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[G.R. No. L-32473. July 31, 1973.

IGNACIO VICENTE and MOISES ANGELES, petitioners, vs. HON. AMBROSIO M.


GERALDEZ, as Judge of the Court of First Instance of Bulacan, Branch V (Sta. Maria),
and HI CEMENT CORPORATION, respondents.

[G.R. No. L-32483. July 31, 1973.]

JUAN BERNABE, petitioner, vs. HI CEMENT CORPORATION and THE HON.


AMBROSIO M. GERALDEZ, Presiding Judge, Branch V, Court of First Instance of
Bulacan, respondents.

Librado S. Correa for petitioners Ignacio Vicente and Moises Angeles.

Francisco R. Capistrano and Andreciano F . Caballero for petitioner Juan Bernabe.

Renato L. Cayetano and Jesus G. Diaz for respondent HI Cement Corporation.

DECISION

ANTONIO, J p:

There are two original actions of certiorari with prayer for preliminary injunction wherein
petitioners seek to annul the orders dated April 24, May 18, and July 18, 1970 of
respondent Judge of the Court of First Instance of Bulacan in Civil Case No. SM-201 (Hi
Cement Corporation vs. Juan Bernabe, Ignacio Vicente and Moises Angeles). The two
cases are herein decided jointly because they proceed from the same case and involve
in substance the same question of law.

On September 9, 1967 herein private respondent Hi Cement Corporation filed with the
Court of First Instance of Bulacan a complaint for injunction and damages against
herein petitioners Juan Bernabe, Ignacio Vicente and Moises Angeles. In said complaint
the plaintiff alleged that it had acquired on October 27, 1965, Placer Lease Contract No.
V-90, from the Banahaw Shale Mining Association, under a deed of sale and transfer
which was duly registered with the Office of the Mining Recorder of Bulacan on
November 4, 1965 and duly approved by the Secretary of Agriculture and Natural
Resources on December 15, 1965; that the said Placer Lease Contract No. V-90 was
for a period of twenty-five years commencing from August 1, 1960 and covered two
mining claims (Red Star VIII & IX) with a combined area of about fifty-one hectares; that
within the limits of Placer Mining Claim Red Star VIII are three parcels of land claimed
by the defendants Juan Bernabe (about two hectares), Ignacio Vicente (about two
hectares), and Moises Angeles (about one-fourth hectare); that the plaintiff had, on
several occasions, informed the defendants, thru its representatives, of the plaintiff's
acquisition of the aforesaid placer mining claims which included the areas occupied by
them; that the plaintiff had requested the defendants to allow its workers to enter the
area in question for exploration and development purposes as well as for the extraction
of minerals therefrom, promising to pay the defendants reasonable amounts as
damages, but the defendants refused to allow entry of the plaintiff's representatives; that
the defendants were threatening the plaintiff's workers with bodily harm if they entered
the premises, for which reason the plaintiff had suffered irreparable damages due to its
failure to work on and develop its claims and to extract minerals therefrom, resulting in
its inability to comply with its contractual commitments, for all of which reasons the
plaintiff prayed the court to issue preliminary writs of mandatory injunction perpetually
restraining the defendants and those cooperating with them from the commission or
continuance of the acts complained of, ordering defendants to allow plaintiff, or its
agents and workers, to enter, develop and extract minerals from the areas claimed by
defendants, to declare the injunction permanent after hearing and to order the
defendants to pay damages to the plaintiff in the amount of P200,000.00, attorney's
fees, expenses of litigation and costs.

On September 12, 1967 the trial court issued a restraining order and required the
defendants to file their answers. The defendants filed their respective answers, which
contained the usual admissions and denials and interposed special and affirmative
defenses, namely, among others, that they are the rightful owners of certain portions of
the land covered by the supposed mining claims: of the plaintiff; that it was the plaintiff
and its workers who had committed acts of force and violence when they entered into
and intruded upon the defendants' lands; and that the complaint failed to state a cause
of action. The defendants set up counter-claims against the plaintiff for actual and moral
damages, as well as for attorney's fees.

In another pleading filed on the same date, defendant Juan Bernabe opposed the
issuance of a writ of preliminary mandatory or prohibitory injunction. In its Order dated
September 30, 1967, the trial court, however, directed the issuance of a writ of
preliminary mandatory injunction upon the plaintiff's posting of a bond in the amount of
P100,000.00. In its order, the court suggested the relocation of the boundaries of the
plaintiff's claims in relation to the properties of the defendants, and to this end named as
Commissioner, a Surveyor from the Office of the District Engineer of Bulacan to relocate
the boundaries of the plaintiff's mining claims, to show in a survey plan the location of
the areas thereof in conflict with the portions whose ownership is claimed by the
defendants and to submit his report thereof to the court on or before October 31, 1967.
The court also directed the parties to send their representatives to the place of the
survey on the date thereof and to furnish the surveyor with copies of their titles. The
Commissioner submitted his report to the Court on November 24, 1967 containing the
following findings:
"1. In the attached survey plan, the area covered and embraced full and heavy lines
is the Placer Mining Claims of the Plaintiff containing an area of 107 hectares while the
area bounded by fine-broken lines are the properties of the Defendants.

"2. The property of the Defendant MOISES ANGELES, consisting of two (2) parcels
known as Lot 1-B and Lot 2 of Psu-103374, both described in O.C.T. No. O-1769 with a
total area of 34,984 square meters were totally covered by the Claims of the Plaintiff.

"3. The property of the Defendant IGNACIO VICENTE, containing an area of 32,619
square meters, is also inside the Claims of the Plaintiff.

4. The property of the Defendant JUAN BERNABE known as Psu-178969,


described in O.C.T No. O-2050 is partially covered by the Claims of the Plaintiff and the
area affected is 57,539 square meters."

In an Order issued on December 14, 1967, the court approved the report "with the
conformity of all the parties in this case."

Thereafter, on April 2, 1968 plaintiff HI Cement Corporation filed a motion to amend the
complaint "so as to conform to the facts brought out and/or impliedly admitted in the pre-
trial." This motion was granted by the court on April 6, 1968. Accordingly, on October
21, 1968, the plaintiff filed its amended complaint. The amendments consisted in the
statement of the correct areas of the land belonging to defendants Bernabe (57,539
square meters), Vicente (32,619 square meters) and Angeles (34,984 square meters),
as well as the addition of allegations to the effect, among others, that at the pre-trial the
defendants Angeles and Vicente declared their willingness to sell to the plaintiff their
properties covered by the plaintiff's mining claims for P10.00 per square meter, and that
when the plaintiff offered to pay only P0.90 per square meter, the said defendants
stated that they were willing to go to trial on the issue of what would be the reasonable
price for the properties of defendants sought to be taken by plaintiff. With particular
reference to defendant Bernabe, the amended complaint alleged that the said
defendant neither protested against nor prohibited the predecessor-in-interest of the
plaintiff from prospecting, discovering, locating and contracting minerals from the
aforementioned claims, or from conducting the survey thereon, or filed any opposition
against the application for lease by the Red Star Mining Association, and that as a result
of the failure of said defendant to object to the acts of possession or occupation over the
said property by plaintiff, defendant is now estopped from claiming that plaintiff
committed acts of usurpation on said property. The plaintiff prayed the court, among
other things, to fix the reasonable value of the defendants' properties as reasonable
compensation for any resulting damage.

Defendant Bernabe filed an amended answer substantially reproducing his original


answer and denying the averments concerning him in the amended complaint.
The respective counsels of the parties then conferred among themselves on the
possibility of terminating the case by compromise the defendants having previously
signified their willingness to sell to the plaintiff their respective properties at reasonable
prices.

On January 30, 1969 the counsels of the parties executed and submitted to the court for
its approval the following Compromise Agreement:

"COMPROMISE AGREEMENT

"COME NOW the plaintiff and the defendants represented by their respective counsel
and respectfully submit the following agreement:

"1. That the plaintiff is willing to buy the properties subject of litigation and the
defendants are willing to sell their respective properties;

"2. That this Honorable Court authorizes the plaintiff and the defendants to appoint
their respective commissioners that is one for the plaintiff and one for each defendant;

"3. That the parties hereby agree to abide by the decision of the Court based on the
findings of the Commissioners;

"4. That the fees of the Commissioners shall be paid as follows:

For those appointed by the parties shall be paid by them respectively; and for the one
appointed by the Court his fees shall be paid pro-rata by the parties;

"5. That the names of the Commissioners to be appointed by the parties shall be
submitted to the Court on or before February 8, 1969.

"WHEREFORE the undersigned respectfully pray that the foregoing agreement be


approved.

"Sta. Maria Bulacan, January 30, 1969.

"For the Plaintiff:

(Sgd.) FRANCISCO VENTURA

t/ FRANCISCO VENTURA

(Sgd.) FLORENTINO V. CARDENAS

t/ FLORENTINO V. CARDENAS

(Sgd.) ENRIQUETO I. MAGPANTAY


t/ ENRIQUETO I. MAGPANTAY

"For Juan Bernabe:

(Sgd.) ANDRECIANO F. CABALLERO

t/ ANDRECIANO F. CABALLERO

"For Ignacio Vicente and

Moises Angeles:

(Sgd.) CONRADO MANZANO

t/ CONRADO MANZANO

"The Clerk of Court

CFI, Sta. Maria, Bulacan

"GREETINGS:

"Please submit the foregoing Compromise Agreement to the Honorable Court for the
consideration and approval immediately upon receipt hereof.

VENTURA, CARDENAS & MAGPANTAY

By:

(Sgd.) FRANCISCO VENTURA

t/ FRANCISCO VENTURA"

On the same date, the foregoing Compromise Agreement was approved by the trial
court, which enjoined the parties to comply with the terms and conditions thereof.

Pursuant to the terms of the said compromise agreement the counsels of both parties
submitted the names of the persons designated by them as their respective
commissioners, and in conformity therewith, the trial court, in its Order dated February
26, 1969, appointed the following as Commissioners: Mr. Larry G. Marquez, to
represent the plaintiff; Mr. Demetrio M. Aquino, to represent defendant Bernabe; Mr.
Moises Correa, to represent defendant Angeles; Mr. Santiago Cabungcal, to represent
defendant Vicente; and Mr. Liberato Barrameda, to represent the court, and directed
that said Commissioners should appear before the court on March 17, 1969, to take
their oath and qualify as such Commissioners, and then meet on March 31, 1969 in the
court for their first session and to submit their report not later than April 30, 1969.
On September 15, 1969, Commissioner Liberato Barrameda submitted to the court for
its approval a Consolidated Report, containing the three reports of the Commissioners
of the plaintiff and the three defendants, together with an analysis of the said reports
and a summary of the important facts and conclusions. The following unit prices for the
three defendants' properties were recommended in the Consolidated Report:

"A — JUAN BERNABE at P12.00 per square meter, wherefrom plaintiff has been
extracting its first output, and would still continue to extract therefrom as the property
consists of a mountain of limestone and shale:

"B — IGNACIO VICENTE:

a) 60% or 19,571.4 sq. m. (mineral land) at P12.00 per sq. m.

b) 40% or 13,047.6 sq. m. (riceland) at P8.00 per sq. m.

"C — MOISES ANGELES (riceland) at P8.00 per sq. m."

It is worthy of note that in the individual report of the Commissioner nominated by


plaintiff HI Cement Corporation, the price recommended for defendant Juan Bernabe's
property was P0.60 per square meter, while in the individual report of the Commissioner
nominated by the said defendant, the price recommended was P50.00 per square
meter. The Commissioners named by defendants Vicente and Angeles recommended
P15.00 per square meter for the lands owned by the said two defendants, while the
Commissioner named by the plaintiff recommended P0.65 per square meter for
Vicente's land, and P0.55 per square meter for Angeles' land.

On October 21, 1969, Atty. Francisco Ventura, one of the three lawyers for plaintiff HI
Cement Corporation, filed with the trial court a manifestation stating that on September
1, 1969 he sent a copy of the Compromise Agreement to Mr. Antonio Diokno, President
of the corporation, requesting the latter to intercede with the Board of Directors for the
confirmation or approval of the commitment made by the plaintiff's lawyers to abide by
the decision of the court based on the reports of the Commissioners; and that on
October 15, 1969 he received a letter from Mr. Diokno, a copy of which was attached to
the manifestation. In that letter Mr. Diokno said:

"While I realize your interest in cooperating with the Court in its desire to expedite the
disposition of the case, this commitment would deprive us of the right to appeal if we do
not agree with the valuation set by the Court. Our Board, therefore, cannot waive its
rights; only when it knows the value set by the Court on the properties can it decide
whether to abide by it or appeal therefrom. I would like to stress that, under the law, the
compromise agreement requires the express approval of our Board of Directors to be
binding on our corporation. Such an approval, I regret to say, cannot be obtained at this
time."

On November 5, 1969, defendant Bernabe filed an answer to Atty. Ventura's


manifestation, praying the court to ignore, disregard and, if possible, order striken from
the record, the plaintiff's manifestation on the following grounds: that its filing after the
Consolidated Report of the Commissioners had been submitted and approved, and long
after the signing of the Compromise Agreement on January 30, 1969, cast suspicion on
the sincerity of the plaintiff's motive; that when the Compromise Agreement was being
considered, the court inquired from the parties and their respective lawyers if all the
attorneys appearing in the case had been duly authorized and/or empowered to enter
into a compromise agreement, and the three lawyers for the plaintiff answered in the
affirmative; that in fact it was Atty. Ventura himself who prepared the draft of the
Compromise Agreement in his own handwriting and was the first to sign the agreement;
that one of the three lawyers for the plaintiff, Atty. Florentino V. Cardenas, who also
signed the Compromise Agreement, was the official representative, indeed was an
executive official, of plaintiff corporation; that the Compromise Agreement, having been
executed pursuant to a pre-trial conference, partakes the nature of a stipulation of facts
mutually agreed upon by the parties and approved by the court, hence, was binding and
conclusive upon the parties; and that the nomination by the plaintiff of Mr. Larry G.
Marquez as its Commissioner pursuant to the Compromise Agreement, was a clear
indication of the plaintiff's tacit approval of the terms and conditions of the Compromise
Agreement, if not an implied ratification of Atty. Ventura's acts.

On March 13, 1970 the court rendered a decision in which the terms and conditions of
the Compromise Agreement are reproduced, and the Consolidated Report of the
Commissioners is extensively quoted. The rationale and dispositive portion of the
decision read:

"What is fair and just compensation?

'Just compensation includes all elements of value that inheres in the property, but it
does not exceed market value fairly determined. The sum required to be paid the owner
does not depend upon the usage to which he has devoted his land but is to be arrived
at upon just consideration of all the uses for which it is suitable. The highest and most
profitable use for which the property is adoptable and needed or likely to be needed in
the reasonably near future is to be considered, not necessarily as the measure of value,
but to the full extent that the prospect of demand for such use affects the market value
while the property is privately held.'

"The term fair and just compensation as applied in expropriation or eminent domain
proceedings need not necessarily be applied in the present case. In expropriation
proceedings the government is the party involved and its use is for public purpose. In
the instant case, however, private parties are involved and the use of the land is a
private venture and for profit.

"It appears that defendants' properties are practically adjacent to plaintiff's plant site. It
also appears that practically all the surrounding areas were acquired by the plaintiff by
purchase.

"In the report submitted by the commissioner representing the plaintiff, it is claimed that
the surrounding areas were acquired thru purchase by the plaintiff in the amount of less
than P1.00 per square meter. On the other hand, it appears from the reports submitted
by the commissioners representing the defendants that there were some recorded sales
around the area from P20.00 to P25.00 per square meter and there were subdivision
lots which command even higher prices.

"The properties are reported to consist of mineral land which are rocky and barren
containing limestone and shale. From the viewpoint of the owners their property which
is described as rocky and barren mineral land must necessarily command a higher
price, and this Court believes that the plaintiff will adopt the same attitude from the
viewpoint of its business.

"While it may be true that the plaintiff acquired properties within the area in question at a
low price, we cannot overlook the fact that this was so at the time when plaintiff
corporation was not yet in operation and that the land owners were not as yet aware of
the potential value of their landholdings.

"Irrespective of the different classifications of the properties owned by the defendants,


and considering the benefits that will enure to the plaintiff and bearing in mind the
property rights and privileges to which the property owners are entitled both under the
constitution and the mining law, coupled with the fact that the plaintiff had already taken
advantage of the properties even long before the rightful acquisition of the same, this
Court believes that the just and fair market value of the land should be in the amount of
P15.00 per square meter.

"In view of the above findings, the plaintiff pursuant to the compromise agreement, is
hereby ordered to pay the defendants the amount of P15.00 per square meter for the
subject properties, and upon full payment, the restraining order earlier issued by this
Court shall be deemed lifted."

On March 23, 1970 defendant Juan Bernabe filed an urgent motion for execution of
judgment anchored on the proposition that the judgment, being based on a compromise
agreement, is not appealable and is, on the other hand, immediately executory. The
other two defendants, Moises Angeles and Ignacio Vicente, likewise filed their
respective motions for execution. These motions were granted by the court in its Order
of April 14, 1970.

