Reyes spouses never came to know about the public bidding in which the land was offered for sale
and therefore could not have participated therein. Had not the Reyes spouses misrepresented in their
sales application that the land was uncultivated and unoccupied, the Director of Lands would in all
probability have found out about the occupancy and cultivation of the said land by the petitioners and
about Eloy Miguel's homestead application over the same, and consequently would have denied the
sales application of the Reyes spouses. Secondly, it may justifiably be postulated that equity will convert
one who, for any reason recognized by courts of equity as a ground for interference, has received legal
title from the Government to lands, which in equity and by the laws of Congress ought to have gone to
another, into a trustee for such other and compel him to convey the legal title accordingly.13 Thirdly, Eloy
Miguel could have very easily obtained title to the said parcel of land in either of two ways, had he not
been inveigled by Leonor Reyes to file a homestead application. Thus, since he is a natural-born Filipino
citizen, who is not an owner of more than twenty-four hectares of land, and who since prior to July 4,
1926 (under R.A. 782, approved June 21, 1952, occupation and cultivation since July 4, 1945, or prior
thereto, is deemed sufficient) has continuously occupied and cultivated a parcel of land not more than
twenty-four hectares in area, he was entitled to apply for a free patent for, or gratuitous grant, of said
land. This is known as confirmation of imperfect or incomplete titles by administrative legalization.14 Or,
since Eloy Miguel has possessed the land prior to July 26, 1894 and said possession has been
continuous, uninterrupted, open, adverse and in the concept of an owner, there is a presumption juris et
de jure that all necessary conditions for a grant by the State have been complied with, and he would have
been by force of law entitled pursuant to the provisions of sec. 48(b) of the Public Land Act to the
registration of his title to the land. 15
ACCORDINGLY, the decision of the Court of Appeals of May 10, 1962 and its resolutions of July 23 and
September 5, 1962, are set aside. Another judgment is hereby entered, ordering the private respondent
Anacleta M. Vda. de Reyes to convey the land subject matter of the complaint, in fee simple, to the
petitioners, in the proportion of nine (9) hectares in favor of Eloy Miguel and fourteen (14) hectares in
favor of Demetrio Miguel. In the event of failure of the said private respondent, for any reason whatsoever,
to convey within thirty (30) days from the date this judgment becomes final, it is hereby decreed that at
the end of that period she will be automatically divested of her title to the property in dispute, and this
decision shall be authority for the Register of Deeds to forthwith cancel the original of the original
certificate of title P1433 in his office and the owner's copy thereof in the name of Anacleta M. Vda. de
Reyes, and to issue in favor of Eloy Miguel and Demetrio Miguel new Torrens titles over the land in the
proportion above indicated. Costs against the private respondent Reyes.
13. DOMINGO v. DOMINGO
G.R. No. L-30573; October 29, 1971
Ponente: J. Makasiar
FACTS:
On June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive
agency to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate
of P2.00 per square meter (or for P176,954.00) with a commission of 5% on the total price, if the
property is sold by Vicente or by anyone else during the 30-day duration of the agency or if the property
is sold by Vicente within three months from the termination of the agency to a purchaser to whom it was
submitted by Gregorio during the continuance of the agency with notice to Vicente. The said agency
contract was in triplicate, one copy was given to Vicente, while the original and another copy were
retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising
him one-half of the 5% commission.Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio
as a prospective buyer.
Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square
meter. Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences
between Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20 and Vicente
agreed.
Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest
money, after which Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his
former offer to pay for the property at P1.20 per square meter in another letter. Subsequently, Vicente
asked for an additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to
deliver to him.
Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of 1,000.00 for
succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total in round figure of
P109,000.00. This gift of P1,000.00 was not disclosed by Gregorio to Vicente. Neither did Oscar pay
Vicente the additional amount of P1,000.00 by way of earnest money.
When the deed of sale was not executed on August 1, 1956 as stipulated nor on August 16, 1956 as
extended by Vicente, Oscar told Gregorio that he did not receive his money from his brother in the
United States, for which reason he was giving up the negotiation including the amount of P 1,000 given
as earnest money to Vicente and the P 1,000 given to Gregorio as propina or gift.
