G.R. No. 167552. April 23, 2007.

*
that Article 1897 of the New Civil Code upon which petitioner anchors its claim
against respondent EDWIN “does not hold that in case of excess of authority, both
EUROTECH INDUSTRIAL TECHNOLOGIES, INC.,
the agent and the principal are liable to the other contracting party.” To reiterate,
petitioner, vs. EDWIN CUIZON and ERWIN CUIZON, respondents.
the first part of Article 1897 declares that the principal is liable in cases when the
Agency; The underlying principle of the contract of agency is to accomplish
agent acted within the bounds of his authority. Under this, the agent is
results by using the services of others—to do a great variety of things like selling,
completely absolved of any liability. The second part of the said provision
buying, manufacturing, and transporting.—In a contract of agency, a person
presents the situations when the agent himself becomes liable to a third party
binds himself to render some service or to do something in representation or on
when he expressly binds himself or he exceeds the limits of his authority without
behalf of another with the latter’s consent. The underlying principle of the
giving notice of his powers to the third person. However, it must be pointed out
contract of agency is to accomplish results by using the services of others—to do a
that in case of excess of authority by the agent, like what petitioner claims exists
great variety of things like selling, buying, manufacturing, and transporting. Its
here, the law does not say that a third person can recover from both the principal
purpose is to extend the personality of the principal or the party for whom
and the agent.
another acts and from whom he or she derives the authority to act. It is said that
Same; Actions; Parties; Words and Phrases; An agent acting within his
the basis of agency is representation, that is, the agent acts for and on behalf of
authority as such, who did not acquire any right nor incur any liability arising
the principal on matters within the scope of his authority and said acts have the
from a Deed, is not a real property in interest who should be impleaded; A real
same legal effect as if they were personally executed by the principal. By this
party in interest is one who stands to be benefited or injured by the judgment in the
legal fiction, the actual or real absence of the principal is converted into his legal
suit, or the party entitled to the avails of the suit.—As we declare that respondent
or juridical presence—qui facit per alium facit per se.
EDWIN acted within his authority as an agent, who did not acquire any right nor
Same; Elements.—The elements of the contract of agency are: (1) consent,
incur any liability arising from the Deed of Assignment, it follows that he is not a
express or implied, of the parties to establish the relationship; (2) the object is the
real party in interest who should be impleaded in this case. A real party in
execution of a juridical act in relation to a third person; (3) the agent acts as a
interest is one who “stands to be benefited or injured by the judgment in the suit,
representative and not for himself; (4) the agent acts within the scope of his
or the party entitled to the avails of the suit.” In this respect, we sustain his
authority.
exclusion as a defendant in the suit before the court a quo.
Same; Article 1897 of the Civil Code reinforces the familiar doctrine that an
PETITION for review on certiorari of the decision and resolution of the
agent, who acts as such, is not personally liable to the party with whom he
contracts; Exceptions.—Article 1897 reinforces the familiar doctrine that an Court of Appeals.
agent, who acts as such, is not personally liable to the party with whom he The facts are stated in the opinion of the Court.
contracts. The same provision, however, presents two instances when an agent Nilo G. Ahat for petitioner.
becomes personally liable to a third person. The first is when he expressly binds Zosa and Quijano Law Offices for respondents.
himself to the obligation and the second is when he exceeds his authority. In the
last instance, the agent can be held liable if he does not give the third party CHICO-NAZARIO, J.:
sufficient notice of his powers. We hold that respondent EDWIN does not fall
within any of the exceptions contained in this provision.
Before Us is a petition for review by certiorari assailing the Decision of 1

Same; Managers; The position of manager is unique in that it presupposes

the Court of Appeals dated 10 August 2004 and its Resolution dated 17 2

the grant of broad powers with which to conduct the business of the principal.—
The Deed of Assignment clearly states that respondent EDWIN signed thereon as
the sales manager of Impact Systems. As discussed elsewhere, the position of
manager is unique in that it presupposes the grant of broad powers with which to
March 2005 in CA-G.R. SP No. 71397 entitled, “Eurotech Industrial
Technologies, Inc. v. Hon. Antonio T. Echavez.” The assailed Decision and
Resolution affirmed the Order dated 29 January 2002 rendered by Judge
3