On April 17, 1970 the plaintiff filed a motion for reconsideration of the April 14, 1970
Order, alleging that it had an opposition to the defendants' motions for execution, and
that the Compromise Agreement had been repudiated by the plaintiff corporation
through its Vice President, as earlier manifested by the plaintiff. The plaintiff prayed for
ten days from the date of the hearing of the motion within which to file its written
opposition to the motions for execution. Defendant Juan Bernabe filed an opposition to
the plaintiff's motion on April 21, 1970.

On April 22, 1970 the plaintiff filed with the court a motion for new trial on the ground
that the decision of the court dated March 13, 1970 is null and void because it was
based on the Compromise Agreement of January 30, 1969 which was itself null and
void for want of a special authority by the plaintiff's lawyers to enter into the said
agreement. The plaintiff also prayed that the decision dated March 13, 1970 and the
Order dated April 14, 1970 granting the defendants' motions for execution, be set aside.
Defendant Juan Bernabe filed on April 27, 1970 an opposition to the plaintiff's motion on
the grounds that the decision of the court is in accordance with law, for three lawyers for
the plaintiff signed the Compromise Agreement, and one of them, Atty. Cardenas, was
an official representative of plaintiff corporation, hence, when he signed the
Compromise Agreement, he did so in the dual capacity of lawyer and representative of
the management of the corporation; that the plaintiff itself pursued, enforced and
implemented the agreement by appointing Mr. Larry Marquez as its duly accredited
Commissioner; and that the plaintiff is conclusively bound by the acts of its lawyers in
entering into the Compromise Agreement.

In the meantime, or on April 24, 1970, the court issued an Order setting aside its Order
of April 14, 1970 under which the defendants' motions for execution of judgment had
been granted, and gave the plaintiff ten days within which to file an opposition to the
defendants' motions for execution.

On May 9, 1970 the plaintiff filed an opposition to the motions for execution of judgment,
on the grounds that the decision dated March 13, 1970 is contrary to law for it is based
on a compromise agreement executed by the plaintiff's lawyers who had no special
power of attorney as required by Article 1878 of the Civil Code, or any special authority
as required by Section 23, Rule 138 of the Rules of Court; and that the judgment is void
for lack of jurisdiction of the court because the same is based on a void compromise
agreement.

On May 18, 1970 the court issued an Order setting aside its decision dated March 13,
1970, denying the defendants' motions for execution of judgment, and setting for June
23, 1970 a pretrial conference in the case. The three defendants moved for
reconsideration, but their motions were denied in an Order dated July 18, 1970.

It is in these factual premises that the defendants in Civil Case No. SM-201 came to this
Court by means of the present petitions. In G.R. No. L-32473, petitioners Vicente and
Angeles pray this Court to issue a writ of preliminary injunction, and, after hearing, to
annul and set aside the Order dated May 18, 1970 issued by respondent Judge setting
aside the decision dated March 13, 1970; to declare the said decision legal, effective
and immediately executory; to dissolve the writ of preliminary mandatory injunction
issued by respondent Judge on September 30, 1967 commanding petitioners to allow
private respondent to enter their respective properties and excavate thereon; to make
the preliminary injunction permanent; and to award treble costs in favor of petitioners
and against private respondent. In G.R. No. L-32483, petitioner Juan Bernabe prays this
Court to issue a writ of preliminary injunction or, at least a temporary restraining order,
and, after hearing, to annul and set aside the Order dated April 24, 1970 issued by
respondent Judge setting aside his Order of April 14, 1970 and allowing private
respondent to file an opposition to petitioners' motion for execution, the Order dated
May 18, 1970, and the Order dated July 18, 1970. Petitioner Bernabe also seeks the
reinstatement of the trial court's decision dated May 13, 1970 and its Order dated April
14, 1970 granting his motion for execution of judgment, and an award in his favor of
attorney's fees and of actual, moral and exemplary damages.

At issue is whether the respondent court, in setting aside its decision of March 13, 1970
and denying the motions for execution of said decision, had acted without or in excess
of its jurisdiction or with grave abuse of discretion. We hold that said court did not, in
view of the following considerations:

1. Special powers of attorney are necessary, among other cases, in the following: to
compromise and to renounce the right to appeal from a judgment. 1 Attorneys have
authority to bind their clients in any case by any agreement in relation thereto made in
writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they
cannot, without special authority, compromise their clients' litigation, or receive anything
in discharge of their clients' claims but the full amount in cash. 2

The Compromise Agreement dated January 30, 1969 was signed only by the lawyers
for petitioners and by the lawyers for private respondent corporation. It is not disputed
that the lawyers of respondent corporation had not submitted to the Court any written
authority from their client to enter into a compromise.

This Court has said that the Rules 3 "require, for attorneys to compromise the litigation
of their clients, a special authority. And while the same does not state that the special
authority he in writing the court has every reason to expect that, if not in writing, the
same be duly established by evidence other than the self-serving assertion of counsel
himself that such authority was verbally given him." 4

2. The law specifically requires that "juridical persons may compromise only in the
form and with the requisites which may be necessary to alienate their property." 5
Under the corporation law the power to compromise or settle claims in favor of or
against the corporation is ordinarily and primarily committed to the Board of Directors.
The right of the Directors "to compromise a disputed claim against the corporation rests
upon their right to manage the affairs of the corporation according to their honest and
informed judgment and discretion as to what is for the best interests of the corporation."
6 This power may however be delegated either expressly or impliedly to other corporate
officials or agents. Thus it has been stated, that as a general rule an officer or agent of
the corporation has no power to compromise or settle a claim by or against the
corporation, except to the extent that such power is given to him either expressly or by
reasonable implication from the circumstances. 7 It is therefore necessary to ascertain
whether from the relevant facts it could be reasonably concluded that the Board of
Directors of the HI Cement Corporation had authorized its lawyers to enter into the said
compromise agreement.

Petitioners claim that private respondent's attorneys admitted twice in open court on
January 30, 1969, that they were authorized to compromise their client's case, which
fact, according to them, was never denied by the said lawyers in any of the pleadings
filed by them in the case. The claim is unsupported by evidence. On the contrary, in
private respondent's "Reply to Defendant Bernabe's Answer Dated November 8, 1969,"
said counsels categorically denied that they ever represented to the court that they were
authorized to enter into a compromise. Indeed, the complete transcripts of stenographic
notes taken at the proceedings on January 30, 1969 are before Us, and nowhere does it
appear therein that respondent corporation's lawyers ever made such a representation.
In any event, assuming arguendo that they did, such a self-serving assertion cannot
properly be the basis for the conclusion that the respondent corporation had in fact
authorized its lawyers to compromise the litigation.

3. Petitioners however insist that there was tacit ratification on the part of the
corporation, because it nominated Mr. Larry Marquez as its commissioner pursuant to
the agreement, paid his services therefor, and Atty. Florentino V, Cardenas, respondent
corporation's administrative manager, not only did not object but even affixed his
signature to the agreement. It is also argued that respondent corporation having
represented, through its lawyers, to the court and to petitioners that said lawyers had
authority to bind the corporation and having induced by such representations the
petitioners to sign the compromise agreement, said respondent is now estopped from
questioning the same.
The infirmity of these arguments is in their assumption that Atty. Cardenas as
administrative manager had authority to bind the corporation or to compromise the
case. Whatever authority the officers or agents of a corporation may have is derived
from the board of directors, or other governing body, unless conferred by the charter of
the corporation. A corporate officer's power as an agent of the corporation must
therefore be sought from the statute, the charter, the by-laws, or in a delegation of
authority to such officer, from the acts of the board of directors, formally expressed or
implied from a habit or custom of doing business. 8 In the case at bar no provision of
the charter and by-laws of the corporation or any resolution or any other act of the board
of directors of HI Cement Corporation has been cited, from which We could reasonably
infer that the administrative manager had been granted expressly or impliedly the power
to bind the corporation or the authority to compromise the case. Absent such authority
to enter into the compromise, the signature of Atty. Cardenas on the agreement would
be legally ineffectual.

4. As regards the nomination of Mr. Marquez as commissioner, counsel for


respondent corporation has explained — and this has not been disproven — that Atty.
Cardenas, apparently on his own, submitted the same to the court. There is no iota of
proof that at the time of the submission to the Court, on February 26, 1969, of the name
of Mr. Marquez, respondent corporation knew of the contents of the compromise
agreement. As matter of fact, according to the manifestation of Atty. Ventura to the
court, it was only on September 1, 1969 that he sent to Mr. Antonio Diokno, Vice-
President of the corporation, a copy of the compromise agreement for the approval by
the board of directors and on October 22, 1969, Mr. Diokno informed him that the
approval of the Board cannot be obtained, as under the agreement the corporation is
deprived of its right to appeal from the judgment.

In the absence of any proof that the governing body of respondent corporation had
knowledge, either actual or constructive, or the contents of the compromise agreement
before September 1, 1969, why should the nomination of Mr. Marquez as
commissioner, by Attys. Ventura, Cardenas and Magpantay, on February 26, 1969, be
considered as a form of tacit ratification of the compromise agreement by the
corporation? In order to ratify the unauthorized act of an agent and make it binding on
the corporation, it must he shown that the governing body or officer authorized to ratify
had full and complete knowledge of all the material facts connected with the transaction
to which it relates. 9 It cannot be assumed also that Atty. Cardenas, as administrative
manager of the corporation, had authority to ratify. For ratification can never be made
"on the part of the corporation by the same persons who wrongfully assume the power
to make the contract, but the ratification must be by the officer or governing body having
authority to make such contract and, as we have seen, must be with full knowledge."
10
5. Equally inapposite is petitioners' invocation of the principle of estoppel. In the
case at bar, except those made by Attys. Ventura, Cardenas and Magpantay,
petitioners have not demonstrated any act or declaration of the corporation amounting
to false representation or concealment of material facts calculated to mislead said
petitioners. The acts or conduct for which the corporation may be liable under the
doctrine of estoppel must be those of the corporation, its governing body or authorized
officers, and not those of the purported agent who is himself responsible for the
misrepresentation. 11

It having been found by the trial court that "the counsel for the plaintiff entered into the
compromise agreement without the written authority of his client and the latter did not
ratify, on the contrary it repudiated and disowned the same . . . ", 12 We therefore
declare that the orders of the court a quo subject of these two petitions, have not been
issued in excess of its jurisdictional authority or in grave abuse of its discretion.

WHEREFORE, the petitions in these two cases are hereby dismissed. Costs against
the petitioners.

Makalintal, Actg. C .J ., Castro, Teehankee, Barredo, Makasiar and Esguerra, JJ .,


concur.

Zaldivar, J ., is on leave.

Fernando, J ., did not take part.

G.R. No. 38816. November 3, 1933.]

INSULAR DRUG CO., INC., plaintiff-appellee, vs. THE PHILIPPINE NATIONAL BANK,
ET AL., defendants. THE PHILIPPINE NATIONAL BANK, appellant.

Camus & Delgado, for appellant.

Franco & Reinoso, for appellee.

SYLLABUS

1. BANKS AND BANKING; BILLS AND NOTES; PRINCIPAL AND AGENT. — The
right of an agent to indorse commercial paper is a very responsible power and will not
be lightly inferred. A salesman with authority to collect money belonging to his principal
does not have the implied authority to indorse checks received in payment. Any person
taking checks made payable to a corporation, which can act only by agents does so at
his peril, and must abide by the consequences if the agent who indorses the same is
without authority.
2. ID.; ID.; ID. — When a bank accepts the indorsements on checks made out to a
drug company of a salesman of the drug company and the indorsements of the
salesman's wife and clerk, and credits the checks to the personal account of the
salesman and his wife, permitting them to make withdrawals, the bank makes itself
responsible to the drug company for the amounts represented by the checks, unless it is
pleaded and proved that after the money was withdrawn from the bank, it passed to the
drug company which thus suffered no loss.

DECISION

MALCOLM, J p:

This is an appeal taken by the Philippine National Bank from a judgment of the Court of
First Instance of Manila requiring the bank to pay to the Insular Drug Co., Inc., the sum
of P18,285.92 with legal interest and costs.

The record consists of the testimony of Alfred Von Arend, President and Manager of the
Insular Drug Co., Inc., and of exhibits obtained from the Philippine National Bank
showing transactions of U. E. Foerster with the bank. The Philippine National Bank was
content to submit the case without presenting evidence in its behalf. The meagre record
and the statement of facts agreed upon by the attorneys for the contending parties
disclose the following facts:

The Insular Drug Co., Inc., is a Philippine corporation with offices in the City of Manila.
U. E. Foerster was formerly a salesman of the drug company for the Islands of Panay
and Negros. Foerster also acted as a collector for the company. He was instructed to
take the checks which came to his hands for the drug company to the Iloilo branch of
the Chartered Bank of India, Australia and China and deposit the amounts to the credit
of the drug company. Instead, Foerster deposited checks, including those of Juan
Llorente, Dolores Salcedo, Estanislao Salcedo, and a fourth party, with the Iloilo branch
of the Philippine National Bank. The checks were in that bank placed in the personal
account of Foerster. Some of the checks were drawn against the Bank of the Philippine
Islands and some were drawn against the Philippine National Bank. After the
indorsements on the checks was written "Received payment prior indorsement
guaranteed by the Philippine National Bank, Iloilo Branch, Angel Padilla, Manager." The
indorsements on the checks took various forms, some being "Insular Drug Company,
Inc. By: (Sgd.) U. Foerster, Agent.(Sgd.) U. Foerster" others being "Insular Drug Co.,
Inc. By: (Sgd.) Carmen E. de Foerster, Carmen E. de Foerster"; others "(Sgd.) Carmen
E. de Foerster, (Sgd.) Carmen E. de Foerster"; one "(Sgd.) U. Foerster. (Sgd.) U.
Foerster"; others "Insular Drug Co., Inc. Carmen E. de Foerster, By: (Sgd.) V. Bacaldo,"
etc. In this connection it should be explained that Carmen E. de Foerster was the wife of
U. E. Foerster, and that V. Bacaldo was his stenographer. As a consequence of the
indorsements on the checks the amounts therein stated were subsequently withdrawn
by U. E. Foerster and Carmen E. de Foerster.

Eventually the Manila office of the drug company investigated the transactions of
Foerster. Upon the discovery of anomalies, Foerster committed suicide. But there is no
evidence showing that the bank knew that Foerster was misappropriating the funds of
his principal. The Insular Drug Company claims that it never received the face value of
the 132 checks here in question covering a total of P18,285.92.

There is no Philippine authority which directly fits the proven facts. The case of Fulton
Iron Works Co. vs. China Banking Corporation ([1930]), 55 Phil., 208), mentioned by
both parties rests on a different state of facts. However, there are elementary principles
governing the relationship between a bank and its customers which are controlling.

In the first place, the bank argues that the drug company was never defrauded at all.
While the evidence on the extent of the loss suffered by the drug company is not nearly
as clear as it should be, it is a sufficient answer to state that no such special defense
was relied upon by the bank in the trial court. The drug company saw fit to stand on the
proposition that checks drawn in its favor were improperly and illegally cashed by the
bank for Foerster and placed in his personal account, thus making it possible for
Foerster to defraud the drug company, and the bank did not try to go back of this
proposition.

The next point relied upon by the bank, to the effect that Foerster had implied authority
to indorse all checks made out in the name of the Insular Drug Co., Inc., has even less
force. Not only did the bank permit Foerster to indorse the checks and then place them
to his personal account, but it went farther and permitted Foerster's wife and clerk to
indorse the checks. The right of an agent to indorse commercial paper is a very
responsible power and will not be lightly inferred. A salesman with authority to collect
money belonging to his principal does not have the implied authority to indorse checks
received in payment. Any person taking checks made payable to a corporation, which
can act only by agents does so at his peril, and must abide by the consequences if the
agent who indorses the same is without authority. (Arcade Realty Co. vs. Bank of
Commerce [1919], 180 Cal., 318; Standard Steam Speciality Co. vs. Corn Exchange
Bank [1917], 220 N. Y., 278; People vs. Bank of North America [1879], 75 N. Y., 547;
Graham vs. United States Savings Institution [1870], 46 Mo., 186.)

Further speaking to the errors specified by the bank, it is sufficient to state that no trust
fund was involved; that the fact that the bank acted in good faith does not relieve it from
responsibility; that no proof was adduced, admitting that Foerster had the right to
indorse the checks, indicative of the right of his wife and clerk to do the same, and that
the checks drawn on the Bank of the Philippine Islands can not be differentiated from
those drawn on the Philippine National Bank because of the indorsement by the latter.

In brief, this is a case where 132 checks made out in the name of the Insular Drug Co.,
Inc., were brought to the branch office of the Philippine National Bank in Iloilo by
Foerster, a salesman of the drug company, Foerster's wife, and Foerster's clerk. The
bank could tell by the checks themselves that the money belonged to the Insular Drug
Co., Inc., and not to Foerster of his wife or his clerk. When the bank credited those
checks to the personal account of Foerster and permitted Foerster and his wife to make
withdrawals without there being any authority from the drug company to do so, the bank
made itself responsible to the drug company for the amounts represented by the
checks. The bank could relieve itself from responsibility by pleading and proving that
after the money was withdrawn from the bank it passed to the drug company which thus
suffered no loss, but the bank has not done so. Much more could be said about this
case, but it suffices to state in conclusion that the bank will have to stand the loss
occasioned by the negligence of its agents.