When Oscar did not see him after several weeks, Gregorio sensed something fishy. So, he went to
Vicente and read a portion to the effect that Vicente was still committed to pay him 5% commission.
Vicente grabbed the original of the document and tore it to pieces.
From his meeting with Vicente, Gregorio proceeded to the office of the Register of Deeds of Quezon
City, where he discovered a deed of sale executed on September 17, 1956 by Amparo Diaz.
Upon thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he
demanded in writing payment of his commission on the sale price of P109,000.00.
Vicente stated that Gregorio is not entitled to the 5% commission because he sold the property not to
Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon
ISSUE:
Whether Gregorio was entitled to receive the 5% commission
HELD:
No, Gregorio is not entitled to receive the 5% commission.
The Supreme Court held that the law imposes upon the agent the absolute obligation to make a full
disclosure or complete account to his principal of all his transactions and other material facts relevant to
the agency, so much so that the law as amended does not countenance any stipulation exempting the
agent from such an obligation and considers such an exemption as void.
Hence, by taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a
position wholly inconsistent with that of being an agent for his principal, who has a right to treat him,
insofar as his Commission is concerned, as if no agency had existed. The fact that the principal may
have been benefited by the valuable services of the said agent does not exculpate the agent who has
only himself to blame for such a result by reason of his treachery or perfidy.
14. Escueta vs. Lim
G.R No. 137162 Jan 24, 2007
First Division
Azcuna,J.:
Facts:Rufino Lim, herein respondent, averred that she had bought the hereditary properties of the
Petitioners Rubio and heirs of Baloloy. On April 10, 1990 Petitioners executed a Contract of Sale and
received from Respondent Lim a down payment of 102,169.86 and 450,000 respectively and the balance
will be paid after the titles are transferred into Lims name.
Rubio and the heirs of Baloloy refused to deliver the title to Lim despite her offer of the payment of the
balance. Despite the existence of a Contract of Sale between Lim and Rubio and the heirs of Baloloy,
Corazon Escueta having knowledge thereof executed a simulated sale involving the lots. As for the
Baloloys, they argued that they already withdrawn their offer to sell for the reason that respondent failed
to pay the balance on time hence the Contract of Sale has no more force and effect. As to Rubio, it
alleged that Lim has no cause of action since, Rubio appointed her daughter Patricia Llamas to be his
attorney-in-fact, and not in favor of Victoria Laygo Lim who represented Rubio in the sale between the
Respondent Rufina Lim. The RTC declared the Petitioners in default. CA affirmed RTC decision with
amendments. Hence, this petition.
Issue: Whether or not the Contract of Sale between Rufina Lim and the Petitioners Rubio and Baloloys
is valid.
Held: Yes, the Contract of Sale is valid.
Ruling: The Court held that the Contract of Sale between the petitioner and respondent is valid and
binding. Rubio argued that Victoria has no authority to represent him in the Sale of the disputed properties
since Rubio appointed her daughter as his attorney-in-fact and not Victoria. Art. 1892 provides:
Article 1892 of the Civil Code provides:
Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but
he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one
In the case above, Rubio made his daughter Patricia to be her Attorney-in fact, and according to the
above article, Patricia is not prohibited to appoint a substitute as a representative of Rubio. Patricia, acting
on the authority given to her, appointed
Victoria as her substitute hence the transaction between Victoria and Respondent is valid. Art. 1317
further provides:
Art. 1317. x x x
A contract entered into in the name of another by one who has no authority or legal representation, or
who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by
the person on whose behalf it has been executed, before it is revoked by the other contracting party.
The acceptance of Rubio of the downpayment and encashment of the said checks serves as the
ratification of Rubio of the Sale of the Properties with the respondent Rufina Lim.