conduct the business of the principal, thus: The powers of an agent are
particularly broad in the case of one acting as a general agent or manager; such a
position presupposes a degree of confidence reposed and investiture with liberal
powers for the exercise of judgment and discretion in transactions and concerns
which are incidental or appurtenant to the business entrusted to his care and
management. In the absence of an agreement to the contrary, a managing agent
may enter into any contracts that he deems reasonably necessary or requisite for
the protection of the interests of his principal entrusted to his management. x x x.
Same; In case of excess of authority by the agent, the law does not say that a
third person can recover from both the principal and the agent.—We likewise take
note of the fact that in this case, petitioner is seeking to recover both from
respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here
Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon
(EDWIN) as a party defendant in Civil Case No. CEB-19672.
The generative facts of the case are as follows:
Petitioner is engaged in the business of importation and distribution
of various European industrial equipment for customers here in the
Philippines. It has as one of its customers Impact Systems Sales (“Impact
Systems”) which is a sole proprietorship owned by respondent ERWIN
Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact
Systems and was impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems
various products allegedly amounting to ninety-one thousand three
hundred thirty-eight (P91,338.00) pesos. Subsequently, respondents
sought to buy from petitioner one unit of sludge pump valued at
P250,000.00 with respondents making a down payment of fifty thousand
pesos (P50,000.00). When the sludge pump arrived from the United
4
Kingdom, petitioner refused to deliver the same to respondents without
their having fully settled their indebtedness to petitioner. Thus, on 28
June 1995, respondent EDWIN and Alberto de Jesus, general manager of
petitioner, executed a Deed of Assignment of receivables in favor of
petitioner, the pertinent part of which states:
“1.) That ASSIGNOR has an outstanding receivables from Toledo
5
Power Corporation in the amount of THREE HUNDRED SIXTY
FIVE THOUSAND (P365,000.00) PESOS as payment for the
purchase of one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER,
and CONVEY unto the ASSIGNEE the said receivables from
6
Toledo Power Corporation in the amount of THREE HUNDRED
SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables
the ASSIGNOR is the lawful recipient;
3.) That the ASSIGNEE does hereby accept this assignment.” 7 in Default with Motion for Summary Judgment. The trial court granted
Following the execution of the Deed of Assignment, petitioner delivered
to respondents the sludge pump as shown by Invoice No. 12034 dated 30
June 1995.8
Allegedly unbeknownst to petitioner, respondents, despite the
existence of the Deed of Assignment, proceeded to collect from Toledo
Power Company the amount of P365,135.29 as evidenced by Check
Voucher No. 0933 prepared by said power company and an official receipt
9 affirmative defenses raised by respondent EDWIN.
dated 15 August 1995 issued by Impact Systems. Alarmed by this
10
development, petitioner made several demands upon respondents to pay
their obligations. As a result, respondents were able to make partial
payments to petitioner. On 7 October 1996, petitioner’s counsel sent
respondents a final demand letter wherein it was stated that as of 11
June 1996, respondents’ total obligations stood at P295,000.00 excluding
interests and attorney’s fees. Because of respondents’ failure to abide by
11
said final demand letter, petitioner instituted a complaint for sum of
money, damages, with application for preliminary attachment against
herein respondents before the Regional Trial Court of Cebu City. 12
On 8 January 1997, the trial court granted petitioner’s prayer for the
issuance of writ of preliminary attachment. 13
On 25 June 1997, respondent EDWIN filed his Answer wherein he
14
admitted petitioner’s allegations with respect to the sale transactions
entered into by Impact Systems and petitioner between January and
April 1995. He, however, disputed the total amount of Impact Systems’
15
indebtedness to petitioner which, according to him, amounted to only
P220,000.00. 16
By way of special and affirmative defenses, respondent EDWIN
alleged that he is not a real party in interest in this case. According to
him, he was acting as mere agent of his principal, which was the Impact
Systems, in his transaction with petitioner and the latter was very much
aware of this fact. In support of this argument, petitioner points to
paragraphs 1.2 and 1.3 of petitioner’s Complaint stating—
“1.2. Defendant Erwin H. Cuizon, is of legal age, married, a
resident of Cebu City. He is the proprietor of a single
proprietorship business known as Impact Systems Sales (“Impact
Systems” for brevity), with office located at 46-A del Rosario
Street, Cebu City, where he may be served summons and other
processes of the Honorable Court.
1.3. Defendant Edwin B. Cuizon is of legal age, Filipino,
married, a resident of Cebu City. He is the Sales Manager of
Impact Systems and is sued in this action in such capacity.” 17
On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN
petitioner’s motion to declare respondent ERWIN in default “for his
failure to answer within the prescribed period despite the opportunity
granted” but it denied petitioner’s motion for summary judgment in its
18
Order of 31 August 2001 and scheduled the pre-trial of the case on 16
October 2001. However, the conduct of the pre-trial conference was
19
deferred pending the resolution by the trial court of the special and
20
After the filing of respondent EDWIN’s Memorandum in support of
21
his special and affirmative defenses and petitioner’s opposition thereto,
22
the trial court rendered its assailed Order dated 29 January 2002
dropping respondent EDWIN as a party defendant in this case. According
to the trial court—
“A study of Annex “G” to the complaint shows that in the Deed of
Assignment, defendant Edwin B. Cuizon acted in behalf of or
represented [Impact] Systems Sales; that [Impact] Systems Sale is
a single proprietorship entity and the complaint shows that
defendant Erwin H. Cuizon is the proprietor; that plaintiff
corporation is represented by its general manager Alberto de Jesus
in the contract which is dated June 28, 1995. A study of Annex “H”
to the complaint reveals that [Impact] Systems Sales which is
owned solely by defendant Erwin H. Cuizon, made a down
payment of P50,000.00 that Annex “H” is dated June 30, 1995 or
two days after the execution of Annex “G”, thereby showing that
[Impact] Systems Sales ratified the act of Edwin B. Cuizon; the
records further show that plaintiff knew that [Impact] Systems
Sales, the principal, ratified the act of Edwin B. Cuizon, the agent,
when it accepted the down payment of P50,000.00. Plaintiff,
therefore, cannot say that it was deceived by defendant Edwin B.
Cuizon, since in the instant case the principal has ratified the act
of its agent and plaintiff knew about said ratification. Plaintiff
could not say that the subject contract was entered into by Edwin
B. Cuizon in excess of his powers since [Impact] Systems Sales
made a down payment of P50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant
Edwin B. Cuizon be dropped as party defendant.”Aggrieved by the
adverse ruling of the trial court, petitioner brought the matter to the
Court of Appeals which, however, affirmed the 29 January 2002 Order of
the court a quo. The dispositive portion of the now assailed Decision of
the Court of Appeals states:
“WHEREFORE, finding no viable legal ground to reverse or
modify the conclusions reached by the public respondent in his
Order dated January 29, 2002, it is hereby AFFIRMED.” 24
Petitioner’s motion for reconsideration was denied by the appellate court
in its Resolution promulgated on 17 March 2005. Hence, the present
petition raising, as sole ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE
ERROR WHEN IT RULED THAT RESPONDENT EDWIN
CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN
CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS
NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR
DID HE PARTICIPATE IN THE PERPETUATION OF A
FRAUD. 25
To support its argument, petitioner points to Article 1897 of the New
Civil Code which states:
“Art. 1897. The agent who acts as such is not personally liable to
the party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving such
party sufficient notice of his powers.”
Petitioner contends that the Court of Appeals failed to appreciate the
effect of ERWIN’s act of collecting the receivables from the Toledo Power
Corporation notwithstanding the existence of the Deed of Assignment
signed by EDWIN on behalf of Impact Systems. While said collection did
not revoke the agency relations of respondents, petitioner insists that
ERWIN’s action repudiated EDWIN’s power to sign the Deed of
Assignment. As EDWIN did not sufficiently notify it of the extent of his
powers as an agent, petitioner claims that he should be made personally
liable for the obligations of his principal.26
Petitioner also contends that it fell victim to the fraudulent scheme of
respondents who induced it into selling the one unit of sludge pump to
Impact Systems and signing the Deed of Assignment. Petitioner directs
the attention of this Court to the fact that respondents are bound not only
by their principal and agent relationship but are in fact full-blooded
brothers whose successive contravening acts bore the obvious signs of
conspiracy to defraud petitioner. 27
In his Comment, respondent EDWIN again posits the argument that
28
he is not a real party in interest in this case and it was proper for the
trial court to have him dropped as a defendant. He insists that he was a
mere agent of Impact Systems which is owned by ERWIN and that his
status as such is known even to petitioner as it is alleged in the
Complaint that he is being sued in his capacity as the sales manager of
the said business venture. Likewise, respondent EDWIN points to the
Deed of Assignment which clearly states that he was acting as a
representative of Impact Systems in said transaction.
We do not find merit in the petition.
In a contract of agency, a person binds himself to render some service
or to do something in representation or on behalf of another with the
latter’s consent. The underlying principle of the contract of agency is to
29
accomplish results by using the services of others—to do a great variety
of things like selling, buying, manufacturing, and transporting. Its 30
purpose is to extend the personality of the principal or the party for
whom another acts and from whom he or she derives the authority to
act. It is said that the basis of agency is representation, that is, the agent
31
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. By this legal fiction, the actual or
32
real absence of the principal is converted into his legal or juridical
presence—qui facit per alium facit per se. 33
The elements of the contract of agency are: (1) consent, express or
implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agent acts
as a representative and not for himself; (4) the agent acts within the
scope of his authority. 34
In this case, the parties do not dispute the existence of the agency
relationship between respondents ERWIN as principal and EDWIN as
agent. The only cause of the present dispute is whether respondent
EDWIN exceeded his authority when he signed the Deed of Assignment
thereby binding himself personally to pay the obligations to petitioner.
Petitioner firmly believes that respondent EDWIN acted beyond the
authority granted by his principal and he should therefore bear the effect
of his deed pursuant to Article 1897 of the New Civil Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts
as such, is not personally liable to the party with whom he contracts. The
same provision, however, presents two instances when an agent becomes
personally liable to a third person. The first is when he expressly binds
himself to the obligation and the second is when he exceeds his authority.
In the last instance, the agent can be held liable if he does not give the
third party sufficient notice of his powers. We hold that respondent
EDWIN does not fall within any of the exceptions contained in this
provision.
The Deed of Assignment clearly states that respondent EDWIN
signed thereon as the sales manager of Impact Systems. As discussed
elsewhere, the position of manager is unique in that it presupposes the
grant of broad powers with which to conduct the business of the principal,
thus:
“The powers of an agent are particularly broad in the case of one
acting as a general agent or manager; such a position presupposes
a degree of confidence reposed and investiture with liberal powers
for the exercise of judgment and discretion in transactions and
concerns which are incidental or appurtenant to the business
entrusted to his care and management. In the absence of an
agreement to the contrary, a managing agent may enter into any
contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his
management. x x x.” 35
Applying the foregoing to the present case, we hold that Edwin Cuizon
acted well-within his authority when he signed the Deed of Assignment.
To recall, petitioner refused to deliver the one unit of sludge pump unless
it received, in full, the payment for Impact Systems’ indebtedness. We 36
may very well assume that Impact Systems desperately needed the
sludge pump for its business since after it paid the amount of fifty
thousand pesos (P50,000.00) as down payment on 3 March 1995, it still
37
persisted in negotiating with petitioner which culminated in the
execution of the Deed of Assignment of its receivables from Toledo Power
Company on 28 June 1995. The significant amount of time spent on the
38
negotiation for the sale of the sludge pump underscores Impact Systems’
perseverance to get hold of the said equipment. There is, therefore, no
doubt in our mind that respondent EDWIN’s participation in the Deed of
Assignment was “reasonably necessary” or was required in order for him
to protect the business of his principal. Had he not acted in the way he
did, the business of his principal would have been adversely affected and
he would have violated his fiduciary relation with his principal.
We likewise take note of the fact that in this case, petitioner is
seeking to recover both from respondents ERWIN, the principal, and
EDWIN, the agent. It is well to state here that Article 1897 of the New
Civil Code upon which petitioner anchors its claim against respondent
EDWIN “does not hold that in case of excess of authority, both the agent
and the principal are liable to the other contracting party.” To reiterate,
39
the first part of Article 1897 declares that the principal is liable in cases
when the agent acted within the bounds of his authority. Under this, the
agent is completely absolved of any liability. The second part of the said
provision presents the situations when the agent himself becomes liable
to a third party when he expressly binds himself or he exceeds the limits
of his authority without giving notice of his powers to the third person.
However, it must be pointed out that in case of excess of authority by the
agent, like what petitioner claims exists here, the law does not say that a
third person can recover from both the principal and the agent. As we40
declare that respondent EDWIN acted within his authority as an agent,
who did not acquire any right nor incur any liability arising from the
Deed of Assignment, it follows that he is not a real party in interest who
should be impleaded in this case. A real party in interest is one who
“stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.” In this respect, we sustain his
41
exclusion as a defendant in the suit before the court a quo.
WHEREFORE, premises considered, the present petition is DENIED
and the Decision dated 10 August 2004 and Resolution dated 17 March
2005 of the Court of Appeals in CA-G.R. SP No. 71397, affirming the
Order dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu
City, is AFFIRMED.
Let the records of this case be remanded to the Regional Trial Court,
Branch 8, Cebu City, for the continuation of the proceedings against
respondent ERWIN CUIZON.
SO ORDERED.
Ynares-Santiago (Chairperson), Austria-Martinez, Callejo,
Sr. and Nachura, JJ., concur.
Petition denied, judgment and resolution affirmed.
Notes.—The essence of agency being the representation of another, it
is evident that the obligations contracted are for and on behalf of the
principal—a consequence of this representation is the liability of the
principal for the acts of his agent performed within the limits of his
authority that is equivalent to the performance by the principal himself
who should answer therefor. (Tan vs. G.V.T. Engineering Services, 489
SCRA 93 [2006])
 No. L-24332. January 31, 1978. *
RAMON RALLOS, Administrator of the Estate of CONCEPCION
RALLOS, petitioner, vs.FELIX GO CHAN & SONS REALTY
CORPORATION and COURT OF APPEALS, respondents.
Agency, its concept, essential elements and characteristics.—By the
relationship of agency, one party called the principal authorizes another called
the agent to act for and in his behalf in transactions with third persons. The
essential elements of agency are:(l) there is consent, express or implied, of the
parties to establish the relationship: (2) the object is the execution of a juridical
act in relation to a third person; (3) the agent acts as a representative and not for
himself; and (4) the agent acts within the scope of his authority. Agency is
basically personal, representative, and derivative in nature. The authority of the
agent to act emanates from the powers granted to him by his principal; his act is
the act of the principal if done within the scope of the authority. “He who acts
through another acts himself.”
Same: Same; Art. 1930 and Art. 1931 of the Civil Code providing that death
of principal or agent extinguishing agency is only a general rule; Rationale for the
provision.—Reason of the very nature of the relationship between principal and
agent, agency is extinguished by the death of the principal. Manresa explains
that the rationale for the law is found in the juridical basis of agency which is
representation. Laurent says that the juridical tie between the principal and the
agent is severed ipso jure upon the death of either without necessity for the heirs
of the principal to notify the agent of the fact of death of the former. The same
rule prevails at common law—the death of the principal effects instantaneous and
absolute revocation of the authority of the agent unless the power be coupled with
an interest. This is the prevalent rule in American jurisprudence where it is well-
settled that a power without an interest conferred upon an agent is dissolved by
the principal’s death, and any attempted execution of the power afterwards is not
binding on the heirs or representatives of the deceased.
Same; Same; Art. 1930 and Art. 1931 of the Civil Code exceptions to general
rule provided in Art. 1919 of the Civil Code, that death of principal revokes ipso
jure the agency.—Is the general rule provided for in Art. 1919 that the death of
the principal or of the agent extinguishes the agency, subject to any exception,
and if so, is the instant case within that exception? That is the determinative
point in issue in this litigation x x x Articles 1930 and 1931 of the Civil Code
provide the exceptions to the general rule aforementioned.
Same; Same; Same; Contention that despite death of principal the act of
attorney-in-fact in selling his principal’s share of the disputed property is valid
and enforceable since the buyer acted in good faith is untenable because of the
established knowledge of the attorney-in-fact of the death of his principal;
Requisites of Art. 1931 that despite death of principal and of agent is valid not
complied with.—Under Art. 1931 of the Civil Code, an act done by the agent after
the death of his principal is valid and effective only under two conditions, viz: (1)
that the agent acted without knowledge of the death of the principal, and (2) that
the third person who contracted with the agent himself acted in good faith. Good
faith here means that the third person was not aware of the death of the principal
at the time he contracted with said agent. These two requisites must concur: the
absence of one will render the act of the agent invalid and unenforceable. In the
instant case, it cannot be questioned that the agent Simeon Rallos knew of the
death of his principal at the time he sold the latter’s share in Lot No. 5983 to
respondent corporation. x x x On the basis of the established knowledge of Simeon
Rallos concerning the death of his principal, Concepcion Rallos, Article 1931 of
the Civil Code is inapplicable. The law expressly requires for its application lack
of knowledge on the part of the agent of the death of his principal; it is not enough
that the third person acted in good faith.
Same; Same; Same; Same; General rule is that an act of agent after death of
his principal is void ab initio unless the same falls under exceptions in Arts. 1930
and 1931 of the Civil Code; Art 1931 being an exception to the general rule is to be
strictly construed.—In sustaining the validity of the sale to respondent
corporation, the Court of Appeals reasoned out that there is no provision in the
Civil Code which provides that whatever is done by an agent having knowledge of
the death of his principal is void even with respect to third persons who may have
contracted with him in good faith and without knowledge of the death of the
principal. We cannot see the merits of the foregoing argument as it ignores the
existence of the general rule enunciated in Art. 1919 that the death of the
principal extinguishes the agency. That being the general rule it follows a
fortiori that any act of an agent after the death of his principal is void ab
initio unless the same falls under the exceptions provided for in the
aforementioned Articles 1930 and 1931. Article 1931, being an exception to the
general rule, is to be strictly construed; it is not to be given an interpretation or
application beyond the clear import of its terms for otherwise the courts will be
involved in a process of legislation outside of their judicial function.
Same; Same; Revocation by an act of the principal as a mode of terminating
agency distinguished from revocation by operation of law such as death of
principal.—Revocation by an act of the principal as a mode of terminating an
agency is to be distinguished from revocation by operation of law such as death of
the principal which obtains in this case. The decision stressed that by reason of
the very nature of the relationship between principal and agent, agency is
extinguished ipso jure upon the death of either principal or agent. Although a
revocation of a power of attorney to be effective must be communicated to the
parties concerned, yet a revocation by operation of law, such as by death of the
principal is, as a rule, instantaneously effective inasmuch as “by legal fiction the
agent’s exercise of authority is regarded as an execution of the principal’s
continuing will.” With death, the principal’s will ceases or is terminated; the
source of authority is extinguished.
Same; Same; Law does not impose a duty on the heirs of principal to notify
agent of death of principal; If agent dies, his heirs must notify principal thereof.—
The Civil Code does not impose a duty on the heirs of the principal to notify the
agent of the death of said principal. What the Code provides in Article 1932 is
that, if the agent dies, his heirs must notify the principal thereof, and in the
meantime adopt such measures as the circumstances may demand in the interest
of the latter. Hence, the fact that no notice of the death of the principal was
registered on the certificate of title of the property in the Office of the Register of
Deeds, is not fatal to the cause of the estate of the principal.
Same; Same; No parallel can be drawn between the case of attorney-in-fact
who after death of his principal sold the latter’s share in the land pursuant to a
special power of attorney which the principal had executed in his favor and that of
an innocent purchaser for value of registered land.—Holding that the good faith of
a third person in dealing with an agent affords the former sufficient protection,
respondent court drew a “parallel” between the instant case and that of an
innocent purchaser for value of a registered land, stating that if a person
purchases a registered land from one who acquired it in bad faith—even to the
extent of forging or falsifying the deed of sale in his favor—the registered owner
has no recourse against such innocent purchaser for value but only against the
forger. To support the correctness of this “parallelism”, respondent corporation, in
its brief, cites the case of Blondeau, et al. vs. Nano and Vallejo, 61 Phil. 625. x x x
The Blondeau decision, however, is not on all fours with the case before Us
because here We are confronted with one who admittedly was an agent of his
sister and who sold the property of the latter after her death with full knowledge
of such death. The situation is expressly covered by a provision of law on agency
the terms of which are clear and unmistakable leaving no room for an
interpretation contrary to its tenor, in the same manner that the ruling
in Blondeau and the cases cited therein found a basis in Section 55 of the Land
Registration Law.
Same; Same; Conflict of legal opinion in American jurisprudence does not
hold true in Philippine law; Civil Code of the Philippines expressly provides for
two exceptions to general rule that death of the principal revokes the agency;
Agent’s act of executing the sale of property despite notice of death of his principal
is unenforceable against the estate of the principal.—One last point raised by
respondent corporation in support of the appealed decision is an 1842 ruling of
the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments
made to an agent after the death of the principal were held to be “good”, “the
parties being ignorant of the death.” Let us take note that the Opinion of Justice
Rogers was premised on the statement that the parties were ignorant of the death
of the principal. x x x To avoid any wrong impression which the Opinion
in Cassiday v. McKenzie may evoke, mention may be made that the above
represents the minority view in American jurisprudence. x x x Whatever conflict
of legal opinion was generated by Cassiday v. McKenzie in American
jurisprudence, no such conflict exists in our own for the simple reason that our
statute, the Civil Code, expressly provides for two exceptions to the general rule
that death of the principal revokes ipso jure the agency, to wit: (1) that the agency
is coupled with an interest (Art. 1930), and (2) that the act of the agent was
executed without knowledge of the death of the principal and the third person
who contracted with the agent acted also in good faith (Art. 1931). Exception No.
2 is the doctrine followed in Cassiday, and again We stress the indispensable
requirement—that the agent acted without knowledge or notice of the death of
the principal. In the case before Us the agent Ramon Rallos executed the sale
notwithstanding notice of the death of his principal. Accordingly, the agent’s act
is unenforceable against the estate of his principal.
PETITION for review on certiorari of the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.
MUÑOZ PALMA, J.:
This is a case of an attorney-in-fact, Simeon Rallos, who after the death of
his principal, Concepcion Rallos, sold the latter’s undivided share in a
parcel of land pursuant to a special power of attorney which the principal
had executed in his favor. The administrator of the estate of the deceased
principal went to court to have the sale declared unenforceable and to
recover the disposed share. The trial court granted the relief prayed for,
but upon appeal, the Court of Appeals upheld the validity of the sale and
dismissed the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed. Concepcion and Gerundia both
surnamed Rallos were sisters and registered co-owners of a parcel of land
known as Lot No. 5983 of the Cadastral Survey of Cebu covered by
Transfer Certificate of Title No. 11118 of the Registry of Cebu. On April
21, 1954, the sisters executed a special power of attorney in favor of their
brother, Simeon Rallos, authorizing him to sell for and in their behalf lot
5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955,
Simeon Rallos sold the undivided shares of his sisters Concepcion and
Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the
sum of P10,686.90. The deed of sale was registered in the Registry of
Deeds of Cebu, TCT No. 11118 was cancelled, and a new Transfer
Certificate of Title No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate
Estate of Concepcion Rallos filed a complaint docketed as Civil Case No.
R-4530 of the Court of First Instance of Cebu, praying (1) that the sale of
the undivided share of the deceased Concepcion Rallos in lot 5983 be
declared unenforceable, and said share be reconveyed to her estate; (2)
that the Certificate of Title issued in the name of Felix Go Chan & Sons
Realty Corporation be cancelled and another title be issued in the names
of the corporation and the “Intestate estate of Concepcion Rallos” in equal
undivided shares; and (3) that plaintiff be indemnified by way of
attorney’s fees and payment of costs of suit. Named party defendants
were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the
Register of Deeds of Cebu, but subsequently, the latter was dropped from
the complaint. The complaint was amended twice; defendant
Corporation’s Answer contained a cross-claim against its co-defendant,
Simeon Rallos, while the latter filed third-party complaint against his
sister, Gerundia Rallos. While the case was pending in the trial court,
both Simeon and his sister Gerundia died and they were substituted by
the respective administrators of their estates.
After trial, the court a quo rendered judgment with the following
dispositive portion:
1. “A.On Plaintiff’s Complaint—
 1. (1)Declaring the deed of sale, Exh. ‘C’, null and void insofar as the
one-half pro-indiviso share of Concepcion Rallos in the property
in question,—Lot 5983 of the Cadastral Survey of Cebu—is
concerned;
2. (2)Ordering the Register of Deeds of Cebu City to cancel Transfer
Certificate of Title No. 12989 covering Lot 5983 and to issue in
lieu thereof another in the names of FELIX GO CHAN & SONS
REALTY CORPORATION and the Estate of Concepcion Rallos
in the proportion of one-half (1/2) share each pro-indiviso;
3. (3)Ordering Felix Go Chan & Sons Realty Corporation to deliver
the possession of an undivided one-half (1/2) share of Lot 5983 to
the herein plaintiff;
4. (4)Sentencing the defendant Juan T. Borromeo, administrator of
the Estate of Simeon Rallos, to pay to plaintiff in concept of
reasonable attorney’s fees the sum of P1,000.00; and
5. (5)Ordering both defendants to pay the costs jointly and severally.
1. “B.On GO CHAN’S Cross-claim:
1. (1)Sentencing the co-defendant Juan T. Borromeo, administrator
of the Estate of Simeon Rallos, to pay to defendant Felix Go
Chan & Sons Realty Corporation the sum of P5,343.45,
representing the price of one-half (1/2) share of lot 5983;
2. (2)Ordering co-defendant Juan T. Borromeo, administrator of the
Estate of Simeon Rallos, to pay in concept of reasonable
attorney’s fees to Felix Go Chan & Sons Realty Corporation the
sum of P500.00.
1. “C.On Third-Party Complaint of defendant Juan T. Borromeo
administrator of Estate of Simeon Rallos, against Josefina
Rallos, special administratrix of the Estate of Gerundia Rallos:
1. (1)Dismissing the third-party complaint without prejudice to
filing either a complaint against the regular administrator of the
Estate of Gerundia Rallos or a claim in the Intestate-Estate of
Gerundia Rallos, covering the same subject-matter of the third-
party complaint, at bar.” (pp. 98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the
Court of Appeals from the foregoing judgment insofar as it set aside the
sale of the one-half (1/2) share of Concepcion Rallos. The appellate
tribunal, as adverted to earlier, resolved the appeal on November 20,
1964 in favor of the appellant corporation sustaining the sale in
question. The appellee-administrator, Ramon Rallos, moved for a
1
reconsideration of the decision but the same was denied in a resolution of
March 4, 1965. 2
What is the legal effect of an act performed by an agent after the
death of his principal? Applied more particularly to the instant case, We
have the query: is the sale of the undivided share of Concepcion Rallos in
lot 5983 valid although it was executed by the agent after the death of his
principal? What is the law in this jurisdiction as to the effect of the death
of the principal on the authority of the agent to act for and in behalf of
the latter? Is the fact of knowledge of the death of the principal a
material factor in determining the legal effect of an act performed after
such death?
Before proceeding to the issues, We shall briefly restate certain
principles of law relevant to the matter under consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no
one may contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him. A contract
3
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. Article 1403 (1) of the same Code also provides:
4
“ART. 1403. The following contracts are unenforceable, unless they
are justified:
“(1) Those entered into in the name of another person by one who
has been given no authority or legal representation or who has
acted beyond his powers; x x x.”
Out of the above given principles, sprung the creation and acceptance of
the relationship of agency whereby one party, called the
principal (mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf in transactions with third
persons. The essential elements of agency are: (1) there is consent,
express or implied, of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3)
the agents acts as a representative and not for himself; and (4) the agent
acts within the scope of his authority.5
Agency is basically personal, representative, and derivative in nature.
The authority of the agent to act emanates from the powers granted to
him by his principal; his act is the act of the principal if done within the
scope of the authority. Qui facit per alium facit per se. “He who acts
through another acts himself.” 6
2. There are various ways of extinguishing agency, but here We are
7
concerned only with one cause—death of the principal: Paragraph 3 of
Art. 1919 of the Civil Code which was taken from Art. 1709 of the
Spanish Civil Code provides:
“ART. 1919. Agency is extinguished:
“xx xx xx
“3. By the death, civil interdiction, insanity or insolvency of the
principal or of the agent; x x x.” (Underline supplied)
By reason of the very nature of the relationship between principal and
agent, agency is extinguished by the death of the principal or the agent.
This is the law in this jurisdiction.
8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains
that the rationale for the law is found in the juridical basis of agency
which is representation. There being an integration of the personality of
the principal into that of the agent it is not possible for the representation
to continue to exist once the death of either is establish. Pothier agrees
with Manresa that by reason of the nature of agency, death is a necessary
cause for its extinction. Laurent says that the juridical tie between the
principal and the agent is severed ipso jure upon the death of either
without necessity for the heirs of the principal to notify the agent of the
fact of death of the former.9
The same rule prevails at common law—the death of the principal
effects instantaneous and absolute revocation of the authority of the
agent unless the power be coupled with an in-terest. This is the prevalent
10
rule in American Jurisprudence where it is well-settled that a power
without an interest conferred upon an agent is dissolved by the
principal’s death, and any attempted execution of the power afterwards is
not binding on the heirs or representatives of the deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the
principal or of the agent extinguishes the agency, subject to any
exception, and if so, is the instant case within that exception? That is the
determinative point in issue in this litigation. It is the contention of
respondent corporation which was sustained by respondent court that
notwithstanding the death of the principal, Concepcion Rallos, the act of
the attorney-in-fact, Simeon Rallos, in selling the former’s share in the
property is valid and enforceable inasmuch as the corporation acted in
good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the
general rule aforementioned.
ART. 1930. The agency shall remain in full force and effect even
after the death of the principal, if it has been constituted in the
common interest of the latter and of the agent, or in the interest of
a third person who has accepted the stipulation in his favor.
“ART. 1931. Anything done by the agent, without knowledge of
the death of the principal or of any other cause which extinguishes
the agency, is valid and shall be fully effective with respect to third
persons who may have contracted with him in good faith.
Article 1930 is not involved because admittedly the special power of
attorney executed in favor of Simeon Rallos was not coupled with an
interest.
Article 1931 is the applicable law. Under this provision, an act done
by the agent after the death of his principal is valid and effective only
under two conditions, viz: (1) that the agent acted without knowledge of
the death of the principal, and (2) that the third person who contracted
with the agent himself acted in good faith. Good faith here means that the
third person was not aware of the death of the principal at the time he
contracted with said agent. These two requisites must concur: the absence
of one will render the act of the agent invalid and unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon
Rallos, knew of the death of his principal at the time he sold the latter’s
share in Lot No. 5983 to respondent corporation. The knowledge of the
death is clearly to be inferred from the pleadings filed by Simeon Rallos
before the trial court. That Simeon Rallos knew of the death of his sister
12
Concepcion is also a finding of fact of the court a quo and of respondent
13
appellate court when the latter stated that Simeon Rallos “must have
known of the death of his sister, and yet he proceeded with the sale of the
lot in the name of both his sisters Concepcion and Gerundia Rallos
without informing appellant (the realty corporation) of the death of the
former.”14
On the basis of the established knowledge of Simeon Rallos
concerning the death of his principal, Concepcion Rallos, Article 1931 of
the Civil Code is inapplicable. The law expressly requires for its
application lack of knowledge on the part of the agent of the death of his
principal; it is not enough that the third person acted in good faith. Thus
in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old
Civil Code now Art. 1931 of the new Civil Code sustained the validity of a
sale made after the death of the principal because it was not shown that
the agent knew of his principal’s demise. To the same effect is the case
15
of Herrera, et al. v. Luy Kim Guan, et al., 1961, where in the words of
Justice Jesus Barrera the Court stated:
‘x x x even granting arquendo that Luis Herrera did die in 1936,
plaintiffs presented no proof and there is no indication in the
record, that the agent Luy Kim Guan was aware of the death of his
principal at the time he sold the property. The death of the
principal does not render the act of an agent unenforceable, where
the latter had no knowledge of such extinguishment of the agency.”
(1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent corporation, the
Court of Appeals reasoned out that there is no provision in the Code
which provides that whatever is done by an agent having knowledge of
the death of his principal is void even with respect to third persons who
may have contracted with him in good faith and without knowledge of the
death of the principal.16
We cannot see the merits of the foregoing argument as it ignores the
existence of the general rule enunciated in Article 1919 that the death of
the principal extinguishes the agency. That being the general rule it
follows a fortiori that any act of an agent after the death of his principal
is void ab initio unless the same falls under the exceptions provided for in
the aforementioned Articles 1930 and 1931. Article 1931, being an
exception to the general rule, is to be strictly construed; it is not to be
given an interpretation or application beyond the clear import of its terms
for otherwise the courts will be involved in a process of legislation outside
of their judicial function.
5. Another argument advanced by respondent court is that the vendee
acting in good faith relied on the power of attorney which was duly
registered on the original certificate of title recorded in the Register of
Deeds of the Province of Cebu, that no notice of the death was ever
annotated on said certificate of title by the heirs of the principal and
accordingly they must suffer the consequences of such omission. 17
To support such argument reference is made to a portion
in Manresa’s Commentaries which We quote:
“If the agency has been granted for the purpose of contracting with
certain persons, the revocation must be made known to them. But
if the agency is general in nature, without reference to particular
person with whom the agent is to contract, it is sufficient that the
principal exercise due diligence to make the revocation of the
agency publicly known.
“In case of a general power which does not specify the persons
to whom representation should be made, it is the general opinion
that all acts executed with third persons who contracted in good
faith, without knowledge of the revocation, are valid. In such case,
the principal may exercise his right against the agent, who,
knowing of the revocation, continued to assume a personality
which he no longer had.” (Manresa, Vol. 11, pp. 561 and 575; pp.
15-16, rollo)
The above discourse, however, treats of revocation by an act of the
principal as a mode of terminating an agency which is to be distinguished
from revocation by operation of law such as death of the principal which
obtains in this case. On page six of this Opinion We stressed that by
reason of the very nature of the relationship between principal and agent,
agency is extinguished ipso jure upon the death of either principal or
agent. Although a revocation of a power of attorney to be effective must
be communicated to the parties concerned, yet a revocation by operation
18
of law, such as by death of the principal is, as a rule, instantaneously
effective inasmuch as “by legal fiction the agent’s exercise of authority is
regarded as an execution of the principal’s continuing will.” With death,
19
the principal’s will ceases or is terminated; the source of autnority is
extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent
of the death of the principal. What the Code provides in Article 1932 is
that, if the agent dies, his heirs must notify the principal thereof, and in
the meantime adopt such measures as the circumstances may demand in
the interest of the latter. Hence, the fact that no notice of the death of the
principal was registered on the certificate of title of the property in the
Office of the Register of Deeds, is not fatal to the cause of the estate of the
principal.
6. Holding that the good faith of a third person in dealing with an
agent affords the former sufficient protection, respondent court drew a
“parallel” between the instant case and that of an innocent purchaser for
value of a registered land, stating that if a person purchases a registered
land from one who acquired it in bad faith—even to the extent of
foregoing or falsifying the deed of sale in his favor—the registered owner
has no recourse against such innocent purchaser for value but only
against the forger.20
To support the correctness of this “parallelism”, respondent
corporation, in its brief, cites the case of Blondeau, et al. v. Nano and
Vallejo, 61 Phil. 625. We quote from the brief:
“In the case of Angel Blondeau et al. v. Agustin Nano et al., 61
Phil. 630, one Vallejo was a co-owner of lands with Agustin Nano.
The latter had a power of attorney supposedly executed by Vallejo
in his favor. Vallejo delivered to Nano his land titles. The power
was registered in the Office of the Register of Deeds. When the
lawyer-husband of Angela Blondeau went to that Office, he found
all in order including the power of attorney. But Vallejo denied
having executed the power. The lower court sustained Vallejo and
the plaintiff Blondeau appealed. Reversing the decision of the
court a quo, the Supreme Court, quoting the ruling in the case of
Eliason v. Wilborn, 261 U.S. 457, held:
‘But there is a narrower ground on which the defenses of the defendant-
appellee must be overruled. Agustin Nano had possession of Jose Vallejo’s
title papers. Without those title papers handed over to Nano with the
acquiescence of Vallejo, a fraud could not have been perpetuated. When
Fernando de la Cantera, a member of the Philippine Bar and the
husband of Angela Blondeau, the principal plaintiff, searched the
registration record, he found them in due form including the power of
attorney of Vellajo in favor of Nano. If this had not been so and if
thereafter the proper notation of the encumbrance could not have been
made, Angela Blondeau would not have lent P12,000.00 to the defendant
Vallejo.’ An executed transfer of registered lands placed by the registered
owner thereof in the hands of another operates as a representation to a
third party that the holder of the transfer is authorized to deal with the
land.
‘As between two innocent persons, one of whom must suffer the
consequence of a breach of trust, the one who made it possible by his act
of confidence bear the loss.’ ” (pp. 19-21)
The Blondeau decision, however, is not on all fours with the case before
Us because here We are confronted with one who admittedly was an
agent of his sister and who sold the property of the latter after her death
with full knowledge of such death. The situation is expressly covered by a
provision of law on agency the terms of which are clear and unmistakable
leaving no room for an interpretation contrary to its tenor, in the same
manner that the ruling in Blondeau and the cases cited therein found a
basis in Section 55 of the Land Registration Law which in part provides:
“xx xx xx
“The production of the owner’s duplicate certificate whenever
any voluntary instrument is presented for registration shall be
conclusive authority from the registered owner to the register of
deeds to enter a new certificate or to make a memorandum of
registration in accordance with such instruments, and the new
certificate or memorandum shall be binding upon the registered
owner and upon all persons claiming under him in favor of every
purchaser for value and in good faith: Provided, however. That in
all cases of registration procured by fraud, the owner may pursue
all his legal and equitable remedies against the parties to such
fraud, without prejudice, however, to the rights of any innocent
holder for value of a certificate of title. xx xx xx” (Act No. 496 as
amended)
7. One last point raised by respondent corporation in support of the
appealed decision is an 1842 ruling of the Supreme Court of Pennsylvania
in Cassiday v. McKenzie wherein payments made to an agent after the
death of the principal were held to be “good”, “the parties being ignorant
of the death”. Let us take note that the Opinion of Justice Rogers was
premised on the statement that the parties were ignorant of the death of
the principal. We quote from that decision the following:
“x x x Here the precise point is, whether a payment to an agent
when the parties are ignorant of the death is a good payment. In
addition to the case in Campbell before cited, the same judge Lord
Ellenborough, has decided in 5 Esp. 117, the general question that
a payment after the death of principal is not good. Thus, a
payment of sailor’s wages to a person having a power of attorney to
receive them, has been held void when the principal was dead at
the time of the payment. If, by this case, it is meant merely to
decide the general proposition that by operation of law the death of
the principal is a revocation of the powers of the attorney, no
objection can be taken to it. But if it intended to say that his
principle applies where there was no notice of death, or opportunity
of notice, I must be permitted to dissent from it.
“x x x That a payment may be good today, or bad tomorrow,
from the accidental circumstance of the death of the principal,
which he did not know, and which by no possibility could he know?
It would be unjust to the agent and unjust to the debtor. In the
civil law, the acts of the agent, done bona fide in ignorance of the
death of his principal, are held valid and binding upon the heirs of
the latter. The same rule holds in the Scottish law, and I cannot
believe the common law is so unreasonable. . . .” (39 Am. Dec. 76,
80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v.
McKenzie may evoke, mention may be made that the above represents
the minority view in American jurisprudence. Thus in Clayton v.
Merrett, the Court said:
“ ‘There are several cases which seem to hold that although, as a
general principle, death revokes an agency and renders null every
act of the agent thereafter performed, yet that where a payment
has been made in ignorance of the death, such payment will be
good. The leading case so holding is that of Cassiday v. McKenzie,
4 Watts & S. (Pa.) 282, 39 AmD 76, where, in an elaborate opinion,
this view is broadly announced. It is referred to, and seems to have
been followed, in the case of Dick v. Page, 17 Mo. 234, 57 AmD 267;
but in this latter case it appeared that the estate of the deceased
principal had received the benefit of the money paid, and therefore
the representative of the estate might well have been held to be
estopped from suing for it again. . . . These cases, in so far, at least,
as they announce the doctrine under discussion, are exceptional.
The Pennsylvania Case, supra (Cassiday v. McKenzie, 4 Watts &
S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone
in announcing the principle in its broadest scope.’ ” (52 Misc. 353,
357, cited in 2 C.J. 549)
So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and
pointing out that the opinion, except so far as it related to the particular
facts, was a mere dictum, Baldwin, J. said:
“ ‘The opinion, therefore, of the learned Judge may be regarded joint, not joint and several or solidary. (Philippine National Bank vs. Sta.
more as an extrajudicial indication of his views on the general Maria, 29 SCRA 303).
subject, than as the adjudication of the Court upon the point in Air carriers which are members of the International Air Transport
question. But accordingly all proper weight to this opinion, as the Association are constituted as agents of each other in the issuing of
tickets and, therefore, bound by the mistakes committed by a member
judgment of a Court of great respectability, it stands alone among
thereof which, in behalf of the petitioner airline confirmed the
common law authorities, and is opposed by an array too formidable passenger’s reservation for a first-class reservation. (Ortigas, Jr. vs.
to permit us to follow it.’ ” (15 Cal. 12, 17, cited in 2 C.J. 549) Lufthansa German Airlines, 65 SCRA 610).
Whatever conflict of legal opinion was generated by Cassiday v. Where a check is deposited with a collecting bank, the relationship
McKenzie in American jurisprudence, no such conflict exists in our own created is that of agency, not creditor-debtor. The same rule follows after
for the simple reason that our statute, the Civil Code, expressly provides the drawee-bank’s check was forged by one who previously encashed
for two exceptions to the general rule that death of the principal them. (Jai-Alai Corporation of the Philippines vs. Bank of the Philippine
revokes ipso jure the agency, to wit: (1) that the agency is coupled with an Islands, 66 SCRA 29).
interest (Art. 1930), and (2) that the act of the agent was executed
without knowledge of the death of the principal and the third person who ——o0o——
contracted with the agent acted also in good faith (Art. 1931). Exception
No. 2 is the doctrine followed in Cassiday, and again We stress the
indispensable requirement—that the agent acted without knowledge or
notice of the death of the principal. In the case before Us the agent
Ramon Rallos executed the sale notwithstanding notice of the death of his
principal. Accordingly, the agent’s act is unenforceable against the estate
of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the decision of
respondent appellate court, and We affirm en toto the judgment rendered
by then Hon. Amador E. Gomez of the Court of First Instance of Cebu,
quoted in pages 2 and 3 of this Opinion, with costs against respondent
realty corporation at all instances.
So Ordered.
Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ.,
concur.