Overruling the errors assigned, the judgment of the trial court will be affirmed, the costs
of this instance to be paid by the appellant.

Villa-Real, Hull, Imperial and Butte, JJ., concur.

C o p y r i g h t 1 9 9 4 - 1 9 9 9 C D T e c h n o l o g i e s A s i a, I n c.

G.R. No. 38384 November 3, 1933

Veloso y Ricablanca v. La Urbana

058 Phil 681

EN BANC

[G.R. No. 38384. November 3, 1933.]

CORAZON CH. VELOSO Y RICABLANCA and ROBUSTIANO M. ROSALES, plaintiffs-


appellees, vs. LA URBANA, Mutual Building and Loan Association, and JOSE MARIA
DEL MAR, defendants. LA URBANA, Mutual Building and Loan Association, appellant.

Ramirez & Ortigas, for appellant.

Gullas, Lopez & Tuaño and Jose N. Leuterio, for appellees.


Solicitor-General Hilado, for the Insular Treasurer as amicus curiae.

SYLLABUS

1. FORGED POWERS OF ATTORNEY; REGISTRATION OF MORTGAGES


WHICH ARE NULL AND VOID AND WITHOUT FORGE AND EFFECT. — Pursuant to
article 1714 of the Civil Code and under the Torrens Act in force in this jurisdiction, the
forged powers of attorney prepared by Del Mar are without force and effect, and the
record of the mortgages constituted by virtue thereof were likewise null and void and
without force and effect, and that they could not in any way prejudice the rights of the
plaintiff herein as the registered owner of her participations in the properties in question.

DECISION

IMPERIAL, J p:

The plaintiffs herein brought this action to annul certain mortgages constituted by Jose
Maria del Mar in the name of the plaintiff, Corazon Ch. Veloso in favor of the defendant
corporation, and recover damages amounting to P2,000 from the defendants.

La Urbana, one of the defendants herein, appealed from the judgment rendered in this
case, the dispositive part of which reads as follows:

"For the reasons above stated, the deeds of mortgage executed by Jose del Mar in the
name of Corazon Ch. Veloso in favor of La Urbana are declared null and void in so far
as they purport to bind the plaintiffs or their property; the sale of the said property to La
Urbana by virtue of these mortgages is also hereby declared null and void; and it is
further ordered and adjudged that the registration of the said deeds in the office of the
register of deeds of Manila be cancelled, and that La Urbana and Jose del Mar pay the
costs of this suit.

"This decision is without prejudice to any right of action which La Urbana may have
against Jose Maria del Mar or the Insular Treasurer, or both, under the provisions of
sections 99 to 107 of Act No. 496. So ordered."

The plaintiff Corazon Ch. Veloso was the owner of certain undivided portions of the five
parcels of land in question together with the improvements thereon, situated in the City
of Manila, and described in certificates of title Nos. 5767 and 33360. In the month of
May, 1929, the defendant herein Jose Maria del Mar, plaintiff's brother-in-law, forged
two powers of attorney purporting to have been executed by the plaintiffs, as husband
and wife, conferring upon him ample authority to mortgage the plaintiff's participation in
the aforementioned properties described in said certificates of title. These powers of
attorney were duly registered in the office of the register of deeds. Acting under these
powers of attorney, Del Mar succeeded in mortgaging the plaintiff's participations to La
Previsora Filipina. On February 6, 1929, he cancelled said mortgage and transferred it
to the defendant La Urbana which granted him a loan of P10,600. Upon mortgaging the
said participations of the plaintiff to the aforesaid defendant, Del Mar delivered to the
mortgage creditor the owner's duplicates of the certificates of title whereon the
mortgage in question was noted. On November 14 of the same year, Del Mar obtained
from the same defendant an additional loan of P2,875 and executing another mortgage
deed which was likewise noted on the aforesaid duplicates of the certificates of title. Del
Mar later violated the conditions of the mortgages whereupon La Urbana foreclosed
them and purchased the said properties at public auction for the sum of P10,051.82
which was the total amount of Del Mar's indebtedness at that time. The plaintiffs herein
learned of Del Mar's fraudulent transactions from the advertisement of the sale thereof,
and in addition to this civil action, they instituted criminal proceedings against him
resulting in his conviction of the crime of falsification and the imposition upon him of a
sentence of two (2) years, four (4) months and one (1) day of prision correccional.

In view of the foregoing facts, the court held that pursuant to article 1714 of the Civil
Code and under the Torrens Act in force in this jurisdiction, the forged powers of
attorney prepared by Del Mar were without force and effect and that the registration of
the mortgages constituted by virtue thereof were likewise null and void and without force
and effect, and that they could not in any way prejudice the rights of the plaintiff as the
registered owner of her participations in the properties in question.

The defendant-appellant herein assigns various alleged errors in its brief which we have
found to be groundless after a careful consideration thereof. Inasmuch as Del Mar is not
the registered owner of the mortgaged properties and inasmuch as the appellant was
fully aware of the fact that it was dealing with him on the strength of the alleged powers
of attorney purporting to have been conferred upon him by the plaintiff, it was its duty to
ascertain the genuineness of said instruments and not rely absolutely and exclusively
upon the fact that the said powers of attorney appeared to have been registered. In view
of its failure to proceed in this manner, it acted negligently and should suffer the
consequences and damages resulting from such transactions.

"Every person dealing with an agent is put upon inquiry, and must discover upon his
peril the authority of the agent, and this is especially true where the act of the agent is of
an unusual nature.

"If a person makes no inquiry, he is chargeable with knowledge of the agent's authority,
and his ignorance of that authority will not be any excuse." (Deen vs. Pacific
Commercial Co., 42 Phil., 738.)

"Persons dealing with an assumed agent, whether the assumed agency be a general or
special one, are bound at their peril, if they would hold the principal, to ascertain not
only the fact of the agency but the nature and extent of the authority, and in case either
is controverted, the burden of proof is upon them to establish it." (Harry E. Keeler
Electric Co. vs. Rodriquez, 44 Phil., 19.)

As has been noted at the beginning, the court reserved to the appellant any right of
action it might have against Del Mar and the Insular Treasurer under the provisions of
sections 99 to 107 of Act No. 496. We deem it unnecessary to repeat such reservation
in this decision. At all events, the appellant may exercise such right of action without the
necessity of such reservation if the facts of the case so warrant.

Wherefore, the judgment appealed from is hereby affirmed, with the costs against the
appellant. So ordered.

Malcolm, Villa-Real, Hull and Butte, JJ., concur.

EQUITABLE PCI BANK, formerly EQUITABLE BANKING CORPORATION, petitioner,


vs. ROSITA KU, respondent.

Curato Divina & Partners for petitioner.

Rico B. Bolongaita for respondent.

SYNOPSIS

When petitioner became the owner of respondent's foreclosed property, it filed an


ejectment suit against respondent's father where the MeTC ordered the eviction of
respondent and father from the subject property. Respondent, however, contended that
she was not made a party to the ejectment suit and thus deprived of her right to due
process. The Court of Appeals agreed with the contention and subsequently rendered a
decision enjoining the eviction of respondent from the premises. Hence, instant petition,
which respondent claimed was defective. Allegedly, petitioner filed its motion for
extension to file the instant petition 16 days from receipt of the CA decision, or one day
beyond the reglementary period. ASTcEa

In light of the merits of the instant petition, the Court gave due course to the petition. A
judgment in an ejectment suit is binding not only upon the defendants in the suit but
also against those not made parties thereto if they are "members of the family . . .''
Thus, respondent was bound by the MeTC judgment of eviction as she is the daughter
of the defendant in the ejectment suit.
SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; EJECTMENT; TO WHOM


JUDGMENT THEREOF IS BINDING. — Generally, no man shall be affected by any
proceeding to which he is a stranger, and strangers to a case are not bound by
judgment rendered by the court. Nevertheless, a judgment in an ejectment suit is
binding not only upon the defendants in the suit but also against those not made parties
thereto, if they are: a) trespassers, squatters or agents of the defendant fraudulently
occupying the property to frustrate the judgment; b) guests or other occupants of the
premises with the permission of the defendant; c) transferees pendente lite; d) sub-
lessees; e) co-lessees; or f) members of the family, relatives and other privies of the
defendant. Thus, even if respondent were a resident of the property, a point disputed by
the parties, she is nevertheless bound by the judgment of the MeTC in the action for
ejectment despite her being a non-party thereto. Respondent is the daughter of Ku Giok
Heng, the defendant in the action for ejectment. ADScCE

2. CIVIL LAW; SPECIAL CONTRACTS; AGENCY; MAY BE EXPRESS AND


IMPLIED; ACCEPTANCE BY AGENT, MAY ALSO BE EXPRESS OR IMPLIED. — An
agency may be express but it may also be implied from the acts of the principal, from
his silence, or lack of action, or his failure to repudiate the agency, knowing that another
person is acting on his behalf without authority. Likewise, acceptance by the agent may
also be express, although it may also be implied from his acts which carry out the
agency, or from his silence or inaction according to the circumstances.

3. REMEDIAL LAW; LIBERAL CONSTRUCTION; SUSPENSION OF


REGLEMENTARY RULES ALLOWED IN LIGHT OF THE MERITS OF THE PETITION.
— Assuming the motion for extension was indeed one day late, petitioner urges the
Court, in any event, to suspend its rules and admit the petition in the interest of justice.
Petitioner invokes Philippine National Bank vs. Court of Appeals, where the petition was
filed three (3) days late. The Court proceeded to enumerate cases where the rules on
reglementary periods were suspended. The Court finds these arguments to be
persuasive, especially in light of the merits of the petition. cDTIAC

DECISION

KAPUNAN, J p:

Can a person be evicted by virtue of a decision rendered in an ejectment case where


she was not joined as a party? This was the issue that confronted the Court of Appeals,
which resolved the issue in the negative. To hold the contrary, it said, would violate due
process. Given the circumstances of the present case, petitioner Equitable PCI Bank
begs to differ. Hence, this petition. CHEDAc
On February 4, 1982, respondent Rosita Ku, as treasurer of Noddy Dairy Products, Inc.,
and Ku Giok Heng, as Vice-President/General Manager of the same corporation,
mortgaged the subject property to the Equitable Banking Corporation, now known as
Equitable PCI Bank to secure Noddy Inc.'s loan to Equitable. The property, a residential
house and lot located in La Vista, Quezon City, was registered in respondent's name.

Noddy, Inc. subsequently failed to pay the loan secured by the mortgage, prompting
petitioner to foreclose the property extrajudicially. As the winning bidder in the
foreclosure sale, petitioner was issued a certificate of sale. Respondent failed to redeem
the property. Thus, on December 10, 1984, the Register of Deeds canceled the
Transfer Certificate of Title in the name of respondent and a new one was issued in
petitioner's name.

On May 10, 1989, petitioner instituted an action for ejectment before the Quezon City
Metropolitan Trial Court (MeTC) against respondent's father Ku Giok Heng. Petitioner
alleged that it allowed Ku Giok Heng to remain in the property on the condition that the
latter pay rent. Ku Giok Heng's failure to pay rent prompted the MeTC to seek his
ejectment. Ku Giok Heng denied that there was any lease agreement over the property.
aHTCIc

On December 8, 1994, the MeTC rendered a decision in favor of petitioner and ordered
Ku Giok Heng to, among other things, vacate the premises. It ruled:

. . . for his failure or refusal to pay rentals despite proper demands, the defendant had
not established his right for his continued possession of or stay in the premises acquired
by the plaintiff thru foreclosure, the title of which had been duly transferred in the name
of the plaintiff. The absence of lease agreement or agreement for the payment of rentals
is of no moment in the light of the prevailing Supreme Court ruling on the matter. Thus:
"It is settled that the buyer in foreclosure sale becomes the absolute owner of the
property purchased if it is not redeemed during the period of one (1) year after the
registration of the sale is as such he is entitled to the possession of the property and the
demand at any time following the consolidation of ownership and the issuance to him of
a new certificate of title. The buyer can, in fact, demand possession of the land even
during the redemption period except that he has to post a bond in accordance with
Section 7 of Act No. 3155 as amended. Possession of the land then becomes an
absolute right of the purchaser as confirmed owner. Upon proper application and proof
of title, the issuance of a writ of possession becomes a ministerial duty of the court.
(David Enterprises vs. IBAA[,] 191 SCRA 116). 1

Ku Giok Heng did not appeal the decision of the MeTC. Instead, he and his daughter,
respondent Rosita Ku, filed on December 20, 1994, an action before the Regional Trial
Court (RTC) of Quezon City to nullify the decision of the MeTC. Finding no merit in the
complaint, the RTC on September 13, 1999 dismissed the same and ordered the
execution of the MeTC decision.

Respondent filed in the Court of Appeals (CA) a special civil action for certiorari
assailing the decision of the RTC. She contended that she was not made a party to the
ejectment suit and was, therefore, deprived of due process. The CA agreed and, on
March 31, 2000, rendered a decision enjoining the eviction of respondent from the
premises. cHAaEC

On May 10, 2000, Equitable PCI Bank filed in this Court a motion for an extension of 30
days from May 10, 2000 or until June 9, 2000 to file its petition for review of the CA
decision. The motion alleged that the Bank received the CA decision on April 25, 2000.
2 The Court granted the motion for a 30-day extension "counted from the expiration of
the reglementary period" and "conditioned upon the timeliness of the filing of [the]
motion [for extension]." 3

On June 13, 2000, 4 Equitable Bank filed its petition, contending that there was no need
to name respondent Rosita Ku as a party in the action for ejectment since she was not a
resident of the premises nor was she in possession of the property.

The petition is meritorious.

Generally, no man shall be affected by any proceeding to which he is a stranger, and


strangers to a case are not bound by judgment rendered by the court. 5 Nevertheless, a
judgment in an ejectment suit is binding not only upon the defendants in the suit but
also against those not made parties thereto, if they are:

a) trespassers, squatters or agents of the defendant fraudulently occupying the


property to frustrate the judgment;

b) guests or other occupants of the premises with the permission of the defendant;

c) transferees pendente lite;

d) sub-lessees;

e) co-lessees; or

f) members of the family, relatives and other privies of the defendant. 6

Thus, even if respondent were a resident of the property, a point disputed by the
parties, she is nevertheless bound by the judgment of the MeTC in the action for
ejectment despite her being a non-party thereto. Respondent is the daughter of Ku Giok
Heng, the defendant in the action for ejectment.
Respondent nevertheless claims that the petition is defective. The bank alleged in its
petition that it received a copy of the CA decision on April 25, 2000. A Certification
dated June 6, 2000 issued by the Manila Central Post Office reveals, however, that the
copy "was duly delivered to and received by Joel Rosales (Authorized Representative)
on April 24, 2000." 7 Petitioner's motion for extension to file this petition was filed on
May 10, 2000, sixteen (16) days from the petitioner's receipt of the CA decision (April
24, 2000) and one (1) day beyond the reglementary period for filing the petition for
review (May 9, 2000).

Petitioner however maintains "its honest representation of having received [a copy of


the decision] on April 25, 2000." 8 Appended as Annex "A" to petitioner's Reply is an
Affidavit 9 dated October 27, 2000 and executed by Joel Rosales, who was mentioned
in the Certification as having received the decision. The Affidavit states:

(1) I am an employee of Unique Industrial & Allied Services, Inc. (Unique) a


corporation duly organized and existing under Philippine laws with principal place of
business at 1206 Vito Cruz St., Malate, Manila, and I am assigned with the Equitable
PCI Bank, Mail and Courier Department, Equitable PCI Bank Tower II, cor. Makati
Avenue and H.V. dela Costa St., Makati City, Metro Manila;

(2) Under the contract of services between the Bank and Unique, it is my official duty
and responsibility to receive and pick-up from the Manila Central Post Office (CPO) the
various mails, letters, correspondence, and other mail matters intended for the bank's
various departments and offices at Equitable Bank Building, 262 Juan Luna St.,
Binondo, Manila. This building, however, also houses various other offices or tenants
not related to the Bank.

(3) I am not the constituted agent of "Curato Divina Mabilog Niedo Magturo
Pagaduan Law Office" whose former address is at Rm. 405 4/F Equitable Bank Bldg.,
262 Juan Luna St., Binondo, Manila, for purposes of receiving their incoming mail
matters; neither am I any such agent of the various other tenants of the said Building.
On occasions when I receive mail matters for said law office, it is only to help them
receive their letters promptly. ScaATD

(4) On April 24, 2000, I received the registered letter sent by the Court of Appeals,
covered by Registry Receipt No. 125234 and Deliver No. 4880 (copy of envelope
attached as Annex "A") together with other mail matters, and brought them to the Mail
and Courier Department;

(5) After sorting out these mail matters, on April 25, 2000, I erroneously recorded
them on page 422 of my logbook as having been received by me on said dated April 25,
2000 (copy of page 422 is attached as Annex "B").
(6) On April 27, 2000, this letter was sent by the Mail and Courier Department to said
Law Office whose receiving clerk Darwin Bawar opened the letter and stamped on the
"Notice of Judgment" their actual date of receipt: "April 27, 2000" (copy of the said
Notice with the date so stamped is attached as Annex "C").