15. Bacaltos Coal Mines v. CA
G.R. No. 114091 June 29, 1995
FACTS:
In an Authorization, petitioner Bacaltos authorized Savellon, to use the coal operating contract of
Bacaltos Coal Mine of which he is the proprietor, For any legitimate purpose that it may serve and
particularly: (1) to acquire purchase orders; (2) to engage in trading; (3) to collect all receivables due or
in arrears; (4) to extend to any person or company by substitution the same extent of authority that is
granted to Rene Savellon; (5) in connection with the preceding paragraphs to execute and sign
documents, contracts, and other pertinent papers.
In 1988, a Trip Charter Party was executed between Bacaltos Coal Mines (represented by Savellon) and
San Miguel. The agreement was that For Php 650,000 to be paid within seven days after the execution
of the contract, it "lets, demises" the vessel to charterer SMC "For three round trips to Davao." The vessel
was able to make only one trip, so SMC filed an action for specific performance.
Petitioners alleged that Savellon was not their Chief Operating Officer and that the powers granted to him
are only those clearly expressed in the Authorization which do not include the power to enter into any
contract with SMC.
ISSUE:
WON Savellon was duly authorized by the petitioners to enter into the Trip Charter Party.
RULING:
NO. The broadest scope of Savellon's authority is limited to the use of the coal operating contract and
the clause cannot contemplate any other power not included in the enumeration or which are unrelated
either to the power to use the coal operating contract or to those already enumerated. In short, while the
clause allows some room for flexibility, it can comprehend only additional prerogatives falling within the
primary power and within the same class as those enumerated. There is no evidence at all that Bacaltos
Coal Mines as a coal mining company owns and operates vessels, and even if it owned any such vessels,
that it was allowed to charter or lease them. Also, the Authorization is not a general power of attorney. It
is a special power of attorney for it refers to a clear mandate specially authorizing the performance of a
specific power and of express acts subsumed therein.
Furthermore, had SMC exercised due diligence and prudence, it should have known in no time that there
is absolutely nothing on the Face of the Authorization that confers upon Savellon the authority to enter
into any Trip Charter Party.
16. SMITH, BELL & CO. V. CA
A resident agent of a foreign insurance company is only tasked on behalf of its principal to receive
processes and not to answer personally for any insurance claims therefore it cannot be held solidarily
liable with the principal.
FACTS: Plaintiff, doing business under the business name of Tic Hin Chiong, importer, bought and
imported to the Philippines 50 metric tons of Dicalcium phosphate, feed grade F-15% at US$19,500.00.
These were contained in 1,250 bags to be shipped from Taiwan to the Philippines. Such shipment is
insured by First Insurance Co. against all risks at port of departure and with Smith, Bell and Co stamped
at the lower left side as Claim agent.
When the cargo arrived, Chua had the cargo surveyed and found 600 bags were damaged by tearing at
the sides of the container bags and it weighed 18,546.0 kg short
Plaintiff filed with Smith, Bell and Co., a formal statement of claim for settlement of the corresponding
losses but the latter informed the former that its principal is only willing to pay 50% of the claim on the
ground of discrepancy between the amounts contained in the shipping agents reply and that of Metroport,
the local arrastre contractor.
Chua refused the offer contending that the discrepancy was a result of loss from vessel to arrastre to
consignees warehouse which losses were still within the all risk insurance cover. Since no settlement
was made, Chua instituted the instant petition.
RTC: ruled in favor of Chua, finding that he the liability of the insurance firm was fully established and
since Smith, Bell and Co is a claim agent of the
foreign insurance firm, justice is better served if said agent is made liable without prejudice to the right of
action against the principal CA: affirmed the decision of the RTC thus the case at bar.
ISSUE: W/N Smith, Bell can be held solidarily liable with First Insurance Co, the principal
HELD: NO. There is only solidary liability when the obligation expressly so states. It cannot be lightly
inferred. The insurance code is quite clear as to the purpose and role of a resident agent which is what
Smith, Bell and Co is in the case at bar. Such agent, as representative of the foreign insurance company,
is tasked only to receive processes on behalf of its principal and not to answer to answer personally for
any insurance claims.