Decision set aside and judgment affirmed.
Notes.—The death of the principal does not render the act of an agent
unenforceable where the latter had no knowledge of the extinguishment
of the agency. (Herrera vs. Luy Kim Guan, 1 SCRA 406).
Ratification by the grantor or estoppel, consisting in benefiting from
the loan must be expressly shown and proven during the trial. (Philippine
National Bank vs. Sta. Maria, 29 SCRA 303).
In an expropriation proceeding, the State cannot raise the alleged lack
of authority of the counsel of the owner of the property to bind his client
in a compromise agreement because such lack of authority may be
questioned only by the principal or client. (Commissioner of Public
Highways vs. San Diego, 31 SCRA 616).
Where a person expressly authorized another to mortgage and borrow
money for and in his name, the liability of the two to the creditor is only
 [No. 18058. January 16, 1923]
FABIOLA SEVERINO, plaintiff and appellee, vs. GUILLERMO
SEVERINO, defendant and appellant. FELICITAS VILLANUEVA,
intervenor and appellee.
1. 1.PRINCIPAL AND AGENT; ADVERSE TITLE; ESTOPPEL.—The
relations of an agent to his principal are fiduciary and in regard to the
property forming the subject-matter of the agency, he is estopped from
acquiring or asserting a title adverse to that of the principal.
1. 2.ID.; REAL PROPERTY; CONVEYANCE BY AGENT TO
PRINCIPAL.—An action in personam will lie against an agent to
compel him to return or retransfer to his principal, or the latter's
estate, the real property committed to his custody as such agent and
also to execute the necessary documents of conveyance to effect such
retransfer.
1. 3.ID.; ID.; ID.; REGISTRATION OF LAND.—The principal's right of
action to compel a reconveyance is not extinguished through the
registration of the land in favor of the agent; though the final decree of
registration may not be reopened after the expiration of one year from
the date of its entry, there appears to be no reason why the agent
should not be compelled, through a suit in equity, to make such
reparation as may lie within his power for the breach of trust
committed by him, and as long as the land stands registered in his
name such reparation may take the form of a conveyance or transfer of
the title to the cestui que trust, i. e., the principal.
1. 4.LAND REGISTRATION; ACTION TO COMPEL
CONVEYANCE; EVIDENCE.— There is a strong presumption in favor
of the regularity and validity of a registered title, and in order to
maintain an action to compel the transfer of the title to a cestui que
trust, proof of the fiduciary relations and of the breach of trust must be
clear and convincing.
1. 5.CIVIL PROCEDURE; RECOGNITION OF NATURAL
CHILD; PARTIES.—In an action for a judicial declaration of the right
of a person to be recognized as a natural child of a deceased person, the
potential heirs of the deceased are necessary parties.
APPEAL from a judgment of the Court of First Instance of Occidental
Negros, Villa-Real, J.
The facts are stated in the opinion of the court.
Serafin P. Hilado and A. P. Seva for appellant.
Jose Ma. Arroyo, Jose Lopez Vito, and Fisher & DeWitt for appellees.
OSTRAND, J.:
This is an action brought by the plaintiff as the alleged natural daughter
and sole heir of one Melecio Severino, deceased, to compel the defendant
Guillermo Severino to convey to her four parcels of land described in the
complaint, or in def ault thereof to pay her the sum of P800,000 in
damages for wrongfully causing said land to be registered in his own
name. Felicitas Villanueva, in her capacity as administratrix of the estate
of Melecio Severino, has filed a complaint in intervention claiming the
same relief as the original plaintiff, except in so far as she prays that the
conveyance be made, or damages paid, to the estate instead of to the
plaintiff Fabiola Severino. The defendant answered both complaints with
a general denial.
The lower court rendered a judgment recognizing the plaintiff Fabiola
Severino as the acknowledged natural child of the said Melecio Severino
and ordering the defendant to convey 428 hectares of the land in question
to the intervenor as administratrix of the estate of the said Melecio
Severino, to deliver to her the proceeds in his possession of a certain
mortgage placed thereon by him and to pay the costs. From this judgment
only the defendant appeals.
The land described in the complaint forms one continuous tract and
consists of lots Nos. 827, 828, 834, and 874 of the cadaster of Silay,
Province of Occidental Negros, which measure, respectively, 61 hectares,
74 ares, and 79 centiares; 76 hectares, 34 ares, and 79 centiares; 52
hectares, 86 ares, and 60 centiares and 608 hectares, 77 ares and 28
centiares, or a total of 799 hectares, 75 ares, and 46 centiares.
The evidence shows that Melecio Severino died on the 25th day of
May, 1915; that some 428 hectares of the land were recorded in the
Mortgage Law Register in his name in the year 1901 by virtue of
possessory information proceedings instituted on the 9th day of May of
that year by his brother Agapito Severino in his behalf; that during the
lifetime of Melecio Severino the land was worked by the defendant,
Guillermo Severino, his brother, as administrator for and on behalf of the
said Melecio Severino; that after Melecio's death, the defendant
Guillermo Severino continued to occupy the land; that in 1916 a parcel
survey was made of the lands in the municipality of Silay, including the
land here in question, and cadastral proceedings were instituted for the
registration of the land titles within the surveyed area; that in the
cadastral proceedings the land here in question was described as four
separate lots numbered as above stated; that Roque Hofileña, as lawyer
for Guillermo Severino, filed answers in behalf of the latter in said
proceedings claiming the lots mentioned as the property of his client; that
no opposition was presented in the proceedings to the claims of Guillermo
Severino and the court therefore decreed the title in his favor, in
pursuance of which decree certificates of title were issued to him in the
month of March, 1917.
It may be f urther observed that at the time of the cadastral
proceedings the plaintiff Fabiola Severino was a minor; that Guillermo
Severino did not appear personally in the proceedings and did not there
testify; that the only testimony in support of his claim was that of his
attorney Hofileña, who swore that he knew the land and that he also
knew that Guillermo Severino inherited the land from his father and that
he, by himself, and through his predecessors in interest, had possessed
the land for thirty years.
The appellant presents the following nine assignments of error:
1. "1.The trial court erred in admitting the evidence that was offered
by plaintiff in order to establish the fact that said plaintiff was
the legally acknowledged natural child of the deceased Melecio
Severino.
2. "2.The trial court erred in finding that, under the evidence
presented, plaintiff was the legally acknowledged natural child
of Melecio Severino.
3. "3.The trial court erred in rejecting the evidence offered by
defendant to establish the absence of fraud on his part in
securing title to the lands in Nacayao.
4. "4.The trial court erred in concluding that the evidence adduced
by plaintiff and intervenor established that defendant was guilty
of fraud in procuring title to the lands in question in his name.
1. "5.The trial court erred in declaring that the land that was f
ormerly placed in the name of Melecio Severino had an extent of
either 434 or 428 hectares at the time of his death.
2. "6.The trial court erred in declaring that the value of the land in
litigation is P500 per hectare.
3. "7.The trial court erred in granting the petition of the plaintiff f or
an attachment without first giving the defendant an opportunity
to be heard.
4. "8.The trial court erred in ordering the conveyance of 428
hectares of land by defendant to the administratrix.
5. "9.The trial court erred in failing or refusing to make any finding
as to the defendant's contention that the petition for attachment
was utterly devoid of any reasonable ground."
In regard to the first two assignments of error, we agree with the
appellant that the trial court erred in making a declaration in the present
case as to the recognition of Fabiola Severino as the natural child of
Melecio Severino. We have held in the case of Briz vs. Briz and
Remigio (43 Phil., 763), that "The legitimate heirs or kin of a deceased
person who would be prejudiced by a declaration that another person is
entitled to recognition as the natural child of such decedent, are
necessary and indispensable parties to any action in which a judgment
declaring the right to recognition is sought." In the present action only
the widow, the alleged natural child, and one of the brothers of the
deceased are parties; the other potential heirs have not been included.
But, inasmuch as the judgment appealed from is in favor of the
intervenor and not of the plaintiff, except to the extent of holding that the
latter is a recognized natural child of the deceased, this question is, from
the view we take of the case, of no importance in its final disposition. We
may say, however, in this connection, that the point urged in appellant's
brief that it does not appear affirmatively f rom the evidence that, at the
time of the conception of Fabiola, her mother was a single woman, may be
sufficiently disposed of by a reference to article 130 of the Civil Code and
subsection 1 of section 334 of the Code of Civil Procedure which create the
presumption that a child born out of wedlock is natural rather than
illegitimate. The question of the status of the plaintiff Fabiola Severino
and her right to share in the inheritance may, upon notice to all the
interested parties, be determined in the probate proceedings for the
settlement 'of the estate of the deceased.
The fifth assignment of error relates to the finding of the trial court
that the land belonging to Melecio Severino had an area of 428 hectares.
The appellant contends that the court should have found that there were
only 324 hectares inasmuch as one hundred hectares of the original area
were given to Melecio's brother Donato during the lifetime of the father
Ramon Severino. As it appears that Ramon Severino died in 1896 and
that the possessory information proceedings, upon which the finding of
the trial court as to the area of the land is principally based, were not
instituted until the year 1901, we are not disposed to disturb the
conclusions of the trial court on this point. Moreover, in the year 1913,
the defendant Guillermo Severino testified under oath, in the case
of Montelibano vs. Severino, that the area of the land owned by Melecio
Severino and of which he (Guillermo) was the administrator, embraced
an area of 424 hectares. The fact that Melecio Severino, in declaring the
land for taxation in 1906, stated that the area was only 324 hectares and
60 ares while entitled to some weight is not conclusive and is not
sufficient to overcome the positive- statement of the defendant and the
recitals in the record of the possessory information proceedings.
The sixth assignment of error is also of minor importance in view of
the fact that in the dispositive part of the decision of the trial court, the
only relief given is an order requiring the appellant to convey to the
administratrix the land in question, together with such parts of the
proceeds of the mortgage thereon as remain in his hands. We may say
furher that the court's estimate of the value of the land does not appear
unreasonable and that, upon the evidence before us, it will not be
disturbed.
The seventh and ninth assignments of error relate to the ex
parte granting by the trial court of a preliminary attachment in the case
and the refusal of the court to dissolve the same. We find no merit
whatever in these assignments and a detailed discussion of them is
unnecessary.
The third, fourth, and eighth assignments of error involve the vital
points in the case, are inter-related and may be conveniently considered
together.
The defendant argues that the gist of the instant action is the alleged
fraud on his part in causing the land in question to be registered in his
name; that the trial court therefore erred in rejecting his offer of evidence
to the effect that the land was owned in common by all the heirs of
Ramon Severino and did not belong to Melecio Severino exclusively; that
such evidence, if admitted, would have shown that he did not act with
fraudulent intent in taking title to the land; that the trial court erred in
holding him estopped from denying Melecio's title; that more than a year
having elapsed since the entry of the final decree adjudicating the land to
the defendant, said decree cannot now be reopened; that the ordering of
the defendant to convey the decreed land to ;the administratrix is, for all
practical purposes, equivalent to the reopening of the decree of
registration; that under section 38 of the Land Registration Act the
defendant has an indefeasible title to the land; and that the question of
ownership of the land being thus judicially settled, the question as to the
previous relations between the parties cannot now be inquired into.
Upon no point can the defendant's contentions be sustained. It may
first be observed that this is not an action under section 38 of the Land
Registration Act to reopen or set aside a decree; it is an action in
personam against an agent to compel him to return, or retransfer, to the
heirs or the estate of its principal, the property committed to his custody
as such agent, to execute the necessary documents of conveyance to effect
such retransfer or, in default thereof, to pay damages.
That the defendant came into the possession of the property here in
question as the agent of the deceased Melecio Severino in the
administration of the property, cannot be successfully disputed. His
testimony in the case of Montelibano vs. Severino (civil case No. 902 of
the Court of First Instance of Occidental Negros and which forms a part
of the evidence in the present case) is, in fact, conclusive in this respect.
He there stated under oath that from the year 1902 up to the time the
testimony was given, in the year 1913, he had been continuously in
charge and occupation of the land as the encargado or administrator of
Melecio Severino; that he had always known the land as the property of
Melecio Severino; and that the possession of the latter had been peaceful,
continuous, and exclusive. In his answer filed in the same case, the same
defendant, through his attorney, disclaimed all personal interest in the
land and averred that it was wholly the property of his brother Melecio.
Neither is it disputed that the possession enjoyed by the defendant at
the time of obtaining his decree was of the same character as that held
during the lifetime of his brother, except in so far as shortly before the
trial of the cadastral case the defendant had secured from his brothers
and sisters a relinquishment in his favor of such rights as they might
have in the land.
The relations of an agent to his principal are fiduciary and it is an
elementary and very old rule that in regard to property forming the
subject-matter of the agency, he is estopped from acquiring or asserting a
title adverse to that of the principal. His position is analogous to that of a
trustee and he cannot consistently, with the principles of good faith, be
allowed to create in himself an interest in opposition to that of his
principal or cestui que trust. Upon this ground, and substantially in
harmony with the principles of the Civil Law (see sentence of the supreme
court of Spain of May 1, 1900)', the English Chancellors held that in
general whatever a trustee does for the advantage of the trust estate
inures to the benefit of the cestui que trust. (Greenlaw vs. King, 5 Jur.,
18; Ex parte Burnell, 7 Jur., 116; Ex parte Hughes, 6 Ves., 617; Ex
parte James, 8 Ves., 337; Oliver vs. Court, 8 Price, 127.) The same
principle has been consistently adhered to in so many American cases
and is so well established that exhaustive citations of authorities are
superfluous and we shall therefore limit ourselves to quoting a few of the
numerous judicial expressions upon the subject. The principle is well
stated in the case of Gilbert vs; Hewetson (79 Minn., 326) :
"A receiver, trustee, attorney, agent, or any other person occupying
fiduciary relations respecting property or persons, is utterly disabled
from acquiring for his own benefit the property committed to his custody f
or management. This rule is entirely independent of the f act whether
any fraud has intervened. No fraud in fact need be shown, and no excuse
will be heard from the trustee. It is to avoid the necessity of any such
inquiry that the rule takes so general a form. The rule stands on the
moral obligation to refrain from placing one's self in positions which
ordinarily excite conflicts between self-interest and integrity. It seeks to
remove the temptation that might arise out of such a relation to serve
one's self-interest at the expense of one's integrity and duty to another, by
making it impossible to profit by yielding to temptation. It applies
universally to all who come within its principle."
In the case of Massie vs. Watts (6 Cranch, 148), the United States
Supreme Court, speaking through Chief Justice Marshall, said:
 "But Massie, the agent of Oneale, has entered and surveyed a portion
of that land for himself and obtained a patent for it in his own name.
According to the clearest and best established principles of equity, the
agent who so acts becomes a trustee for his principal. He cannot hold the
land under an entry for himself otherwise than as trustee for his
principal."
In the case of Felix vs. Patrick (145 U. S., 317), the United States
Supreme Court, after examining the authorities, said:
"The substance of these authorities is that, wherever a person obtains
the legal title to land by any artifice or concealment, or by making use of
facilities intended for the benefit of another, a court of equity will impress
upon the land so held by him a trust in favor of the party who is justly
entitled to them, and will order the trust executed by decreeing their
conveyance to the party in whose favor the trust was
created." (Citing Bank of Metropolis vs. Guttschlick, 14 Pet., 19,
31; Moses vs. Murgatroyd, 1 Johns. Ch., 119; Cumberland vs. Codrington,
3 Johns. Ch., 229, 261; Neilson vs. Blight, 1 Johns. Cas.,
205; Weston vs. Barker, 12 Johns., 276.)
The same doctrine has also been adopted in the Philippines. In the
case of Uy Aloc vs. Cho Jan Ling (19 Phil., 202), the facts are stated by
the court as follows:
"From the facts proven at the trial it appears that a number of
Chinese merchants raised a fund by voluntary subscription with which
they purchased a valuable tract of land and erected a large building to be
used as a sort of club house for the mutual benefit of the subscribers to
the fund. The subscribers organized themselves into an irregular
association, which had no regular articles of association, and was not
incorporated or registered in the commercial registry or elsewhere. The
association not having any existence as a legal entity, it was agreed to
have the title to the property placed in the name of one of the members,
the defendant, Cho Jan Ling, who on his part accepted the trust, and
agreed to hold the property as the agent of the members of the
association. After the club building was completed with the funds of
the members of the association, Cho Jan Ling collected some
P25,000 in rents for which he failed and refused to account, and
upon proceedings being instituted to compel him to do so, he set up
title in himself to the club property as well as to the rents accruing
therefrom, falsely alleging that he had bought the real estate and
constructed the building with his own funds, and denying the
claims of the members of the association that it was their funds
which had been used for that purpose."
The decree of the court provided, among other things, for the conveyance
of the club house and the land on which it stood f rom the defendant, Cho
Jan Ling, in whose name it was registered, to the members of the
association. In affirming the decree, this court said:
"In the case at bar the legal title of the holder of the registered title
is not questioned; it is admitted that the members of the
association voluntarily obtained the inscription in the name of Cho
Jan Ling, and that they had no right to have that inscription
cancelled; they do not seek such cancellation, and on the contrary
they allege and prove that the duly registered legal title to the
property is in Cho Jan Ling, but they maintain, and we think that
they rightly maintain, that he holds it under an obligation, both
express and implied, to deal with it exclusively f or the benefit of
the members of the association, and subject to their will."
In the case of Camacho vs. Municipality of Baliuag (28 Phil., 466), the
plaintiff, Camacho, took title to the land in his own name, while acting as
agent for the municipality. The court said:
"There have been a number of cases before this court in which a
title to real property was acquired by a person in his own name,
while acting under a fiduciary capacity, and who afterwards
sought to take advantage of the confidence reposed in him by
claiming the ownership of the property for himself. This court has
invariably held such evidence competent as between the fiduciary
and the cestui que trust.
* * * * * * *
"What judgment ought to be entered in this case? The court
below simply absolved the defendant from the complaint. The
defendant municipality does not ask for a cancellation of the deed.
On the contrary, the deed is relied upon to supplement the oral
evidence showing that the title to the land is in the defendant. As
we have indicated in Consunji vs. Tison, 15 Phil., 81, and Uy
Aloc vs. Cho Jan Ling, 19 Phil., 202, the proper procedure in such a
case, so long as the rights of innocent third persons have not
intervened, is to compel a conveyance to the rightful owner. This
ought and can be done under the issues raised and the proof
presented in the case at bar."
The case of Sy-Juco and Viardo vs. Sy-Juco (40 Phil., 634) is also in point.
As will be seen from the authorities quoted, an agent is not only
estopped from denying his principal's title to the property, but he is also
disabled from acquiring interests therein adverse to those of his principal
during the term of the agency. But the defendant argues that his title has
become res adjudicata through the decree of registration and cannot now
be disturbed.
 This contention may, at first sight, appear to possess some force, but
on closer examination it proves untenable. The decree of registration
determined the legal title to the land as of the date of the decree; as to
that there is no question. That, under section 38 of the Land Registration
Act, this decree became conclusive after one year from the date of the
entry is not disputed and no one attempts to disturb the decree or the
proceedings upon which it is based; the plaintiff in intervention merely
contends that in equity the legal title so acquired inured to the benefit of
the estate of Melecio Severino, the defendant's principal and cestui que
trust and asks that this superior equitable holder of the legal title, to
transfer it to the estate.
We have already shown that before the issuance of the decree of
registration it was the undoubted duty of the defendant to restore the
property committed to his custody to his principal, or to the latter's
estate, and that the principal had a right of action in personam to enforce
the performance of this duty and to compel the defendant to execute the
necessary conveyance to that effect. The only question remaining for
consideration is, therefore, whether the decree of registration
extinguished this personal right of action.
In Australia and New Zealand, under statutes in this respect similar
to ours, courts of equity exercise general jurisdiction in matters of fraud
and error with reference to Torrens registered lands, and giving attention
to the special provisions of the Torrens acts, will issue such orders and
directions to all the parties to the proceedings as may seem just and
proper under the circumstances. They may order parties to make deeds of
conveyance and if the order is disobeyed, they may cause proper
conveyances to be made by a Master in Chancery or Commissioner in
accordance with the practice in equity (Hogg, Australian Torrens System,
p. 847).
In the United States courts have even gone so far in the exercise of
their equity jurisdiction as to set aside final decrees after the expiration
of the statutory period of limitation for the reopening of such decrees
(Baart vs. Martin, 99 Minn., 197). But, considering that equity follows the
law and that our statutes expressly prohibit the reopening of a decree
after one year from the date of its entry, this practice would probably be
out of question here, especially so as the ends of justice may be attained
by other equally effective, and less objectionable means.
Turning to our own Land Registration Act, we find no indication there
of an intention to cut off, through the issuance of a decree of registration,
equitable rights or remedies such as those here in question. On the
contrary, section 70 of the Act provides:
"Registered lands and ownership therein, shall in all respects be
subject to the same burdens and incidents attached by law to
unregistered land. Nothing contained in this Act shall in any way be
construed to relieve registered land or the owners thereof from any rights
incident to the relation of husband and wife, or from liability to
attachment on mesne process or levy on execution, or from liability to any
lien of any description established by law on land and the buildings
thereon, or the interest of the owner in such land or buildings, or to
change the laws of descent, or the rights of partition between
coparceners, joint tenants and other cotenants, or the right to take the
same by eminent domain, or to relieve such land from liability to be
appropriated in any lawful manner for the payment of debts, or to change
or affect in any other way any other rights or liabilities created by law
and applicable to unregistered land, except as otherwise expressly
provided in this Act or in the amendments hereof."
Section 102 of the Act, after providing for actions for damages in
which the Insular Treasurer, as the Custodian of the Assurance Fund is a
party, contains the following proviso:
"Provided, however, That nothing in this Act shall be construed to
deprive the plaintiff of any action which he may have against any person
for such loss or damage or deprivation of land or of any estate or interest
therein without joining the Treasurer of the Philippine Archipelago as a
defendant therein."
That an action such as the present one is covered by this proviso can
hardly admit of doubt. Such was also the view taken by this court in the
case of Medina Ong-Quingco vs. Imaz and Warner, Barnes & Co. (27
Phil., 314), in which the plaintiff was seeking to take advantage of his
possession of a certificate of title to deprive the defendant of land
included in that certificate and sold to him by the former owner before the
land was registered. The court decided adversely to plaintiff and in so
doing said:
"As between them no question as to the indefeasibility of a Torrens
title could arise. Such an action could have been maintained at any time
while the property remained in the hands of the purchaser. The peculiar
force of a Torrens title would have been brought into play only when the
purchaser had sold to an innocent third person for value the lands
described in his conveyance. * * * Generally speaking, as between the
vendor and the purchaser the same rights and remedies exist with
reference to land registered under Act No. 496, as exist in relation to land
not so registered."
In Cabanos vs. Register of Deeds of Laguna and Obiñana (40 Phil.,
620), it was held that, while a purchaser of land under a pacto de
retro cannot institute a real action f or the recovery thereof where the
vendor under said sale has caused such lands to be registered in his name
without said vendee's consent, yet he may have his personal action based
on the contract of sale to compel the execution of an unconditional deed
for the said lands when the period for repurchase has passed.
 Torrens titles being based on judicial decrees there is, of course, a Araullo, C.
strong presumption in favor of their regularity or validity, and in order to J., Johnson, Street, Malcolm, Avanceña, Villamor, Johns, and Romualdez
maintain an action such as the present the proof as to the fiduciary , JJ., concur.
relation of the parties and of the breach of trust must be clear and Judgment affirmed with instructions.
convincing. Such proof is, as we have seen, not lacking in this case.
But once the relation and the breach of trust on the part of the __________________
fiduciary is thus established, there is no reason, neither practical nor
legal, why he should not be compelled to make such reparation as may lie
within his power for the injury caused by his wrong, and as long as the
land stands registered in the name of the party who is guilty of the
breach of trust and no rights of innocent third parties are adversely
affected, there can be no reason why such reparation should not, in the
proper case, take the form of a conveyance or transfer of the title to
the cestui que trust. No reasons of public policy demand that a person
guilty of fraud or breach of trust be permitted to use his certificate of title
as a shield against the consequences of his own wrong.
The judgment of the trial court is in accordance with the facts and the
law. In order to prevent unnecessary delay and further litigation it may,
however, be well to attach some additional directions to its dispositive
clauses. It will be observed that lots Nos. 827, 828, and 834 of a total area
of approximately 191 hectares, lie wholly within the area to be conveyed
to the plaintiff in intervention and these lots may, therefore, be so
conveyed without subdivision. The remaining 237 hectares to be conveyed
lie within the western part of lot No. 874 and before a conveyance of this
portion can be effected a subdivision of that lot must be made and a
technical description of the portion to be conveyed, as well as of the
remaining portion of the lot, must be prepared. The subdivision shall be
made by an authorized surveyor and in accordance with the provisions of
Circular No. 31 of the General Land Registration Office, and the
subdivision and technical descriptions shall be submitted to the Chief of
that office for his approval. Within thirty days after being notified of the
approval of said subdivision and technical descriptions, the defendant
Guillermo Severino shall execute good and sufficient deed or deeds of
conveyance in favor of the administratrix of the estate of the deceased
Melecio Severino for said lots Nos. 827, 828, 834, and the 237 hectares
segregated from the western part of lot No. 874 and shall deliver to the
register of deeds his duplicate certificates of title for all of the four lots in
order that said certificates may be cancelled and new certificates issued.
The cost of the subdivision and the fees of the register of deeds will be
paid by the plaintiff in intervention. It is so ordered.
With these additional directions the judgment appealed from is affirmed,
with the costs against the appellant. The right of the plaintiff Fabiola
Severino to establish in the probate proceedings of the estate of Melecio
Severino her status as his recognized natural child is reserved.
 G.R. No. 76931. May 29, 1991. *
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES,
petitioner, vs. COURT OF APPEALS and AMERICAN AIRLINES
INCORPORATED, respondents.
G.R. No. 76933. May 29, 1991. *
AMERICAN AIRLINES, INCORPORATED, petitioner, vs. COURT OF
APPEALS and ORIENT AIR SERVICES & HOTEL
REPRESENTATIVES, INCORPORATED, respondents.
Contracts; The various stipulation in the contract must be read together to
give effect to all.—It is a well settled legal principle that in the interpretation of a
contract, the entirety thereof must be taken into consideration to ascertain the
meaning of its provisions. The various stipulations in the contract must be read
together to give effect to all. After a careful examination of the records, the Court
finds merit in the contention of Orient Air that the Agreement, when interpreted
in accordance with the foregoing principles, entitles it to the 3% overriding
commission based on total revenue, or as referred to by the parties, “total flown
revenue.”
Same; Same; Any ambiguity in the contract, the stipulations of which are
susceptible of various interpretations, shall be construed against the party who
drafted it.—An additional point before finally disposing of this issue. It is clear
from the records that American Air was the party responsible for the preparation
of the Agreement. Consequently, any ambiguity in this “contract of adhesion” is to
be taken “contra proferentem”, i.e., construed against the party who caused the
ambiguity and could have avoided it by the exercise of a little more care. Thus,
Article 1377 of the Civil Code provides that the interpretation of obscure words or
stipulations in a contract shall not favor the party who caused the obscurity. To
put it differently, when several interpretations of a provision are otherwise
equally proper, that interpretation or construction is to be adopted which is most
favorable to the party in whose favor the provision was made and who did not
cause the ambiguity. We therefore agree with the respondent appellate court’s
declaration that: “Any ambiguity in a contract, whose terms are susceptible of
different interpretations, must be read against the party who drafted it.”
Agency; An agent-principal relationship can only be effected with the consent
of the principal, and must not, in any way be compelled by law or by any court.—
By affirming this ruling of the trial court, respondent appellate court, in effect,
compels American Air to extend its personality to Orient Air. Such would be
violative of the principles and essence of agency, defined by law as a contract
whereby “a person binds himself to render some service or to do something in
representation or on behalf of another, WITH THE CONSENT OR AUTHORITY
OF THE LATTER.” (emphasis supplied) In an agent-principal relationship, the
personality of the principal is extended through the facility of the agent. In so
doing, the agent, by legal fiction, becomes the principal, authorized to perform all
acts which the latter would have him do. Such a relationship can only be effected
with the consent of the principal, which must not, in any way, be compelled by
law or by any court. The Agreement itself between the parties states that “either
party may terminate the Agreement without cause by giving the other 30 days’
notice by letter, telegram or cable.” (emphasis supplied) We, therefore, set aside
the portion of the ruling of the respondent appellate court reinstating Orient Air
as general sales agent of American Air.
PETITIONS for certiorari to review the decision of the Court of Appeals.
Camilon, J.
The facts are stated in the opinion of the Court.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air
Service and Hotel Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines,
Inc.
PADILLA, J.:
This case is a consolidation of two (2) petitions for review on certiorari of
a decision of the Court of Appeals in CA-G.R. No. CV-04294, entitled
1
“American Airlines, Inc. vs. Orient Air Services and Hotel
Representatives, Inc.” which affirmed, with modification, the decision of 2
the Regional Trial Court of Manila, Branch IV, which dismissed the
complaint and granted therein defendant’s counterclaim for agent’s
overriding commission and damages.
The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc. (hereinafter referred to
as American Air), an air carrier offering passenger and air cargo
transportation in the Philippines, and Orient Air Services and Hotel
Representatives (hereinafter referred to as Orient Air), entered into a
General Sales Agency Agreement (hereinafter referred to as the
Agreement), whereby the former authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air
passenger transportation. Pertinent provisions of the agreement are
reproduced, to wit:
“WITNESSETH
In consideration of the mutual convenants herein contained, the
parties hereto agree as follows:
1. 1.Representation of American by Orient Air Services
Orient Air Services will act on American’s behalf as its
exclusive General Sales Agent within the Philippines, including
any United States military installation therein which are not
serviced by an Air Carrier Representation Office (ACRO), for the
sale of air passenger transportation. The services to be performed
by Orient Air Services shall include:
1. (a)soliciting and promoting passenger traffic for the services
of American and, if necessary, employing staff competent
and sufficient to do so;
2. (b)providing and maintaining a suitable area in its place of
business to be used exclusively for the transaction of the
business of American;
3. (c)arranging for distribution of American’s timetables,
tariffs and promotional material to sales agents and the
general public in the assigned territory;
1. (d)servicing and supervising of sales agents (including such
sub-agents as may be appointed by Orient Air Services
with the prior written consent of American) in the
assigned territory including if required by American the
control of remittances and commissions retained; and
2. (e)holding out a passenger reservation facility to sales
agents and the general public in the assigned territory.
In connection with scheduled or non-scheduled air passenger
transportation within the United States, neither Orient Air
Services nor its sub-agents will perform services for any other air
carrier similar to those to be performed hereunder for American
without the prior written consent of American. Subject to periodic
instructions and continued consent from American, Orient Air
Services may sell air passenger transportation to be performed
within the United States by other scheduled air carriers provided
American does not provide substantially equivalent schedules
between the points involved.
xxx xxx xxx
1. 4.Remittances
Orient Air Services shall remit in United States dollars to
American the ticket stock or exchange orders, less commissions to
which Orient Air Services is entitled hereunder, not less frequently
than semi-monthly, on the 15th and last days of each month for
sales made during the preceding half month.
All monies collected by Orient Air Services for transportation
sold hereunder on American’s ticket stock or on exchange orders,
less applicable commissions to which Orient Air Services is
entitled hereunder, are the property of American and shall be held
in trust by Orient Air Services until satisfactorily accounted for to
American.
1. 5.Commissions
American will pay Orient Air Services commission on
transportation sold hereunder by Orient Air Services or its sub-
agents as follows:
1. (a)Sales agency commission
American will pay Orient Air Services a sales agency
commission for all sales of transportation by Orient Air Services or
its sub-agents over American’s services and any connecting
through air tranportation, when made on American’s ticket stock,
equal to the following percentages of the tariff fares and charges:
(i) For transportation solely between points within the United States and
between such points and Canada: 7% or such other rate(s) as may be
prescribed by the Air Traffic Conference of America.
(ii) For transportation included in a through ticket covering
transportation between points other than those described above: 8% or
such other rate(s) as may be prescribed by the International Air
Transport Association.
1. (b)Overriding commission
In addition to the above commission American will pay Orient
Air Services an overriding commission of 3% of the tariff fares and
charges for all sales of transportation over American’s service by
Orient Air Service or its sub-agents.
xxx xxx xxx
1. 10.Default
If Orient Air Services shall at any time default in observing or
performing any of the provisions of this Agreement or shall become
bankrupt or make any assignment for the benefit of or enter into
any agreement or promise with its creditors or go into liquidation,
or suffer any of its goods to be taken in execution, or if it ceases to
be in business, this Agreement may, at the option of American, be
terminated forthwith and American may, without prejudice to any
of its rights under this Agreement, take possession of any ticket
forms, exchange orders, traffic material or other property or funds
belonging to American.
1. 11.IATA and ATC Rules
The provisions of this Agreement are subject to any applicable
rules or resolutions of the International Air Transport Association
and the Air Traffic Conference of America, and such rules or
resolutions shall control in the event of any conflict with the
provisions hereof.
xxx xxx xxx
1. 13.Termination
American may terminate the Agreement on two days’ notice in
the event Orient Air Services is unable to transfer to the United
States the funds payable by Orient Air Services to American under
this Agreement. Either party may terminate the Agreement
without cause by giving the other 30 days’ notice by letter,
telegram or cable.
xxx xxx xxx” 3
On 11 May 1981, alleging that Orient Air had reneged on its obligations
under the Agreement by failing to promptly remit the net proceeds of
sales for the months of January to March 1981 in the amount of US
$254,400.40, American Air by itself undertook the collection of the
proceeds of tickets sold originally by Orient Air and terminated forthwith
the Agreement in accordance with Paragraph 13 thereof (Termination).
Four (4) days later, or on 15 May 1981, American Air instituted suit
against Orient Air with the Court of First Instance of Manila, Branch 24,
for Accounting with Preliminary Attachment or Garnishment, Mandatory
Injunction and Restraining Order, averring the aforesaid basis for the
4
termination of the Agreement as well as therein defendant’s previous
record of failures “to promptly settle past outstanding refunds of which
there were available funds in the possession of the defendant, x x x to the
damage and prejudice of plaintiff.”5
In its Answer with counterclaim dated 9 July 1981, defendant Orient
6
Air denied the material allegations of the complaint with respect to
plaintiff’s entitlement to alleged unremitted amounts, contending that
after application thereof to the commissions due it under the Agreement,
plaintiff in fact still owed Orient Air a balance in unpaid overriding
commissions. Further, the defendant contended that the actions taken by
American Air in the course of terminating the Agreement as well as the
termination itself were untenable, Orient Air claiming that American
Air’s precipitous conduct had occasioned prejudice to its business
interests.
Finding that the record and the evidence substantiated the allegations
of the defendant, the trial court ruled in its favor, rendering a decision
dated 16 July 1984, the dispositive portion of which reads:
“WHEREFORE, all the foregoing premises considered, judgment
is hereby rendered in favor of defendant and against plaintiff
dismissing the complaint and holding the termination made by the
latter as affecting the GSA agreement illegal and improper and
order the plaintiff to reinstate defendant as its general sales agent
for passenger tranportation in the Philippines in accordance with
said GSA agreement; plaintiff is ordered to pay defendant the
balance of the overriding commission on total flown revenue
covering the period from March 16, 1977 to December 31, 1980 in
the amount of US$84,821.31 plus the additional amount of
US$8,000.00 by way of proper 3% overriding commission per
month commencing from January 1, 1981 until such reinstatement
or said amounts in its Philippine peso equivalent legally prevailing
at the time of payment plus legal interest to commence from the
filing of the counterclaim up to the time of payment. Further,
plaintiff is directed to pay defendant the amount of One Million
Five Hundred Thousand (P1,500,000.00) pesos as and for
exemplary damages; and the amount of Three Hundred Thousand
(P300,000.00) pesos as and by way of attorney’s fees.
Costs against plaintiff.”7
On appeal, the Intermediate Appellate Court (now Court of Appeals) in a
decision promulgated on 27 January 1986, affirmed the findings of the
court a quo on their material points but with some modifications with
respect to the monetary awards granted. The dispositive portion of the
appellate court’s decision is as follows:
“WHEREFORE, with the following modifications—
1. 1)American is ordered to pay Orient the sum
of US$53,491.11 representing the balance of the latter’s
 overriding commission covering the period March 16, 1977
to December 31, 1980, or its Philippine peso equivalent in
accordance with the official rate of exchange legally
prevailing on July 10, 1981, the date the counterclaim was
filed;
2. 2)American is ordered to pay Orient the sum
of US$7,440.00 as the latter’s overriding commission per
month starting January 1, 1981 until date of termination,
May 9, 1981 or its Philippine peso equivalent in accordance
with the official rate of exchange legally prevailing on July
10, 1981, the date the counterclaim was filed;
1. 3)American is ordered to pay interest of 12% on said
amounts from July 10, 1981 the date the answer with
counterclaim was filed, until full payment;
2. 4)American is ordered to pay Orient exemplary damages of
P200,000.00;
3. 5)American is ordered to pay Orient the sum of P25,000.00
as attorney’s fees.
the rest of the appealed decision is affirmed.
Costs against American.” 8
American Air moved for reconsideration of the aforementioned decision,
assailing the substance thereof and arguing for its reversal. The appellate
court’s decision was also the subject of a Motion for Partial
Reconsideration by Orient Air which prayed for the restoration of the
trial court’s ruling with respect to the monetary awards. The Court of
Appeals, by resolution promulgated on 17 December 1986, denied
American Air’s motion and with respect to that of Orient Air, ruled thus:
“Orient’s motion for partial reconsideration is denied insofar as it
prays for affirmance of the trial court’s award of exemplary
damages and attorney’s fees, but granted insofar as the rate of
exchange is concerned. The decision of January 27, 1986 is
modified in paragraphs (1) and (2) of the dispositive part so that
the payment of the sums mentioned therein shall be at their
Philippine peso equivalent in accordance with the official rate of
exchange legally prevailing on the date of actual payment.” 9
Both parties appealed the aforesaid resolution and decision of the
respondent court, Orient Air as petitioner in G.R. No. 76931 and
American Air as petitioner in G.R. No. 76933. By resolution of this Court
10
dated 25 March 1987 both petitions were consolidated, hence, the case at
bar.
The principal issue for resolution by the Court is the extent of Orient
Air’s right to the 3% overriding commission. It is the stand of American
Air that such commission is based only on sales of its services actually
negotiated or transacted by Orient Air, otherwise referred to as “ticketed
sales.” As basis thereof, primary reliance is placed upon paragraph 5(b) of
the Agreement which, in reiteration, is quoted as follows:
1. “5.Commissions
1. a)xxx xxx
2. b)Overriding Commission
In addition to the above commission, American will pay Orient
Air Services an overriding commission of 3% of the tariff fees
and charges for all sales of transportation over American’s
services by Orient Air Services or its sub-agents.” (italics
supplied)
Since Orient Air was allowed to carry only the ticket stocks of American
Air, and the former not having opted to appoint any sub-agents, it is
American Air’s contention that Orient Air can claim entitlement to the
disputed overriding commission based only on ticketed sales. This is
supposed to be the clear meaning of the underscored portion of the above
provision. Thus, to be entitled to the 3% overriding commission, the sale
must be made by Orient Air and the sale must be done with the use of
American Air’s ticket stocks.
On the other hand, Orient Air contends that the contractual
stipulation of a 3% overriding commission covers the total revenue of
American Air and not merely that derived from ticketed sales undertaken
by Orient Air. The latter, in justification of its submission, invokes its
designation as the exclusive General Sales Agent of American Air, with
the corresponding obligations arising from such agency, such as, the
promotion and solicitation for the services of its principal. In effect, by
virtue of such exclusivity, “all sales of transportation over American Air’s
services are necessarily by Orient Air.”
11
It is a well settled legal principle that in the interpretation of a
contract, the entirety thereof must be taken into consideration to
ascertain the meaning of its provisions. The various stipulations in the
12
contract must be read together to give effect to all. After a careful
13
examination of the records, the Court finds merit in the contention of
Orient Air that the Agreement, when interpreted in accordance with the
foregoing principles, entitles it to the 3% overriding commission based on which Orient is entitled, and from paragraph 5(d) which
total revenue, or as referred to by the parties, “total flown revenue.” specifically allows Orient to retain the full amount of its
As the designated exclusive General Sales Agent of American Air, commissions. Since, as stated ante, Orient is entitled to the 3%
Orient Air was responsible for the promotion and marketing of American override. American’s premise, therefore, for the cancellation of the
Air’s services for air passenger transportation, and the solicitation of
Agreement did not exist. x x x.”
sales therefor. In return for such efforts and services, Orient Air was to
We agree with the findings of the respondent appellate court. As earlier
be paid commissions of two (2) kinds: first, a sales agency commission,
established, Orient Air was entitled to an overriding commission based on
ranging from 7-8% of tariff fares and charges from sales by Orient
total flown revenue. American Air’s perception that Orient Air was
Air when made on American Air ticket stock; and second, an overriding
remiss or in default of its obligations under the Agreement was, in fact, a
commission of 3% of tariff fares and charges for all sales of passenger
situation where the latter acted in accordance with the Agreement—that
transportation over American Air services. It is immediately observed
of retaining from the sales proceeds its accrued commissions before
that the precondition attached to the first type of commission does not
remitting the balance to American Air. Since the latter was still obligated
obtain for the second type of commissions. The latter type of commissions
to Orient Air by way of such commissions. Orient Air was clearly justified
would accrue for sales of American Air services made not on its ticket
in retaining and refusing to remit the sums claimed by American Air. The
stock but on the ticket stock of other air carriers sold by such carriers or
latter’s termination of the Agreement was, therefore, without cause and
other authorized ticketing facilities or travel agents. To rule otherwise,
basis, for which it should be held liable to Orient Air.
i.e., to limit the basis of such overriding commissions to sales from
On the matter of damages, the respondent appellate court modified by
American Air ticket stock would erase any distinction between the two (2)
reduction the trial court’s award of exemplary damages and attorney’s
types of commissions and would lead to the absurd conclusion that the
fees. This Court sees no error in such modification and, thus, affirms the
parties had entered into a contract with meaningless provisions. Such an
same.
interpretation must at all times be avoided with every effort exerted to
It is believed, however, that respondent appellate court erred in
harmonize the entire Agreement.
affirming the rest of the decision of the trial court. We refer particularly
An additional point before finally disposing of this issue. It is clear
to the lower court’s decision ordering American Air to “reinstate
from the records that American Air was the party responsible for the
defendant as its general sales agent for passenger transportation in the
preparation of the Agreement. Consequently, any ambiguity in this
Philippines in accordance with said GSA Agreement.”
“contract of adhesion” is to be taken “contra proferentem”, i.e., construed
By affirming this ruling of the trial court, respondent appellate court,
against the party who caused the September 1987, 153 SCRA 657
in effect, compels American Air to extend its personality to Orient Air.
ambiguity and could have avoided it by the exercise of a little more care.
Such would be violative of the principles and essence of agency, defined
Thus, Article 1377 of the Civil Code provides that the interpretation of
by law as a contract whereby “a person binds himself to render some
obscure words or stipulations in a contract shall not favor the party who
service or to do something in representation or on behalf of another,
caused the obscurity. To put it differently, when several interpretations
14