(7) On May 8, 2000, Atty. Roland A. Niedo of said law office inquired from me as to
my actual date of receipt of this letter, and I informed him that based on my logbook, I
received it on April 25, 2000.

(8) I discovered this error only on September 6, 2000, when I was informed by Atty.
Niedo that Postmaster VI Alfredo C. Mabanag, Jr. of the Central Post Office, Manila,
issued a certification that I received the said mail on April 24, 2000.

(9) I hereby confirm that this error was caused by an honest mistake. EDISaA

Petitioner argues that receipt on April 25, 2000 by Joel Rosales, who was not an agent
of its counsel's law office, did not constitute notice to its counsel, as required by
Sections 2 10 and 10, 11 Rule 13 of the Rules of Court. To support this contention,
petitioner cites Philippine Long Distance Telephone Co. vs. NLRC. 12 In said case, the
bailiff served the decision of the National Labor Relations Commission at the ground
floor of the building of the petitioner therein, the Philippine Long Distance Telephone
Co., rather than on the office of its counsel, whose address, as indicated in the notice of
the decision, was on the ninth floor of the building. We held that:

. . . practical considerations and the realities of the situation dictate that the service
made by the bailiff on March 23, 1981 at the ground floor of the petitioner's building and
not at the address of record of petitioner's counsel on record at the 9th floor of the PLDT
building cannot be considered a valid service. It was only when the Legal Services
Division actually received a copy of the decision on March 26, 1981 that a proper and
valid service may be deemed to have been made. . . . .

Applying the foregoing provisions and jurisprudence, petitioner submits that actual
receipt by its counsel was on April 27, 2000, not April 25, 2000. Following the argument
to its logical conclusion, the motion for extension to file the petition for review was even
filed two (2) days before the lapse of the 15-day reglementary period. That counsel
treated April 25, 2000 and not April 27, 2000 as the date of receipt was purportedly
intended to obviate respondent's possible argument that the 15-day period had to be
counted from April 25, 2000.

The Court is not wholly convinced by petitioner's argument. The Affidavit of Joel
Rosales states that he is "not the constituted agent of 'Curato Divina Mabilog Nedo
Magturo Pagaduan Law Office."' An agency may be express but it may also be implied
from the acts of the principal, from his silence, or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without
authority. 13 Likewise, acceptance by the agent may also be express, although it may
also be implied from his acts which carry out the agency, or from his silence or inaction
according to the circumstances. 14 In this case, Joel Rosales averred that "[o]n
occasions when I receive mail matters for said law office, it is only to help them receive
their letters promptly," implying that counsel had allowed the practice of Rosales
receiving mail in behalf of the former. There is no showing that counsel had objected to
this practice or took steps to put a stop to it. The facts are, therefore, inadequate for the
Court to make a ruling in petitioner's favor. CSHDTE

Assuming the motion for extension was indeed one day late, petitioner urges the Court,
in any event, to suspend its rules and admit the petition in the interest of justice.
Petitioner invokes Philippine National Bank vs. Court of Appeals, 15 where the petition
was filed three (3) days late. The Court held:

It has been said time and again that the perfection of an appeal within the period fixed
by the rules is mandatory and jurisdictional. But, it is always in the power of this Court to
suspend its own rules, or to except a particular case from its operation, whenever the
purposes of justice require it. Strong compelling reasons such as serving the ends of
justice and preventing a grave miscarriage thereof warrant the suspension of the rules.

The Court proceeded to enumerate cases where the rules on reglementary periods
were suspended. Republic vs. Court of Appeals 16 involved a delay of six days;
Siguenza vs. Court of Appeals, 17 thirteen days; Pacific Asia Overseas Shipping
Corporation vs. NLRC, 18 one day; Cortes vs. Court of Appeals, 19 seven days; Olacao
vs. NLRC, 20 two days; Legasto vs. Court of Appeals, 21 two days; and City Fair
Corporation vs. NLRC, 22 which also concerned a tardy appeal.

The Court finds these arguments to be persuasive, especially in light of the merits of the
petition.

WHEREFORE, the petition is GIVEN DUE COURSE and GRANTED. The decision of
the Court of Appeals is REVERSED. SHIcDT

SO ORDERED.

Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.


[G.R. No. 120528. January 29, 2001.]

ATTY. DIONISIO CALIBO, JR., petitioner, vs. COURT OF APPEALS and DR. PABLO
U. ABELLA, respondents.

Dionisio A. Calibo, Jr. in his own behalf.

Delfin M. Quijano for private respondent.

SYNOPSIS

A tractor owned by private respondent was offered by Mike Abella, his son, as security
in the payment of his rents in arrears with petitioner who took possession thereof. This
tractor became the subject of a suit for replevin with private respondent alleging that the
pledge was made without his knowledge and consent. Petitioner, on the other hand,
alleged that the tractor was validly pledged to him by respondent's son to answer for his
financial obligations. In the alternative, petitioner asserted that the tractor was left with
him in the concept of an innkeeper, on deposit. The trial court rendered judgment in
favor of private respondent. The same was affirmed on appeal by the Court of Appeals.
Hence, this recourse. TcCEDS

In a contract of pledge, the creditor is given the right to retain his debtor's movable
property in his possession, or that of a third person to whom it has been delivered. It
does not apply where, as in this case, the lessee is not the owner of the property. In
deposit, a person receives an object belonging to another with the obligation of safely
keeping it and of returning the same. There is no deposit where the principal purpose
for receiving the object is not for safekeeping.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; PLEDGE; REQUISITES. — In a


contract of pledge, the creditor is given the right to retain his debtor's movable property
in his possession, or in that of a third person to whom it has been delivered, until the
debt is paid. For the contract to be valid, it is necessary that: (1) the pledge is
constituted to secure the fulfillment of a principal obligation; (2) the pledgor be the
absolute owner of the thing pledged; and (3) the person constituting the pledge has the
free disposal of his property, and in the absence thereof, that he be legally authorized
for the purpose.

2. ID.; ID.; ID.; NOT PRESENT WHERE POSSESSION OF SUBJECT PROPERTY


WAS FOR SAFEKEEPING. — As found by the trial court and affirmed by respondent
court, the pledgor in this case, Mike Abella, was not the absolute owner of the tractor
that was allegedly pledged to petitioner. The tractor was owned by his father, private
respondent, who left the equipment with him for safekeeping. Clearly, the second
requisite for a valid pledge, that the pledgor be the absolute owner of the property, is
absent in this case. Hence, there is no valid pledge.

3. ID.; ID.; DEPOSIT; PURPOSE IS FOR SAFEKEEPING. — In a contract of


deposit, a person receives an object belonging to another with the obligation of safely
keeping it and of returning the same. Petitioner himself states that he received the
tractor not to safely keep it but as a form of security for the payment of Mike Abella's
obligations. There is no deposit where the principal purpose for receiving the object is
not safekeeping. TSAHIa

DECISION

QUISUMBING, J p:

Before us is the petition for review on certiorari by petitioner Dionisio Calibo, Jr.,
assailing the decision of the Court of Appeals in CA-G.R. CV No. 39705, which affirmed
the decision of the Regional Trial Court of Cebu, Branch 11, declaring private
respondent as the lawful possessor of a tractor subject of a replevin suit and ordering
petitioner to pay private respondent actual damages and attorney's fees. aCATSI

The facts of the case, as summarized by respondent court, are undisputed.

". . . on January 25, 1979, plaintiff-appellee [herein petitioner] Pablo U. Abella


purchased an MF 210 agricultural tractor with Serial No. 00105 and Engine No.
P126M00199 (Exhibit A; Record, p. 5) which he used in his farm in Dagohoy, Bohol.

Sometime in October or November 1985, Pablo Abella's son, Mike Abella rented for
residential purposes the house of defendant-appellant Dionisio R. Calibo, Jr., in
Tagbilaran City.

In October 1986, Pablo Abella pulled out his aforementioned tractor from his farm in
Dagohoy, Bohol, and left it in the safekeeping of his son, Mike Abella, in Tagbilaran
City. Mike kept the tractor in the garage of the house he was leasing from Calibo.

Since he started renting Calibo's house, Mike had been religiously paying the monthly
rentals therefor, but beginning November of 1986, he stopped doing so. The following
month, Calibo learned that Mike had never paid the charges for electric and water
consumption in the leased premises which the latter was duty-bound to shoulder. Thus,
Calibo confronted Mike about his rental arrears and the unpaid electric and water bills.
During this confrontation, Mike informed Calibo that he (Mike) would be staying in the
leased property only until the end of December 1986. Mike also assured Calibo that he
would be settling his account with the latter, offering the tractor as security. Mike even
asked Calibo to help him find a buyer for the tractor so he could sooner pay his
outstanding obligation.
In January 1987 when a new tenant moved into the house formerly leased to Mike,
Calibo had the tractor moved to the garage of his father's house, also in Tagbilaran City.

Apprehensive over Mike's unsettled account, Calibo visited him in his Cebu City
address in January, February and March, 1987 and tried to collect payment. On all
three occasions, Calibo was unable to talk to Mike as the latter was reportedly out of
town. On his third trip to Cebu City, Calibo left word with the occupants of the Abella
residence thereat that there was a prospective buyer for the tractor. The following week,
Mike saw Calibo in Tagbilaran City to inquire about the possible tractor buyer. The sale,
however, did not push through as the buyer did not come back anymore. When again
confronted with his outstanding obligation, Mike reassured Calibo that the tractor would
stand as a guarantee for its payment. That was the last time Calibo saw or heard from
Mike.

After a long while, or on November 22, 1988, Mike's father, Pablo Abella, came to
Tagbilaran City to claim and take possession of the tractor. Calibo, however, informed
Pablo that Mike left the tractor with him as security for the payment of Mike's obligation
to him. Pablo offered to write Mike a check for P2,000.00 in payment of Mike's unpaid
lease rentals, in addition to issuing postdated checks to cover the unpaid electric and
water bills the correctness of which Pablo said he still had to verify with Mike. Calibo
told Pablo that he would accept the P2,000.00-check only if the latter would execute a
promissory note in his favor to cover the amount of the unpaid electric and water bills.
Pablo was not amenable to this proposal. The two of them having failed to come to an
agreement, Pablo left and went back to Cebu City, unsuccessful in his attempt to take
possession of the tractor." 1

On November 25, 1988, private respondent instituted an action for replevin, claiming
ownership of the tractor and seeking to recover possession thereof from petitioner. As
adverted to above, the trial court ruled in favor of private respondent; so did the Court of
Appeals when petitioner appealed. ICTacD

The Court of Appeals sustained the ruling of the trial court that Mike Abella could not
have validly pledged the subject tractor to petitioner since he was not the owner thereof,
nor was he authorized by its owner to pledge the tractor. Respondent court also
rejected petitioner's contention that, if not a pledge, then a deposit was created. The
Court of Appeals said that under the Civil Code, the primary purpose of a deposit is only
safekeeping and not, as in this case, securing payment of a debt.

The Court of Appeals reduced the amount of actual damages payable to private
respondent, deducting therefrom the cost of transporting the tractor from Tagbilaran,
Bohol, to Cebu City.

Hence, this petition.


Essentially, petitioner claims that the tractor in question was validly pledged to him by
private respondent's son Mike Abella to answer for the latter's monetary obligations to
petitioner. In the alternative, petitioner asserts that the tractor was left with him, in the
concept of an innkeeper, on deposit and that he may validly hold on thereto until Mike
Abella pays his obligations.

Petitioner maintains that even if Mike Abella were not the owner of the tractor, a
principal-agent relationship may be implied between Mike Abella and private
respondent. He contends that the latter failed to repudiate the alleged agency, knowing
that his son is acting on his behalf without authority when he pledged the tractor to
petitioner. Petitioner argues that, under Article 1911 of the Civil Code, private
respondent is bound by the pledge, even if it were beyond the authority of his son to
pledge the tractor, since he allowed his son to act as though he had full powers.

On the other hand, private respondent asserts that respondent court had correctly ruled
on the matter.

In a contract of pledge, the creditor is given the right to retain his debtor's movable
property in his possession, or in that of a third person to whom it has been delivered,
until the debt is paid. For the contract to be valid, it is necessary that: (1) the pledge is
constituted to secure the fulfillment of a principal obligation; (2) the pledgor be the
absolute owner of the thing pledged; and (3) the person constituting the pledge has the
free disposal of his property, and in the absence thereof, that he be legally authorized
for the purpose. 2

As found by the trial court and affirmed by respondent court, the pledgor in this case,
Mike Abella, was not the absolute owner of the tractor that was allegedly pledged to
petitioner. The tractor was owned by his father, private respondent, who left the
equipment with him for safekeeping. Clearly, the second requisite for a valid pledge,
that the pledgor be the absolute owner of the property, is absent in this case. Hence,
there is no valid pledge.

"He who is not the owner or proprietor of the property pledged or mortgaged to
guarantee the fulfillment of a principal obligation, cannot legally constitute such a
guaranty as may validly bind the property in favor of his creditor, and the pledgee or
mortgagee in such a case acquires no right whatsoever in the property pledged or
mortgaged." 3

There also does not appear to be any agency in this case. We agree with the Court of
Appeals that:

"As indicated in Article 1869, for an agency relationship to be deemed as implied, the
principal must know that another person is acting on his behalf without authority. Here,
appellee categorically stated that the only purpose for his leaving the subject tractor in
the care and custody of Mike Abella was for safekeeping, and definitely not for him to
pledge or alienate the same. If it were true that Mike pledged appellee's tractor to
appellant, then Mike was acting not only without appellee's authority but without the
latter's knowledge as well. IDAEHT

Article 1911, on the other hand, mandates that the principal is solidarily liable with the
agent if the former allowed the latter to act as though he had full powers. Again, in view
of appellee's lack of knowledge of Mike's pledging the tractor without any authority from
him, it stands to reason that the former could not have allowed the latter to pledge the
tractor as if he had full powers to do so." 4

There is likewise no valid deposit in this case. In a contract of deposit, a person


receives an object belonging to another with the obligation of safely keeping it and of
returning the same. 5 Petitioner himself states that he received the tractor not to safely
keep it but as a form of security for the payment of Mike Abella's obligations. There is no
deposit where the principal purpose for receiving the object is not safekeeping. 6

Consequently, petitioner had no right to refuse delivery of the tractor to its lawful owner.
On the other hand, private respondent, as owner, had every right to seek to repossess
the tractor, including the institution of the instant action for replevin.

We do not here pass upon the other assignment of errors made by petitioner
concerning alleged irregularities in the raffle and disposition of the case at the trial court.
A petition for review on certiorari is not the proper vehicle for such allegations.

WHEREFORE, the instant petition is DENIED for lack of merit, and the decision of the
Court of Appeals in CA-G.R. CV No. 39705 is AFFIRMED. Costs against petitioner.

SO ORDERED.

Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.

FIRST DIVISION

[G.R. No. L-40242. December 15, 1982.]

DOMINGA CONDE, petitioner, vs. THE HONORABLE COURT OF APPEALS, MANILA,


PACIENTE CORDERO, together with his wife, NICETAS ALTERA, RAMON CONDE,
together with his wife, CATALINA T. CONDE, respondents.

Leon Cuevas for petitioner.


Rafael M. Iriarte for private respondent.

SYNOPSIS

On April 7, 19311, Margarita, Bernardo and petitioner Dominga, all surnamed Conde,
(the vendors-a-retro) sold with right of repurchase within ten years from said date, an
unregistered parcel of agricultural land, to the spouses Casimira Pasagui and Pio Altera
(the vendees-a-retro). Three years later, Original Certificate of Title No. N-534 covering
the land was issued in the name of the vendees-a-retro subject to the stipulated right of
redemption of the vendors-a-retro. Within the repurchase period, particularly on
November 28, 1943, Paciente Cordero, son-in-law of and representing the vendees-a-
retro signed a Memorandum of Repurchase declaring therein that he received from
Eusebio Amarille, a representative of the vendors-a-retro, the full amount of the
repurchase price. Petitioner Domlaga, claiming that she redeemed the property with her
own money, immediately took possession of the land in 1945 and paid the land taxes
thereon since then. On June 30, 1965, however, the vendees-a-retro sold the land to
the private respondent spouses, the Condes, Consequently, in 1969, petitioner filed with
the Court of First Instance a complaint for quieting of title and declaration of ownership
against all the private respondents. The Trial Court dismissed the Complaint and
ordered petitioner to vacate the disputed property and to deliver its peaceful possession
to the Conde spouses. The Court of Appeals affirmed the decision and held that
petitioner failed to validly exercise her right of repurchase because the Memorandum of
Repurchase was not signed by the vendees-a-retro but by Cordero who was not
formally authorized to sign for said vendees-a-retro.