Also, a settling agent acting within the scope of its authority, cannot be held personally and/or solidarily
liable for the obligations of its disclosed principal merely because there is allegedly a need for speedy
settlement of the claim of Chua. When an adjustment and settlement agent adjusts or settles a claim he
is no different from any other agent in that he also acts in a representative capacity. He acts in behalf of
his principal and his acts are binding upon such principal.
Contracts are binding only upon the parties who execute them. The only involvement of Smith Bell in the
contract of insurance was having its name stamped in the bottom left portion as claim agent. It cannot be
interpreted to mean that it participated in the contract. Since there is no privity of contract then there is
no obligation or liability and Chua has no cause of action against Smith Bell.
17. SALFIE ALCAN v. IMPERIAL VEGETABLE OIL CO., Inc.
G.R. No. 126751; March 28, 2001
Ponente: J. Ynares-Santiago
FACTS:
Petitioner Safic Alcan & Cie (hereinafter, "Safic") is a French corporation engaged in the international
purchase, sale and trading of coconut oil.
Petitioner Safic alleged that on July 1, 1986 and September 25, 1986, it placed purchase orders with IVO
for 2,000 long tons of crude coconut oil, valued at US$222.50 per ton to be delivered within the month of
January 1987. Private respondent, however, failed to deliver the said coconut oil and, instead, offered a
"wash out" settlement, whereby the coconut oil subject of the purchase contracts were to be "sold back"
to IVO at the prevailing price in the international market at the time of wash out. Thus, IVO bound itself
to pay to Safic the difference between the said prevailing price and the contract price of the 2,000 long
tons of crude coconut oil, which amounted to US$293,500.00. IVO failed to pay this amount despite
repeated oral and written demands.
Safic alleged that on eight occasions between April 24, 1986 and October 31, 1986, it placed purchase
orders with IVO for a total of 4,750 tons of crude coconut oil. When IVO failed to honor its obligation under
the wash out settlement narrated above, Safic demanded that IVO make marginal deposits within forty-
eight hours on the eight purchase contracts in amounts equivalent to the difference between the contract
price and the market price of the coconut oil, to compensate it for the damages it suffered when it was
forced to acquire coconut oil at a higher price. IVO failed to make the prescribed marginal deposits on
the eight contacts, in the aggregate amount of US$391,593.62, despite written demands.
Hence, Safic prayed that IVO be ordered to pay the sums of US$293,500.00 and US$391,593.62, plus
attorney's fees and litigation expenses.
IVO raised the following special affirmative defenses: Safic had no legal capacity to sue because it was
doing business in the Philippines without the requisite license or authority; the subject contracts were
speculative contracts entered into by IVO's then President, Dominador Monteverde, in contravention of
the prohibition by the Board of Directors against engaging in speculative paper trading, and despite IVO's
lack of the necessary license from Central Bank to engage in such kind of trading activity.
ISSUE:
Whether the act of Dominador Monteverde binds IVO
HELD:
No, the act of Dominador Monteverde without the authorization of the Board of Directors did not bind
IVO.
The Supreme Court ruled 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 and that it did
not authorize Monteverde to enter into speculative contracts.
Safic cannot 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.
Under Article 1898 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 cannot 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
principal's ratification.
G.R. No. 95703 August 3, 1992
18. RURAL BANK OF BOMBON (CAMARINES SUR), INC. v. HON. COURT OF APPEALS,
EDERLINDA M. GALLARDO, DANIEL MANZO and RUFINO S. AQUINO
Date: August 3, 1992
Ponente: GRIO-AQUINO, J.
Legal Doctrine: Agents act of signing mortgage deed in his own name bound himself in his personal
capacity as debtor.
Facts: On January 12, 1981, Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power
of attorney in favor of Rufina S. Aquino authorizing him:
To secure a loan from any bank or lending institution for any amount or otherwise mortgage the property
covered by Transfer Certificate of Title No. S-79238 situated at Las Pias, Rizal, the same being my
paraphernal property, and in that connection, to sign, or execute any deed of mortgage and sign other
document requisite and necessary in securing said loan and to receive the proceeds thereof in cash or
in check and to sign the receipt therefor and thereafter endorse the check representing the proceeds of
loan.