WITH THE CONSENT OR AUTHORITY OF THE LATTER.” (emphasis 17

of a provision are otherwise equally proper, that interpretation or

supplied) In an agent-principal relationship, the personality of the
construction is to be adopted which is most favorable to the party in
principal is extended through the facility of the agent. In so doing, the
whose favor the provision was made and who did not cause the
agent, by legal fiction, becomes the principal, authorized to perform all
ambiguity. We therefore agree with the respondent appellate court’s
15

declaration that:
“Any ambiguity in a contract, whose terms are susceptible of
different interpretations, must be read against the party who
drafted it.” 16
We now turn to the propriety of American Air’s termination of the
Agreement. The respondent appellate court, on this issue, ruled thus:
“It is not denied that Orient withheld remittances but such action
finds justification from paragraph 4 of the Agreement, Exh. F,
which provides for remittances to American less commissions to
acts which the latter would have him do. Such a relationship can only be
effected with the consent of the principal, which must not, in any way, be
compelled by law or by any court. The Agreement itself between the
parties states that “either party may terminate the Agreement without
cause by giving the other 30 days’ notice by letter, telegram or cable.”
(emphasis supplied) We, therefore, set aside the portion of the ruling of
the respondent appellate court reinstating Orient Air as general sales
agent of American Air.
WHEREFORE, with the foregoing modification, the Court AFFIRMS the
decision and resolution of the respondent Court of Appeals, dated 27
January 1986 and 17 December 1986, respectively. Costs against
petitioner American Air.
SO ORDERED.
Melencio-Herrera (Chairman) and Regalado, JJ., concur.
Paras, J., No part. Son is a partner in one of the counsel.
Sarmiento, J., on leave.
Decision and resolution affirmed with modification.
Note.—Interpretation shall not favor the party who caused the
ambiguity. ( Lim Yhi Luya vs. Court of Appeals, 99 SCRA 669.)
 G.R. No. 130148. December 15, 1997. *
resolution disposing of a case sooner than expected of it.—It is ironic that while
some litigants malign the judiciary for being supposedly slothful in disposing of
JOSE BORDADOR and LYDIA BORDADOR, petitioners, vs. BRIGIDA
cases, petitioners are making a show of calling out for justice because the Court of
D. LUZ, ERNESTO M. LUZ and NARCISO DEGANOS, respondents.
Appeals issued a resolution disposing of a case sooner than expected of it. They
Actions; Appeals; Judgments; Concurrent factual findings of the trial court
would even deny the exercise of discretion by the appellate court to prioritize its
and the Court of Appeals are entitled to great weight.— Petitioners argue that the
action on cases in line with the procedure it has adopted in disposing thereof and
Court of Appeals erred in adopting the findings of the court a quo that respondent
in declogging its dockets. It is definitely not for the parties to determine and
spouses are not liable to them, as said conclusion of the trial court is contradicted
dictate when and how a tribunal should act upon those cases since they are not
by the finding of fact of the appellate court that “(Deganos) acted as agent of his
even aware of the status of the dockets and the internal rules and policies for
sister (Brigida Luz).” In support of this contention, petitioners quoted several
acting thereon.
letters sent to them by Brigida D. Luz wherein the latter acknowledged her
Same; Same; Presumption of Regularity; It is a legal presumption, born of
obligation to petitioners and requested for more time to fulfill the same. They
wisdom and experience, that official duty has been regularly performed; that the
likewise aver that Brigida testified in the trial court that Deganos took some gold
proceedings of a judicial tribunal are regular and valid, and that judicial acts and
articles from petitioners and delivered the same to her. Both the Court of Appeals
duties have been and will be duly and properly performed.—The fact that a
and the trial court, however, found as a fact that the aforementioned letters
resolution was issued by said court within a relatively short period of time after
concerned the previous obligations of Brigida to petitioners, and had nothing to do
the records of the case were elevated to the office of the ponente cannot, by itself,
with the money sought to be recovered in the instant case. Such concurrent
be deemed irregular. There is no showing whatsoever that the resolution was
factual findings are entitled to great weight, hence, petitioners cannot plausibly
issued without considering the reply filed by petitioners. In fact, that brief
claim in this appellate review that the letters were in the nature of
pleading filed by petitioners does not exhibit any esoteric or ponderous argument
acknowledgements by Brigida that she was the principal of Deganos in the
which could not be analyzed within an hour. It is a legal presumption, born of
subject transactions.
wisdom and experience, that official duty has been regularly performed; that the
Contracts; Agency; The basis for agency is representation.—The basis for
proceedings of a judicial tribunal are regular and valid, and that judicial acts and
agency is representation. Here, there is no showing that Brigida consented to the
duties have been and will be duly and properly performed. The burden of proving
acts of Deganos or authorized him to act on her behalf, much less with respect to
irregularity in official conduct is on the part of petitioners and they have utterly
the particular transactions involved. Petitioners’ attempt to foist liability on
failed to do so. It is thus reprehensible for them to cast aspersions on a court of
respondent spouses through the supposed agency relation with Deganos is
law on the bases of conjectures or surmises, especially since one of the petitioners
groundless and ill-advised.
appears to be a member of the Philippine Bar.
Same; Same; A person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent.— Besides, it was grossly and
inexcusably negligent of petitioners to entrust to Deganos, not once or twice but PETITION for review on certiorari of a decision of the Court of Appeals.
on at least six occasions as evidenced by six receipts, several pieces of jewelry of
substantial value without requiring a written authorization from his alleged The facts are stated in the opinion of the Court.
principal. A person dealing with an agent is put upon inquiry and must discover Florentino V. Floro, Jr. for petitioners.
upon his peril the authority of the agent. Paulino N. Lorenzo for private respondents.
Actions; Independent Civil Actions; Judgments; A final judgment rendered
in a civil case absolving the defendant from civil liability is no bar to a criminal REGALADO, J.:
action.—Petitioners have apparently lost sight of Article 33 of the Civil Code
which provides that in cases involving alleged fraudulent acts, a civil action for
In this appeal by certiorari, petitioners assail the judgment of the Court
damages, entirely separate and distinct from the criminal action, may be brought
by the injured party. Such civil action shall proceed independently of the criminal of Appeals in CA-G.R. CV No. 49175 affirming the adjudication of the
prosecution and shall require only a preponderance of evidence. It is worth noting Regional Trial Court of Malolos, Bulacan which found private respondent
that this civil case was instituted four years before the criminal case for estafa Narciso Deganos liable to petitioners for actual damages, but absolved
was filed, and that although there was a move to consolidate both cases, the same respondent spouses Brigida D. Luz and Ernesto M. Luz of liability.
was denied by the trial court. Consequently, it was the duty of the two branches Petitioners likewise belabor the subsequent resolution of the Court of
of the Regional Trial Court concerned to independently proceed with the civil and Appeals which denied their motion for reconsideration of its challenged
criminal cases. It will also be observed that a final judgment rendered in a civil decision.
action absolving the defendant from civil liability is no bar to a criminal action.
Petitioners were engaged in the business of purchase and sale of
Courts; Speedy Disposition of Cases; It is ironic that while some litigants
jewelry and respondent Brigida D. Luz, also known as Aida D. Luz, was
malign the judiciary for being supposedly slothful in disposing of cases, petitioners
are making a show of calling out for justice because the Court of Appeals issued a their regular customer. On several occasions during the period from April
27, 1987 to September 4, 1987, respondent Narciso Deganos, the brother
of Brigida D. Luz, received several pieces of gold and jewelry from
petitioners amounting to P382,816.00. These items and their prices were
1
indicated in seventeen receipts covering the same. Eleven of the receipts
stated that they were received for a certain Evelyn Aquino, a niece of
Deganos, and the remaining six indicated that they were received for
Brigida D. Luz.2
Deganos was supposed to sell the items at a profit and thereafter
remit the proceeds and return the unsold items to petitioners. Deganos
remitted only the sum of P53,207.00. He neither paid the balance of the
sales proceeds, nor did he return any unsold item to petitioners. By
January 1990, the total of his unpaid account to petitioners, including
interest, reached the sum of P725,463.98. Petitioners eventually filed a
3
complaint in the barangay court against Deganos to recover said amount.
In the barangay proceedings, Brigida D. Luz, who was not impleaded
in the case, 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.
On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in
the Regional Trial Court of Malolos, Bulacan against Deganos and
Brigida D. Luz for recovery of a sum of money and damages, with an
application for preliminary attachment. Ernesto Luz was impleaded
4
therein as the spouse of Brigida.
Four years later, or on March 29, 1994, Deganos and Brigida D. Luz
were charged with estafa in the Regional Trial Court of Malolos,
5
Bulacan, which was docketed as Criminal Case No. 785-M-94. That
criminal case appears to be still pending in said trial court.
During the trial of the civil case, petitioners claimed that Deganos
acted as the agent of Brigida D. Luz when he received the subject items of
jewelry and, because he failed to pay for the same, Brigida, as principal,
and her spouse are solidarily liable with him therefor.
On the other hand, while Deganos admitted that he had an unpaid
obligation to petitioners, he claimed that the same was only in the sum of
P382,816.00 and not P725,463.98. He further asserted that it was he
alone who was involved in the transaction with the petitioners; that he
neither acted as agent for nor was he authorized to act as an agent by
Brigida D. Luz, notwithstanding the fact that six of the receipts indicated
that the items were received by him for the latter. He further claimed
that he never delivered any of the items he received from petitioners to
Brigida.
Brigida, on her part, denied that she had anything to do with the
transactions between petitioners and Deganos. She claimed that she
never authorized Deganos to receive any item of jewelry in her behalf
and, for that matter, neither did she actually receive any of the articles in
question.
After trial, the court below found that only Deganos was liable to
petitioners for the amount and damages claimed. It held that while
Brigida D. Luz did have transactions with petitioners in the past, the
items involved were already paid for and all that Brigida owed petitioners
was the sum of P21,483.00 representing interest on the principal account
which she had previously paid for. 6
The trial court also found that it was petitioner Lydia Bordador who
indicated in the receipts that the items were received by Deganos for
Evelyn Aquino and Brigida D. Luz. Said court was “persuaded that
7
Brigida D. Luz was behind Deganos,” but because there was no
memorandum to this effect, the agreement between the parties was
unenforceable under the Statute of Frauds. Absent the required
8
memorandum or any written document connecting the respondent Luz
spouses with the subject receipts, or authorizing Deganos to act on their
behalf, the alleged agreement between petitioners and Brigida D. Luz
was unenforceable.
Deganos was ordered to pay petitioners the amount of P725,463.98,
plus legal interest thereon from June 25, 1990, and attorney’s fees.
Brigida D. Luz was ordered to pay P21,483.00 representing the interest
on her own personal loan. She and her co-defendant spouse were absolved
from any other or further liability.9
As stated at the outset, petitioners appealed the judgment of the
court a quo to the Court of Appeals which affirmed said judgment. The 10
motion for reconsideration filed by petitioners was subsequently
dismissed, hence the present recourse to this Court.
11
The primary issue in the instant petition is whether or not herein
respondent spouses are liable to petitioners for the latter’s claim for
money and damages in the sum of P725,463.98, plus interests and
attorney’s 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.
Petitioners argue that the Court of Appeals erred in adopting the
findings of the court a quo that respondent spouses are not liable to them,
as said conclusion of the trial court is contradicted by the finding of fact of
the appellate court that “(Deganos) acted as agent of his sister (Brigida
Luz).” In support of this contention, petitioners quoted several letters
12
sent to them by Brigida D. Luz wherein the latter acknowledged her
obligation to petitioners and requested for more time to fulfill the same.
They likewise aver that Brigida testified in the trial court that Deganos
took some gold articles from petitioners and delivered the same to her.
Both the Court of Appeals and the trial court, however, found as a fact
that the aforementioned letters concerned the previous obligations of
Brigida to petitioners, and had nothing to do with the money sought to be
recovered in the instant case. Such concurrent factual findings are
entitled to great weight, hence, petitioners cannot plausibly claim in this
appellate review that the letters were in the nature of acknowledgements
by Brigida that she was the principal of Deganos in the subject
transactions.
On the other hand, with regard to the testimony of Brigida admitting
delivery of the gold to her, there is no showing whatsoever that her
statement referred to the items which are the subject matter of this case.
It cannot, therefore, be validly said that she admitted her liability
regarding the same.
Petitioners insist that Deganos was the agent of Brigida D. Luz as the
latter clothed him with apparent authority as her agent and held him out
to the public as such, hence Brigida can not be permitted to deny said
authority to innocent third parties who dealt with Deganos under such
belief. Petition ers further represent that the Court of Appeals
13
recognized in its decision that Deganos was an agent of Brigida.14
The evidence does not support the theory of petitioners that Deganos
was an agent of Brigida D. Luz and that the latter should consequently
be held solidarily liable with Deganos in his obligation to petitioners.
While the quoted statement in the findings of fact of the assailed
appellate decision mentioned that Deganos ostensibly acted as an agent
of Brigida, the actual conclusion and ruling of the Court of Appeals
categorically stated that, “(Brigida Luz) never authorized her brother
(Deganos) to act for and in her behalf in any transaction with Petitioners
x x x.” It is clear, therefore, that even assuming arguendothat Deganos
15
acted as an agent of Brigida, the latter never authorized him to act on her
behalf with regard to the transactions subject of this case.
The Civil Code provides:
Art. 1868. By the contract of agency a person binds himself to
render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.
The basis for agency is representation. Here, there is no showing that
Brigida consented to the acts of Deganos or authorized him to act on her
behalf, much less with respect to the particular transactions involved.
Petitioners’ attempt to foist liability on respondent spouses through the
supposed agency relation with Deganos is groundless and ill-advised.
Besides, it was grossly and inexcusably negligent of petitioners to
entrust to Deganos, not once or twice but on at least six occasions as
evidenced by six 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. 16
The records show that neither an express nor an implied agency was
proven to have existed between Deganos and Brigida D. Luz. Evidently,
petitioners, who were negligent in their transactions with Deganos,
cannot seek relief from the effects of their negligence by conjuring a
supposed agency relation between the two respondents where no evidence
supports such claim. Petitioners next allege that the Court of Appeals
erred in ignoring the fact that the decision of the court below, which it
affirmed, is “null and void” as it contradicted its ruling in CA-G.R. SP No.
39445 holding that there is “sufficient evidence/proof” against Brigida D.
Luz and Deganos for estafa in the pending criminal case. They further
aver that said appellate court erred in ruling against them in this civil
action since the same would result in an inevitable conflict of decisions
should the trial court convict the accused in the criminal case.
By way of backdrop for this argument of petitioners, herein
respondents Brigida D. Luz and Deganos had filed a demurrer to
evidence and a motion for reconsideration in the aforestated criminal
case, both of which were denied by the trial court. They then filed a
petition for certiorari in the Court of Appeals to set aside the denial of
their demurrer and motion for reconsideration but, as just stated, their
petition therefor was dis-missed. 17
Petitioners now claim that the aforesaid dismissal by the Court of
Appeals of the petition in CA-G.R. SP No. 39445 with respect to the
criminal case is equivalent to a finding that there is sufficient evidence in
the estafa case against Brigida D. Luz and Deganos. Hence, as already
stated, petitioners theorize that the decision and resolution of the Court
of Appeals now being impugned in the case at bar would result in a
possible conflict with the prospective decision in the criminal case.
Instead of promulgating the present decision and resolution under
review, so they suggest, the Court of Appeals should have awaited the
decision in the criminal case, so as not to render academic or preempt the
same or, worse, create two conflicting rulings.18
Petitioners have apparently lost sight of Article 33 of the Civil Code
which provides that in cases involving alleged fraudulent acts, a civil
action for damages, entirely separate and distinct from the criminal
action, may be brought by the injured party. Such civil action shall
proceed independently of the criminal prosecution and shall require only
a preponderance of evidence.
It is worth noting that this civil case was instituted four years before
the criminal case for estafa was filed, and that although there was a move
to consolidate both cases, the same was denied by the trial court.
Consequently, it was the duty of the two branches of the Regional Trial
Court concerned to independently proceed with the civil and criminal
cases. It will also be observed that a final judgment rendered in a civil
action absolving the defendant from civil liability is no bar to a criminal
action.
19
It is clear, therefore, that this civil case may proceed independently of
the criminal case especially because while both cases are based on the
20
same facts, the quantum of proof required for holding the parties liable
therein differ. Thus, it is improvident of petitioners to claim that the
decision and resolution of the Court of Appeals in the present case would
be preemptive of the outcome of the criminal case. Their fancied fear of
possible conflict between the disposition of this civil case and the outcome
of the pending criminal case is illusory.
Petitioners surprisingly postulate that the Court of Appeals had lost
its jurisdiction to issue the denial resolution dated August 18, 1997, as
the same was tainted with irregularities and badges of fraud perpetrated
by its court officers. They charge that said appellate court, through
21
conspiracy and fraud on the part of its officers, gravely abused its
discretion in issuing that resolution denying their motion for
reconsideration. They claim that said resolution was drafted by
the ponente, then signed and issued by the members of the Eleventh
Division of said court within one and a half days from the elevation
thereof by the division clerk of court to the office of the ponente.
It is the thesis of petitioners that there was undue haste in issuing the
resolution as the same was made without waiting for the lapse of the ten-
day period for respondents to file their comment and for petitioners to file
their reply. It was allegedly impossible for the Court of Appeals to resolve
the issue in just one and a half days, especially because its ponente, the
late Justice Maximiano C. Asuncion, was then recuperating from surgery
and, that, additionally, “hundreds of more important cases were
pending.” 22
These lamentable allegation of irregularities in the Court of Appeals
and in the conduct of its officers strikes us as a desperate attempt of
petitioners to induce this Court to give credence to their arguments
which, as already found by both the trial and intermediate appellate
courts, are devoid of factual and legal substance. The regrettably
irresponsible attempt to tarnish the image of the intermediate appellate
tribunal and its judicial officers through ad hominem imputations could
well be contumacious, but we are inclined to let that pass with a strict
admonition that petitioners refrain from indulging in such conduct in
litigations.
On July 9, 1997, the Court of Appeals rendered judgment in this case
affirming the trial court’s decision. Petitioners moved for reconsideration
23
and the Court of Appeals ordered respondents to file a comment.
Respondents filed the same on August 5, 1997 and petitioners filed their
24
reply to said comment on August 15, 1997. The Eleventh Division of said
25
court issued the questioned resolution denying petitioner’s motion for
reconsideration on August 18, 1997. 26
It is ironic that while some litigants malign the judiciary for being
supposedly slothful in disposing of cases, petitioners are making a show
of calling out for justice because the Court of Appeals issued a resolution
disposing of a case sooner than expected of it. They would even deny the
exercise of discretion by the appellate court to prioritize its action on
cases in line with the procedure it has adopted in disposing thereof and in
declogging its dockets. It is definitely not for the parties to determine and
dictate when and how a tribunal should act upon those cases since they
are not even aware of the status of the dockets and the internal rules and
policies for acting thereon.
The fact that a resolution was issued by said court within a relatively
short period of time after the records of the case were elevated to the
office of the ponente cannot, by itself, be deemed irregular. There is no
showing whatsoever that the resolution was issued without considering
the reply filed by petitioners. In fact, that brief pleading filed by
petitioners does not exhibit any esoteric or ponderous argument which
could not be analyzed within an hour. It is a legal presumption, born of
wisdom and experience, that official duty has been regularly
performed; that the proceedings of a judicial tribunal are regular and
27
valid, and that judicial acts and duties have been and will be duly and
properly performed. The burden of proving irregularity in official conduct
28
lies on the part of petitioners and they have utterly failed to do so. It is
thus reprehensible for them to cast aspersions on a court of law on the
bases of conjectures or surmises, especially since one of the petitioners
appears to be a member of the Philippine Bar.
Lastly, petitioners fault the trial court’s holding that whatever
contract of agency was established between Brigida D. Luz and Narciso
Deganos is unenforceable under the Statute of Frauds as that aspect of
this case allegedly is not covered thereby. They proceed on the premise
29
that the Statute of Frauds applies only to executory contracts and not to
executed or to partially executed ones. From there, they move on to claim
that the contract involved in this case was an executed contract as the
items had already been delivered by petitioners to Brigida D. Luz, hence,
such delivery resulted in the execution of the contract and removed the
same from the coverage of the Statute of Frauds.
Petitioners’ claim is speciously unmeritorious. It should be
emphasized that neither the trial court nor the appellate court
categorically stated that there was such a contractual relation between
these two respondents. The trial court merely said that if there was such
an agency existing between them, the same is unenforceable as the
contract would fall under the Statute of Frauds which requires the
presentation of a note or memorandum thereof in order to be enforceable
in court. That was merely a preparatory statement of a principle of law.
What was finally proven as a matter of fact is that there was no such
contract between Brigida D. Luz and Narciso Deganos, executed or
partially executed, and no delivery of any of the items subject of this case
was ever made to the former.
WHEREFORE, no error having been committed by the Court of
Appeals in affirming the judgment of the court a quo, its challenged
decision and resolution are hereby AFFIRMED and the instant petition is
DENIED, with double costs against petitioners.
SO ORDERED.
Puno, Mendoza and Martinez, JJ., concur.
Petition denied; Challenged decision and resolution affirmed.
Notes.—Presumption of regularity in the performance of official
functions does not apply where it is patent that the sheriff’s return is
defective. (Laus vs. Court of Appeals, 219 SCRA 688 [1993])
Suspicions and conjectures cannot overcome, in the absence of
contrary proof, the disputable presumption that official duties have been
regularly performed. (The New Testament Church of God vs. Court of
Appeals, 246 SCRA 266 [1995])
It is axiomatic that a decision of a lower court cannot be reversed for
its failure to consider evidence which was not even presented by the
parties; Reliance on the presumption of regularity in the performance of
official duties falls in the face of a serious imputation on non-compliance.
(Pulido vs. Court of Appeals, 251 SCRA 673 [1995])