The Supreme Court held that although the contending parties were legally wanting in
their respective actuations, i.e. petitioner had done nothing to formalize her repurchase
while the vendees-a-retro had done nothing to clear their title of the encumbrance
therein regarding petitioner's right to repurchase, the repurchase by petitioner is
supported by the admissions of the pre-trial that petitioner has been in possession since
the year 1945, the date of the deed of repurchase, and has been paying land taxes
thereon since then; and that the imperatives of substantial justice, and the equitable
principle of laches brought about by private respondent's inaction and neglect for 24
years, loom in petitioner's favor.

Judgment of the Court of Appeals is reversed and set aside, and petitioner is declared
owner of the disputed property.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; IMPLIED AGENCY;


WHEN CREATED; CASE AT BAR. — Of significance, however, is the fact that from the
execution of the repurchase document in 1945, possession, which heretofore had been
with the Alteras, has been in the hands of petitioner as stipulated therein. Land taxes
have also been paid for by petitioner yearly from 1947 to 1969 inclusive (Exhibits "D" to
"D-15"; and "E"). If, as opined by both the Court a quo and the Appellate Court,
petitioner had done nothing to formalize her repurchase, by the same token, neither
have the vendees-a-retro done anything to clear their title of the encumbrance therein
regarding petitioner's right to repurchase. No new agreement was entered into by the
parties as stipulated in the deed of pacto de retro, if the vendors a retro failed to
exercise their right of redemption after ten years. If, as alleged, petitioner exerted no
effort to procure the signature of Pio Altera after he had recovered from his illness,
neither did the Alteras repudiate the deed that their son-in-law had signed. Thus, an
implied agency must be held to have been created from their silence or lack of action, or
their failure to repudiate the agency. (Art. 1869, Civil Code.)

2. ID.; LACHES; APPARENT WHERE RESPONDENTS FAILED FOR 24 YEARS


TO QUESTION POSSESSION OF DISPUTED LOT BY PETITIONER. — Possession of
the lot in dispute having been adversely and uninterreptedly with petitioner from 1945
when the document of repurchase was executed, to 1969, when she instituted this
action, or for 24 years, the Alteras must be deemed to have incurred in laches. (Arcuino
vs. Aparis, 22 SCRA 407 (1968); Mejia de Lucas vs. Gamponia, 100 Phil, 278 [1956].)

3. ID.; OBLIGATIONS AND CONTRACTS; SALE; BUYER IN GOOD FAITH;


BUYER WITH NOTICE THAT LAND IS ENCUMBERED NOT CONSIDERED IN GOOD
FAITH; CASE AT BAR. — Private respondents Ramon Conde and Catalina Conde, so
whom Plo Altera sold the disputed property in 1965, assuming that there was, indeed,
such a sale, cannot be said to be purchasers in good faith. OCT No. 534 in the name of
the Alteras specifically contained the condition that it was subject to the right of
repurchase within 10 years from 1938. Although the ten-year period had lapsed in 1965
and there was no annotation of any repurchase by petitioner, neither had the title been
cleared of that encumbrance. The purchasers were put on notice that some other
person could have a right to or interest in the property. It behooved Ramon Conde and
Catalina Conde to have looked into the right of redemption inscribed on the title, and
particularly the matter of possession, which, as also admitted by them at the pre-trial,
had been with petitioner since 1945.

4. ID.; ID.; INTERPRETATION OF CONTRACTS; PARTIES BOUND BY THE


PLAIN AND UNEQUIVOCAL TERMS OF CONTRACT. — Private respondent must be
held bound by the clear terms of the Memorandum of Repurchase that he had signed
wherein he acknowledged the receipt of P165.00 and assumed the obligation to
maintain the repurchasers in peaceful possession should they be "disturbed by other
persons." It was executed in the Visayan dialect which he understood. He cannot now
be allowed to dispute the same.". . . If the contract is plain and unequivocal in its terms
he is ordinarily bound thereby. It is the duty of every contracting party to lean and know
its contents before he signs and delivers it." (Tan Tua Sia vs. Yu Biano Sontua, 56 Phil.
711(1932).

5. REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE; ORAL TESTIMONY OF


PERSON NOT PARTY TO THE DOCUMENT, A VIOLATION OF PAROL EVIDENCE
RULE. — There is nothing in the document of repurchase to show that Paciente
Cordero had signed the same merely to indicate that he had no objection to petitioner's
right of repurchase. Besides, he would have no personality to object. To uphold his oral
testimony on that point, would be a departure from the parol evidence rule (Sec. 7.
Evidence of written agreements. — When the terms of an agreement have been
reduced to writing, and, therefore, there can be, between the parties and their
successors in interest, no evidence of the terms of the agreement other than the
contents of the writing, except in the following cases: (a) Where a mistake or
imperfection of the writing, or its failure to express the true intent and agreement of the
parties, or the validity of the agreement is put in issue by the pleadings; (b)When there
is an intrinsic ambiguity in the writing. The term "agreement" includes wills. (Lim Yhi
Luya vs. Court of Appeals, 99 SCRA 692 [1980]), and would defeat the purpose for
which the doctrine is intended.

DECISION

[G.R. No. 167812. December 19, 2006.]

JESUS M. GOZUN, petitioner, vs. JOSE TEOFILO T. MERCADO a.k.a. 'DON


PEPITO MERCADO, respondent.

DECISION

CARPIO MORALES, J p:

On challenge via petition for review on certiorari is the Court of Appeals' Decision
of December 8, 2004 and Resolution of April 14, 2005 in CA-G.R. CV No. 76309 1
reversing the trial court's decision 2 against Jose Teofilo T. Mercado a.k.a. Don
Pepito Mercado (respondent) and accordingly dismissing the complaint of Jesus
M. Gozun (petitioner). ETAICc

In the local elections of 1995, respondent vied for the gubernatorial post in
Pampanga. Upon respondent's request, petitioner, owner of JMG Publishing
House, a printing shop located in San Fernando, Pampanga, submitted to
respondent draft samples and price quotation of campaign materials.

By petitioner's claim, respondent's wife had told him that respondent already
approved his price quotation and that he could start printing the campaign
materials, hence, he did print campaign materials like posters bearing
respondent's photograph, 3 leaflets containing the slate of party candidates, 4
sample ballots, 5 poll watcher identification cards, 6 and stickers.

Given the urgency and limited time to do the job order, petitioner availed of the
services and facilities of Metro Angeles Printing and of St. Joseph Printing Press,
owned by his daughter Jennifer Gozun and mother Epifania Macalino Gozun,
respectively. 7

Petitioner delivered the campaign materials to respondent's headquarters along


Gapan-Olongapo Road in San Fernando, Pampanga. 8

Meanwhile, on March 31, 1995, respondent's sister-in-law, Lilian Soriano (Lilian)


obtained from petitioner "cash advance" of P253,000 allegedly for the allowances
of poll watchers who were attending a seminar and for other related expenses.
Lilian acknowledged on petitioner's 1995 diary 9 receipt of the amount. 10

Petitioner later sent respondent a Statement of Account 11 in the total amount of


P2,177,906 itemized as follows: P640,310 for JMG Publishing House; P837,696 for
Metro Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000, the
"cash advance" obtained by Lilian. ADSIaT

On August 11, 1995, respondent's wife partially paid P1,000,000 to petitioner who
issued a receipt 12 therefor.

Despite repeated demands and respondent's promise to pay, respondent failed to


settle the balance of his account to petitioner.

Petitioner and respondent being compadres, they having been principal sponsors
at the weddings of their respective daughters, waited for more than three (3)
years for respondent to honor his promise but to no avail, compelling petitioner
to endorse the matter to his counsel who sent respondent a demand letter. 13
Respondent, however, failed to heed the demand. 14

Petitioner thus filed with the Regional Trial Court of Angeles City on November
25, 1998 a complaint 15 against respondent to collect the remaining amount of
P1,177,906 plus "inflationary adjustment" and attorney's fees.

In his Answer with Compulsory Counterclaim, 16 respondent denied having


transacted with petitioner or entering into any contract for the printing of
campaign materials. He alleged that the various campaign materials delivered to
him were represented as donations from his family, friends and political
supporters. He added that all contracts involving his personal expenses were
coursed through and signed by him to ensure compliance with pertinent election
laws.

On petitioner's claim that Lilian, on his (respondent's) behalf, had obtained from
him a cash advance of P253,000, respondent denied having given her authority to
do so and having received the same.

At the witness stand, respondent, reiterating his allegations in his Answer,


claimed that petitioner was his over-all coordinator in charge of the conduct of
seminars for volunteers and the monitoring of other matters bearing on his
candidacy; and that while his campaign manager, Juanito "Johnny" Cabalu
(Cabalu), who was authorized to approve details with regard to printing materials,
presented him some campaign materials, those were partly donated. 17

When confronted with the official receipt issued to his wife acknowledging her
payment to JMG Publishing House of the amount of P1,000,000, respondent
claimed that it was his first time to see the receipt, albeit he belatedly came to
know from his wife and Cabalu that the P1,000,000 represented "compensation
[to petitioner] who helped a lot in the campaign as a gesture of goodwill." 18

Acknowledging that petitioner is engaged in the printing business, respondent


explained that he sometimes discussed with petitioner strategies relating to his
candidacy, he (petitioner) having actively volunteered to help in his campaign;
that his wife was not authorized to enter into a contract with petitioner regarding
campaign materials as she knew her limitations; that he no longer questioned the
P1,000,000 his wife gave petitioner as he thought that it was just proper to
compensate him for a job well done; and that he came to know about petitioner's
claim against him only after receiving a copy of the complaint, which surprised
him because he knew fully well that the campaign materials were donations. 19

Upon questioning by the trial court, respondent could not, however, confirm if it
was his understanding that the campaign materials delivered by petitioner were
donations from third parties. 20

Finally, respondent, disclaiming knowledge of the Comelec rule that if a


campaign material is donated, it must be so stated on its face, acknowledged that
nothing of that sort was written on all the materials made by petitioner. 21

As adverted to earlier, the trial court rendered judgment in favor of petitioner, the
dispositive portion of which reads:
WHEREFORE, the plaintiff having proven its (sic) cause of action by
preponderance of evidence, the Court hereby renders a decision in favor of the
plaintiff ordering the defendant as follows:

1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum
from the filing of this complaint until fully paid;

2. To pay the sum of P50,000.00 as attorney's fees and the costs of suit.
ITESAc

SO ORDERED. 22

Also as earlier adverted to, the Court of Appeals reversed the trial court's
decision and dismissed the complaint for lack of cause of action.

In reversing the trial court's decision, the Court of Appeals held that other than
petitioner's testimony, there was no evidence to support his claim that Lilian was
authorized by respondent to borrow money on his behalf. It noted that the
acknowledgment receipt 23 signed by Lilian did not specify in what capacity she
received the money. Thus, applying Article 1317 24 of the Civil Code, it held that
petitioner's claim for P253,000 is unenforceable.

On the accounts claimed to be due JMG Publishing House — P640,310, Metro


Angeles Printing — P837,696, and St. Joseph Printing Press — P446,900, the
appellate court, noting that since the owners of the last two printing presses were
not impleaded as parties to the case and it was not shown that petitioner was
authorized to prosecute the same in their behalf, held that petitioner could not
collect the amounts due them.

Finally, the appellate court, noting that respondent's wife had paid P1,000,000 to
petitioner, the latter's claim of P640,310 (after excluding the P253,000) had already
been settled.

Hence, the present petition, faulting the appellate court to have erred:

1. . . . when it dismissed the complaint on the ground that there is no


evidence, other than petitioner's own testimony, to prove that Lilian R. Soriano
was authorized by the respondent to receive the cash advance from the petitioner
in the amount of P253,000.00. TaDSHC

xxx xxx xxx

2. . . . when it dismissed the complaint, with respect to the amounts due to the
Metro Angeles Press and St. Joseph Printing Press on the ground that the
complaint was not brought by the real party in interest.
xxx xxx xxx 25

By the contract of agency a person binds himself to render some service or to do


something in representation or on behalf of another, with the consent or authority
of the latter. 26 Contracts entered into in the name of another person by one who
has been given no authority or legal representation or who has acted beyond his
powers are classified as unauthorized contracts and are declared unenforceable,
unless they are ratified. 27

Generally, the agency may be oral, unless the law requires a specific form. 28
However, a special power of attorney is necessary for an agent to, as in this case,
borrow money, unless it be urgent and indispensable for the preservation of the
things which are under administration. 29 Since nothing in this case involves the
preservation of things under administration, a determination of whether Soriano
had the special authority to borrow money on behalf of respondent is in order.

Lim Pin v. Liao Tian, et al. 30 held that the requirement of a special power of
attorney refers to the nature of the authorization and not to its form.

. . . The requirements are met if there is a clear mandate from the principal
specifically authorizing the performance of the act. As early as 1906, this Court in
Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either
oral or written. The one thing vital being that it shall be express. And more
recently, We stated that, if the special authority is not written, then it must be duly
established by evidence:

". . . the Rules require, for attorneys to compromise the litigation of their clients, a
special authority. And while the same does not state that the special authority be
in writing the Court has every reason to expect that, if not in writing, the same be
duly established by evidence other than the self-serving assertion of counsel
himself that such authority was verbally given him." 31 (Emphasis and
underscoring supplied)

Petitioner submits that his following testimony suffices to establish that


respondent had authorized Lilian to obtain a loan from him, viz:

Q Another caption appearing on Exhibit "A" is cash advance, it states given


on 3-31-95 received by Mrs. Lilian Soriano in behalf of Mrs. Annie Mercado,
amount P253,000.00, will you kindly tell the Court and explain what does that
caption means?

A It is the amount representing the money borrowed from me by the


defendant when one morning they came very early and talked to me and told me
that they were not able to go to the bank to get money for the allowances of Poll
Watchers who were having a seminar at the headquarters plus other election
related expenses during that day, sir. IHCSTE

Q Considering that this is a substantial amount which according to you was


taken by Lilian Soriano, did you happen to make her acknowledge the amount at
that time?

A Yes, sir. 32 (Emphasis supplied)

Petitioner's testimony failed to categorically state, however, whether the loan was
made on behalf of respondent or of his wife. While petitioner claims that Lilian
was authorized by respondent, the statement of account marked as Exhibit "A"
states that the amount was received by Lilian "in behalf of Mrs. Annie Mercado."

Invoking Article 1873 33 of the Civil Code, petitioner submits that respondent
informed him that he had authorized Lilian to obtain the loan, hence, following
Macke v. Camps 34 which holds that one who clothes another with apparent
authority as his agent, and holds him out to the public as such, respondent
cannot be permitted to deny the authority.

Petitioner's submission does not persuade. As the appellate court observed:

. . . Exhibit "B" [the receipt issued by petitioner] presented by plaintiff-appellee to


support his claim unfortunately only indicates the Two Hundred Fifty Three
Thousand Pesos (P253,0000.00) was received by one Lilian R. Soriano on 31
March 1995, but without specifying for what reason the said amount was
delivered and in what capacity did Lilian R. Soriano received [sic] the money. The
note reads:

"3-31-95

261,120 ADVANCE MONEY FOR TRAINEE —

RECEIVED BY

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

(SIGNED)

LILIAN R. SORIANO

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

It bears noting that Lilian signed in the receipt in her name alone, without
indicating therein that she was acting for and in behalf of respondent. She thus
bound herself in her personal capacity and not as an agent of respondent or
anyone for that matter.

It is a general rule in the law of agency that, in order to bind the principal by a
mortgage on real property executed by an agent, it must upon its face purport to
be made, signed and sealed in the name of the principal, otherwise, it will bind
the agent only. It is not enough merely that the agent was in fact authorized to
make the mortgage, if he has not acted in the name of the principal. . . . 36
(Emphasis and underscoring supplied)

On the amount due him and the other two printing presses, petitioner explains
that he was the one who personally and directly contracted with respondent and
he merely sub-contracted the two printing establishments in order to deliver on
time the campaign materials ordered by respondent.

Respondent counters that the claim of sub-contracting is a change in petitioner's


theory of the case which is not allowed on appeal.

In Oco v. Limbaring, 37 this Court ruled:

The parties to a contract are the real parties in interest in an action upon it, as
consistently held by the Court. Only the contracting parties are bound by the
stipulations in the contract; they are the ones who would benefit from and could
violate it. Thus, one who is not a party to a contract, and for whose benefit it was
not expressly made, cannot maintain an action on it. One cannot do so, even if
the contract performed by the contracting parties would incidentally inure to
one's benefit. 38 (Underscoring supplied) cACTaI

In light thereof, petitioner is the real party in interest in this case. The trial court's
findings on the matter were affirmed by the appellate court. 39 It erred, however,
in not declaring petitioner as a real party in interest insofar as recovery of the
cost of campaign materials made by petitioner's mother and sister are concerned,
upon the wrong notion that they should have been, but were not, impleaded as
plaintiffs.
In sum, respondent has the obligation to pay the total cost of printing his
campaign materials delivered by petitioner in the total of P1,924,906, less the
partial payment of P1,000,000, or P924,906.

WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004


and the Resolution dated April 14, 2005 of the Court of Appeals are hereby
REVERSED and SET ASIDE.

The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch
57, is REINSTATED mutatis mutandis, in light of the foregoing discussions. The
trial court's decision is MODIFIED in that the amount payable by respondent to
petitioner is reduced to P924,906.