Thereupon, Gallardo delivered to Aquino both the special power of attorney and her owner's copy of
Transfer Certificate of Title.
On August 26, 1981, a Deed of Real Estate Mortgage was executed by Rufino S. Aquino in favor of the
Rural Bank of Bombon over the three parcels of land covered by TCT No. S- 79238. The deed stated
that the property was being given as security for the payment of "certain loans, advances, or other
accommodations obtained by the mortgagor from the mortgagee in the total sum of Three Hundred Fifty
Thousand Pesos only (P350,000.00), plus interest at the rate of fourteen (14%) per annum . . ."
On January 6, 1984, the spouses Ederlinda Gallardo and Daniel Manzo filed an action against Rufino
Aquino and the Bank because Aquino allegedly left his residence at San Pascual, Hagonoy, Bulacan,
and transferred to an unknown place in Bicol. She discovered that Aquino first resided at Sta. Isabel,
Calabanga, Camarines Sur, and then later, at San Vicente, Calabanga, Camarines Sur, and that they
(plaintiffs) were allegedly surprised to discover that the property was mortgaged to pay personal loans
obtained by Aquino from the Bank solely for personal use and benefit of Aquino; that the mortgagor in
the deed was defendant Aquino instead of plaintiff Gallardo whose address up to now is Manuyo, Las
Pias, M.M., per the title (TCT No. S-79238) and in the deed vesting power of attorney to Aquino; that
correspondence relative to the mortgage was sent to Aquino's address at "Sta. Isabel, Calabanga,
Camarines Sur" instead of Gallardo's postal address at Las Pias, Metro Manila; and that defendant
Aquino, in the real estate mortgage, appointed defendant Rural Bank as attorney in fact, and in case of
judicial foreclosure as receiver with corresponding power to sell and that although without any express
authority from Gallardo, defendant Aquino waived Gallardo's rights under Section 12, Rule 39, of the
Rules of Court and the proper venue of the foreclosure suit.
Rufino S. Aquino in his answer said that the plaintiff authorized him to mortgage her property to a bank
so that he could use the proceeds to liquidate her obligation of P350,000 to him. The obligation to pay
the Rural Bank devolved on Gallardo. Of late, however, she asked him to pay the Bank but defendant
Aquino set terms and conditions which plaintiff did not agree to. Aquino asked for payment to him of moral
damages in the sum of P50,000 and lawyer's fees of P35,000.
The Bank moved to dismiss the complaint and filed counter-claims for litigation expenses, exemplary
damages, and attorney's fees. It also filed a crossclaim against Aquino for P350,000 with interest, other
bank charges and damages if the mortgage be declared unauthorized.
Meanwhile, on August 30, 1984, the Bank filed a complaint against Ederlinda Gallardo and Rufino Aquino
for "Foreclosure of Mortgage" docketed as Civil Case No. 8330 in Branch 141, RTC Makati. On motion
of the plaintiff, the foreclosure case and the annulment case (Civil Case No. 6062) were consolidated.
On January 16, 1986, the trial court rendered a summary judgment in Civil Case No. 6062, dismissing
the complaint for annulment of mortgage and declaring the Rural Bank entitled to damages the amount
of which will be determined in appropriate proceedings. The court lifted the writ of preliminary injunction
it previously issued. On April 23, 1986, the trial court issued an order suspending the foreclosure
proceedings until after the decision in the annulment case shall have become final and executory. The
plaintiff appealed to the Court of Appeals, which on September 18, 1990, reversed the trial court. The
dispositive portion of the decision reads:
UPON ALL THESE, the summary judgment entered by the lower court is hereby REVERSED and in lieu
thereof, judgment is hereby RENDERED, declaring the deed of real estate mortgage dated August 26,
1981, executed between Rufino S. Aquino with the marital consent of his wife Bibiana Aquino with the
appellee Rural Bank of Bombon, Camarines Sur, unauthorized, void and unenforceable against plaintiff
Ederlinda Gallardo; ordering the reinstatement of the preliminary injunction issued at the onset of the
case and at the same time, ordering said injunction made permanent.