——o0o——
 G.R. Nos. 152613 & No. 152628. June 23, 2006. *
however, admits of exceptions as recognized by jurisprudence, to wit: (1) [w]hen
the findings are grounded entirely on speculation, surmises or conjectures; (2)
APEX MINING CO., INC., petitioner, vs.SOUTHEAST MINDANAO
when the inference made is manifestly mistaken, absurd or impossible; (3) when
GOLD MINING CORP., THE MINES ADJUDICATION BOARD,
there is grave abuse of discretion; (4) when the judgment is based on
PROVINCIAL MINING REGULATORY BOARD (PMRB-DAVAO), misapprehension of facts; (5) when the findings of facts are conflicting; (6) when
MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, in making its findings the Court of Appeals went beyond the issues of the case, or
INC., ROSENDO VILLAFLOR, BALITE COMMUNAL PORTAL its findings are contrary to the admissions of both the appellant and the appellee;
MINING COOPERATIVE, DAVAO UNITED MINERS COOPERATIVE, (7) when the findings are contrary to the trial court; (8) when the findings are
ANTONIO DACUDAO, PUTING-BATO GOLD MINERS conclusions without citation of specific evidence on which they are based; (9) when
COOPERATIVE, ROMEO ALTAMERA, THELMA CATAPANG, LUIS the facts set forth in the petition as well as in the petitioner’s main and reply
GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO briefs are not disputed by the respondent; (10) when the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence
GLORIA, EDWIN ASION, MACARIO HERNANDEZ, REYNALDO
on record; and (11) when the Court of Appeals manifestly overlooked certain
CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO
relevant facts not disputed by the parties, which, if properly considered, would
CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, justify a different conclusion.
LETICIA ALQUEZA and JOEL BRILLANTES MANAGEMENT Natural Resources; Mines; Administrative Law; The power of administration
MINING CORPORATION, respondents. over mineral lands and minerals vested on the Director of Mines includes the
G.R. Nos. 152619-20. June 23, 2006. * power to prescribe terms and conditions in granting exploration permits to
BALITE COMMUNAL PORTAL MINING COOPERATIVE, qualified entities.—Under Section 90 of Presidential Decree No. 463, the
applicable statute during the issuance of EP 133, the DENR Secretary, through
petitioner, vs. SOUTHEAST MINDANAO GOLD MINING CORP., APEX
Director of BMG, is charged with carrying out the said law. Also, under
MINING CO., INC., THE MINES ADJUDICATION BOARD,
Commonwealth Act No. 136, also known as “An Act Creating The Bureau of
PROVINCIAL MINING REGULATORY BOARD (PMRB-DAVAO), Mines,” which was approved on 7 November 1936, the Director of Mines has the
MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, direct charge of the administration of the mineral lands and minerals, and of the
INC., ROSENDO VILLAFLOR, DAVAO UNITED MINERS survey, classification, lease or any other form of concession or disposition thereof
COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD under the Mining Act. This power of administration includes the power to
MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA prescribe terms and conditions in granting exploration permits to qualified
CATAPANG, LUIS GALANG, RENATO BASMILLO, FRANCISCO entities. Thus, in the grant of EP 133 in favor of the MMC, the Director of the
YOBIDO, EDUARDO GLORIA, EDWIN ASION, MACARIO BMG acted within his power in laying down the terms and conditions attendant
HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY thereto.
Same; Same; Corporation Law; Agency; Elements; The mere fact that an
ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO,
entity may be a 100% subsidiary corporation of another corporation does not
PRIMITIVA LICAYAN, LETICIA ALQUEZA and JOEL BRILLANTES necessarily mean that the former is a duly authorized agent of the latter—for a
MANAGEMENT MINING CORPORATION, respondents. contract of agency to exist, it is essential that the principal consents that the other
G.R. Nos. 152870-71. June 23, 2006. * party, the agent, shall act on its behalf, and the agent consents so as to act.—
THE MINES ADJUDICATION BOARD AND ITS MEMBERS, THE Condition number 6 categorically states that the permit shall be for the exclusive
HON. VICTOR O. RAMOS (Chairman), UNDERSECRETARY VIRGILIO use and benefit of MMC or its duly authorized agents. While it may be true that
MARCELO (Member) and DIRECTOR HORACIO RAMOS (Member), SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records
are bereft of any evidence showing that the former is the duly authorized agent of
petitioners, vs. SOUTHEAST MINDANAO GOLD MINING
the latter. For a contract of agency to exist, it is essential that the principal
CORPORATION, respondent. consents that the other party, the agent, shall act on its behalf, and the agent
Appeals; The established rule is that in the exercise of the Supreme Court’s consents so as to act. In the case of Yu Eng Cho v. Pan American World Airways,
power of review, the Court not being a trier of facts, does not normally embark on a Inc., 328 SCRA 717, 728 (2000), this Court had the occasion to set forth the
re-examination of the evidence presented by the contending parties during the trial elements of agency, viz.: (1) consent, express or implied, of the parties to establish
of the case considering that the findings of facts of the Court of Appeals are the relationship; (2) the object is the execution of a juridical act in relation to a
conclusive and binding on the Court; Exceptions.—The established rule is that in third person; (3) the agent acts as a representative and not for himself; (4) the
the exercise of the Supreme Court’s power of review, the Court not being a trier of agent acts within the scope of his authority. The existence of the elements of
facts, does not normally embark on a re-examination of the evidence presented by agency is a factual matter that needs to be established or proven by evidence. The
the contending parties during the trial of the case considering that the findings of
facts of the Court of Appeals are conclusive and binding on the Court. This rule,
burden of proving that agency is extant in a certain case rests in the party who
sets forth such allegation. This is based on the princi-
ple that he who alleges a fact has the burden of proving it. It must likewise
be emphasized that the evidence to prove this fact must be clear, positive and
convincing.
Same; Same; Same; Same; Assignment; Words and Phrases; Where an entity
is not an agent of a corporation who was earlier granted an Exploration Permit,
the assignment or transfer made by the latter in favor of the former is null and
void for directly contravening the terms and conditions of the grant of said
Exploration Permit; The concept of agency is distinct from assignment—in agency,
the agent acts not on his own but on behalf of his principal, while in assignment,
there is total transfer or relinquishment of right by the assignor to the assignee.—
In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a
contract of agency actually exists between them so as to allow SEM to use and
benefit from EP 133 as the agent of MMC. SEM did not claim nor submit proof
that it is the designated agent of MMC to represent the latter in its business
dealings or undertakings. SEM cannot, therefore, be considered as an agent of
MMC which can use EP 133 and benefit from it. Since SEM is not an authorized
agent of MMC, it goes without saying that the assignment or transfer of the
permit in favor of SEM is null and void as it directly contravenes the terms and
conditions of the grant of EP 133. Furthermore, the concept of agency is distinct
from assignment. In agency, the agent acts not on his own behalf but on behalf of
his principal. While in assignment, there is total transfer or relinquishment of
right by the assignor to the assignee.The assignee takes the place of the assignor
and is no longer bound to the latter.
Same; Same; Same; Same; Same; Exploration permits are strictly granted to
entities or individuals possessing the resources and capability to undertake mining
operations.—The condition stipulating that the permit is for the exclusive use of
the permittee or its duly authorized agent is not without any reason. Exploration
permits are strictly granted to entities or individuals possessing the resources
and capability to undertake mining operations. Without such a condition, non-
qualified entities or individuals could circumvent the strict requirements under
the law by the simple expediency acquiring the permit from the original
permittee.
Same; Same; Same; Same; Same; The Court cannot lend recognition to the
Court of Appeals’ theory that a 100% subsidiary of another corporation is
automatically an agent of the latter—a corporation is an artificial being created by
operation of law, having the right of succession and the powers, attributes, and
properties expressly authorized by law or incident to its existence.—We cannot lend
recognition to the Court of Appeals’ theory that SEM, being a 100% subsidiary of
MMC, is automatically an agent of MMC. A corporation is an artificial being
created by operation of law, having the right of succession and the powers,
attributes, and properties expressly authorized by law or incident to its existence.
It is an artificial being invested by law with a personality separate and distinct
from those of the persons composing it as well as from that of any other legal
entity to which it may be related. Resultantly, absent any clear proof to the
contrary, SEM is a separate and distinct entity from MMC.
Same; Same; Same; Same; Same; Doctrine of Piercing the Veil of Corporate
Fiction; The doctrine of piercing the corporate veil cannot be used as a vehicle to
commit prohibited acts because these acts are the ones which the doctrine seeks to
prevent—the assignment of the Exploration Permit in favor of another corporation
is utilized to circumvent the condition of non-transferability.—The Court of
Appeals pathetically invokes the doctrine of piercing the corporate veil to
legitimize the prohibited transfer or assignment of EP 133. It stresses that SEM
is just a business conduit of MMC, hence, the distinct legal personalities of the
two entities should not be recognized. True, the corporate mask may be removed
when the corporation is just an alter ego or a mere conduit of a person or of
another corporation. For reasons of public policy and in the interest of justice, the
corporate veil will justifiably be impaled only when it becomes a shield for fraud,
illegality or inequity committed against a third person. However, this Court has
made a caveat in the application of the doctrine of piercing the corporate veil.
Courts should be mindful of the milieu where it is to be applied. Only in cases
where the corporate fiction was misused to such an extent that injustice, fraud or
crime was committed against another, in disregard of its rights may the veil be
pierced and removed. Thus, a subsidiary corporation may be made to answer for
the liabilities and/or illegalities done by the parent corporation if the former was
organized for the purpose of evading obligations that the latter may have entered
into. In other words, this doctrine is in place in order to expose and hold liable a
corporation which commits illegal acts and use the corporate fiction to avoid
liability from the said acts. The doctrine of piercing the corporate veil cannot
therefore be used as a vehicle to commit prohibited acts because these acts are
the ones which the doctrine seeks to prevent. To our mind, the application of
the foregoing doctrine is unwarranted. The assignment of the permit in
favor of SEM is utilized to circumvent the condition of non-
transferability of the exploration permit. To allow SEM to avail itself of
this doctrine and to approve the validity of the assignment is
tantamount to sanctioning illegal act which is what the doctrine
precisely seeks to forestall.
Same; Same; Same; Same; Same; Absent prior approval of the Secretary of
the Department of Environment and Natural Resources, the assignment of an
Exploration Permit is without legal effect.—The records are bereft of any
indication that the assignment bears the imprimatur of the Secretary of the
DENR. Presidential Decree No. 463, which is the governing law when the
assignment was executed, explicitly requires that the transfer or assignment of
mining rights, including the right to explore a mining area, must be with the
prior approval of the Secretary of DENR. Quite conspicuously, SEM did not
dispute the allegation that the Deed of Assignment was made without the prior
approval of the Secretary of DENR. Absent the prior approval of the
Secretary of DENR, the assignment of EP 133, was, therefore, without
legal effect for violating the mandatory provision of Presidential Decree
No. 463.
Same; Same; Same; The DENR Secretary has no power to convert forest
reserves into non-forest reserves.—Against the backdrop of the applicable statutes
which govern the issuance of DAO No. 66, this Court is constrained to rule
that said administrative order was issued not in accordance with the
laws. Inescapably, DAO No. 66, declaring 729 hectares of the areas covered by
the Agusan-Davao-Surigao Forest Reserve as non-forest land open to small-scale
mining operations, is null and void as, verily, the DENR Secretary has no power
to convert forest reserves into non-forest reserves.
Same; Same; Upon the effectivity of the 1987 Constitution, the State assumed
a more dynamic role in the exploration, development and utilization of the natural
resources of the country.—Upon the effectivity of the 1987 Constitution, the State
assumed a more dynamic role in the exploration, development and utilization of
the natural resources of the country. With this policy, the State may pursue full
control and supervision of the exploration, development and utilization of the
country’s natural mineral resources. The options open to the State are through
direct undertaking or by entering into co-production, joint venture, or production-
sharing agreements, or by entering into agreement with foreign-owned
corporations for large-scale exploration, development and utilization.
Same; Same; Mining operations in the Diwalwal Mineral Reservation are
now within the full control of the State through the executive branch, and
pursuant to Section 5 of Republic Act No. 7942, the State can either directly
undertake the exploration, development and utilization of the area or it can enter
into agreements with qualified entities.—Recognizing the importance of the
country’s natural resources, not only for national economic development, but also
for its security and national defense, Section 5 of Republic Act No. 7942 empowers
the President, when the national interest so requires, to establish mineral
reservations where mining operations shall be undertaken directly by the State or
through a contractor. To implement the intent and provisions of Proclamation No.
297, the DENR Secretary issued DAO No. 2002-18 dated 12 August 2002
declaring an emergency situation in the Diwalwal Gold Rush Area and ordering
the stoppage of all mining operations therein. The issue on who has priority right
over the disputed area is deemed overtaken by the above subsequent
developments particularly with the issuance of Proclamation 297 and DAO No.
2002-18, both being constitutionally-sanctioned acts of the Executive Branch.
Mining operations in the Diwalwal Mineral Reservation are now, therefore,
within the full control of the State through the executive branch. Pursuant to
Section 5 of Republic Act No. 7942, the State can either directly undertake the
exploration, development and utilization of the area or it can enter into
agreements with qualified entities.
Same; Same; The State may not be precluded from considering a direct
takeover of the mines, if it is the only plausible remedy in sight to the gnawing
complexities generated by the gold rush.—It is now up to the Executive
Department whether to take the first option, i.e., to undertake directly the mining
operations of the Diwalwal Gold Rush Area. As already ruled, the State may not
be precluded from considering a direct takeover of the mines, if it is the only
plausible remedy in sight to the gnawing complexities generated by the gold rush.
The State need be guided only by the demands of public interest in settling on
this option, as well as its material and logistic feasibility. The State can also opt
to award mining operations in the mineral reservation to private entities
including petitioners Apex and Balite, if it wishes. The exercise of this prerogative
lies with the Executive Department over which courts will not interfere.
PETITIONS for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Amado L. Cantos for Davao United Miners Cooperative, et al.
Jesus T. Albacite for Provincial Mining Regulatory Board of Davao.
Martin T. Lu for Rosendo Villaflor, et al.
Rodolfo C. Rapista for Balite Communal Portal Mining
Cooperative.
Clarence D. Guerrero and Cesar T. Jayme for Apex Mining Co., Inc.
Kapunan, Imperial, Paraguiton & Bongolan for MISMA.
Quasha, Ancheta, Peña & Nolasco Law Office for Southeast
Mindanao Gold Mining Corporation.
CHICO-NAZARIO, J.:
On 27 February 1931, Governor General Dwight F. Davis issued
Proclamation No. 369, establishing the Agusan-Davao-Surigao Forest
Reserve consisting of approximately 1,927,400 hectares.1
The disputed area, a rich tract of mineral land, is inside the forest
reserve located at Monkayo, Davao del Norte, and Cateel, Davao
Oriental, consisting of 4,941.6759 hectares. This mineral land is
2
encompassed by Mt. Diwata, which is situated in the municipalities of
Monkayo and Cateel. It later became known as the “Diwalwal Gold Rush
Area.” It has since the early 1980’s been stormed by conflicts brought
about by the numerous mining claimants scrambling for gold that lies
beneath its bosom.
On 21 November 1983, Camilo Banad and his group, who claimed to
have first discovered traces of gold in Mount Diwata, filed a Declaration
of Location (DOL) for six mining claims in the area.
Camilo Banad and some other natives pooled their skills and
resources and organized the Balite Communal Portal Mining Cooperative
(Balite).
3
On 12 December 1983, Apex Mining Corporation (Apex) entered into
operating agreements with Banad and his group. From November 1983 to
February 1984, several individual applications for mining locations over
mineral land covering certain parts of the Diwalwal gold rush area were
filed with the Bureau of Mines and Geo-Sciences (BMG).
On 2 February 1984, Marcopper Mining Corporation (MMC) filed 16
DOLs or mining claims for areas adjacent to the area covered by the DOL
of Banad and his group. After realizing that the area encompassed by its
mining claims is a forest reserve within the coverage of Proclamation No.
369 issued by Governor General Davis, MMC abandoned the same and
instead applied for a prospecting permit with the Bureau of Forest
Development (BFD).
On 1 July 1985, BFD issued a Prospecting Permit to MMC covering
an area of 4,941.6759 hectares traversing the municipalities of Monkayo
and Cateel, an area within the forest reserve under Proclamation No.
369. The permit embraced the areas claimed by Apex and the other
individual mining claimants.
 On 11 November 1985, MMC filed Exploration Permit Application No.
84-40 with the BMG. On 10 March 1986, the BMG issued to MCC
Exploration Permit No. 133 (EP 133). Discovering the existence of several
mining claims and the proliferation of small-scale miners in the area
covered by EP 133, MMC thus filed on 11 April 1986 before the BMG
a Petition for the Cancellation of the Mining Claims of Apex and Small
Scale Mining Permit Nos. (x-1)-04 and (x-1)-05 which was docketed as
MAC No. 1061. MMC alleged that the areas covered by its EP 133 and
the mining claims of Apex were within an established and existing forest
reservation (Agusan-Davao-Surigao Forest Reserve) under Proclamation
No. 369 and that pursuant to Presidential Decree No. 463, acquisition of
4
mining rights within a forest reserve is through the application for a
permit to prospect with the BFD and not through registration of a DOL
with the BMG.
On 23 September 1986, Apex filed a motion to dismiss MMC’s petition
alleging that its mining claims are not within any established or
proclaimed forest reserve, and as such, the acquisition of mining rights
thereto must be undertaken via registration of DOL with the BMG and
not through the filing of application for permit to prospect with the BFD.
On 9 December 1986, BMG dismissed MMC’s petition on the ground
that the area covered by the Apex mining claims and MMC’s permit to
explore was not a forest reservation. It further declared null and void
MMC’s EP 133 and sustained the validity of Apex mining claims over the
disputed area. MMC appealed the adverse order of BMG to the
Department of Environment and Natural Resources (DENR).
On 15 April 1987, after due hearing, the DENR reversed the 9
December 1996 order of BMG and declared MMC’s EP 133 valid and
subsisting. Apex filed a Motion for Reconsideration with the DENR which
was subsequently denied. Apex then filed an appeal before the Office of
the President. On 27 July 1989, the Office of the President, through
Assistant Executive Secretary for Legal Affairs, Cancio C.
Garcia, dismissed Apex’s appeal and affirmed the DENR ruling.
5
Apex filed a Petition for Certiorari before this Court. The Petition was
docketed as G.R. No. 92605 entitled, “Apex Mining Co., Inc. v.
Garcia.” On 16 July 1991, this Court rendered a Decision against Apex
6
holding that the disputed area is a forest reserve; hence, the proper
procedure in acquiring mining rights therein is by initially applying for a
permit to prospect with the BFD and not through a registration of DOL
with the BMG.
On 27 December 1991, then DENR Secretary Fulgencio Factoran, Jr.
issued Department Administrative Order No. 66 (DAO No. 66) declaring
729 hectares of the areas covered by the Agusan-Davao-Surigao Forest
Reserve as non-forest lands and open to small-scale mining purposes.
As DAO No. 66 declared a portion of the contested area open to small
scale miners, several mining entities filed applications for Mineral
Production Sharing Agreement (MPSA).
On 25 August 1993, Monkayo Integrated Small Scale Miners
Association (MISSMA) filed an MPSA application which was denied by
the BMG on the grounds that the area applied for is within the area
covered by MMC EP 133 and that the MISSMA was not qualified to apply
for an MPSA under DAO No. 82, Series of 1990.
7
On 5 January 1994, Rosendo Villaflor and his group filed before the BMG
a Petition for Cancellation of EP 133 and for the admission of their MPSA
Application. The Petition was docketed as RED Mines Case No. 8-8-94.
Davao United Miners Cooperative (DUMC) and Balite intervened and
likewise sought the cancellation of EP 133.
On 16 February 1994, MMC assigned EP 133 to Southeast Mindanao
Gold Mining Corporation (SEM), a domestic corporation which is alleged
to be a 100% -owned subsidiary of MMC.
On 14 June 1994, Balite filed with the BMG an MPSA application
within the contested area that was later on rejected.
On 23 June 1994, SEM filed an MPSA application for the entire
4,941.6759 hectares under EP 133, which was also denied by reason of
the pendency of RED Mines Case No. 8-8-94. On 1 September 1995, SEM
filed another MPSA application.
On 20 October 1995, BMG accepted and registered SEM’s MPSA
application and the Deed of Assignment over EP 133 executed in its favor
by MMC. SEM’s application was designated MPSA Application No. 128
(MPSAA 128). After publication of SEM’s application, the following filed
before the BMG their adverse claims or oppositions:
1. a)MAC Case No. 004 (XI)—JB Management Mining Corporation;
2. b)MAC Case No. 005(XI)—Davao United Miners Cooperative;
3. c)MAC Case No. 006(XI)—Balite Integrated Small Scale Miner’s
Cooperative;
4. d)MAC Case No. 007(XI)—Monkayo Integrated Small Scale
Miner’s Association, Inc. (MISSMA);
5. e)MAC Case No. 008(XI)—Paper Industries Corporation of the
Philippines;
6. f)MAC Case No. 009(XI)—Rosendo Villafor, et al.;
7. g)MAC Case No. 010(XI)—Antonio Dacudao;
1. i)MAC Case No. 012(XI)—Puting-Bato Gold Miners Cooperative;
2. j)MAC Case No. 016(XI)—Balite Communal Portal Mining
Cooperative;
3. k)MAC Case No. 97-01(XI)—Romeo Altamera, et al. 8
To address the matter, the DENR constituted a Panel of Arbitrators (PA)
to resolve the following:
1. (a)The adverse claims on MPSAA No. 128; and
2. (b)The Petition to Cancel EP 133 filed by Rosendo Villaflor
docketed as RED Case No. 8-8-94. 9
On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-
8-94. As to the Petition for Cancellation of EP 133 issued to MMC, the PA
relied on the ruling in Apex Mining Co., Inc. v. Garcia, and opined that
10
EP 133 was valid and subsisting. It also declared that the BMG Director,
under Section 99 of the Consolidated Mines Administrative Order
implementing Presidential Decree No. 463, was authorized to issue
exploration permits and to renew the same without limit.
With respect to the adverse claims on SEM’s MPSAA No. 128, the PA
ruled that adverse claimants’ petitions were not filed in accordance with
the existing rules and regulations governing adverse claims because the
adverse claimants failed to submit the sketch plan containing the
technical description of their respective claims, which was a mandatory
requirement for an adverse claim that would allow the PA to determine if
indeed there is an overlapping of the area occupied by them and the area
applied for by SEM. It added that the adverse claimants were not claim
owners but mere occupants conducting illegal mining activities at the
contested area since only MMC or its assignee SEM had valid mining
claims over the area as enunciated in Apex Mining Co., Inc. v.
Garcia. Also, it maintained that the adverse claimants were not qualified
11
as small-scale miners under DENR Department Administrative Order
No. 34 (DAO No. 34), or the Implementing Rules and Regulation of
12
Republic Act No. 7076 (otherwise known as the “People’s Small-Scale
Mining Act of 1991”), as they were not duly licensed by the DENR to
engage in the extraction or removal of minerals from the ground, and
that they were large-scale miners. The decretal portion of the PA
resolution pronounces:
“VIEWED IN THE LIGHT OF THE FOREGOING, the validity of
Expoloration Permit No. 133 is hereby reiterated and all the
adverse claims against MPSAA No. 128 are DISMISSED.” 13
Undaunted by the PA ruling, the adverse claimants appealed to the
Mines Adjudication Board (MAB). In a Decision dated 6 January 1998,
the MAB considered erroneous the dismissal by the PA of the adverse
claims filed against MMC and SEM over a mere technicality of failure to
submit a sketch plan. It argued that the rules of procedure are not meant
to defeat substantial justice as the former are merely secondary in
importance to the latter. Dealing with the question on EP 133’s validity,
the MAB opined that said issue was not crucial and was irrelevant in
adjudicating the appealed case because EP 133 has long expired due to its
non-renewal and that the holder of the same, MMC, was no longer a
claimant of the Agusan-Davao-Surigao Forest Reserve having
relinquished its right to SEM. After it brushed aside the issue of the
validity of EP 133 for being irrelevant, the MAB proceeded to treat SEM’s
MPSA application over the disputed area as an entirely new and distinct
application. It approved the MPSA application, excluding the area
segregated by DAO No. 66, which declared 729 hectares within the
Diwalwal area as non-forest lands open for small-scale mining. The MAB
resolved:
“WHEREFORE, PREMISES CONSIDERED, the decision of the
Panel of Arbitrators dated 13 June 1997 is hereby VACATED and
a new one entered in the records of the case as follows:
1. 1.SEM’s MPSA application is hereby given due course
subject to the full and strict compliance of the provisions of
the Mining Act and its Implementing Rules and
Regulations;
2. 2.The area covered by DAO 66, series of 1991, actually
occupied and actively mined by the small-scale miners on
or before August 1, 1987 as determined by the Provincial
Mining Regulatory Board (PMRB), is hereby excluded
from the area applied for by SEM;
3. 3.A moratorium on all mining and mining-related activities,
is hereby imposed until such time that all necessary
procedures, licenses, permits, and other requisites as
provided for by RA 7076, the Mining Act and its
Implementing Rules and Regulations and all other
pertinent laws, rules and regulations are complied with,
and the appropriate environmental protection measures
and safeguards have been effectively put in place;
4. 4.Consistent with the spirit of RA 7076, the Board
encourages SEM and all small-scale miners to continue to
negotiate in good faith and arrive at an agreement
beneficial to all. In the event of SEM’s strict and full
compliance with all the requirements of the Mining Act
and its Implementing Rules and Regulations, and the
concurrence of the small-scale miners actually occupying
and actively mining the area, SEM may apply for the
inclusion of portions of the areas segregated under
paragraph 2 hereof, to its MPSA application. In this light,
 subject to the preceding paragraph, the contract between
JB [JB Management Mining Corporation] and SEM is
hereby recognized.” 14
1. Dissatisfied, the Villaflor group and Balite appealed the decision
to this Court. SEM, aggrieved by the exclusion of 729 hectares
from its MPSA application, likewise appealed. Apex filed
a Motion for Leave to Admit Petition for Intervention predicated
on its right to stake its claim over the Diwalwal gold rush which
was granted by the Court. These cases, however, were remanded
to the Court of Appeals for proper disposition pursuant to Rule
43 of the 1997 Rules of Civil Procedure. The Court of Appeals
consolidated the remanded cases as CA-G.R. SP No. 61215 and
No. 61216.
In the assailed Decision dated 13 March 2002, the Court of Appeals
15
affirmed in toto the decision of the PA and declared null and void the
MAB decision.
The Court of Appeals, banking on the premise that the SEM is the
agent of MMC by virtue of its assignment of EP 133 in favor of SEM and
the purported fact that SEM is a 100% subsidiary of MMC, ruled that the
transfer of EP 133 was valid. It argued that since SEM is an agent of
MMC, the assignment of EP 133 did not violate the condition therein
prohibiting its transfer except to MMC’s duly designated agent. Thus,
despite the non-renewal of EP 133 on 6 July 1994, the Court of Appeals
deemed it relevant to declare EP 133 as valid since MMC’s mining rights
were validly transferred to SEM prior to its expiration.
The Court of Appeals also ruled that MMC’s right to explore under EP
133 is a property right which the 1987 Constitution protects and which
cannot be divested without the holder’s consent. It stressed that MMC’s
failure to proceed with the extraction and utilization of minerals did not
diminish its vested right to explore because its failure was not
attributable to it.
Reading Proclamation No. 369, Section 11 of Commonwealth Act 137,
and Sections 6, 7, and 8 of Presidential Decree No. 463, the Court of
Appeals concluded that the issuance of DAO No. 66 was done by the
DENR Secretary beyond his power for it is the President who has the sole
power to withdraw from the forest reserve established under
Proclamation No. 369 as non-forest land for mining purposes.
Accordingly, the segregation of 729 hectares of mining areas from the
coverage of EP 133 by the MAB was unfounded.
The Court of Appeals also faulted the DENR Secretary in
implementing DAO No. 66 when he awarded the 729 hectares segregated
from the coverage area of EP 133 to other corporations who were not
qualified as small-scale miners under Republic Act No. 7076.
As to the petitions of Villaflor and company, the Court of Appeals
argued that their failure to submit the sketch plan to the PA, which is a
jurisdictional requirement, was fatal to their appeal. It likewise stated
the Villaflor and company’s mining claims, which were based on their
alleged rights under DAO No. 66, cannot stand as DAO No. 66 was null
and void. The dispositive portion of the Decision decreed:
“WHEREFORE, premises considered, the Petition of Southeast
Mindanao Gold Mining Corporation is GRANTED while the
Petition of Rosendo Villaflor, et al., is DENIED for lack of merit.
The Decision of the Panel of Arbitrators dated 13 June 1997 is
AFFIRMED in toto and the assailed MAB Decision is hereby SET
ASIDE and declared as NULL and VOID.” 16
Hence, the instant Petitions for Review on Certiorari under Rule 45 of the
Rules of Court filed by Apex, Balite and MAB.
During the pendency of these Petitions, President Gloria Macapagal-
Arroyo issued Proclamation No. 297 dated 25 November 2002. This
proclamation excluded an area of 8,100 hectares located in Monkayo,
Compostela Valley, and proclaimed the same as mineral reservation and
as environmentally critical area. Subsequently, DENR Administrative
Order No. 2002-18 was issued declaring an emergency situation in the
Diwalwal gold rush area and ordering the stoppage of all mining
operations therein. Thereafter, Executive Order No. 217 dated 17 June
2003 was issued by the President creating the National Task Force
Diwalwal which is tasked to address the situation in the Diwalwal Gold
Rush Area.
In G.R. No. 152613 and No. 152628, Apex raises the following issues:
I
WHETHER OR NOT SOUTHEAST MINDANAO GOLD
MINING’S [SEM] E.P. 133 IS NULL AND VOID DUE TO THE
FAILURE OF MARCOPPER TO COMPLY WITH THE TERMS
AND CONDITIONS PRESCRIBED IN EP 133.
II
WHETHER OR NOT APEX HAS A SUPERIOR AND
PREFERENTIAL RIGHT TO STAKE IT’S CLAIM OVER THE
ENTIRE 4,941 HECTARES AGAINST SEM AND THE OTHER
CLAIMANTS PURSUANT TO THE TIME-HONORED
PRINCIPLE IN MINING LAW THAT “PRIORITY IN TIME IS
PRIORITY IN RIGHT.” 17
In G.R. No. 152619-20, Balite anchors its petition on the following
grounds:
I validity and continuous existence of EP 133 as well as its
WHETHER OR NOT THE MPSA OF SEM WHICH WAS FILED
NINE (9) DAYS LATE (JUNE 23, 1994) FROM THE FILING OF
THE MPSA OF BALITE WHICH WAS FILED ON JUNE 14, 1994
HAS A PREFERENTIAL RIGHT OVER THAT OF BALITE.
II
WHETHER OR NOT THE DISMISSAL BY THE PANEL OF
ARBITRATORS OF THE ADVERSE CLAIM OF BALITE ON THE
GROUND THAT BALITE FAILED TO SUBMIT THE REQUIRED
SKETCH PLAN DESPITE THE FACT THAT BALITE, HAD IN
FACT SUBMITTED ON TIME WAS A VALID DISMISSAL OF
BALITE’S ADVERSE CLAIM.
III
WHETHER OR NOT THE ACTUAL OCCUPATION AND
SMALL-MINING OPERATIONS OF BALITE PURSUANT TO
DAO 66 IN THE 729 HECTARES WHICH WAS PART OF THE
4,941.6759 HECTARES COVERED BY ITS MPSA WHICH WAS
REJECTED BY THE BUREAU OF MINES AND GEOSCIENCES
WAS ILLEGAL. 18
In G.R. No. 152870-71, the MAB submits two issues, to wit:
I As regards the Court of Appeals recognition of SEM’s vested right
WHETHER OR NOT EP NO. 133 IS STILL VALID AND
SUBSISTING.
II
WHETHER OR NOT THE SUBSEQUENT ACTS OF THE
GOVERNMENT SUCH AS THE ISSUANCE OF DAO NO. 66,
PROCLAMATION NO. 297, AND EXECUTIVE ORDER 217 CAN
OUTWEIGH EP NO. 133 AS WELL AS OTHER ADVERSE
CLAIMS OVER THE DIWALWAL GOLD RUSH AREA. 19
The common issues raised by petitioners may be summarized as follows:
1. I.Whether or not the Court of Appeals erred in upholding the
transfer to SEM;
2. II.Whether or not the Court of Appeals erred in declaring that the
DENR Secretary has no authority to issue DAO No. 66; and
3. III.Whether or not the subsequent acts of the executive
department such as the issuance of Proclamation No. 297, and
DAO No. 2002-18 can outweigh Apex and Balite’s claims over
the Diwalwal Gold Rush Area.
On the first issue, Apex takes exception to the Court of Appeals’ ruling
upholding the validity of MMC’s EP 133 and its subsequent transfer to
SEM asserting that MMC failed to comply with the terms and conditions
in its exploration permit, thus, MMC and its successor-in-interest SEM
lost their rights in the Diwalwal Gold Rush Area. Apex pointed out that
MMC violated four conditions in its permit. First, MMC failed to comply
with the mandatory work program, to complete exploration work, and to
declare a mining feasibility. Second, it reneged on its duty to submit an
Environmental Compliance Certificate. Third, it failed to comply with the
reportorial requirements. Fourth, it violated the terms of EP 133 when it
assigned said permit to SEM despite the explicit proscription against its
transfer.
Apex likewise emphasizes that MMC failed to file its MPSA
application required under DAO No. 82 which caused its exploration
20
permit to lapse because DAO No. 82 mandates holders of exploration
permits to file a Letter of Intent and a MPSA application not later than
17 July 1991. It said that because EP 133 expired prior to its assignment
to SEM, SEM’s MPSA application should have been evaluated on its own
merit.
over the disputed area, Apex bewails the same to be lacking in statutory
bases. According to Apex, Presidential Decree No. 463 and Republic Act
No. 7942 impose upon the claimant the obligation of actually undertaking
exploration work within the reserved lands in order to acquire priority
right over the area. MMC, Apex claims, failed to conduct the necessary
exploration work, thus, MMC and its successor-in-interest SEM lost any
right over the area.
In its Memorandum, Balite maintains that EP 133 of MMC,
predecessor-in-interest of SEM, is an expired and void permit which
cannot be made the basis of SEM’s MPSA application.
 Similarly, the MAB underscores that SEM did not acquire any right
from MMC by virtue of the transfer of EP 133 because the transfer
directly violates the express condition of the exploration permit stating
that “it shall be for the exclusive use and benefit of the permittee or his
duly authorized agents.” It added that while MMC is the permittee, SEM
cannot be considered as MMC’s duly designated agent as there is no proof
on record authorizing SEM to represent MMC in its business dealings or
undertakings, and neither did SEM pursue its interest in the permit as
an agent of MMC. According to the MAB, the assignment by MMC of EP
133 in favor of SEM did not make the latter the duly authorized agent of
MMC since the concept of an agent under EP 133 is not equivalent to the
concept of assignee. It finds fault in the assignment of EP 133 which
lacked the approval of the DENR Secretary in contravention of Section 25
of Republic Act No. 7942 requiring his approval for a valid assignment or
21
transfer of exploration permit to be valid.
SEM, on the other hand, counters that the errors raised by petitioners
Apex, Balite and the MAB relate to factual and evidentiary matters
which this Court cannot inquire into in an appeal by certiorari.
The established rule is that in the exercise of the Supreme Court’s
power of review, the Court not being a trier of facts, does not normally
embark on a re-examination of the evidence presented by the contending
parties during the trial of the case considering that the findings of facts of
the Court of Appeals are conclusive and binding on the Court. This rule,
22
however, admits of exceptions as recognized by jurisprudence, to wit:
“(1) [w]hen the findings are grounded entirely on speculation,
surmises or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on misapprehension of
facts; (5) when the findings of facts are conflicting; (6) when in
making its findings the Court of Appeals went beyond the issues of
the case, or its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the findings are contrary to
the trial court; (8) when the findings are conclusions without
citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioner’s main
and reply briefs are not disputed by the respondent; (10) when the
findings of fact are premised on the supposed absence of evidence
and contradicted by the evidence on record; and (11) when the
Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would
justify a different conclusion.” Also, in the case of Manila Electric
23
Company v. Benamira, the Court in a Petition for Review on Certiorari,
24
deemed it proper to look deeper into the factual circumstances of the case
since the Court of Appeal’s findings are at odds to those of the National
Labor Relations Commission (NLRC). Just like in the foregoing case, it is
this Court’s considered view that a re-evaluation of the attendant facts
surrounding the present case is appropriate considering that the findings
of the MAB are in conflict with that of the Court of Appeals.
I
At the threshold, it is an undisputed fact that MMC assigned to SEM all
its rights under EP 133 pursuant to a Deed of Assignment dated 16
February 1994. 25
EP 133 is subject to the following terms and conditions: :
26
1. 1.That the permittee shall abide by the work program submitted
with the application or statements made later in support
thereof, and which shall be considered as conditions and
essential parts of this permit;
2. 2.That permittee shall maintain a complete record of all activities
and accounting of all expenditures incurred therein subject to
periodic inspection and verification at reasonable intervals by
the Bureau of Mines at the expense of the applicant;
3. 3.That the permittee shall submit to the Director of Mines within
15 days after the end of each calendar quarter a report under
oath of a full and complete statement of the work done in the
area covered by the permit;
4. 4.That the term of this permit shall be for two (2) years to be
effective from this date, renewable for the same period at the
discretion of the Director of Mines and upon request of the
applicant;
1. 5.That the Director of Mines may at any time cancel this permit
for violation of its provision or in case of trouble or breach of
peace arising in the area subject hereof by reason of conflicting
interests without any responsibility on the part of the
government as to expenditures for exploration that might have
been incurred, or as to other damages that might have been
suffered by the permittee; and
2. 6.That this permit shall be for the exclusive use and benefit of the
permittee or his duly authorized agents and shall be used for
mineral exploration purposes only and for no other purpose.
Under Section 90 of Presidential Decree No. 463, the applicable statute
27
during the issuance of EP 133, the DENR Secretary, through Director of
BMG, is charged with carrying out the said law. Also, under
Commonwealth Act No. 136, also known as “An Act Creating The Bureau
of Mines,” which was approved on 7 November 1936, the Director of
Mines has the direct charge of the administration of the mineral lands
and minerals, and of the survey, classification, lease or any other form of
concession or disposition thereof under the Mining Act. This power of
28
administration includes the power to prescribe terms and conditions in
granting exploration permits to qualified entities. Thus, in the grant of
EP 133 in favor of the MMC, the Director of the BMG acted within his
power in laying down the terms and conditions attendant thereto.
Condition number 6 categorically states that the permit shall be for
the exclusive use and benefit of MMC or its duly authorized agents.
While it may be true that SEM, the assignee of EP 133, is a 100%
subsidiary corporation of MMC, records are bereft of any evidence
showing that the former is the duly authorized agent of the latter. For a
contract of agency to exist, it is essential that the principal consents that
the other party, the agent, shall act on its behalf, and the agent consents
so as to act. In the case of Yu Eng Cho v. Pan American World Airways,
29
Inc., this Court had the occasion to set forth the elements of agency, viz.:
30
1. (1)consent, express or implied, of the parties to establish the
relationship;
2. (2)the object is the execution of a juridical act in relation to a
third person;
3. (3)the agent acts as a representative and not for himself;
4. (4)the agent acts within the scope of his authority.
The existence of the elements of agency is a factual matter that needs to
be established or proven by evidence. The burden of proving that agency
is extant in a certain case rests in the party who sets forth such
allegation. This is based on the principle that he who alleges a fact has
the burden of proving it. It must likewise be emphasized that the
31
evidence to prove this fact must be clear, positive and convincing. 32
In the instant Petitions, it is incumbent upon either MMC or SEM to
prove that a contract of agency actually exists between them so as to
allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did
not claim nor submit proof that it is the designated agent of MMC to
represent the latter in its business dealings or undertakings. SEM
cannot, therefore, be considered as an agent of MMC which can use EP
133 and benefit from it. Since SEM is not an authorized agent of MMC, it
goes without saying that the assignment or transfer of the permit in favor
of SEM is null and void as it directly contravenes the terms and
conditions of the grant of EP 133. Furthermore, the concept of agency is
distinct from assignment. In agency, the agent acts not on his own behalf
but on behalf of his principal. While in assignment, there is total
33
transfer or relinquishment of right by the assignor to the assignee. The
34
assignee takes the place of the assignor and is no longer bound to the
latter. The deed of assignment clearly stipulates:
1. 1.That for ONE PESO (P1.00) and other valuable consideration
received by the ASSIGNOR from the ASSIGNEE, the
ASSIGNOR hereby ASSIGNS, TRANSFERS and CONVEYS
unto the ASSIGNEE whatever rights or interest the ASSIGNOR
may have in the area situated in Monkayo, Davao del Norte and
Cateel, Davao Oriental, identified as Exploration Permit No. 133
and Application for a Permit to Prospect in Bunawan, Agusan
del Sur respectively.35
Bearing in mind the just articulated distinctions and the language of the
Deed of Assignment, it is readily obvious that the assignment by MMC of
EP 133 in favor of SEM did not make the latter the former’s agent. Such
assignment involved actual transfer of all rights and obligations MMC
have under the permit in favor of SEM, thus, making SEM the permittee.
It is not a mere grant of authority to SEM, as an agent of MMC, to use
the permit. It is a total abdication of MMC’s rights over the permit.
Hence, the assignment in question did not make SEM the authorized
agent of MMC to make use and benefit from EP 133.
The condition stipulating that the permit is for the exclusive use of
the permittee or its duly authorized agent is not without any reason.
Exploration permits are strictly granted to entities or individuals
possessing the resources and capability to undertake mining operations.
Without such a condition, non-qualified entities or individuals could
circumvent the strict requirements under the law by the simple
expediency acquiring the permit from the original permittee.
We cannot lend recognition to the Court of Appeals’ theory that SEM,
being a 100% subsidiary of MMC, is automatically an agent of MMC.
A corporation is an artificial being created by operation of law, having
the right of succession and the powers, attributes, and properties
expressly authorized by law or incident to its existence. It is an artificial
36
being invested by law with a personality separate and distinct from those
of the persons composing it as well as from that of any other legal entity
to which it may be related. Resultantly, absent any clear proof to the
37
contrary, SEM is a separate and distinct entity from MMC.
The Court of Appeals pathetically invokes the doctrine of piercing the
corporate veil to legitimize the prohibited transfer or assignment of EP
133. It stresses that SEM is just a business conduit of MMC, hence, the
distinct legal personalities of the two entities should not be recognized.
True, the corporate mask may be removed when the corporation is just an
alter ego or a mere conduit of a person or of another corporation. For 38
reasons of public policy and in the interest of justice, the corporate veil
will justifiably be impaled only when it becomes a shield for fraud,
illegality or inequity committed against a third person. However, this
39
Court has made a caveat in the application of the doctrine of piercing the
corporate veil. Courts should be mindful of the milieu where it is to be
applied. Only in cases where the corporate fiction was misused to such an
extent that injustice, fraud or crime was committed against another, in
disregard of its rights may the veil be pierced and removed. Thus, a
subsidiary corporation may be made to answer for the liabilities and/or
illegalities done by the parent corporation if the former was organized for
the purpose of evading obligations that the latter may have entered into.
In other words, this doctrine is in place in order to expose and hold liable
a corporation which commits illegal acts and use the corporate fiction to
avoid liability from the said acts. The doctrine of piercing the corporate
veil cannot therefore be used as a vehicle to commit prohibited acts
because these acts are the ones which the doctrine seeks to prevent.
To our mind, the application of the foregoing doctrine is
unwarranted. The assignment of the permit in favor of SEM is
utilized to circumvent the condition of non-transferability of the
exploration permit. To allow SEM to avail itself of this doctrine
and to approve the validity of the assignment is tantamount to
sanctioning illegal act which is what the doctrine precisely seeks
to forestall.
Quite apart from the above, a cursory consideration of the mining law
pertinent to the case, will, indeed, demonstrate the infraction committed
by MMC in its assignment of EP 133 to SEM.
Presidential Decree No. 463, enacted on 17 May 1974, otherwise
known as the Mineral Resources Development Decree, which governed
the old system of exploration, development, and utilization of mineral
resources through “license, concession or lease” prescribed:
SEC. 97. Assignment of Mining Rights.—A mining lease contract
or any interest therein shall not be transferred, assigned, or
subleased without the prior approval of the Secretary: Provided,
That such transfer, assignment or sublease may be made only to a
qualified person possessing the resources and capability to
continue the mining operations of the lessee and that the assignor
has complied with all the obligations of the lease: Provided,
further, That such transfer or assignment shall be duly registered
with the office of the mining recorder concerned. (Emphasis
supplied.)
The same provision is reflected in Republic Act No. 7942, otherwise
known as the Philippine Mining Act of 1995, which is the new law
governing the exploration, development and utilization of the natural
resources, which provides:
SEC. 25. Transfer or Assignment.—An exploration permit may be
transferred or assigned to a qualified person subject to the
approval of the Secretary upon the recommendation of the
Director.
The records are bereft of any indication that the assignment bears
the imprimatur of the Secretary of the DENR. Presidential Decree No.
463, which is the governing law when the assignment was executed,
explicitly requires that the transfer or assignment of mining rights,
including the right to explore a mining area, must be with the prior
approval of the Secretary of DENR. Quite conspicuously, SEM did not
dispute the allegation that the Deed of Assignment was made without the
prior approval of the Secretary of DENR. Absent the prior approval of
the Secretary of DENR, the assignment of EP 133, was, therefore,
without legal effect for violating the mandatory provision of
Presidential Decree No. 463.
An added significant omission proved fatal to MMC/SEM’s cause.
While it is true that the case of Apex Mining Co., Inc. v. Garcia settled
40
the issue of which between Apex and MMC validly acquired mining
rights over the disputed area, such rights, though, had been extinguished
by subsequent events. Records indicate that on 6 July 1993, EP 133 was
extended for 12 months or until 6 July 1994. MMC never renewed its
41
permit prior and after its expiration. Thus, EP 133 expired by non-
renewal. With the expiration of EP 133 on 6 July 1994, MMC lost any
right to the Diwalwal Gold Rush Area. SEM, on the other hand, has not
acquired any right to the said area because the transfer of EP 133 in its
favor is invalid. Hence, both MMC and SEM have not acquired any
vested right over the 4,941.6759 hectares which used to be covered by EP
133.
II
The Court of Appeals theorizes that DAO No. 66 was issued beyond the
power of the DENR Secretary since the power to withdraw lands from
forest reserves and to declare the same as an area open for mining
operation resides in the President.
Under Proclamation No. 369 dated 27 February 1931, the power to
convert forest reserves as non-forest reserves is vested with the DENR
Secretary. Proclamation No. 369 partly states:
From this reserve shall be considered automatically excluded all areas
which had already been certified and which in the future may be
proclaimed as classified and certified lands and approved by the
Secretary of Agriculture and Natural Resources. 42
 However, a subsequent law, Commonwealth Act No. 137, otherwise
known as “The Mining Act” which was approved on 7 November 1936
provides:
Sec. 14. Lands within reservations for purposes other than mining,
which, after such reservation is made, are found to be more
valuable for their mineral contents than for the purpose for which
the reservation was made, may be withdrawn from such
reservations by the President with the concurrence of the National
Assembly, and thereupon such lands shall revert to the public
domain and be subject to disposition under the provisions of this
Act. Unlike Proclamation No. 369, Commonwealth Act No. 137 vests
solely in the President, with the concurrence of the National Assembly,
the power to withdraw forest reserves found to be more valuable for their
mineral contents than for the purpose for which the reservation was
made and convert the same into non-forest reserves. A similar provision
can also be found in Presidential Decree No. 463 dated 17 May 1974, with
the modifications that (1) the declaration by the President no longer
requires the concurrence of the National Assembly and (2) the DENR
Secretary merely exercises the power to recommend to the President
which forest reservations are to be withdrawn from the coverage thereof.
Section 8 of Presidential Decree No. 463 reads:
SEC. 8. Exploration and Exploitation of Reserved Lands.—When
lands within reservations, which have been established for
purposes other than mining, are found to be more valuable for
their mineral contents, they may, upon recommendation of the
Secretary be withdrawn from such reservation by the President
and established as a mineral reservation.
Against the backdrop of the applicable statutes which govern the
issuance of DAO No. 66, this Court is constrained to rule that said
administrative order was issued not in accordance with the
laws. Inescapably, DAO No. 66, declaring 729 hectares of the areas
covered by the Agusan-Davao-Surigao Forest Reserve as non-forest land
open to small-scale mining operations, is null and void as, verily, the
DENR Secretary has no power to convert forest reserves into non-forest
reserves.
III
It is the contention of Apex that its right over the Diwalwal gold rush
area is superior to that of MMC or that of SEM because it was the first
one to occupy and take possession of the area and the first to record its
mining claims over the area. For its part, Balite argues that with the
issuance of DAO No. 66, its occupation in the contested area, particularly
in the 729 hectares small-scale mining area, has entitled it to file its
MPSA. Balite claims that its MPSA application should have been given
preference over that of SEM because it was filed ahead.
The MAB, on the other hand, insists that the issue on who has
superior right over the disputed area has become moot and academic by
the supervening events. By virtue of Proclamation No. 297 dated 25
November 2002, the disputed area was declared a mineral reservation.
Proclamation No. 297 excluded an area of 8,100 hectares located in
Monkayo, Compostela Valley, and proclaimed the same as mineral
reservation and as environmentally critical area, viz.:
WHEREAS, by virtue of Proclamation No. 369, series of 1931,
certain tracts of public land situated in the then provinces of
Davao, Agusan and Surigao, with an area of approximately
1,927,400 hectares, were withdrawn from settlement and
disposition, excluding, however, those portions which had been
certified and/or shall be classified and certified as non-forest lands;
WHEREAS, gold deposits have been found within the area
covered by Proclamation No. 369, in the Municipality of Monkayo,
Compostela Valley Province, and unregulated small to medium-
scale mining operations have, since 1983, been undertaken
therein, causing in the process serious environmental, health, and
peace and order problems in the area;
WHEREAS, it is in the national interest to prevent the further
degradation of the environment and to resolve the health and
peace and order problems spawned by the unregulated mining
operations in the said area;
WHEREAS, these problems may be effectively addressed by
rationalizing mining operations in the area through the
establishment of a mineral reservation;
WHEREAS, after giving due notice, the Director of Mines and
Geosciences conducted public hearings on September 6, 9 and 11,
2002 to allow the concerned sectors and communities to air their
views regarding the establishment of a mineral reservation in the
place in question;
WHEREAS, pursuant to the Philippine Mining Act of 1995 (RA
7942), the President may, upon the recommendation of the
Director of Mines and Geosciences, through the Secretary of
Environment and Natural Resources, and when the national
interest so requires, establish mineral reservations where mining
operations shall be undertaken by the Department directly or thru
a contractor;
 WHEREAS, as a measure to attain and maintain a rational and
orderly balance between socio-economic growth and environmental
protection, the President may, pursuant to Presidential Decree No.
1586, as amended, proclaim and declare certain areas in the
country as environmentally critical;
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO,
President of the Philippines, upon recommendation of the
Secretary of the Department of Environment and Natural
Resources (DENR), and by virtue of the powers vested in me by
law, do hereby exclude certain parcel of land located in Monkayo,
Compostela Valley, and proclaim the same as mineral reservation
and as environmentally critical area, with metes and bound as
defined by the following geographical coordinates;
xxxx
with an area of Eight Thousand One Hundred (8,100) hectares,
more or less. Mining operations in the area may be undertaken
either by the DENR directly, subject to payment of just
compensation that may be due to legitimate and existing
claimants, or thru a qualified contractor, subject to existing rights,
if any.
The DENR shall formulate and issue the appropriate guidelines,
including the establishment of an environmental and social fund, to
implement the intent and provisions of this Proclamation. Upon the
effectivity of the 1987 Constitution, the State assumed a more dynamic
role in the exploration, development and utilization of the natural
resources of the country. With this policy, the State may pursue full
43
control and supervision of the exploration, development and utilization of
the country’s natural mineral resources. The options open to the State are
through direct undertaking or by entering into coproduction, joint
venture, or production-sharing agreements, or by entering into
agreement with foreign-owned corporations for large-scale exploration,
development and utilization. Thus, Article XII, Section 2, of the 1987
44
Constitution, specifically states:
SEC. 2. All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be
alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the
State. The State may directly undertake such activities, or it may
enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or associations at
least sixty per centum of whose capital is owned by such
citizens. Such agreements may be for a period not exceeding
twenty-five years, renewable for not more than twenty-five years,
and under such terms and conditions as may be provided by law. x
xx
xxxx
The President may enter into agreements with foreign-owned
corporations involving either technical or financial assistance for
large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the
economic growth and general welfare of the country. x x x (Italics
supplied.)
Recognizing the importance of the country’s natural resources, not only
for national economic development, but also for its security and national
defense, Section 5 of Republic Act No. 7942 empowers the President,
when the national interest so requires, to establish mineral reservations
where mining operations shall be undertaken directly by the State or
through a contractor.
To implement the intent and provisions of Proclamation No. 297, the
DENR Secretary issued DAO No. 2002-18 dated 12 August 2002
declaring an emergency situation in the Diwalwal Gold Rush Area and
ordering the stoppage of all mining operations therein.
The issue on who has priority right over the disputed area is deemed
overtaken by the above subsequent developments particularly with the
issuance of Proclamation 297 and DAO No. 2002-18, both being
constitutionally-sanctioned acts of the Executive Branch. Mining
operations in the Diwalwal Mineral Reservation are now, therefore,
within the full control of the State through the executive branch.
Pursuant to Section 5 of Republic Act No. 7942, the State can either
directly undertake the exploration, development and utilization of the
area or it can enter into agreements with qualified entities, viz.:
SEC. 5. Mineral Reservations.—When the national interest so
requires, such as when there is a need to preserve strategic raw
materials for industries critical to national development, or certain
minerals for scientific, cultural or ecological value, the President
may establish mineral reservations upon the recommendation of
the Director through the Secretary. Mining operations in existing
mineral reservations and such other reservations as may thereafter
be established, shall be undertaken by the Department or through a
contractor x x x.
It is now up to the Executive Department whether to take the first
option, i.e., to undertake directly the mining operations of the Diwalwal
Gold Rush Area. As already ruled, the State may not be precluded from
considering a direct takeover of the mines, if it is the only plausible
remedy in sight to the gnawing complexities generated by the gold rush.
The State need be guided only by the demands of public interest in
settling on this option, as well as its material and logistic feasibility. The
45