SO ORDERED.

Quisumbing, Carpio, Tinga and Velasco, Jr., JJ., concur.

[G.R. No. 182537. June 1, 2016.]

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. RICHARD E.


UNCHUAN, respondent.

DECISION

MENDOZA, J p:

This petition for review on certiorari 1 under Rule 45 of the 1997 Rules of Civil
Procedure filed by petitioner Mactan-Cebu International Airport Authority (MCIAA),
represented by the Office of the Solicitor General (OSG), assails the November 29,
2007 Decision 2 and the March 25, 2008 Resolution 3 of the Court of Appeals (CA), in
CA-G.R. CV No. 01306, which affirmed the March 3, 2006 Decision 4 of the Regional
Trial Court, Lapu-Lapu City, Branch 27 (RTC), in Civil Case No. 6120-L, an action for
declaration of nullity of deed of absolute sale, quieting of title and/or payment of just
compensation, rental, damages, and attorney's fees. DcHSEa

The Antecedents

On March 5, 2004, respondent Richard Unchuan (Unchuan) filed a complaint for Partial
Declaration of Nullity of the Deed of Absolute Sale with Plea for Partition, Damages and
Attorney's Fees before the RTC against MCIAA. 5 Unchuan later filed an Amended
Complaint for Declaration of Nullity of Deed of Absolute Sale, Quieting of Title and/or
Payment of Just Compensation, Rental and Damages and Attorney's Fees. 6

In his complaint, Unchuan alleged, among others, that he was the legal and rightful
owner of Lot No. 4810-A, with an area of 177,176 square meters, and Lot No. 4810-B,
with an area of 2,740 square meters, both located in Barrio Buaya, Lapu-Lapu City, and
covered by Original Certificate of Title (OCT) No. R0-1173; 7 that the title was
registered under the names of the heirs of Eugenio Godinez, specifically, Teodora
Tampus, Fernanda Godinez (the wife of Iscolastico Epe), Tomasa Godinez (the wife of
Mateo Ibañez), Sotera Godinez (the wife of Guillermo Pino), Atanasio Godinez 8
(married to Florencia Pino), Juana Godinez (the wife of Catalino Cuison), and Ambrosio
Godinez (married to Mamerta Inot); and that he bought the two lots from the surviving
heirs of the registered owners through several deeds of absolute sale, all dated
December 7, 1998. 9

For reference, the table below summarizes the sale transactions between Unchuan and
the aforesaid surviving heirs of the original registered owners: SCaITA

DEEDS OF SALE EXECUTED BY THE HEIRS AREA

(Through Representation) (sq.m.)

Sps. Atanacio Godinez & Florencia Pino & Teodora Tampus 10 29,986

Sps. Ambrosio Godinez & Mamerta Inot 11 5,997.20

Sps. Fernanda Epe & Iscolastico Epe & Teodora Tampus 12 29,986

Sps. Ambrosio Godinez & Mamerta Inot 13 5,997.20

Sps. Sotera Godinez & Guillermo Pino & Teodora Tampus 14 29,986

Sps. Tomasa Godinez & Mateo Ybañez & Teodora Tampus 15 29,986

Sps. Juana Godinez & Catalino Quizon & Teodora Tampus 16 29,986

Sps. Ambrosio Godinez & Mamerta Inot 17 5,997.20

Sps. Ambrosio Godinez & Mamerta Inot 18 5,997.20

Unchuan further alleged that he came to know that Atanacio Godinez (Atanacio), the
supposed attorney-in-fact of all the registered owners and their heirs, already sold both
lots to Civil Aeronautics Administration (CAA), 19 the predecessor of MCIAA; that the
sale covered by the Deed of Absolute Sale, 20 dated April 3, 1958, was null and void
because the registered owners and their heirs did not authorize Atanacio to sell their
undivided shares in the subject lots in favor of CAA; that no actual consideration was
paid to the said registered owners or their heirs, despite promises that they would be
paid; that the deed of absolute sale did not bear the signature of the CAA
representative; that there was no proof that the Secretary of the Department of Public
Works and Highways approved the sale; and that his predecessors-in-interest merely
tolerated the possession by CAA and, later, by MCIAA. 21

In its Motion to Dismiss, dated April 27, 2004, 22 MCIAA moved for the dismissal of the
said complaint citing prescription, laches and estoppel as its grounds. The RTC,
however, denied the motion. 23 MCIAA later filed its Very Urgent Motion for Compulsory
Joinder of Indispensable Parties, 24 but the RTC issued a denial in the Order, 25 dated
November 5, 2004, and required MCIAA to file an Answer. Again, MCIAA moved for
reconsideration, 26 but the RTC still denied it in the Order, 27 dated January 5, 2005.

In its Answer, 28 MCIAA averred that on April 3, 1958, Atanacio, acting as the
representative of the heirs of Eugenio Godinez, who were the registered owners, sold
Lot No. 4810-A and Lot No. 4810-B to the Republic of the Philippines, represented by
CAA. Thereafter, CAA took possession of the said property upon payment of the
purchase price. To corroborate the said transaction, on September 17, 1969, Atanacio,
along with other former registered co-owners, signed a deed of partition attesting to the
fact of sale of the two lots in favor of the government and admitted its absolute right
over the same. Since then, the said lots had been in the possession of the Republic in
the concept of an owner. The said real properties were declared by the Republic for
taxation purposes under Tax Declaration No. 00078 and Tax Declaration No. 00092. In
fact, by virtue of Republic Act (R.A.) No. 6958, otherwise known as "The Charter of
Mactan-Cebu International Airport Authority," the Republic officially turned over the
management of the said lots to MCIAA.

On March 3, 2006, the RTC rendered judgment in favor of Unchuan. The decretal
portion of the decision reads: aTHCSE

WHEREFORE, the above as premises, this court hereby renders judgment in favor of
Plaintiff Unchuan and against Defendant MCIAA and declares:

a. The Deed of Sale signed by Atanacio Godinez alienating the lands denominated
as Lot Nos. 4810-A and 4810-B in favor of Defendant's predecessor-in-interest as
VOID;

b. Plaintiff as the true and legal owner of Lot Nos. 4810-A and 4810-B consisting of
ONE HUNDRED SEVENTY NINE THOUSAND NINE HUNDRED SIXTEEN (179,916)
SQUARE METERS because the Deed of Sale between Plaintiffs predecessor-in-
interest is void;

c. The Register of Deeds of Lapu-Lapu City to annotate in OCT No. RO-1173 up to


the extent of the right of Plaintiff in the said land and to subsequently issue a title in his
name up to such extent;
d. Defendant is directed to vacate from Lot Nos. 4810-A and 4810-B;

e. Defendant to pay the sum of TWENTY PESOS (Php20.00) per square meter per
month as rental reckoned from the time of the filing of the complaint until Defendant
shall vacate the same.

No pronouncement as to the cost of this suit.

SO ORDERED. 29

The RTC held that Atanacio was not legally authorized to act as the attorney-in-fact of
his brothers and sisters and to transact on their behalf because he was not clothed with
a special power of attorney granting him authority to sell the disputed lots. "This lack of
authority of Atanacio Godinez, therefore, has an effect of making the contract of sale
between the parties' predecessors-in-interest as void except perhaps for the share of
Atanacio Godinez which he could very well alienate." Moreover, the documentation of
the sale was never transmitted to CAA's Manila Office; hence, the heirs did not receive
any payment for the sale transaction. 30

The RTC also noted that the deed of absolute sale presented to the trial court did not
bear the signature of the then CAA Administrator which would have shown that the
vendee consented to the sale. Thus, the RTC concluded that (1) there was no valid
consideration for the alleged conveyance; (2) Atanacio lacked the authority to alienate
the undivided shares of his co-heirs to CAA, MCIAA's predecessor-in-interest; and (3)
the lack of signature of the CAA Administrator was indicative of the lack of consent from
him to purchase the lots. 31 cAaDHT

Aggrieved, MCIAA appealed the said decision to the CA.

On November 29, 2007, the CA affirmed the RTC decision. The CA explained that
Atanacio had no authority to act as an agent for the other registered owners and their
heirs absent the special power of attorney specifically executed for such purpose as
required in Article 1874 of the New Civil Code. Also, no evidence was adduced to show
that the purchase price for the said lots was paid. For being a void contract, the heirs'
deed of partition acknowledging the purported sale in favor of CAA was found by the CA
to have produced no legal effects and not susceptible of ratification. It was of the view
that prescription, estoppel or laches did not set in because a void contract could be
questioned anytime and an action or defense for the declaration of its inexistence or
absolute nullity was imprescriptible. It also noted that the deed of absolute sale was not
signed by the then CAA authorized representative. 32

MCIAA filed its Motion for Reconsideration, 33 dated December 18, 2007, and
subsequently, its Supplemental Motion for Reconsideration, 34 dated January 30, 2008.
Later, MCIAA filed its Motion for New Trial, 35 dated March 6, 2008, in which it
incorporated three newly discovered evidence: a) certified true copy of the Deed of
Absolute Sale executed between Atanacio Godinez and the Republic, represented by
CAA, with the signature of then Administrator Urbano B. Caldoza (Caldoza) showing
that the vendee consented to the sale; 36 b) certified true copy of the Joint Affidavit of
Confirmation of Sale of Allotted Shares Already Adjudicated and Quitclaim of a Portion
of Lot No. 4810, dated July 21, 1969, executed by the other heirs who did not sign the
Deed of Partition acknowledging the sale; and c) certified true copy of the Provincial
Voucher with attachments showing that there was payment of the purchase price.
MCIAA claimed that the said documents would prove that there was consent between
the contracting parties and that the consideration was paid.

In its March 25, 2008 Resolution, 37 the CA denied MCIAA's Motion for
Reconsideration. Before MCIAA received its copy of the March 25, 2008 CA Resolution,
it filed a Supplemental Motion for Reconsideration adopting the said newly discovered
evidence. The CA Resolution partly reads:

After a very careful read-through of the motion for reconsideration, we find no new or
substantial arguments which have not been presented in defendant-appellant's prior
pleadings and which have not been taken up or considered in our Decision, save for the
allegation that the proper remedy should have been a petition for just compensation.

Otherwise, no further ratiocination is needed to show there was a valid sale between the
registered owners of the subject lots and the Civil Aeronautics Administration (CAA), the
predecessor-in-interest of defendant-appellant MCIAA. There was absolutely no
competent evidence to prove that all of the registered owners of the subject properties
gave their consent to the sale through their attorney-in-fact or that the CAA through its
authorized representative gave his approval to the sale or that there was consideration.
In addition, we see no reason to discuss again our finding that prescription, laches, or
estoppel is unavailing against the registered owners and equally unavailing against the
latter's successor's, including herein plaintiff-appellee, they having stepped into the
shoes of the decedents-registered owners by operation of law. HCaDIS

Allow us, however, to re-visit the defendant-appellant's claim that extrinsic fraud
prevented it from having a fair trial and completely presenting its case before the trial
court, clearly adverting to the omission of Atty. Sigfredo V. Dublin to timely apprise the
OSG of the adverse claim (in favor of defendant-appellant) that was annotated in the
Original Certificate of Title No. RO-1173 on October 9, 1998.

In our decision, we stressed that even if there was a belated annotation of the adverse
claim in OCT No. RO-1173, said annotation is of no force and effect since the same
was predicated on a void and inexistent contract. For like "the spring that cannot rise
above its source," a void contract cannot create a valid and legally enforceable right.

Anent the allegation of extrinsic fraud, we are not at all persuaded there was one.
"Extrinsic or collateral fraud, as distinguished from intrinsic fraud, connotes any
fraudulent scheme executed by a prevailing litigant outside the trial of a case against
the defeated party, or his agent, attorneys or witnesses, whereby said defeated party, is
prevented from presenting fully and fairly his side of the case." . . . In other words,
extrinsic fraud is one that affects and goes into the jurisdiction of the Court" or that the
defendant-appellant was deprived of due process of law owing to the gross negligence
of its counsel. Both do not, however, obtain under the circumstances prevailing in the
instant case.

Firstly, defendant-appellant has not shown any clear and convincing evidence that the
plaintiff-appellee employed actual and extrinsic fraud in procuring a favorable decision
from the trial court. Sadly, it failed to show that it was prevented by the plaintiff-appellee
from asserting its right over the subject properties and properly presenting its case by
reason of such alleged fraud; neither was any evidence proffered to substantiate such
allegation.

And secondly, it bears to stress that the failure of Atty. Sigfredo V. Dublin to fully apprise
the OSG of the annotation of the defendant-appellant's adverse claim is not tantamount
to gross negligence of counsel. With due and reasonable diligence, the said annotation
could have been timely presented by the OSG during the presentation of evidence. It
bears to stress that the office which has custody of OCT No. RO-1173 (where the
adverse claim is annotated) is another government agency, The Registry of Deeds,
which the OSG can easily have access to.

As we have held in our decision, the defendant-appellant's heavy reliance on the Deed
of Partition which contained the phrase: "Lot No. 4810-A, with an area of ONE
HUNDRED SEVENTY-SEVEN THOUSAND ONE HUNDRED SEVENTY SIX (177,176)
square meters and Lot 4810-B, with [an] area of TWO THOUSAND SEVEN HUNDRED
FORTY (2,740) square meters, ARE OWNED by the Civil Aeronautics Administration
having bought the same from the original owners; (Emphasis supplied) "to support its
assertion that the Civil Aeronautics Administration (predecessor-in-interest of MCIAA)
had indeed validly purchased the lots from the registered owners through their
purported attorney-in-fact, Atanacio Godinez, is misplaced. This Court had already
found and ruled that: AHCETa

". . . At most, the above-quoted statement is a mistaken conclusion that the CAA validly
purchased the subject lots. The above-quoted statement does not change the fact that
the Deed of Sale in favor of CAA was void and inexistent. Neither can the same be
considered as a cure for the defect of lack of consent or authority."

"Lack of consent and consideration made the deeds of sale void altogether and
rendered them subject to attack at any time, conformably to the rule in Article 1410 that
an action to declare the existence of void contracts does not prescribe." We would like
to add that there is even "no need of an action to set aside a void and inexistent
contract; in fact, such action cannot logically exist. However, an action to declare the
non-existence of the contract can be maintained; and in the same action, the plaintiff
may recover what he has given by virtue of the contract." 38

Undaunted, MCIAA filed this present action, praying for the reversal of the assailed CA
ruling and for a new judgment dismissing the complaint against MCIAA or, in the
alternative, to remand the case to the CA to thresh out all unresolved factual issues
concerning the case. To bolster, the reliefs prayed for, MCIAA offers the following:

GROUNDS RELIED UPON

IN SUPPORT OF THE PETITION

THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW WHEN IT


AFFIRMED THE MARCH 3, 2006 DECISION OF THE TRIAL COURT DESPITE THE
FACT THAT:

THE TRIAL COURT GRAVELY ERRED IN DECLARING THAT ATANACIO GODINEZ


WAS NOT AUTHORIZED TO CONVEY LOT NOS. 4810-A AND 4810-B TO CAA.

THE TRIAL COURT GRAVELY ERRED IN FINDING THAT RESPONDENTS'


PREDECESSORS-IN-INTEREST WERE NOT PAID THE CONSIDERATION FOR THE
SALE OF THE SUBJECT LOTS. ScHADI

THE TRIAL COURT GRAVELY ERRED IN DECLARING AS VOID AND INVALID THE
DEED OF ABSOLUTE SALE EXECUTED BY ATANACIO GODINEZ IN FAVOR OF
THE CAA.

D
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT RESPONDENT'S
PREDECESSORS-IN-INTEREST ARE NOT INDISPENSABLE PARTIES TO THE
INSTANT CASE.

THE TRIAL COURT GRAVELY ERRED IN DECLARING THAT RESPONDENT'S


CAUSE OF ACTION IS NOT BARRED BY PRESCRIPTION, LACHES AND
ESTOPPEL.