Issue(s): 1. Whether the mortgage by Aquino was executed as an agent or in his personal capacity.
Held: Personal Capacity.
Ratio: 1. The decision of the Court of Appeals is correct. This case is governed by the general rule in the
law of agency which this Court, applied in "Philippine Sugar Estates Development Co. vs. Poizat," 48
Phil. 536, 538:
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. Neither is it ordinarily sufficient
that in the mortgage the agent describes himself as acting by virtue of a power of attorney, if in fact the
agent has acted in his own name and has set his own hand and seal to the mortgage. This is especially
true where the agent himself is a party to the instrument. However clearly the body of the mortgage may
show and intend that it shall be the act of the principal, yet, unless in fact it is executed by the agent for
and on behalf of his principal and as the act and deed of the principal, it is not valid as to the principal.

In view of this rule, Aquino's act of signing the Deed of Real Estate Mortgage in his name alone as
mortgagor, without any indication that he was signing for and in behalf of the property owner, Ederlinda
Gallardo, bound himself alone in his personal capacity as a debtor of the petitioner Bank and not as the
agent or attorney-in-fact of Gallardo. The Court of Appeals further observed:

It will also be observed that the deed of mortgage was executed on August 26, 1981 therein clearly
stipulating that it was being executed "as security for the payment of certain loans, advances or other
accommodation obtained by the Mortgagor from the Mortgagee in the total sum of Three Hundred Fifty
Thousand Pesos only (P350,000.00)" although at the time no such loan or advance had been obtained.
The promissory notes were dated August 31, September 23 and October 26, 1981 which were
subsequent to the execution of the deed of mortgage. The appellant is correct in claiming that the
defendant Rural Bank should not have agreed to extend or constitute the mortgage on the properties of
Gallardo who had no existing indebtedness with it at the time.

Under the facts the defendant Rural Bank appeared to have ignored the representative capacity of Aquino
and dealt with him and his wife in their personal capacities. Said appellee Rural Bank also did not conduct
an inquiry on whether the subject loans were to benefit the interest of the principal (plaintiff Gallardo)
rather than that of the agent although the deed of mortgage was explicit that the loan was for purpose of
the bangus and sugpo production of defendant Aquino.

In effect, with the execution of the mortgage under the circumstances and assuming it to be valid but
because the loan taken was to be used exclusively for Aquino's business in the "bangus" and "sugpo"
production, Gallardo in effect becomes a surety who is made primarily answerable for loans taken by
Aquino in his personal capacity in the event Aquino defaults in such payment. Under Art. 1878 of the Civil
Code, to obligate the principal as a guarantor or surety, a special power of attorney is required. No such
special power of attorney for Gallardo to be a surety of Aquino had been executed. (pp. 42-43, Rollo.)

Petitioner claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since it was
executed in accordance with Article 1883.

The above provision of the Civil Code relied upon by the petitioner Bank, is not applicable to the case at
bar. Herein respondent Aquino acted purportedly as an agent of Gallardo, but actually acted in his
personal capacity. Involved herein are properties titled in the name of respondent Gallardo against which
the Bank proposes to foreclose the mortgage constituted by an agent (Aquino) acting in his personal
capacity. Under these circumstances, we hold, as we did in Philippine Sugar Estates Development Co.
vs. Poizat, supra, that Gallardo's property is not liable on the real estate mortgage:

There is no principle of law by which a person can become liable on a real mortgage which she never
executed either in person or by attorney in fact. It should be noted that this is a mortgage upon real
property, the title to which cannot be divested except by sale on execution or the formalities of a will or
deed. For such reasons, the law requires that a power of attorney to mortgage or sell real property should
be executed with all of the formalities required in a deed. For the same reason that the personal signature
of Poizat, standing alone, would not convey the title of his wife in her own real property, such a signature
would not bind her as a mortgagor in real property, the title to which was in her name. (p. 548.)