State can also opt to award mining operations in the mineral reservation
to private entities including petitioners Apex and Balite, if it wishes. The
exercise of this prerogative lies with the Executive Department over
which courts will not interfere.
WHEREFORE, premises considered, the Petitions of Apex, Balite and
the MAB are PARTIALLY GRANTED, thus:

1. 1.We hereby REVERSE and SET ASIDE the Decision of the

Court of Appeals, dated 13 March 2002, and hereby declare that
EP 133 of MMC has EXPIRED on 7 July 1994 and that its
subsequent transfer to SEM on 16 February 1994 is VOID.
2. 2.We AFFIRM the finding of the Court of Appeals in the same
Decision declaring DAO No. 66 illegal for having been issued in
excess of the DENR Secretary’s authority. Consequently, the
State, should it so desire, may now award mining operations in
the disputed area to any qualified entity it may determine. No
costs.

SO ORDERED.
Panganiban (C.J., Chairperson), Ynares-Santiago, Austria-
Martinez and Callejo, Sr., JJ., concur.
Petitions partially granted.
Notes.—A deed of sale for a piece of land in favor of an alien is null
and void for being contrary to law. (Ong Ching Po vs. Court of
Appeals, 239 SCRA 341 [1994])
Before the cession of the Philippine Islands to the United States, the
prevailing mining law in the colony was the Royal Decree of May, 1867,
otherwise known as The Spanish Mining Law. (Atok Big-Wedge Mining
Company vs. Intermediate Appellate Court, 261 SCRA 528 [1996])