II

THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW BY NOT


ADMITTING THE ADDITIONAL EVIDENCE SOUGHT TO BE INTRODUCED BY
PETITIONER. 39

The OSG argues that "the mere absence of a special power of attorney in favor of
Atanacio Godinez does not necessarily mean that he was not authorized by his co-
owners who even authorized and represented to CAA that Atanacio Godinez was their
attorney-in-fact." 40 "Even granting for the sake of argument that Atanacio Godinez was
not in fact authorized by the other registered co-owners to execute a deed conveying
Lot Nos. 4810-A and 4810-B to CAA, such defect has nevertheless been cured when
his co-owners subsequently executed on September 17, 1969 a public document
denominated as Deed of Partition." 41 As to the nonpayment of consideration, the OSG
contends that such allegation cannot be established by mere testimonial evidence and
that it must be proved by clear, positive and convincing evidence. 42 Moreover, "not
only are private transactions presumed to be fair and regular and that the ordinary
course of business presumed to have been followed but, also, government employees
are presumed to have regularly performed their official duties. In this case, Unchuan
has not overcome the foregoing legal presumptions." 43

The OSG further avers that "the absence of the signature of Administrator Caldoza on
the challenged Deed of Absolute Sale should, at best, be treated as a mere formal
defect which should not affect the very substance of the contract" 44 bearing in mind
that "a contract of sale is a consensual contract." 45 The OSG likewise posits that
"assuming arguendo that petitioner does not possess any title or right whatsoever over
the above parcels of land, its possession is justified by extraordinary prescription." 46 It
also claims that laches had set in against the original registered owners for their failure
to question the validity of the sale for over forty six (46) years after the sale transaction
between CAA and Atanacio in 1958. 47 Thus, "the laches of the original registered
owners extend to Unchuan since he stands in privity with his predecessors-in-interest."
48 aICcHA
The OSG insists that extrinsic fraud was committed against it as Atty. Sigfredo Dublin
(Atty. Dublin), the legal manager of CAA, withheld from their office, while the trial was
ongoing, the information that on October 9, 1998, he had caused the annotation of an
adverse claim on OCT No. RO-1173. The OSG asserts that it was significant because
the deed of absolute sale between Unchuan and the alleged heirs of the registered
owners was executed only on December 7, 1998. Also suppressed from the OSG, as it
claims, were the following:

1. Deed of Absolute Sale executed between Atanacio Godinez and the CAA
bearing the signature of Urbano B. Caldoza, then CAA Administrator;

2. Joint Affidavit of Confirmation of Sale of Allotted Shares Already Adjudicated and


Quitclaim of a Portion of Lot No. 4810, Open Cadastre, executed by the heirs of Juana
Godinez.

3. Extra-Judicial Declaration of Partition and Adjudication executed by Tomasa


Godinez, Atanacio Godinez, Mamerta Inot (for Ambrosio Godinez), Pedro Pino (for
Sotera Godinez) and Corazon Epe (for Fernanda Godinez).

4. Provincial Voucher, dated October 3, 1958 (and its attachments) evidencing


payment of the consideration for the sale of Lot Nos. 4810-A and 4810-B.

The OSG argues that these documents are very important and material to petitioner's
defense and should be admitted to prevent a miscarriage of justice.

The Court's Ruling

The RTC decision, as affirmed by the CA, needs to be modified.

The Court finds that the sale transaction executed between Atanacio, acting as an
agent of his fellow registered owners, and the CAA was indeed void insofar as the other
registered owners were concerned. They were represented without a written authority
from them clearly in violation of the requirement under Articles 1874 and 1878 of the
Civil Code, which provide:

Art. 1874. When a sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void.

Art. 1878. Special powers of attorney are necessary in the following cases:
EHaASD

xxx xxx xxx

(5) To enter into any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration;
xxx xxx xxx

The significance of requiring the authority of an agent to be put into writing was
amplified in Dizon v. Court of Appeals: 49

When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the
authority of an agent to execute a contract for the sale of real estate must be conferred
in writing and must give him specific authority, either to conduct the general business of
the principal or to execute a binding contract containing terms and conditions which are
in the contract he did execute. A special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration. The express mandate required by law to
enable an appointee of an agency (couched) in general terms to sell must be one that
expressly mentions a sale or that includes a sale as a necessary ingredient of the act
mentioned. For the principal to confer the right upon an agent to sell real estate, a
power of attorney must so express the powers of the agent in clear and unmistakable
language. When there is any reasonable doubt that the language so used conveys such
power, no such construction shall be given the document.

Without a special power of attorney specifying his authority to dispose of an immovable,


Atanacio could not be legally considered as the representative of the other registered
co-owners of the properties in question. Atanacio's act of conveying Lot No. 4810-A and
Lot No. 4810-B cannot be a valid source of obligation to bind all the other registered co-
owners and their heirs because he was not clothed with any authority to enter into a
contract with CAA. The other heirs could not have given their consent as required under
Article 1475 50 of the New Civil Code because there was no meeting of the minds
among the other registered co-owners who gave no written authority to Atanacio to
transact on their behalf. Therefore, no contract was perfected insofar as the portions or
shares of the other registered co-owners or their heirs were concerned.

Thus, the Court cannot give any weight either to the Deed of Partition of Lot No. 4810,
Open Cadastre 51 (subsequently executed by all the heirs of Ambrosio and Sotera
Godinez to the effect that they had acknowledged 52 the sale of the subject lots in favor
of CAA) or to other documents (such as Joint Affidavit of Confirmation of Sale of Allotted
Shares Already Adjudicated and Quitclaim of a Portion of Lot No. 4810, Open Cadastre)
53 all of which gave the impression that they had ratified 54 the sale of the subject lots
in favor of CAA, MCIAA's predecessor-in-interest.

The rule is that a void contract produces no effect either against or in favor of anyone
and cannot be ratified. 55 Similarly, laches will not set in against a void transaction, as
in this case, where the agent did not have a special power of attorney to dispose of the
lots co-owned by the other registered owners. In fact, Article 1410 of the Civil Code
specifically provides that an action to declare the inexistence of a void contract does not
prescribe. DaIAcC

The transaction entered into by Atanacio and CAA, however, was not entirely void
because the lack of consent by the other co-owners in the sale was with respect to their
shares only. Article 493 of the New Civil Code expressly provides:

Art. 493. Each co-owner shall have the full ownership of his part and the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and
even substitute another person in its enjoyment, except when personal rights are
involved. But the effect of the alienation or the mortgage, with respect to the co-owners,
shall be limited to the portion which may be allotted to him in the division upon the
termination of the co-ownership.

The quoted provision recognizes the absolute right of a co-owner to freely dispose of his
pro indiviso share as well as the fruits and other benefits arising from that share,
independently of the other co-owners. The sale of the subject lots affects only the
seller's share pro indiviso, and the transferee gets only what corresponds to his
grantor's share in the partition of the property owned in common. Since a co-owner is
entitled to sell his undivided share, a sale of the entire property by one co-owner without
the consent of the other co-owners is not null and void; only the rights of the co-
owner/seller are transferred, thereby making the buyer a co-owner of the property. 56

In the case at bench, although the sale transaction insofar as the other heirs of the
registered owners was void, the sale insofar as the extent of Atanacio's interest is
concerned, remains valid. Atanacio was one of the registered co-owners of the subject
lots, but he was not clothed with authority to transact for the other co-owners. By signing
the deed of sale with the CAA, Atanacio effectively sold his undivided share in the lots in
question. Thus, CAA became a co-owner of the undivided subject lots. Accordingly,
Atanacio's heirs could no longer alienate anything in favor of Unchuan because he
already conveyed his pro indiviso share to CAA.

The Court does not accept either Unchuan's allegation that no payment was received
for the transaction between Atanacio and CAA. Section 3, Rule 131 of the Rules of
Court identifies the following as disputable presumptions: (1) private transactions have
been fair and regular; (2) the ordinary course of business has been followed; and (3)
there was sufficient consideration for a contract. A presumption may operate against a
challenger who has not presented any proof to rebut it. "The effect of a legal
presumption upon a burden of proof is to create the necessity of presenting evidence to
meet the legal presumption or the prima facie case created thereby, and which, if no
proof to the contrary is presented and offered, will prevail. The burden of proof remains
where it is, but by the presumption, the one who has that burden is relieved for the time
being from introducing evidence in support of the averment, because the presumption
stands in the place of evidence unless rebutted." 57 Atanacio, by affixing his signature
on the deed of absolute sale, a disputable presumption arose that consideration was
paid. A mere allegation that no payment was received is not sufficient to dispel such
legal presumption. Furthermore, the record shows an official communication, dated
October 8, 1958, from the District Land Office of Cebu to the Provincial Treasurer of
Cebu stating that Provincial Voucher No. 05358 was disbursed in favor of Atanacio. 58
TAacHE

Consequently, the Court deems it just and fair to modify the disposition of the subject
lots to Unchuan. Unchuan is not entitled to the whole 179,916 square meters of the
property, as originally awarded by the RTC and affirmed by the CA. Atanacio's share
should be excluded from the computation as his heirs were already precluded from
further conveying what he, their predecessor-in-interest, had previously sold to CAA.
Thus, Unchuan is only legally entitled to an unidentified 149,930 square meters of the
property after excluding Atanacio's unidentified share of 29,986 square meters.

The Court notes that the lots in question were formerly undeveloped lands, but now,
form part of the Mactan-Cebu International Airport. It is, thus, being used for a public
purpose. It being the situation, the government or the MCIAA should initiate
expropriation proceedings so that the registered owners or successors-in-interest would
be compensated for their undivided shares in the lots taken from them. In the meantime,
MCIAA should pay rentals thereon, after these shall have been identified and
segregated, at the rate of P20.00 per square meter to be reckoned from the filing of the
complaint.

WHEREFORE, the petition is PARTIALLY GRANTED. The November 29, 2007


Decision and the March 25, 2008 Resolution of the Court of Appeals (CA) in CA-G.R.
CV No. 01306 are AFFIRMED with MODIFICATION. Accordingly, the dispositive portion
of the decision should read as follows:

WHEREFORE, judgment is hereby rendered declaring that:

a. The Deed of Sale signed by Atanacio Godinez alienating the lands denominated
as Lot No. 4810-A and Lot No. 4810-B in favor of MCIAA's predecessor-in-interest is
VALID, insofar as his undivided share in the said lots is concerned, but VOID, insofar as
the undivided shares of the other registered owners, who did not sign the deed, are
concerned; and

b. Plaintiff Richard E. Unchuan is the true and legal owner of portions of Lot No.
4810-A and Lot No. 4810-B consisting of One Hundred Forty Nine Thousand Nine
Hundred Thirty (149,930) Square Meters. HDICSa
The Register of Deeds of Lapu-Lapu City is hereby ordered to annotate in OCT No. RO-
1173 the respective rights of Richard E. Unchuan and the Mactan-Cebu International
Airport Authority in the said property.

The Mactan-Cebu International Airport Authority is ordered to initiate expropriation


proceedings over the undivided portions of Lots No. 4810-A and 4810-B covering the
said 149,930 Square Meters.

In the meantime, Mactan-Cebu International Airport Authority is ordered to pay the sum
of P20.00 per square meter per month as rental for the use of the property reckoned
from the time of the filing of the complaint until its final payment for the same.

No pronouncement as to the cost of the suit.

SO ORDERED.

Carpio, Del Castillo and Leonen, JJ., concur.

Brion, * J., is on official leave.

ALVIN PATRIMONIO, petitioner, vs. NAPOLEON GUTIERREZ and OCTAVIO


MARASIGAN III, respondents.

DECISION

BRION, J p:

Assailed in this petition for review on certiorari 1 under Rule 45 of the Revised Rules of
Court is the decision 2 dated September 24, 2008 and the resolution 3 dated April 30,
2009 of the Court of Appeals (CA) in CA-G.R. CV No. 82301. The appellate court
affirmed the decision of the Regional Trial Court (RTC) of Quezon City, Branch 77,
dismissing the complaint for declaration of nullity of loan filed by petitioner Alvin
Patrimonio and ordering him to pay respondent Octavio Marasigan III (Marasigan) the
sum of P200,000.00. HETDAa

The Factual Background

The facts of the case, as shown by the records, are briefly summarized below.

The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a
business venture under the name of Slam Dunk Corporation (Slum Dunk), a production
outfit that produced mini-concerts and shows related to basketball. Petitioner was
already then a decorated professional basketball player while Gutierrez was a well-
known sports columnist. DAcaIE
In the course of their business, the petitioner pre-signed several checks to answer for
the expenses of Slam Dunk. Although signed, these checks had no payee's name, date
or amount. The blank checks were entrusted to Gutierrez with the specific instruction
not to fill them out without previous notification to and approval by the petitioner.
According to petitioner, the arrangement was made so that he could verify the validity of
the payment and make the proper arrangements to fund the account.

In the middle of 1993, without the petitioner's knowledge and consent, Gutierrez went to
Marasigan (the petitioner's former teammate), to secure a loan in the amount of
P200,000.00 on the excuse that the petitioner needed the money for the construction of
his house. In addition to the payment of the principal, Gutierrez assured Marasigan that
he would be paid an interest of 5% per month from March to May 1994. HcTIDC

After much contemplation and taking into account his relationship with the petitioner and
Gutierrez, Marasigan acceded to Gutierrez' request and gave him P200,000.00
sometime in February 1994. Gutierrez simultaneously delivered to Marasigan one of the
blank checks the petitioner pre-signed with Pilipinas Bank, Greenhills Branch, Check
No. 21001764 with the blank portions filled out with the words "Cash" "Two Hundred
Thousand Pesos Only", and the amount of "P200,000.00". The upper right portion of the
check corresponding to the date was also filled out with the words "May 23, 1994" but
the petitioner contended that the same was not written by Gutierrez.

On May 24, 1994, Marasigan deposited the check but it was dishonored for the reason
"ACCOUNT CLOSED." It was later revealed that petitioner's account with the bank had
been closed since May 28, 1993. ISTCHE

Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several


demand letters to the petitioner asking for the payment of P200,000.00, but his
demands likewise went unheeded. Consequently, he filed a criminal case for violation of
B.P. 22 against the petitioner, docketed as Criminal Case No. 42816.

On September 10, 1997, the petitioner filed before the Regional Trial Court (RTC) a
Complaint for Declaration of Nullity of Loan and Recovery of Damages against
Gutierrez and co-respondent Marasigan. He completely denied authorizing the loan or
the check's negotiation, and asserted that he was not privy to the parties' loan
agreement. AaCTID

Only Marasigan filed his answer to the complaint. In the RTC's order dated December
22, 1997, Gutierrez was declared in default.

The Ruling of the RTC


The RTC ruled on February 3, 2003 in favor of Marasigan. 4 It found that the petitioner,
in issuing the pre-signed blank checks, had the intention of issuing a negotiable
instrument, albeit with specific instructions to Gutierrez not to negotiate or issue the
check without his approval. While under Section 14 of the Negotiable Instruments Law
Gutierrez had the prima facie authority to complete the checks by filling up the blanks
therein, the RTC ruled that he deliberately violated petitioner's specific instructions and
took advantage of the trust reposed in him by the latter. ACTESI

Nonetheless, the RTC declared Marasigan as a holder in due course and accordingly
dismissed the petitioner's complaint for declaration of nullity of the loan. It ordered the
petitioner to pay Marasigan the face value of the check with a right to claim
reimbursement from Gutierrez.

The petitioner elevated the case to the Court of Appeals (CA), insisting that Marasigan
is not a holder in due course. He contended that when Marasigan received the check,
he knew that the same was without a date, and hence, incomplete. He also alleged that
the loan was actually between Marasigan and Gutierrez with his check being used only
as a security.

The Ruling of the CA

On September 24, 2008, the CA affirmed the RTC ruling, although premised on different
factual findings. After careful analysis, the CA agreed with the petitioner that Marasigan
is not a holder in due course as he did not receive the check in good faith. TcDIaA

The CA also concluded that the check had been strictly filled out by Gutierrez in
accordance with the petitioner's authority. It held that the loan may not be nullified since
it is grounded on an obligation arising from law and ruled that the petitioner is still liable
to pay Marasigan the sum of P200,000.00.

After the CA denied the subsequent motion for reconsideration that followed, the
petitioner filed the present petition for review on certiorari under Rule 45 of the Revised
Rules of Court.

The Petition

The petitioner argues that: (1) there was no loan between him and Marasigan since he
never authorized the borrowing of money nor the check's negotiation to the latter; (2)
under Article 1878 of the Civil Code, a special power of attorney is necessary for an
individual to make a loan or borrow money in behalf of another; (3) the loan transaction
was between Gutierrez and Marasigan, with his check being used only as a security; (4)
the check had not been completely and strictly filled out in accordance with his authority
since the condition that the subject check can only be used provided there is prior
approval from him, was not complied with; (5) even if the check was strictly filled up as
instructed by the petitioner, Marasigan is still not entitled to claim the check's value as
he was not a holder in due course; and (6) by reason of the bad faith in the dealings
between the respondents, he is entitled to claim for damages. HAEDIS

The Issues

Reduced to its basics, the case presents to us the following issues:

1. Whether the contract of loan in the amount of P200,000.00 granted by


respondent Marasigan to petitioner, through respondent Gutierrez, may be nullified for
being void;

2. Whether there is basis to hold the petitioner liable for the payment of the
P200,000.00 loan;

3. Whether respondent Gutierrez has completely filled out the subject check strictly
under the authority given by the petitioner; and

4. Whether Marasigan is a holder in due course. IcSHTA

The Court's Ruling

The petition is impressed with merit.

We note at the outset that the issues raised in this petition are essentially factual in
nature. The main point of inquiry of whether the contract of loan may be nullified, hinges
on the very existence of the contract of loan — a question that, as presented, is
essentially, one of fact. Whether the petitioner authorized the borrowing; whether
Gutierrez completely filled out the subject check strictly under the petitioner's authority;
and whether Marasigan is a holder in due course are also questions of fact, that, as a
general rule, are beyond the scope of a Rule 45 petition. DEcSaI

The rule that questions of fact are not the proper subject of an appeal by certiorari, as a
petition for review under Rule 45 is limited only to questions of law, is not an absolute
rule that admits of no exceptions. One notable exception is when the findings of fact of
both the trial court and the CA are conflicting, making their review necessary. 5 In the
present case, the tribunals below arrived at two conflicting factual findings, albeit with
the same conclusion, i.e., dismissal of the complaint for nullity of the loan. Accordingly,
we will examine the parties' evidence presented.