——o0o——
 [No. L-7089. August 31, 1954]
DOMINGO DE LA CRUZ, plaintiff and appellant, vs. NORTHERN
THEATRICAL ENTERPRISES INC.,, ET AL, defendants and appellees,
1. 1.EMPLOYER AND EMPLOYEE; DAMAGES CAUSED TO
EMPLOYEE BY A STRANGER CAN NOT BE RECOVERED FROM
EMPLOYER GIVING LEGAL ASSISTANCE TO EMPLOYEE is NOT
A LEGAL BUT A MORAL OBLIGATION.—A claim of an employee
against his employer for damages caused to the former by a stranger or
outsider while said employee was in the performance of his duties,
presents a novel question which under present legislation can not be
decided in favor of the employee. While it is to the interest of the
employer to give legal help to, and defend, its employees charged
criminally in court, in order to show that he was ,not guilty of any crime
either deliberately or through negligence, because should the employee
be finally held criminally liable and he is found to be insolvent, the
employer would be subsidiarily liable, such legal assistance might be
regarded as a moral obligation but it does not at present count with the
sanction of man-made laws. If the employer is not legally obliged to give
legal assistance to its employee and provide him with a lawyer,
naturally said employee may not recover from his employer the amount
he may have paid a lawyer hired by him.
1. 2.ID.; ID.; PARTIES WHO MAY BE HELD RESPONSIBLE FOR
DAMAGES.— If despite the absence of any criminal responsibility on
the part of the employee he was accused of homicide, the responsibility
for the improper accusation may be laid at the door of the heirs of the
deceased at whose instance the action was filed by the State through
the Fiscal. This responsibility can not be transferred to his employer,
who in no way intervened, much less initiated the criminal proceedings
and whose only connection or relation to the whole affair was that it
employed plaintiff to perform a specific duty or task, which was
performed lawfully and without negligence.
APPEAL from a judgment of the Court of First Instance of Ilocos Norte.
Belmonte, J.
The facts are stated in the opinion of the Court.
Conrado Rubio for appellant.
Ruiz, Ruiz, Ruiz, Ruiz, and Benjamin Guerrero for appellees.
MONTEMAYOR, J.:
The facts in this case based on an agreed statement of facts are simple. In
the year 1941 the Northern Theatrical Enterprises Inc., a domestic
corporation operated a movie house in Laoag, Ilocos Norte, and among
the persons employed by it was the plaintiff DOMINGO DE LA CRUZ,
hired as a special guard whose duties were to guard the main entrance of
the cine, to maintain peace and order and to report the commission of
disorders within the premises. As such guard he carried a revolver. In the
afternoon of July 4, 1941, one Benjamin Martin wanted to crash the gate
or entrance of the movie house. Infuriated by the refusal of plaintiff De la
Cruz to let him in without first providing himself with a ticket, Martin
attacked him with a bolo. De la Cruz defended himself as best he could
until he was cornered, at which moment to save himself he shot the gate
crasher, resulting in the latter's death.
For the killing, De la Cruz was charged with homicide in Criminal
Case No. 8449 of the Court of First Instance of Ilocos Norte. After a re-
investigation conducted by the Provincial Fiscal the latter filed a motion
to dismiss the complaint, which was granted by the court in January
1943. On July 8, 1947, De la Cruz was again accused of the same crime of
homicide, in Criminal Case No. 431 of the same Court. After trial, he was
finally acquitted of the charge on January 31, 1948. In both criminal
cases De la Cruz employed a lawyer to defend him. He demanded from
his former employer reimbursement of his expenses but was refused,
after which he filed the present action against the movie corporation and
the three members of its board of directors, to recover not only the
amounts he had paid his lawyers but also moral damages said to have
been suffered, due to his worry, his neglect of his interests and his family
as well in the supervision of the cultivation of his land, a total of P1
5,000. On the basis of the complaint and the answer filed by defendants
wherein they asked for the dismissal of the complaint, as well as the
agreed statement of facts, the Court of First Instance of Ilocos Norte after
rejecting the theory of the plaintiff that he was an agent of the
defendants and that as such agent he was entitled to reimbursement of
the expenses incurred by him in connection with the agency (Arts. 1709-
1729 of the old Civil Code), found that plaintiff had no cause of action and
dismissed the complaint without costs. De la Cruz appealed directly to
this Tribunal for the reason that only questions of law are involved in the
appeal.
We agree with the trial court that the relationship between the movie
corporation and the plaintiff was not that of principal and agent because
the principle of representation was in no way involved. Plaintiff was not
employed to represent the defendant corporation in its dealings with
third parties. He was a mere employee hired to perform a certain specific
duty or task, that of acting as special guard and staying at the main
entrance of the movie house to stop gate crashers and to maintain peace
and order within the premises. The question posed by this appeal is
whether an employee or servant who in line of duty and while in the
performance of the task assigned to him, performs an act which
eventually results in his incurring in expenses, caused not directly by his
master or employer or his fellow servants or by reason of his performance
of his duty, but rather by a third party or stranger not in the employ of
his employer, may recover said damages against his employer,
The learned trial court in the last paragraph of its decision dismissing
the complaint said that "after studying many laws or provisions of law to
find out what law is applicable to the facts submitted and admitted by the
parties, has found none and it has no other alternative than to dismiss
the complaint." The trial court is right. We confess that we are not aware
of any law or judicial authority that is directly applicable to the present
case, and realizing the importance and far-reaching effect of a ruling on
the subject-matter we have searched, though vainly, for judicial
authorities and enlightenment. All the laws and principles of law we have
found, as regards master and servants, or employer and employee, refer
to cases of physical injuries, light or serious, resulting in loss of a member
of the body or of any one of the senses, or permanent physical disability
or even dealth, suffered in line of duty and in the course of the
performance of the duties assigned to the servant or employee, and these
cases are mainly governed by the Employer's Liability Act and the
Workmen's Compensation Act. But a case involving damages caused to
an employee by a stranger or outsider while said employee was in the
perf ormance of his duties, presents a novel question which under present
legislation we are neither able nor prepared to decide in favor of the
employee.
In a case like the present or a similar case of say a driver employed by
a transportation company, who while in the course of employment runs
over and inflicts physical injuries on or causes the death of a pedestrian;
and such driver is later charged criminally in court, one can imagine that
it would be to the interest of the employer to give legal help to and defend
its employee in order to show that the latter was not guilty of any crime
either deliberately or through negligence, because should the employee be
finally held criminally liable and he is found to be insolvent, the employer
would be subsidiarily liable. That is why, we repeat, it is to the interest of
the employer to render legal assistance to its employee. But we are not
prepared to say and to hold that the giving of said legal assistance to its
employees is a legal obligation. While it might yet and possibly be
regarded as a moral obligation, it does not at present count with the
sanction of man-made laws.
If the employer is not legally obliged to give, legal assistance to its
employee and provide him with a lawyer, naturally said employee may
not recover the amount he may have paid a lawyer hired by him.
Viewed from another angle it may be said that the damage suffered by
the plaintiff by reason of the expenses incurred by him in remunerating
his lawyer, is not caused by his act of shooting to death the gate crasher
but rather by the filing of the charge of homicide which made it necessary
for him to defend himself with the aid of counsel. Had no criminal charge
been filed against him, there would have been no expenses incurred or
damage suffered. So the damage suffered by plaintiff was caused rather
by the improper filing of the criminal charge, possibly at the instance of
the heirs of the deceased gate crasher and by the State through the
Fiscal. We say improper filing, judging by the results of the court
proceedings, namely, acquittal. In other words, the plaintiff was innocent
and blameless. If despite his innocence and despite the absence of any
criminal responsibility on his part he was accused of homicide, then the
responsibility for the improper accusation may be laid at the door of the
heirs of the deceased and the State, and so theoretically, they are the
parties that may be held responsible civilly ex or damages and if this is
so, we fail to see how this responsibility can be transferred to the
employer who in no way intervened, much less initiated the criminal
proceedings and whose only connection or relation to the whole affairs
was that he employed plaintiff to perform a specific duty or task, which
task or duty was performed lawfully and without negligence.
Still another point of view is that the damages incurred here
consisting of the payment of the lawyer's fee did not flow directly from the
performance of his duties but only indirectly because there was an
efficient, intervening cause, namely, the filing of the criminal charges. In
other words, the shooting to death of the deceased by the plaintiff was not
the proximate cause of the damages suffered but may be regarded as only
a remote cause, because from the shooting to the damages suff ered there
was not that natural and continuous sequence required to fix civil
responsibility.
In view of the foregoing, the judgment of the lower court is affirmed.
No costs.
Bengzon, Padilla, Reyes, A., Bautista
Angelo, Labrador, Concepcion, and Reyes, J. B. L., JJ., concur.
Judgment affirmed.
——o0o——
 G.R. No. 156262. July 14, 2005. * The facts are stated in the opinion of the Court.
MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON,
Spouses ANASTACIO and MARY T. BUENA-VENTURA,
petitioners, vs. HEIRS OF BARTOLOME RAMOS, respondents.
Remedial Law; Appeals; Supreme Court’s role in a petition under Rule 45 is
limited to reviewing errors of law allegedly committed by the Court of Appeals.—
Well-entrenched is the rule that the Supreme Court’s role in a petition under
Rule 45 is limited to reviewing errors of law allegedly committed by the Court of
Appeals. Factual findings of the trial court, especially when affirmed by the CA,
are conclusive on the parties and this Court. Petitioners have not given us
sufficient reasons to deviate from this rule.
Civil Law; Agency; In a contract of agency, one binds oneself to render some
service or to do something in representation or on behalf of another, with the
latter’s consent or authority; Elements of Agency.—In a contract of agency, one
binds oneself to render some service or to do something in representation or on
behalf of another, with the latter’s consent or authority. The following are the
elements of agency: (1) the parties’ consent, express or implied, to establish the
relationship; (2) the object, which is the execution of a juridical act in relation to a
third person; (3) the representation, by which the one who acts as an agent does
so, not for oneself, but as a representative; (4) the limitation that the agent acts
within the scope of his or her authority. As the basis of agency is representation,
there must be, on the part of the principal, an actual intention to appoint, an
intention naturally inferable from the principal’s words or actions. In the same
manner, there must be an intention on the part of the agent to accept the
appointment and act upon it. Absent such mutual intent, there is generally no
agency.
Same; Same; Declarations of agents alone are generally insufficient to
establish the fact or extent of their authority.—The declarations of
agents alone are generally insufficient to establish the fact or extent of their
authority. The law makes no presumption of agency; proving its existence, nature
and extent is incumbent upon the person alleging it. In the present case,
petitioners raise the fact of agency as an affirmative defense, yet fail to prove its
existence.
Negotiable Instruments Law; After an instrument is dishonored by
nonpayment, indorsers cease to be merely secondarily liable, they become principal
debtors whose liability becomes identical to that of the original obligor.—As
indorser, Petitioner Maria Tuazon warranted that upon due presentment, the
checks were to be accepted or paid, or both, according to their tenor; and that in
case they were dishonored, she would pay the corresponding amount. After an
instrument is dishonored by nonpayment, indorsers cease to be merely
secondarily liable; they become principal debtors whose liability becomes identical
to that of the original obligor. The holder of a negotiable instrument need not
even proceed against the maker before suing the indorser. Clearly, Evangeline
Santos—as the drawer of the checks—is not an indispensable party in an action
against Maria Tuazon, the indorser of the checks.
PETITION for review on certiorari of a decision of the Court of Appeals.
Habitan, Carbonell, Ferrer, Chan & Associates for petitioners.
Ireneo G. Calderon for respondents.
PANGANIBAN, J.:
Stripped of nonessentials, the present case involves the collection of a
sum of money. Specifically, this case arose from the failure of petitioners
to pay respondents’ predecessor-in-interest. This fact was shown by the
non-encashment of checks issued by a third person, but indorsed by
herein Petitioner Maria Tuazon in favor of the said predecessor. Under
these circumstances, to enable respondents to collect on the indebtedness,
the check drawer need not be impleaded in the Complaint. Thus, the suit
is directed, not against the drawer, but against the debtor who indorsed
the checks in payment of the obligation.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court,
1
challenging the July 31, 2002 Decision of the Court of Appeals (CA)
2
in CA-G.R. CV No. 46535. The decretal portion of the assailed Decision
reads:
“WHEREFORE, the appeal is DISMISSED and the appealed
decision is AFFIRMED.”
On the other hand, the affirmed Decision of Branch 34 of the Regional
3
Trial Court (RTC) of Gapan, Nueva Ecija, disposed as follows:
“WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendants, ordering the defendants
spouses Leonilo Tuazon and Maria Tuazon to pay the plaintiffs, as
follows:
1. “1.The sum of P1,750,050.00, with interests from the filing
of the second amended complaint;
2. “2.The sum of P50,000.00, as attorney’s fees;
3. “3.The sum of P20,000.00, as moral damages;
4. “4.And to pay the costs of suit.
xxx xxx x x x” 4
The Facts
The facts are narrated by the CA as follows:
“[Respondents] alleged that between the period of May 2, 1988 and
June 5, 1988, spouses Leonilo and Maria Tuazon purchased a total
of 8,326 cavans of rice from [the deceased Bartolome] Ramos
[predecessor-in-interest of respondents]. That of this [quantity,] x x
x only 4,437 cavans [have been paid for so far], leaving unpaid
3,889 cavans valued at P1,211,919.00. In payment therefor, the
spouses Tuazon issued x x x [several] Traders Royal Bank checks.
xxx xxx xxx
[B]ut when these [checks] were encashed, all of the checks
bounced due to insufficiency of funds. [Respondents] advanced that
before issuing said checks[,] spouses Tuazon already knew that
they had no available fund to support the checks, and they failed
to provide for the payment of these despite repeated demands
made on them.
“[Respondents] averred that because spouses Tuazon
anticipated that they would be sued, they conspired with the other
[defendants] to defraud them as creditors by executing x x x
fictitious sales of their properties. They executed x x x simulated
sale[s] [of three lots] in favor of the x x x spouses Buenaventura x x
x[,] as well as their residential lot and the house thereon[,] all
located at Nueva Ecija, and another simulated deed of sale dated
July 12, 1988 of a Stake Toyota registered with the Land
Transportation Office of Cabanatuan City on September 7, 1988.
[Co-petitioner] Melecio Tuazon, a son of spouses Tuazon,
registered a fictitious Deed of Sale on July 19, 1988 x x x over a
residential lot located at Nueva Ecija. Another simulated sale of a
Toyota Willys was executed on January 25, 1988 in favor of their
other son, [co-petitioner] Alejandro Tuazon x x x. As a result of the
said sales, the titles of these properties issued in the names of
spouses Tuazon were cancelled and new ones were issued in favor
of the [co-]defendants spouses Buenaventura, Alejandro Tuazon
and Melecio Tuazon. Resultantly, by the said antedated and
simulated sales and the corresponding transfers there was no more
property left registered in the names of spouses Tuazon
answerable to creditors, to the damage and prejudice of
[respondents].
“For their part, defendants denied having purchased x x x rice
from [Bartolome] Ramos. They alleged that it was Magdalena
Ramos, wife of said deceased, who owned and traded the
merchandise and Maria Tuazon was merely her agent. They
argued that it was Evangeline Santos who was the buyer of the
rice and issued the checks to Maria Tuazon as payments therefor.
In good faith[,] the checks were received [by petitioner] from
Evangeline Santos and turned over to Ramos without knowing
that these were not funded. And it is for this reason that
[petitioners] have been insisting on the inclusion of Evangeline
Santos as an indispensable party, and her non-inclusion was a
fatal error. Refuting that the sale of several properties were
fictitious or simulated, spouses Tuazon contended that these were
sold because they were then meeting financial difficulties but the
disposals were made for value and in good faith and done before
the filing of the instant suit. To dispute the contention of plaintiffs
that they were the buyers of the rice, they argued that there was
no sales invoice, official receipts or like evidence to prove this.
They assert that they were merely agents and should not be held
answerable.” 5
The corresponding civil and criminal cases were filed by respondents
against Spouses Tuazon. Those cases were later consolidated and
amended to include Spouses Anastacio and Mary Buenaventura, with
Alejandro Tuazon and Melecio Tuazon as additional defendants. Having
passed away before the pretrial, Bartolome Ramos was substituted by his
heirs, herein respondents.
Contending that Evangeline Santos was an indispensable party in the
case, petitioners moved to file a third-party complaint against her.
Allegedly, she was primarily liable to respondents, because she was the
one who had purchased the merchandise from their predecessor, as
evidenced by the fact that the checks had been drawn in her name. The
RTC, however, denied petitioners’ Motion.
Since the trial court acquitted petitioners in all three of the
consolidated criminal cases, they appealed only its decision finding them
civilly liable to respondents.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioners had failed to prove the
existence of an agency between respondents and Spouses Tuazon. The
appellate court disbelieved petitioners’ contention that Evangeline Santos
should have been impleaded as an indispensable party. Inasmuch as all
the checks had been indorsed by Maria Tuazon, who thereby became
liable to subsequent holders for the amounts stated in those checks, there
was no need to implead Santos. Hence, this Petition. 6
Issues
Petitioners raise the following issues for our consideration:
1. “1.Whether or not the Honorable Court of Appeals erred in ruling
that petitioners are not agents of the respondents.
 1. “2.Whether or not the Honorable Court of Appeals erred in
rendering judgment against the petitioners despite x x x the
failure of the respondents to include in their action Evangeline
Santos, an indispensable party to the suit.” 7
The Court’s Ruling
The Petition is unmeritorious.
First Issue:
Agency
Well-entrenched is the rule that the Supreme Court’s role in a petition
under Rule 45 is limited to reviewing errors of law allegedly committed
by the Court of Appeals. Factual findings of the trial court, especially
when affirmed by the CA, are conclusive on the parties and this
Court. Petitioners have not given us sufficient reasons to deviate from
8
this rule.
In a contract of agency, one binds oneself to render some service or to
do something in representation or on behalf of another, with the latter’s
consent or authority. The following are the elements of agency: (1) the
9
parties’ consent, express or implied, to establish the relationship; (2)
the object, which is the execution of a juridical act in relation to a third
person; (3) the representation, by which the one who acts as an agent does
so, not for oneself, but as a representative; (4) the limitation that the
agent acts within the scope of his or her authority. As the basis of agency
10
is representation, there must be, on the part of the principal, an actual
intention to appoint, an intention naturally inferable from the principal’s
words or actions. In the same manner, there must be an intention on the
part of the agent to accept the appointment and act upon it. Absent such
mutual intent, there is generally no agency. 11
This Court finds no reversible error in the findings of the courts a
quo that petitioners were the rice buyers themselves; they were not mere
agents of respondents in their rice dealership. The question of whether a
contract is one of sale or of agency depends on the intention of the
parties. 12
The declarations of agents alone are generally insufficient to establish
the fact or extent of their authority. The law makes no presumption of
13
agency; proving its existence, nature and extent is incumbent upon the
person alleging it. In the present case, petitioners raise the fact of agency
14
as an affirmative defense, yet fail to prove its existence.
The Court notes that petitioners, on their own behalf, sued
Evangeline Santos for collection of the amounts represented by the
bounced checks, in a separate civil case that they sought to be
consolidated with the current one. If, as they claim, they were mere
agents of respondents, petitioners should have brought the suit against
Santos for and on behalf of their alleged principal, in accordance with
Section 2 of Rule 3 of the Rules on Civil Procedure. Their filing a suit
15
against her in their own names negates their claim that they acted as
mere agents in selling the rice obtained from Bartolome Ramos.
Second Issue:
Indispensable Party
Petitioners argue that the lower courts erred in not allowing Evangeline
Santos to be impleaded as an indispensable party. They insist that
respondents’ Complaint against them is based on the bouncing checks she
issued; hence, they point to her as the person primarily liable for the
obligation.
We hold that respondents’ cause of action is clearly founded on
petitioners’ failure to pay the purchase price of the rice. The trial court
held that Petitioner Maria Tuazon had indorsed the questioned checks in
favor of respondents, in accordance with Sections 31 and 63 of the
Negotiable Instruments Law. That Santos was the drawer of the checks
16
is thus immaterial to the respondents’ cause of action.
As indorser, Petitioner Maria Tuazon warranted that upon due
presentment, the checks were to be accepted or paid, or both, according to
their tenor; and that in case they were dishonored, she would pay the
corresponding amount. After an instrument is dishonored by
17
nonpayment, indorsers cease to be merely secondarily liable; they become
principal debtors whose liability becomes identical to that of the original
obligor. The holder of a negotiable instrument need not even proceed
against the maker before suing the indorser. Clearly, Evangeline
18
Santos—as the drawer of the checks—is not an indispensable party in an
action against Maria Tuazon, the indorser of the checks.
Indispensable parties are defined as “parties in interest without
whom no final determination can be had.” The instant case was
19
originally one for the collection of the purchase price of the rice bought by
Maria Tuazon from respondents’ predecessor. In this case, it is clear that
there is no privity of contract between respondents and Santos. Hence, a
final determination of the rights and interest of the parties may be made
without any need to implead her.
WHEREFORE, the Petition is DENIED and the assailed
Decision AFFIRMED. Costs against petitioners.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio-Morales and Garcia, JJ.,
concur.
Petition denied, assailed decision affirmed.
Note.—The declarations of the agent alone are generally insufficient
to establish the fact or extent of his authority. (Yu Eng Cho vs. Pan
American World Airways, Inc., 328 SCRA 717 [2000])
——o0o——
 G.R. No. 117356. June 19, 2000. *
that its debt has been offset by its claim for STM’s unpaid purchases, pursuant to
Article 1279 of the Civil Code. However, the trial court found, and the Court of
VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS
Appeals concurred, that the purchase of sugar covered by SLDR No. 1214M was a
and CONSOLIDATED SUGAR CORPORATION, respondents.
separate and independent transaction; it was not a serial part of a single
Appeals; Pleadings and Practice; It is settled that an issue which was not
transaction or of one account contrary to petitioner’s insistence. Evidence on
raised during the trial in the court below could not be raised for the first time on
record shows, without being rebutted, that petitioner had been paid for the sugar
appeal as to do so would be offensive to the basic rules of fair play, justice, and due
purchased under SLDR No. 1214M. Petitioner clearly had the obligation to
process.—Anent the first issue, we find from the records that petitioner raised
deliver said commodity to STM or its assignee. Since said sugar had been fully
this issue for the first time on appeal. It is settled that an issue which was not
paid for, petitioner and CSC, as assignee of STM, were not mutually creditors and
raised during the trial in the court below could not be raised for the first time on
debtors of each other. No reversible error could thereby be imputed to respondent
appeal as to do so would be offensive to the basic rules of fair play, justice, and
appellate court when it refused to apply Article 1279 of the Civil Code to the
due process. Nonetheless, the Court of Appeals opted to address this issue, hence,
present case.
now a matter for our consideration.
Sale; Words and Phrases; Where the terms and conditions clearly show that
Agency; The basis of agency is representation—on the part of the principal,
the vendor transferred title to the articles to the buyer or his assignee upon
there must be an actual intention to appoint or an intention naturally inferable
payment of the purchase price, the same clearly establish a contract of sale, not a
from his words or actions, while on the part of the agent, there must be an
contract to sell.—The aforequoted terms and conditions clearly show that
intention to accept the appointment and act on it; One factor which most clearly
petitioner transferred title to the sugar to the buyer or his assignee upon payment
distinguishes agency from other legal concepts is control—one person (the agent)
of the purchase price. Said terms clearly establish a contract of sale, not a
agreeing to act under the control or direction of another (the principal).—It is clear
contract to sell. Petitioner is now estopped from alleging the contrary. The
from Article 1868 that the basis of agency is representation. On the part of the
contract is the law between the contracting parties. And where the terms and
principal, there must be an actual intention to appoint or an intention naturally
conditions so stipulated are not contrary to law, morals, good customs, public
inferable from his words or actions; and on the part of the agent, there must be an
policy or public order, the contract is valid and must be upheld. Having
intention to accept the appointment and act on it, and in the absence of such
transferred title to the sugar in question, petitioner is now obliged to deliver it to
intent, there is generally no agency. One factor which most clearly distinguishes
the purchaser or its assignee.
agency from other legal concepts is control; one person—the agent—agrees to act
under the control or direction of another—the principal. Indeed, the very word
“agency” has come to connote control by the principal. The control factor, more PETITION for review on certiorari of a decision of the Court of Appeals.
than any other, has caused the courts to put contracts between principal and
agent in a separate category. The facts are stated in the opinion of the Court.
Same; An authorization given to another containing the phrase “for and in Ruben E. Agpalo for petitioner.
our behalf” does not necessarily establish an agency, as ultimately, what is decisive Alfonso R. Yatco for private respondent.
is the intention of the parties, and the use of the words “sold and endorsed” means
that the parties intended a contract of sale, and not an agency.—It appears plain QUISUMBING, J.:
to us that private respondent CSC was a buyer of the SLDFR form, and not an
agent of STM. Private respondent CSC was not subject to STM’s control. The
Before us is a petition for review on certiorari under Rule 45 of the Rules
question of whether a contract is one of sale or agency depends on the intention of
the parties as gathered from the whole scope and effect of the language employed. of Court assailing the decision of the Court of Appeals dated February 24,
That the authorization given to CSC contained the phrase “for and in our (STM’s) 1994, in CA-G.R. CV No. 31717, as well as the respondent court’s
behalf” did not establish an agency. Ultimately, what is decisive is the intention resolution of September 30, 1994 modifying said decision. Both decision
of the parties. That no agency was meant to be established by the CSC and STM and resolution amended the judgment dated February 13, 1991, of the
is clearly shown by CSC’s communication to petitioner that SLDR No. 1214M had Regional Trial Court of Makati City, Branch 147, in Civil Case No. 90-
been “sold and endorsed” to it. The use of the words “sold and endorsed” means 118.
that STM and CSC intended a contract of sale, and not an agency. Hence, on this The facts of this case as found by both the trial and appellate courts
score, no error was committed by the respondent appellate court when it held that are as follows:
CSC was not STM’s agent and could independently sue petitioner.
St. Therese Merchandising (hereafter STM) regularly bought sugar
Compensation; Where the articles had been fully paid for, the vendor and the
assignee of vendee are not mutually creditors and debtors of each other and from petitioner Victorias Milling Co., Inc., (VMC). In the course of their
compensation could not take place pursuant to Article 1279 of the Civil Code.—On dealings, petitioner issued several Shipping List/Delivery Receipts
the second issue, proceeding from the theory that the transactions entered into (SLDRs) to STM as proof of purchases. Among these was SLDR No.
between petitioner and STM are but serial parts of one account, petitioner insists 1214M, which gave rise to the instant ease. Dated October 16, 1989,
SLDR No. 1214M covers 25,000 bags of sugar. Each bag contained 50
kilograms and priced at P638.00 per bag as “per sales order VMC
Marketing No. 042 dated October 16, 1989.” The transaction it covered
1
was a “direct sale.” The SLDR also contains an additional note which
2
reads: “subject for (sic) availability of a (sic) stock at NAWACO
(warehouse).”3
On October 25, 1989, STM sold to private respondent Consolidated
Sugar Corporation (CSC) its rights in SLDR No. 1214M for
P14,750,000.00. CSC issued one check dated October 25, 1989 and three
checks postdated November 13, 1989 in payment. That same day, CSC
wrote petitioner that it had been authorized by STM to withdraw the
sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of
SLDR No. 1214M and a letter of authority from STM authorizing CSC “to
withdraw for and in our behalf the refined sugar covered by Shipping
List/Delivery Receipt-Refined Sugar (SDR) No. 1214 dated October 16,
1989 in the total quantity of 25,000 bags.”
4
On October 27, 1989, STM issued 16 checks in the total amount of
P31,900,000.00 with petitioner as payee. The latter, in turn, issued
Official Receipt No. 33743 dated October 27, 1989 acknowledging receipt
of the said checks in payment of 50,000 bags. Aside from SLDR No.
1214M, said checks also covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No. 1214M to the
petitioner’s NAWACO warehouse and was allowed to withdraw sugar.
However, after 2,000 bags had been released; petitioner refused to allow
further withdrawals of sugar against SLDR No. 1214M. CSC then sent
petitioner a letter dated January 23, 1990 informing it that SLDR No.
1214M had been “sold and endorsed” to it but that it had been refused
further withdrawals of sugar from petitioner’s warehouse despite the fact
that only 2,000 bags had been withdrawn. CSC thus inquired when it
5
would be allowed to withdraw the remaining 23,000 bags.
On January 31, 1990, petitioner replied that it could not allow any
further withdrawals of sugar against SLDR No. 1214M because STM had
already withdrawn all the sugar covered by the cleared checks.6
On March 2, 1990, CSC sent petitioner a letter demanding the release
of the balance of 23,000 bags.
Seven days later, petitioner reiterated that all the sugar
corresponding to the amount of STM’s cleared checks had been fully
withdrawn and hence, there would be no more deliveries of the
commodity to STM’s account. Petitioner also noted that CSC had
represented itself to be STM’s agent as it had withdrawn the 2,000 bags
against SLDR No. 1214M “for and in behalf” of STM.
On April 27, 1990, CSC filed a complaint for specific performance,
docketed as Civil Case No. 90-1118. Defendants were Teresita Ng Sy
(doing business under the name of St. Therese Merchandising) and
herein petitioner. Since the former could not be served with summons,
the case proceeded only against the latter. During the trial, it was
discovered that Teresita Ng Go who testified for CSC was the same
Teresita Ng Sy who could not be reached through summons. CSC, 7
however, did not bother to pursue its case against her, but instead used
her as its witness.
CSC’s complaint alleged that STM had fully paid petitioner for the
sugar covered by SLDR No. 1214M. Therefore, the latter had no
justification for refusing delivery of the sugar. CSC prayed that petitioner
be ordered to deliver the 23,000 bags covered by SLDR No. 1214M and
sought the award of P1,104,000.00 in unrealized profits, P3,000,000.00 as
exemplary damages, P2,200,000.00 as attorney’s fees and litigation
expenses.
Petitioner’s primary defense a quo was that it was an unpaid seller for
the 23,000 bags. Since STM had already drawn in full all the sugar
8
corresponding to the amount of its cleared checks, it could no longer
authorize further delivery of sugar to CSC. Petitioner also contended that
it had no privity of contract with CSC.
Petitioner explained that the SLDRs, which it had issued, were not
documents of title, but mere delivery receipts issued pursuant to a series
of transactions entered into between it and STM. The SLDRs prescribed
delivery of the sugar to the party specified therein and did not authorize
the transfer of said party’s rights and interests.
Petitioner also alleged that CSC did not pay for the SLDR and was
actually STM’s co-conspirator to defraud it through a misrepresentation
that CSC was an innocent purchaser for value and in good faith.
Petitioner then prayed that CSC be ordered to pay it the following sums:
P10,000,000.00 as moral damages; P10,000,000.00 as exemplary
damages; and P1,500,000.00 as attorney’s fees. Petitioner also prayed
that cross-defendant STM be ordered to pay it P10,000,000.00 in
exemplary damages, and P1,500,000.00 as attorney’s fees.
Since no settlement was reached at pre-trial, the trial court heard the
case on the merits.
As earlier stated, the trial court rendered its judgment favoring
private respondent CSC, as follows:
“WHEREFORE, in view of the foregoing, the Court hereby renders
judgment in favor of the plaintiff and against defendant Victorias
Milling Company:
1. “1)Ordering defendant Victorias Milling Company to deliver
to the plaintiff 23,000 bags of refined sugar due under
SLDR No. 1214;
 2. “2)Ordering defendant Victorias Milling Company to pay
the amount of P920,000.00 as unrealized profits, the
amount of P800,000.00 as exemplary damages and the
amount of P1,357,000.00, which is 10% of the acquisition
value of the undelivered bags of refined sugar in the
amount of P13,570,000.00, as attorney’s fees, plus the
costs.
“SO ORDERED.” 9 Petitioner appealed the trial court’s decision to the Court of Appeals.
It made the following observations:
“[T]he testimony of plaintiffs witness Teresita Ng Go, that she had
fully paid the purchase price of P15,950,000.00 of the 25,000 bags
of sugar bought by her covered by SLDR No. 1214 as well as the
purchase price of P15,950,000.00 for the 25,000 bags of sugar
bought by her covered by SLDR No. 1213 on the same date,
October 16, 1989 (date of the two SLDRs) is duly supported by
Exhibits C to C-15 inclusive which are post-dated checks dated
October 27, 1989 issued by St. Therese Merchandising in favor of
Victorias Milling Company at the time it purchased the 50,000
bags of sugar covered by SLDR No. 1213 and 1214. Said checks
appear to have been honored and duly credited to the account of
Victorias Milling Company because on October 27, 1989 Victorias
Milling Company issued official receipt no. 34734 in favor of St.
Therese Merchandising for the amount of P31,900,000.00 (Exhibits
B and B-1). The testimony of Teresita Ng Go is further supported
by Exhibit F, which is a computer printout of defendant Victorias
Milling Company showing the quantity and value of the purchases
made by St. Therese Merchandising, the SLDR no. issued to cover
the purchase, the official receipt no. and the status of payment. It
is clear in Exhibit ‘F’ that with respect to the sugar covered by
SLDR No. 1214 the same has been fully paid as indicated by the
word ‘cleared’ appearing under the column of ‘status of payment.’
“On the other hand, the claim of defendant Victorias Milling
Company that the purchase price of the 25,000 bags of sugar
purchased by St. Therese Merchandising covered by SLDR No.
1214 has not been fully paid is supported only by the testimony of
Arnulfo Caintic, witness for defendant Victorias Milling Company.
The Court notes that the testimony of Arnulfo Caintic is merely a
sweeping barren assertion that the purchase price has not been
fully paid and is not corroborated by any positive evidence. There
is an insinuation by Arnulfo Caintic in his testimony that the
postdated checks issued by the buyer in payment of the purchase
price were dishonored. However, said witness failed to present in
Court any dishonored check or any replacement check. Said
witness likewise failed to present any bank record showing that
the checks issued by the buyer, Teresita Ng Go, in payment of the
purchase price of the sugar covered by SLDR No. 1214 were
dishonored.” 10
On appeal, petitioner averred that the dealings between it and STM
were part of a series of transactions involving only one account or one
general contract of sale. Pursuant to this contract, STM or any of its
authorized agents could withdraw bags of sugar only against cleared
checks of STM. SLDR No. 1214M was only one of 22 SLDRs issued to
STM and since the latter had already withdrawn its full quota of sugar
under the said SLDR, CSC was already precluded from seeking delivery
of the 23,000 bags of sugar.
Private respondent CSC countered that the sugar purchases involving
SLDR No. 1214M were separate and independent transactions and that
the details of the series of purchases were contained in a single statement
with a consolidated summary of cleared check payments and sugar stock
withdrawals because this is a more convenient system than issuing
separate statements for each purchase.
The appellate court considered the following issues: (a) Whether or
not the transaction between petitioner and STM involving SLDR No.
1214M was a separate, independent, and single transaction; (b) Whether
or not CSC had the capacity to sue on its own on SLDR No. 1214M; and
(c) Whether or not CSC as buyer from STM of the rights to 25,000 bags of
sugar covered by SLDR No. 1214M could compel petitioner to deliver
23,000 bags allegedly unwithdrawn.
On February 24, 1994, the Court of Appeals rendered its decision
modifying the trial court’s judgment, to wit:
“WHEREFORE, the Court hereby MODIFIES the assailed
judgment and orders defendant-appellant to:
1. “1)Deliver to plaintiff-appellee 12,586 bags of sugar covered
by SLDR No. 1214M;
2. “2)Pay to plaintiff-appellee P792,918.00 which is 10% of the
value of the undelivered bags of refined sugar, as
attorneys fees;
3. “3)Pay the costs of suit.
 “SO ORDERED.” 11
Both parties then seasonably filed separate motions for reconsideration.
In its resolution dated September 30, 1994, the appellate court
modified its decision to read:
“WHEREFORE, the Court hereby modifies the assailed judgment
and orders defendant-appellant to:
1. “(1)Deliver to plaintiff-appellee 23,000 bags of refined sugar
under SLDR No. 1214M;
2. “(2)Pay costs of suit.
“SO ORDERED.” 12
The appellate court explained the rationale for the modification as
follows:
“There is merit in plaintiff-appellee’s position.
“Exhibit ‘F’ We relied upon in fixing the number of bags of
sugar which remained undelivered as 12,586 cannot be made the
basis for such a finding. The rule is explicit that courts should
consider the evidence only for the purpose for which it was offered.
(People v. Abalos, et al., 1 CA Rep 783). The rationale for this is to
afford the party against whom the evidence is presented to object
thereto if he deems it necessary. Plaintiff-appellee is, therefore,
correct in its argument that Exhibit ‘F’ which was offered to prove
that checks in the total amount of P15,950,000.00 had been
cleared. (Formal Offer of Evidence for Plaintiff Records p. 58)
cannot be used to prove the proposition that 12,586 bags of sugar
remained undelivered.
“Testimonial evidence (Testimonies of Teresita Ng [TSN, 10
October 1990, p. 33] and Marianito L. Santos [TSN, 17 October
1990, pp. 16, 18, and 36]) presented by plaintiff-appellee was to the
effect that it had withdrawn only 2,000 bags of sugar from SLDR
No. 1214M, after which it was not allowed to withdraw anymore.
Documentary evidence (Exhibit I, Id., p. 78, Exhibit K, Id., p. 80)
show that plaintiff-appellee had sent demand letters to defendant-
appellant asking the latter to allow it to withdraw the remaining
23,000 bags of sugar from SLDR No. 1214M. Defendant-appellant,
on the other hand, alleged that sugar delivery to the STM
corresponded only to the value of cleared checks; and that all sugar
corresponded to cleared checks had been withdrawn. Defendant-
appellant did not rebut plaintiff-appellee’s assertions. It did not
present evidence to show how many bags of sugar had been
withdrawn against SLDR No. 1214M, precisely because of its
theory that all sales in question were a series of one single
transaction and withdrawal of sugar depended on the clearing of
checks paid therefor.
“After a second look at the evidence, We see no reason to
overturn the findings of the trial court on this point.” 13
Hence, the instant petition, positing the following errors as grounds for
review:
1. “1.The Court of Appeals erred in not holding that STM’s and
private respondent’s specially informing petitioner that
respondent was authorized by buyer STM to withdraw sugar
against SLDR No. 1214M “for and in our (STM)
behalf” (emphasis in the original) private respondent’s
withdrawing 2,000 bags of sugar for STM, and STM’s
empowering other persons as its agents to withdraw sugar
against the same SLDR No. 1214M, rendered respondent like
the other persons, an agent of STM as held in Ratios v. Felix Go
Chan & Realty Corp.,81 SCRA 252, and precluded it from
subsequently claiming and proving being an assignee of SLDR
No. 1214M and from suing by itself for its enforcement because
it was conclusively presumed to be an agent (Sec. 2, Rule 131,
Rules of Court) and estopped from doing so. (Art. 1431, Civil
Code).
2. “2.The Court of Appeals erred in manifestly and arbitrarily
ignoring and disregarding certain relevant and undisputed facts
which, had they been considered, would have shown that
petitioner was not liable, except for 69 bags of sugar, and which
would justify review of its conclusion of facts by this Honorable
Court.
3. “3.The Court of Appeals misapplied the law on compensation
under Arts. 1279, 1285 and 1626 of the Civil Code when it ruled
that compensation applied only to credits from one SLDR or
contract and not to those from two or more distinct
contracts between the same parties; and erred in denying
petitioner’s right to setoff all its credits arising prior to notice of
assignment from other sales or SLDRS against private
respondent’s claim as assignee under SLDR No. 1214M, so as to
extinguish or reduce its liability to 69 bags, because the law on
compensation applies precisely to two or more distinct contracts
between the same parties (emphasis in the original). “4. The
Court of Appeals erred in concluding that the settlement or
liquidation of accounts in Exh. ‘F’ between petitioner and
 1. STM, respondent’s admission of its balance, and STM’s
acquiescence thereto by silence for almost one year did not
render Exh. ‘F’ an account stated and its balance binding.
2. “5.The Court of Appeals erred in not holding that the conditions
of the assigned SLDR No. 1214. namely, (a) its subject matter
being generic, and (b) the sale of sugar being subject to its
availability at the Nawaco warehouse, made the sale conditional
and prevented STM or private respondent from acquiring title to
the sugar; and the non-availability of sugar freed petitioner from
further obligation.
3. “6.The Court of Appeals erred in not holding that the “clean
hands“ doctrine precluded respondent from seeking judicial
reliefs (sic) from petitioner, its only remedy being against its
assignor.”14
Simply stated, the issues now to be resolved are:
1. (1)Whether or not the Court of Appeals erred in not ruling that
CSC was an agent of STM and hence, estopped to sue upon
SLDR No. 1214M as an assignee.
2. (2)Whether or not the Court of Appeals erred in applying the law
on compensation to the transaction under SLDR No. 1214M so
as to preclude petitioner from offsetting its credits on the other
SLDRS.
3. (3)Whether or not the Court of Appeals erred in not ruling that
the sale of sugar under SLDR No. 1214M was a conditional sale
or a contract to sell and hence freed petitioner from further
obligations.
4. (4)Whether or not the Court of Appeals committed an error of lav
in not applying the “clean hands doctrine” to preclude CSC from
seeking judicial relief.
The issues will be discussed in seriatim.
Anent the first issue, we find from the records that petitioner raised
this issue for the first time on appeal. It is settled that an issue which
was not raised during the trial in the court below could not be raised for
the first time on appeal as to do so would be offensive to the basic rules of
fair play, justice, and due process. Nonetheless, the Court of Appeals
15
opted to address this issue, hence, now a matter for our consideration.
Petitioner heavily relies upon STM’s letter of authority allowing CSC
to withdraw sugar against SLDR No. 1214M to show that the latter was
STM’s agent. The pertinent portion of said letter reads:
“This is to authorize Consolidated Sugar Corporation or its
representative to withdraw for and in our behalf (stress supplied)
the refined sugar covered by Shipping List/Delivery Receipt
=Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total
quantity of 25,000 bags. 16
The Civil Code defines a contract of agency as follows:
“Art. 1868. By the contract of agency a person binds himself to
render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.”
It is clear from Article 1868 that the basis of agency is
representation. On the part of the principal, there must be an actual
17
intention to appoint or an intention naturally inferable from his words or
18
actions; and on the part of the agent, there must be an intention to
19
accept the appointment and act on it, and in the absence of such intent,
20
there is generally no agency. One factor which most clearly distinguishes
21
agency from other legal concepts is control; one person—the agent—
agrees to act under the control or direction of another—the principal.
Indeed, the very word “agency” has come to connote control by the
principal. The control factor, more than any other, has caused the courts
22
to put contracts between principal and agent in a separate category. The
23
Court of Appeals, in finding that CSC, was not an agent of STM, opined:
“This Court has ruled that where the relation of agency is
dependent upon the acts of the parties, the law makes no
presumption of agency, and it is always a fact to be proved, with
the burden of proof resting upon the persons alleging the agency,
to show not only the fact of its existence, but also its nature and
extent (Antonio vs. Enriquez [CA], 51 O.G. 3536]. Here, defendant-
appellant failed to sufficiently establish the existence of an agency
relation between plaintiff-appellee and STM. The fact alone that it
(STM) had authorized withdrawal of sugar by plaintiff-appellee
“for, and in our (STM’s) behalf should not be eyed as pointing to
the existence of an agency relation . . . It should be viewed in the
context of all the circumstances obtaining. Although it would seem
STM represented plaintiff-appellee as being its agent by the use of
the phrase “for and in our (STM’s) behalf” the matter was cleared
when on 23 January 1990, plaintiff-appellee informed defendant-
appellant that SLDFR No. 1214M had been “sold and endorsed” to
it by STM (Exhibit I, Records, p. 78). Further, plaintiff-appellee
has shown that the 25,000 bags of sugar covered by the SLDR No.
1214M were sold and transferred by STM to it . . . A conclusion
that there was a valid sale and transfer to plaintiff-appellee may,
therefore, be made thus capacitating plaintiff-appellee to sue in its
own name, without need of joining its imputed principal STM as
co-plaintiff.” 24
In the instant case, it appears plain to us that private respondent CSC
was a buyer of the SLDFR form, and not an agent of STM. Private
respondent CSC was not subject to STM’s control. The question of
whether a contract is one of sale or agency depends on the intention of
the parties as gathered from the whole scope and effect of the language
employed. That the authorization given to CSC contained the phrase “for
25
and in our (STM’s) behalf” did not establish an agency. Ultimately, what
is decisive is the intention of the parties. That no agency was meant to
26
be established by the CSC and STM is clearly shown by CSC’s
communication to petitioner that SLDR No. 1214M had been “sold and
endorsed” to it. The use of the words “sold and endorsed“ means that
27
STM and CSC intended a contract of sale, and not an agency. Hence, on
this score; no error was committed by the respondent appellate court
when it held that CSC was not STM’s agent and could independently sue
petitioner.
On the second issue, proceeding from the theory that the transactions
entered into between petitioner and STM are but serial parts of one
account, petitioner insists that its debt has been offset by its claim for
STM’s unpaid purchases, pursuant to Article 1279 of the Civil
Code. However, the trial court found, and the Court of Appeals
28
concurred, that the purchase of sugar covered by SLDR No. 1214M was a
separate and independent transaction; it was not a serial part of a single
transaction or of one account contrary to petitioner’s insistence. Evidence
on record shows, without being rebutted, that petitioner had been paid
for the sugar purchased under SLDR No. 1214M. Petitioner clearly had
the obligation to deliver said commodity to STM or its assignee. Since
said sugar had been fully paid for, petitioner and CSC, as assignee of
STM, were not mutually creditors and debtors of each other. No
reversible error could thereby be imputed to respondent appellate court
when it refused to apply Article 1279 of the Civil Code to the present
case.
Regarding the third issue, petitioner contends that the sale of sugar
under SLDR No. 1214M is a conditional sale or a contract to sell, with
title to the sugar still remaining with the vendor. Noteworthy, SLDR No.
1214M contains the following terms and conditions:
“It is understood and agreed that by payment by buyer/trader of
refined sugar and/or receipt of this document by the buyer/trader
personally or through a representative, title to refined sugar is
transferred to buyer/trader and delivery to him/it is deemed
effected and completed (stress supplied) and buyer/trader assumes
full responsibility therefore . . .”29
The aforequoted terms and conditions clearly show that petitioner
transferred title to the sugar to the buyer or his assignee upon payment
of the purchase price. Said terms clearly establish a contract of sale, not a
contract to sell. Petitioner is now estopped from alleging the contrary.
The contract is the law between the contracting parties. And where the
30
terms and conditions so stipulated are not contrary to law, morals, good
customs, public policy or public order, the contract is valid and must be
upheld. Having transferred title to the sugar in question, petitioner is
31
now obliged to deliver it to the purchaser or its assignee.
As to the fourth issue, petitioner submits that STM and private
respondent CSC have entered into a conspiracy to defraud it of its sugar.
This conspiracy is allegedly evidenced by: (a) the fact that STM’s selling
price to CSC was below its purchasing price; (b) CSC’s refusal to pursue
its case against Teresita Ng Go; and (c) the authority given by the latter
to other persons to withdraw sugar against SLDR No. 1214M after she
had sold her rights under said SLDR to CSC. Petitioner prays that the
doctrine of “clean hands” should be applied to preclude CSC from seeking
judicial relief. However, despite careful scrutiny, we find here the records
bare of convincing evidence whatsoever to support the petitioner’s
allegations of fraud. We are now constrained to deem this matter purely
speculative, bereft of concrete proof.
WHEREFORE, the instant petition is DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.
Bellosillo (Chairman), Mendoza, Buena and De Leon, Jr., JJ.,
concur.
Petition denied.
Notes.—A promise to pay amounts to an offer to compromise and
requires a special power of attorney or the express consent of the
principal. (Kanlaon Construction Enterprises Co., Inc. vs. National Labor
Relations Commission, 279 SCRA 337 [1997])
For the validity of a sale involving land, the agent should have an
authorization in writing. (Raet vs. Court of Appeals, 295 SCRA
677 [1998]) The general principles of agency govern the relation between
the corporation and its officers or agents, subject to the articles of
incorporation, bylaws, or relevant provisions of law. (San Juan Structural
and Steel Fabricators, Inc. vs. Court of Appeals, 296 SCRA 631 [1998])
——o0o——
 G.R. No. 149353. June 26, 2006. *
JOCELYN B. DOLES, petitioner, vs. MA. AURA TINA ANGELES,
respondent.
Agency; Evidence; Estoppel; The basis of agency is representation; The
question of whether an agency has been created is ordinarily a question which may
be established in the same way as any other fact, either by direct or circumstantial
evidence; Though that fact or extent of authority of the agents may not, as a
general rule, be established from the declarations of the agents alone, if one
professes to act as agent for another, she may be estopped to deny her agency both
as against the asserted principal and the third persons interested in the
transaction in which he or she is engaged.—This Court has affirmed that, under
Article 1868 of the Civil Code, the basis of agency is representation. The question
of whether an agency has been created is ordinarily a question which may be
established in the same way as any other fact, either by direct or circumstantial
evidence. The question is ultimately one of intention. Agency may even be implied
from the words and conduct of the parties and the circumstances of the particular
case. Though the fact or extent of authority of the agents may not, as a general
rule, be established from the declarations of the agents alone, if one professes to
act as agent for another, she may be estopped to deny her agency both as against
the asserted principal and the third persons interested in the transaction in
which he or she is engaged.
Same; For an agency to arise, it is not necessary that the principal personally
encounter the third person with whom the agent interacts—precisely, the purpose
of agency is to extend the personality of the principal through the facility of the
agent.—The CA is incorrect when it considered the fact that the “supposed friends
of [petitioner], the actual borrowers, did not present themselves to [respondent]”
as evidence that negates the agency relationship—it is sufficient that petitioner
disclosed to respondent that the former was acting in behalf of her principals, her
friends whom she referred to respondent. For an agency to arise, it is not
necessary that the principal personally encounter the third person with whom the
agent interacts. The law in fact contemplates, and to a great degree, impersonal
dealings where the principal need not personally know or meet the third person
with whom her agent transacts: precisely, the purpose of agency is to extend the
personality of the principal through the facility of the agent.
Same; If the principals do not actually and personally know each other, such
ignorance does not affect their juridical standing as agents.—In the case at bar,
both petitioner and respondent have undeniably disclosed to each other that they
are representing someone else, and so both of them are estopped to deny the
same. It is evident from the record that petitioner merely refers actual borrowers
and then collects and disburses the amounts of the loan upon which she received
a commission; and that respondent transacts on behalf of her “principal
financier,” a certain Arsenio Pua. If their respective principals do not actually and
personally know each other, such ignorance does not affect their juridical
standing as agents, especially since the very purpose of agency is to extend the
personality of the principal through the facility of the agent.
Same; Words and Phrases; If an act done by one person in behalf of another
is in its essential nature one of agency, the former is the agent of the latter
notwithstanding he or she is not so called—it will be an agency whether the parties
understood the exact nature of the relation or not.—With respect to the admission
of petitioner that she is “re-lending” the money loaned from respondent to other
individuals for profit, it must be stressed that the manner in which the parties
designate the relationship is not controlling. If an act done by one person in behalf
of another is in its essential nature one of agency, the former is the agent of the
latter notwithstanding he or she is not so called. The question is to be determined
by the fact that one represents and is acting for another, and if relations exist
which will constitute an agency, it will be an agency whether the parties
understood the exact nature of the relation or not.
Same; Loans; Sales; A sale predicated on a loan between the principals in
which the agents are not privy to is void for lack of consideration.—In view of the
two agency relationships, petitioner and respondent are not privy to the contract
of loan between their principals. Since the sale is predicated on that loan, then
the sale is void for lack of consideration.
Sales; Mortgages; An assumption of a mortgage debt may constitute a valid
consideration for a sale.—A further scrutiny of the record shows, however, that
the sale might have been backed up by another consideration that is separate and
distinct from the debt: respondent averred in her complaint and testified that the
parties had agreed that as a condition for the conveyance of the property the
respondent shall assume the balance of the mortgage loan which petitioner
allegedly owed to the NHMFC. This Court in the recent past has declared that an
assumption of a mortgage debt may constitute a valid consideration for a sale.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Maria Rowena R. Dimson for petitioner.
Salonga, Evasco, Clave Law Office for respondent.
AUSTRIA-MARTINEZ, J.:
This refers to the Petition for Review on Certiorari under Rule 45 of the
Rules of Court questioning the Decision dated April 30, 2001 of the Court
1
of Appeals (CA) in C.A.-G.R. CV No. 66985, which reversed the Decision
dated July 29, 1998 of the Regional Trial Court (RTC), Branch 21, City of
Manila; and the CA Resolution dated August 6, 2001 which denied
2
petitioner’s Motion for Reconsideration.
The antecedents of the case follow:
On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the
RTC a complaint for Specific Performance with Damages against Jocelyn
B. Doles (petitioner), docketed as Civil Case No. 97-82716. Respondent
alleged that petitioner was indebted to the former in the concept of a
personal loan amounting to P405,430.00 representing the principal
amount and interest; that on October 5, 1996, by virtue of a “Deed of
Absolute Sale,” petitioner, as seller, ceded to respondent, as buyer, a
3
parcel of land, as well as the improvements thereon, with an area of 42
square meters, covered by Transfer Certificate of Title No. 382532, and 4
located at a subdivision project known as Camella Townhomes Sorrente
in Bacoor, Cavite, in order to satisfy her personal loan with respondent;
that this property was mortgaged to National Home Mortgage Finance
Corporation (NHMFC) to secure petitioner’s loan in the sum of
P337,050.00 with that entity; that as a condition for the foregoing sale,
respondent shall assume the undue balance of the mortgage and pay the
monthly amortization of P4,748.11 for the remainder of the 25 years
which began on September 3, 1994; that the property was at that time
being occupied by a tenant paying a monthly rent of P3,000.00; that upon
verification with the NHMFC, respondent learned that petitioner had
incurred arrearages amounting to P26,744.09, inclusive of penalties and
interest; that upon informing the petitioner of her arrears, petitioner
denied that she incurred them and refused to pay the same; that despite
repeated demand, petitioner refused to cooperate with respondent to
execute the necessary documents and other formalities required by the
NHMFC to effect the transfer of the title over the property; that
petitioner collected rent over the property for the month of January 1997
and refused to remit the proceeds to respondent; and that respondent
suffered damages as a result and was forced to litigate.
Petitioner, then defendant, while admitting some allegations in the
Complaint, denied that she borrowed money from respondent, and
averred that from June to September 1995, she referred her friends to
respondent whom she knew to be engaged in the business of lending
money in exchange for personal checks through her capitalist Arsenio
Pua. She alleged that her friends, namely, Zenaida Romulo, Theresa
Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden,
borrowed money from respondent and issued personal checks in payment
of the loan; that the checks bounced for insufficiency of funds; that
despite her efforts to assist respondent to collect from the borrowers, she
could no longer locate them; that, because of this, respondent became
furious and threatened petitioner that if the accounts were not settled, a
criminal case will be filed against her; that she was forced to issue eight
checks amounting to P350,000 to answer for the bounced checks of the
borrowers she referred; that prior to the issuance of the checks she
informed respondent that they were not sufficiently funded but the latter
nonetheless deposited the checks and for which reason they were
subsequently dishonored; that respondent then threatened to initiate a
criminal case against her for violation of Batas Pambansa Blg. 22; that
she was forced by respondent to execute an “Absolute Deed of Sale” over
her property in Bacoor, Cavite, to avoid criminal prosecution; that the
said deed had no valid consideration; that she did not appear before a
notary public; that the Community Tax Certificate number on the deed
was not hers and for which respondent may be prosecuted for falsification
and perjury; and that she suffered damages and lost rental as a result.
The RTC identified the issues as follows: first, whether the Deed of
Absolute Sale is valid; second, if valid, whether petitioner is obliged to
sign and execute the necessary documents to effect the transfer of her
rights over the property to the respondent; and third, whether petitioner
is liable for damages.
On July 29, 1998, the RTC rendered a decision the dispositive portion
of which states:
“WHEREFORE, premises considered, the Court hereby orders the
dismissal of the complaint for insufficiency of evidence. With costs
against plaintiff.
SO ORDERED.”
The RTC held that the sale was void for lack of cause or consideration: 5
“Plaintiff Angeles’ admission that the borrowers are the friends of
defendant Doles and further admission that the checks issued by
these borrowers in payment of the loan obligation negates [sic] the
cause or consideration of the contract of sale executed by and
between plaintiff and defendant. Moreover, the property is not
solely owned by defendant as appearing in Entry No. 9055 of
Transfer Certificate of Title No. 382532 (Annex “A,” Complaint),
thus:
“Entry No. 9055. Special Power of Attorney in favor of Jocelyn
Doles covering the share of Teodorico Doles on the parcel of land
described in this certificate of title by virtue of the special power of
attorney to mortgage, executed before the notary public, etc.”
The rule under the Civil Code is that contracts without a cause or
consideration produce no effect whatsoever. (Art. 1352, Civil Code).
Respondent appealed to the CA. In her appeal brief, respondent
interposed her sole assignment of error:
THE TRIAL COURT ERRED IN DISMISSING THE CASE AT
BAR ON THE GROUND OF [sic] THE DEED OF SALE
BETWEEN THE PARTIES HAS NO CONSIDERATION OR
INSUFFICIENCY OF EVIDENCE. 6
On April 30, 2001, the CA promulgated its Decision, the dispositive
portion of which reads:
“WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is
hereby GRANTED. The Decision of the lower court dated July 29,
1998 is REVERSED and SET ASIDE. A new one is entered
ordering defendant-appellee to execute all necessary documents to
effect transfer of subject property to plaintiff-appellant with the
arrearages of the former’s loan with the NHMFC, at the latter’s
expense. No costs.
SO ORDERED.”
The CA concluded that petitioner was the borrower and, in turn, would
“re-lend” the amount borrowed from the respondent to her friends. Hence,
the Deed of Absolute Sale was supported by a valid consideration, which
is the sum of money petitioner owed respondent amounting to
P405,430.00, representing both principal and interest.
The CA took into account the following circumstances in their
entirety: the supposed friends of petitioner never presented themselves to
respondent and that all transactions were made by and between
petitioner and respondent; that the money borrowed was deposited with
7
the bank account of the petitioner, while payments made for the loan
were deposited by the latter to respondent’s bank account; that petitioner
8
herself admitted in open court that she was “re-lending” the money
loaned from respondent to other individuals for profit; and that the
9
documentary evidence shows that the actual borrowers, the friends of
petitioner, consider her as their creditor and not the respondent. 10
Furthermore, the CA held that the alleged threat or intimidation by
respondent did not vitiate consent, since the same is considered just or
legal if made to enforce one’s claim through competent authority under
Article 1335 of the Civil Code; that with respect to the arrearages of
11 12
petitioner on her monthly amortization with the NHMFC in the sum of
P26,744.09, the same shall be deemed part of the balance of petitioner’s
loan with the NHMFC which respondent agreed to assume; and that the
amount of P3,000.00 representing the rental for January 1997 supposedly
collected by petitioner, as well as the claim for damages and attorney’s
fees, is denied for insufficiency of evidence.
13
On May 29, 2001, petitioner filed her Motion for Reconsideration with the
CA, arguing that respondent categorically admitted in open court that
she acted only as agent or representative of Arsenio Pua, the principal
financier and, hence, she had no legal capacity to sue petitioner; and that
the CA failed to consider the fact that petitioner’s father, who co-owned
the subject property, was not impleaded as a defendant nor was he
indebted to the respondent and, hence, she cannot be made to sign the
documents to effect the transfer of ownership over the entire property.
On August 6, 2001, the CA issued its Resolution denying the motion
on the ground that the foregoing matters had already been passed upon.
On August 13, 2001, petitioner received a copy of the CA Resolution.
On August 28, 2001, petitioner filed the present Petition and raised the
following issues:
I.
WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED
AS A DEBTOR OF THE RESPONDENT.
II.
WHETHER OR NOT AN AGENT WHO WAS NOT
AUTHORIZED BY THE PRINCIPAL TO COLLECT DEBT IN
HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM
THE DEBTOR.
III.
WHETHER OR NOT THE CONTRACT OF SALE WAS
EXECUTED FOR A CAUSE. 14
Although, as a rule, it is not the business of this Court to review the
findings of fact made by the lower courts, jurisprudence has recognized
several exceptions, at least three of which are present in the instant case,
namely: when the judgment is based on a misapprehension of facts; when
the findings of facts of the courts a quo are conflicting; and when the CA
manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, could justify a different conclusion. To 15
arrive at a proper judgment, therefore, the Court finds it necessary to re-
examine the evidence presented by the contending parties during the
trial of the case.
The Petition is meritorious.
The principal issue is whether the Deed of Absolute Sale is supported
by a valid consideration.
1. Petitioner argues that since she is merely the agent or
representative of the alleged debtors, then she is not a party to the loan;
and that the Deed of Sale executed between her and the respondent in
their own names, which was predicated on that pre-existing debt, is void
for lack of consideration.
Indeed, the Deed of Absolute Sale purports to be supported by a
consideration in the form of a price certain in money and that this sum
16
indisputably pertains to the debt in issue. This Court has consistently
held that a contract of sale is null and void and produces no effect
whatsoever where the same is without cause or consideration. The 17
question that has to be resolved for the moment is whether this debt can
be considered as a valid cause or consideration for the sale.
To restate, the CA cited four instances in the record to support its
holding that petitioner “re-lends” the amount borrowed from respondent
to her friends: first, the friends of petitioner never presented themselves
to respondent and that all transactions were made by and between
petitioner and respondent; second, the money passed through the bank
18
accounts of petitioner and respondent; third, petitioner herself admitted
19
that she was “re-lending” the money loaned to other individuals for
profit; and fourth, the documentary evidence shows that the actual
20
borrowers, the friends of petitioner, consider her as their creditor and not
the respondent. 21
 On the first, third, and fourth points, the CA cites the testimony of the a. Yes, sir.
petitioner, then defendant, during her cross-examination: 22

Atty. Diza:
Atty. Diza: q. You are intermediaries?
q. You also mentioned that you were not witness:
the one indebted to the plaintiff? a. We are both intermediaries. As
witness: evidenced by the checks of the
Yes, sir. debtors they were deposited to the
Atty. Diza: name of Arsenio Pua because the
q. And you mentioned the persons[,] money came from Arsenio Pua.
namely, Elizabeth Tomelden, Teresa xxxx
Moraquin, Maria Luisa Inocencio, Atty. Diza:
Zenaida Romulo, they are your q. Did the plaintiff knew [sic] that you
friends? will lend the money to your friends
witness: specifically the one you mentioned [a]
a. Inocencio and Moraquin are my while ago?
friends while [as to] Jacob and witness:
Tomelden[,] they were just referred. a. Yes, she knows the money will go to
Atty. Diza: those persons.
q. And you have transact[ed] with the Atty. Diza:
plaintiff? q. You are re-lending the money?
witness: witness:
a. Yes, sir. a. Yes, sir.
Atty. Diza: Atty. Diza:
q. What is that transaction? q. What profit do you have, do you have
witness: commission?
a. To refer those persons to Aura and to witness:
refer again to Arsenio Pua, sir. a. Yes, sir.
Atty. Diza: Atty. Diza:
q. Did the plaintiff personally see the q. How much?
transactions with your friends? witness:
witness: a. Two percent to Tomelden, one
a. No, sir. percent to Jacob and then Inocencio
Atty. Diza: and my friends none, sir.
q. Your friends and the plaintiff did not Based on the foregoing, the CA concluded that petitioner is the real
meet personally? borrower, while the respondent, the real lender. But as correctly noted by
witness:
the RTC, respondent, then plaintiff, made the following admission during Atty. Villacorta:
her cross examination:23

Atty. Villacorta:
Atty. Villacorta: q. And these friends of the defendant
q. Who is this Arsenio Pua? borrowed money from you with the
witness: assurance of the defendant?
a. Principal financier, sir. witness:
Atty. Villacorta: a. They go direct to Jocelyn because I
q. So the money came from Arsenio don’t know them.
Pua? xxxx
witness: Atty. Villacorta:
a. Yes, because I am only representing q. And is it not also a fact Madam
him, sir. witness that everytime that the
Other portions of the testimony of respondent must likewise be
considered:
24
defendant borrowed money from you
Atty. Villacorta: her friends who [are] in need of
q. So it is not actually your money but money issued check[s] to you? There
the money of Arsenio Pua? were checks issued to you?
witness: witness:
a. Yes, sir. a. Yes, there were checks issued.
Court: Atty. Villacorta:
q. It is not your money? q. By the friends of the defendant, am I
witness: correct?
a. Yes, Your Honor. witness:
Atty. Villacorta: a. Yes, sir.
q. Is it not a fact Ms. Witness that the Atty. Villacorta:
defendant borrowed from you to q. And because of your assistance, the
accommodate somebody, are you friends of the defendant who are in
aware of that? need of money were able to obtain
witness: loan to [sic] Arsenio Pua through your
a. I am aware of that. assistance?
Atty. Villacorta: witness:
q. More or less she [accommodated] a. Yes, sir.
several friends of the defendant? Atty. Villacorta:
witness: q. So that occasion lasted for more than
a. Yes, sir, I am aware of that. a year?
xxxx witness:
a. Yes, sir.
Atty. Villacorta:
Atty. Villacorta:
q. And some of the checks that were
issued by the friends of the defendant
bounced, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of that Arsenio Pua got
mad with you?
witness:
a. Yes, sir.
Respondent is estopped to deny that she herself acted as agent of a
certain Arsenio Pua, her disclosed principal. She is also estopped to deny
that petitioner acted as agent for the alleged debtors, the friends whom
she (petitioner) referred. This Court has affirmed that, under Article 1868
of the Civil Code, the basis of agency is representation. The question of
25
whether an agency has been created is ordinarily a question which may
be established in the same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one of
intention. Agency may even be implied from the words and conduct of
26
the parties and the circumstances of the particular case. Though the fact
27
or extent of authority of the agents may not, as a general rule, be
established from the declarations of the agents alone, if one professes to
act as agent for another, she may be estopped to deny her agency both as
against the asserted principal and the third persons interested in the
transaction in which he or she is engaged. 28
In this case, petitioner knew that the financier of respondent is Pua;
and respondent knew that the borrowers are friends of petitioner.
The CA is incorrect when it considered the fact that the “supposed
friends of [petitioner], the actual borrowers, did not present themselves to
[respondent]” as evidence that negates the agency relationship—it is
sufficient that petitioner disclosed to respondent that the former was
acting in behalf of her principals, her friends whom she referred to
respondent. For an agency to arise, it is not necessary that the principal
personally encounter the third person with whom the agent interacts.
The law in fact contemplates, and to a great degree, impersonal dealings
where the principal need not personally know or meet the third person
with whom her agent transacts: precisely, the purpose of agency is to
extend the personality of the principal through the facility of the agent.
29
In the case at bar, both petitioner and respondent have undeniably
disclosed to each other that they are representing someone else, and so
both of them are estopped to deny the same. It is evident from the record
that petitioner merely refers actual borrowers and then collects and
disburses the amounts of the loan upon which she received a commission;
and that respondent transacts on behalf of her “principal financier,” a
certain Arsenio Pua. If their respective principals do not actually and
personally know each other, such ignorance does not affect their juridical
standing as agents, espe-
cially since the very purpose of agency is to extend the personality of the
principal through the facility of the agent.
With respect to the admission of petitioner that she is “re-lending” the
money loaned from respondent to other individuals for profit, it must be
stressed that the manner in which the parties designate the relationship is
not controlling. If an act done by one person in behalf of another is in its
essential nature one of agency, the former is the agent of the latter
notwithstanding he or she is not so called. The question is to be
30
determined by the fact that one represents and is acting for another, and
if relations exist which will constitute an agency, it will be an agency
whether the parties understood the exact nature of the relation or not. 31
That both parties acted as mere agents is shown by the undisputed
fact that the friends of petitioner issued checks in payment of the loan in
the name of Pua. If it is true that petitioner was “re-lending”, then the
checks should have been drawn in her name and not directly paid to Pua.
With respect to the second point, particularly, the finding of the CA
that the disbursements and payments for the loan were made through
the bank accounts of petitioner and respondent, suffice it to say that in
the normal course of commercial dealings and for reasons of convenience
and practical utility it can be reasonably expected that the facilities of the
agent, such as a bank account, may be employed, and that a sub-agent be
appointed, such as the bank itself, to carry out the task, especially where
there is no stipulation to the contrary. 32
In view of the two agency relationships, petitioner and respondent are not
privy to the contract of loan between their principals. Since the sale is
predicated on that loan, then the sale is void for lack of consideration.
2. A further scrutiny of the record shows, however, that the sale might
have been backed up by another consideration that is separate and
distinct from the debt: respondent averred in her complaint and testified
that the parties had agreed that as a condition for the conveyance of the
property the respondent shall assume the balance of the mortgage loan
which petitioner allegedly owed to the NHMFC. This Court in the recent
33
past has declared that an assumption of a mortgage debt may constitute
a valid consideration for a sale. Although the record shows that
34
petitioner admitted at the time of trial that she owned the property endowed with any ownership rights to validly mortgage and convey the
described in the Paragraph 6 of respondent’s complaint reads: property. As the complainant who initiated the case, respondent bears
6. On October 5, 1996 after defendant continuously failed to settle her the burden of proving the basis of her complaint. Having failed to
personal obligation to plaintiff, defendant offered to pay plaintiff by way of discharge such burden, the Court has no choice but to declare the sale
ceding the above-described property on condition that plaintiff would assume void for lack of cause. And since the sale is void, the Court finds it
the balance of the mortgage and pay the monthly amortization of P4,748.11 unnecessary to dwell on the issue of whether duress or intimidation had
for the remainder of the 25 years to which the latter agreed; been foisted upon petitioner upon the execution of the sale.
xxx Moreover, even assuming the mortgage validly exists, the Court notes
Annex “D” of the Petition, Rollo, p. 39. Respondent testified as follows: respondent’s allegation that the mortgage with the NHMFC was for 25
TSN, January 13, 1998, at 14 (emphasis supplied). years which began September 3, 1994. Respondent filed her Complaint
Q. At the time of the sale, can you tell to for Specific Performance in 1997. Since the 25 years had not lapsed, the
this Court whether the defendant [is] prayer of respondent to compel petitioner to execute necessary documents
still indebted to the [NHMFC]? to effect the transfer of title is premature.
WHEREFORE, the petition is granted. The Decision and Resolution of
A. I am aware that she is indebted. the Court of Appeals are REVERSED and SET ASIDE. The complaint of
Q. Is there any agreement with respect to respondent in Civil Case No. 97-82716 is DISMISSED.
the obligation of the defendant to the SO ORDERED.
NHMFC? Panganiban (C.J., Chairperson), Ynares-Santiago, Callejo,
Sr. and Chico-Nazario, JJ., concur.
A. We have a verbal agreement that I Petition granted, judgment and resolution reversed and set aside.
will be the one to assume the balance. Notes.—It is common practice for the buyer to inform the seller who
Q. When you speak of balance what are referred him; Agents working on commission basis will not normally pass
you talking to? [sic] up a commission by not informing their principal of a referred buyer.
(People vs. Castillo, 333 SCRA 506 [2000])
A. Undue [sic] balance, sir.
One factor which most clearly distinguishes agency from other legal
34 See Bravo-Guerrero v. Bravo, G.R. No. 152658, July 29, 2005, 465 SCRA
concepts is control—one person (the agent) agreeing to act under the
244.
control or direction of another (the principal). (Victorias Milling Co., Inc.
TCT, the Court must stress that the Transfer Certificate of Title No.
35

vs. Court of Appeals, 333 SCRA 663 [2000])

382532 on its face shows that the owner of the property which
36

In this jurisdiction, it is clear that an attorney cannot, without a

admittedly forms the subject matter of the Deed of Absolute Sale refers
client’s authorization, settle the action or subject matter of the litigation
neither to the petitioner nor to her father, Teodorico Doles, the alleged co-
even when he believes that such a settlement will best serve his client’s
owner. Rather, it states that the property is registered in the name of
interest. (Philippine Aluminum Wheels, Inc. vs. FASGI Enterprises,
“Household Development Corporation.” Although there is an entry to the
Inc., 342 SCRA 722 [2000])
effect that the petitioner had been granted a special power of attorney
“covering the shares of Teodorico Doles on the parcel of land described in
——o0o——
this certificate,” it cannot be inferred from this bare notation, nor from
37

any other evidence on the record, that the petitioner or her father held
any direct interest on the property in question so as to validly constitute
a mortgage thereon and, with more reason, to effect the delivery of the
38

object of the sale at the consummation stage. What is worse, there is a

39

notation that the TCT itself has been “cancelled.” 40

In view of these anomalies, the Court cannot entertain the possibility

that respondent agreed to assume the balance of the mortgage loan which
petitioner allegedly owed to the NHMFC, especially since the record is
bereft of any factual finding that petitioner was, in the first place,