I. Liability Under the Contract of Loan

The petitioner seeks to nullify the contract of loan on the ground that he never
authorized the borrowing of money. He points to Article 1878, paragraph 7 of the Civil
Code, which explicitly requires a written authority when the loan is contracted through
an agent. The petitioner contends that absent such authority in writing, he should not be
held liable for the face value of the check because he was not a party or privy to the
agreement.

Contracts of Agency May be Oral Unless

The Law Requires a Specific Form

Article 1868 of the Civil Code defines a contract of agency 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." Agency may be express, or
implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without
authority. acAESC

As a general rule, a contract of agency may be oral. 6 However, it must be written when
the law requires a specific form, for example, in a sale of a piece of land or any interest
therein through an agent.

Article 1878 paragraph 7 of the Civil Code expressly requires a special power of
authority before an agent can loan or borrow money in behalf of the principal, to wit:

Art. 1878. Special powers of attorney are necessary in the following cases:

xxx xxx xxx

(7) To loan or borrow money, unless the latter act be urgent and indispensable for
the preservation of the things which are under administration. (emphasis supplied)
cAEDTa

Article 1878 does not state that the authority be in writing. As long as the mandate is
express, such authority may be either oral or written. We unequivocably declared in Lim
Pin v. Liao Tian, et al., 7 that the requirement under Article 1878 of the Civil Code refers
to the nature of the authorization and not to its form. Be that as it may, the authority
must be duly established by competent and convincing evidence other than the self
serving assertion of the party claiming that such authority was verbally given, thus:

The requirements of a special power of attorney in Article 1878 of the Civil Code and of
a special authority in Rule 138 of the Rules of Court refer to the nature of the
authorization and not its form. The requirements are met if there is a clear mandate
from the principal specifically authorizing the performance of the act. As early as 1906,
this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may
be either oral or written, the one vital thing being that it shall be express. And more
recently, We stated that, if the special authority is not written, then it must be duly
established by evidence: SCHIac

. . . the Rules require, for attorneys to compromise the litigation of their clients, a special
authority. And while the same does not state that the special authority be in writing the
Court has every reason to expect that, if not in writing, the same be duly established by
evidence other than the self-serving assertion of counsel himself that such authority was
verbally given him. (Home Insurance Company vs. United States lines Company, et al.,
21 SCRA 863; 866: Vicente vs. Geraldez, 52 SCRA 210; 225). (emphasis supplied).

The Contract of Loan Entered Into by Gutierrez in Behalf

of the Petitioner Should be Nullified for Being Void;

Petitioner is Not Bound by the Contract of Loan.

A review of the records reveals that Gutierrez did not have any authority to borrow
money in behalf of the petitioner. Records do not show that the petitioner executed any
special power of attorney (SPA) in favor of Gutierrez. In fact, the petitioner's testimony
confirmed that he never authorized Gutierrez (or anyone for that matter), whether
verbally or in writing, to borrow money in his behalf, nor was he aware of any such
transaction: TcCDIS

ALVIN PATRIMONIO (witness)

ATTY. DE VERA:

Did you give Nap Gutierrez any Special Power of Attorney in writing authorizing
him to borrow using your money?

WITNESS:

No, sir. (T.S.N., Alvin Patrimonio, Nov. 11, 1999, p. 105) 8

xxx xxx xxx

Marasigan however submits that the petitioner's acts of pre-signing the blank checks
and releasing them to Gutierrez suffice to establish that the petitioner had authorized
Gutierrez to fill them out and contract the loan in his behalf. aHCSTD

Marasigan's submission fails to persuade us.

In the absence of any authorization, Gutierrez could not enter into a contract of loan in
behalf of the petitioner. As held in Yasuma v. Heirs of De Villa, 9 involving a loan
contracted by de Villa secured by real estate mortgages in the name of East Cordillera
Mining Corporation, in the absence of an SPA conferring authority on de Villa, there is
no basis to hold the corporation liable, to wit:

The power to borrow money is one of those cases where corporate officers as agents of
the corporation need a special power of attorney. In the case at bar, no special power of
attorney conferring authority on de Villa was ever presented. . . . There was no showing
that respondent corporation ever authorized de Villa to obtain the loans on its behalf.
CAHTIS

xxx xxx xxx

Therefore, on the first issue, the loan was personal to de Villa. There was no basis to
hold the corporation liable since there was no authority, express, implied or apparent,
given to de Villa to borrow money from petitioner. Neither was there any subsequent
ratification of his act.

xxx xxx xxx

The liability arising from the loan was the sole indebtedness of de Villa (or of his estate
after his death). (citations omitted; emphasis supplied).

This principle was also reiterated in the case of Gozun v. Mercado, 10 where this court
held: CTaIHE

Petitioner submits that his following testimony suffices to establish that respondent had
authorized Lilian to obtain a loan from him.

xxx xxx xxx

Petitioner's testimony failed to categorically state, however, whether the loan was made
on behalf of respondent or of his wife. While petitioner claims that Lilian was authorized
by respondent, the statement of account marked as Exhibit "A" states that the amount
was received by Lilian "in behalf of Mrs. Annie Mercado. AcISTE

It bears noting that Lilian signed in the receipt in her name alone, without indicating
therein that she was acting for and in behalf of respondent. She thus bound herself in
her personal capacity and not as an agent of respondent or anyone for that matter.

It is a general rule in the law of agency that, in order to bind the principal by a mortgage
on real property executed by an agent, it must upon its face purport to be made, signed
and sealed in the name of the principal, otherwise, it will bind the went only. It is not
enough merely that the agent was in fact authorized to make the mortgage, if he has not
acted in the name of the principal. . . . (emphasis supplied).
In the absence of any showing of any agency relations or special authority to act for and
in behalf of the petitioner, the loan agreement Gutierrez entered into with Marasigan is
null and void. Thus, the petitioner is not bound by the parties' loan agreement. ICTHDE

Furthermore, that the petitioner entrusted the blank pre-signed checks to Gutierrez is
not legally sufficient because the authority to enter into a loan can never be presumed.
The contract of agency and the special fiduciary relationship inherent in this contract
must exist as a matter of fact. The person alleging it has the burden of proof to show,
not only the fact of agency, but also its nature and extent. 11 As we held in People v.
Yabut: 12

Modesto Yambao's receipt of the bad checks from Cecilia Que Yabut or Geminiano
Yabut, Jr., in Caloocan City cannot, contrary to the holding of the respondent Judges,
be licitly taken as delivery of the checks to the complainant Alicia P. Andan at Caloocan
City to fix the venue there. He did not take delivery of the checks as holder, i.e., as
"payee" or "indorsee." And there appears to be no contract of agency between Yambao
and Andan so as to bind the latter for the acts of the former. Alicia P. Andan declared in
that sworn testimony before the investigating fiscal that Yambao is but her "messenger"
or "part-time employee." There was no special fiduciary relationship that permeated
their dealings. For a contract of agency to exist, the consent of both parties is essential,
the principal consents that the other party, the agent, shall act on his behalf, and the
agent consents so to act. It must exist as a fact. The law makes no presumption thereof.
The person alleging it has the burden of proof to show, not only the fact of its existence,
but also its nature and extent. This is more imperative when it is considered that the
transaction dealt with involves checks, which are not legal tender, and the creditor may
validly refuse the same as payment of obligation. (at p. 630). (emphasis supplied)
AaITCH

The records show that Marasigan merely relied on the words of Gutierrez without
securing a copy of the SPA in favor of the latter and without verifying from the petitioner
whether he had authorized the borrowing of money or release of the check. He was
thus bound by the risk accompanying his trust on the mere assurances of Gutierrez.

No Contract of Loan was Perfected Between

Marasigan and Petitioner, as the Latter's

Consent was Not Obtained.

Another significant point that the lower courts failed to consider is that a contract of loan,
like any other contract, is subject to the rules governing the requisites and validity of
contracts in general. 13 Article 1318 of the Civil Code 14 enumerates the essential
requisites for a valid contract, namely:
1. consent of the contracting parties; CAaDTH

2. object certain which is the subject matter of the contract; and

3. cause of the obligation which is established.

In this case, the petitioner denied liability on the ground that the contract lacked the
essential element of consent. We agree with the petitioner. As we explained above,
Gutierrez did not have the petitioner's written/verbal authority to enter into a contract of
loan. While there may be a meeting of the minds between Gutierrez and Marasigan,
such agreement cannot bind the petitioner whose consent was not obtained and who
was not privy to the loan agreement. Hence, only Gutierrez is bound by the contract of
loan.

True, the petitioner had issued several pre-signed checks to Gutierrez, one of which fell
into the hands of Marasigan. This act, however, does not constitute sufficient authority
to borrow money in his behalf and neither should it be construed as petitioner's grant of
consent to the parties' loan agreement. Without any evidence to prove Gutierrez'
authority, the petitioner's signature in the check cannot be taken, even remotely, as
sufficient authorization, much less, consent to the contract of loan. Without the consent
given by one party in a purported contract, such contract could not have been perfected;
there simply was no contract to speak of. 15 ECSHAD

With the loan issue out of the way, we now proceed to determine whether the petitioner
can be made liable under the check he signed.

II. Liability Under the Instrument

The answer is supplied by the applicable statutory provision found in Section 14 of the
Negotiable Instruments Law (NIL) which states:

Sec. 14. Blanks; when may be filled. — Where the instrument is wanting in any
material particular, the person in possession thereof has a prima facie authority to
complete it by filling up the blanks therein. And a signature on a blank paper delivered
by the person making the signature in order that the paper may be converted into a
negotiable instrument operates as a prima facie authority to fill it up as such for any
amount. In order, however, that any such instrument when completed may be enforced
against any person who became a party thereto prior to its completion, it must be filled
up strictly in accordance with the authority given and within a reasonable time. But if any
such instrument, after completion, is negotiated to a holder in due course, it is valid and
effectual for all purposes in his hands, and he may enforce it as if it had been filled up
strictly in accordance with the authority given and within a reasonable time.
This provision applies to an incomplete but delivered instrument. Under this rule, if the
maker or drawer delivers a pre-signed blank paper to another person for the purpose of
converting it into a negotiable instrument, that person is deemed to have prima facie
authority to fill it up. It merely requires that the instrument be in the possession of a
person other than the drawer or maker and from such possession, together with the fact
that the instrument is wanting in a material particular, the law presumes agency to fill up
the blanks. 16 AECDHS

In order however that one who is not a holder in due course can enforce the instrument
against a party prior to the instrument's completion, two requisites must exist: (1) that
the blank must be filled strictly in accordance with the authority given; and (2) it must be
filled up within a reasonable time. If it was proven that the instrument had not been filled
up strictly in accordance with the authority given and within a reasonable time, the
maker can set this up as a personal defense and avoid liability. However, if the holder is
a holder in due course, there is a conclusive presumption that authority to fill it up had
been given and that the same was not in excess of authority. 17

In the present case, the petitioner contends that there is no legal basis to hold him liable
both under the contract and loan and under the check because: first, the subject check
was not completely filled out strictly under the authority he has given and second,
Marasigan was not a holder in due course.

Marasigan is Not a Holder in Due Course

The Negotiable Instruments Law (NIL) defines a holder in due course, thus: ITcCSA

Sec. 52 — A holder in due course is a holder who has taken the instrument under the
following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it
had been previously dishonored, if such was the fact; cADTSH

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it. (emphasis supplied)

Section 52 (c) of the NIL states that a holder in due course is one who takes the
instrument "in good faith and for value." It also provides in Section 52 (d) that in order
that one may be a holder in due course, it is necessary that at the time it was negotiated
to him he had no notice of any infirmity in the instrument or defect in the title of the
person negotiating it.
Acquisition in good faith means taking without knowledge or notice of equities of any
sort which could be set up against a prior holder of the instrument. 18 It means that he
does not have any knowledge of fact which would render it dishonest for him to take a
negotiable paper. The absence of the defense, when the instrument was taken, is the
essential element of good faith. 19 EcDATH

As held in De Ocampo v. Gatchalian: 20

In order to show that the defendant had "knowledge of such facts that his action in
taking the instrument amounted to bad faith," it is not necessary to prove that the
defendant knew the exact fraud that was practiced upon the plaintiff by the defendant's
assignor, it being sufficient to show that the defendant had notice that there was
something wrong about his assignor's acquisition of title, although he did not have
notice of the particular wrong that was committed.

It is sufficient that the buyer of a note had notice or knowledge that the note was in
some way tainted with fraud. It is not necessary that he should know the particulars or
even the nature of the fraud, since all that is required is knowledge of such facts that his
action in taking the note amounted bad faith. ADCTac

The term 'bad faith' does not necessarily involve furtive motives, but means bad faith in
a commercial sense. The manner in which the defendants conducted their Liberty Loan
department provided an easy way for thieves to dispose of their plunder. It was a case
of "no questions asked." Although gross negligence does not of itself constitute bad
faith, it is evidence from which bad faith may be inferred. The circumstances thrust the
duty upon the defendants to make further inquiries and they had no right to shut their
eyes deliberately to obvious facts. (emphasis supplied).

In the present case, Marasigan's knowledge that the petitioner is not a party or a privy to
the contract of loan, and correspondingly had no obligation or liability to him, renders
him dishonest, hence, in bad faith. The following exchange is significant on this point:
cEAaIS

WITNESS: AMBET NABUS

Q: Now, I refer to the second call . . . after your birthday. Tell us what you talked
about?

A: Since I celebrated my birthday in that place where Nap and I live together with
the other crew, there were several visitors that included Danny Espiritu. So a week after
my birthday, Bong Marasigan called me up again and he was fuming mad. Nagmumura
na siya. Hinahanap niya si . . . hinahanap niya si Nap, dahil pinagtataguan na siya at
sinabi na niya na kailangan I-settle na niya yung utang ni Nap, dahil. . . AECcTS
xxx xxx xxx

WITNESS:

Yes. Sinabi niya sa akin na kailangan ayusin na bago pa mauwi sa kung saan
ang tsekeng tumalbog. . . (He told me that we have to fix it up before it. . .) mauwi pa
kung saan . . .

xxx xxx xxx

Q: What was your reply, if any?

A: I actually asked him. Kanino ba ang tseke na sinasabi mo? (Whose check is it
that you are referring to or talking about?)

Q: What was his answer? EaHcDS

A: It was Alvin's check.

Q: What was your reply, if any?

A: I told him do you know that it is not really Alvin who borrowed money from you or
what you want to appear. . .

xxx xxx xxx

Q: What was his reply?

A: Yes, it was Nap, pero tseke pa rin ni Alvin ang hawak ko at si Alvin ang maiipit
dito. (T.S.N., Ambet Nabus, July 27, 2000; pp. 65-71; emphasis supplied) 21 SaETCI

Since he knew that the underlying obligation was not actually for the petitioner, the rule
that a possessor of the instrument is prima facie a holder in due course is inapplicable.
As correctly noted by the CA, his inaction and failure to verify, despite knowledge of that
the petitioner was not a party to the loan, may be construed as gross negligence
amounting to bad faith.

Yet, it does not follow that simply because he is not a holder in due course, Marasigan
is already totally barred from recovery. The NIL does not provide that a holder who is
not a holder in due course may not in any case recover on the instrument. 22 The only
disadvantage of a holder who is not in due course is that the negotiable instrument is
subject to defenses as if it were non-negotiable. 23 Among such defenses is the filling
up blank not within the authority.

On this point, the petitioner argues that the subject check was not filled up strictly on the
basis of the authority he gave. He points to his instruction not to use the check without
his prior approval and argues that the check was filled up in violation of said instruction.
cSaATC

Check was Not Completed Strictly under

the Authority Given by the Petitioner

Our own examination of the records tells us that Gutierrez has exceeded the authority to
fill up the blanks and use the check. To repeat, petitioner gave Gutierrez pre-signed
checks to be used in their business provided that he could only use them upon his
approval. His instruction could not be any clearer as Gutierrez' authority was limited to
the use of the checks for the operation of their business, and on the condition that the
petitioner's prior approval be first secured.

While under the law, Gutierrez had a prima facie authority to complete the check, such
prima facie authority does not extend to its use (i.e., subsequent transfer or negotiation)
once the check is completed. In other words, only the authority to complete the check is
presumed. Further, the law used the term "prima facie" to underscore the fact that the
authority which the law accords to a holder is a presumption juris tantum only; hence,
subject to subject to contrary proof. Thus, evidence that there was no authority or that
the authority granted has been exceeded may be presented by the maker in order to
avoid liability under the instrument. SITCcE

In the present case, no evidence is on record that Gutierrez ever secured prior approval
from the petitioner to fill up the blank or to use the check. In his testimony, petitioner
asserted that he never authorized nor approved the filling up of the blank checks, thus:

ATTY. DE VERA:

Did you authorize anyone including Nap Gutierrez to write the date, May 23,
1994?

WITNESS:

No, sir.

Q: Did you authorize anyone including Nap Gutierrez to put the word cash? In the
check? IEHDAT

A: No, sir.

Q: Did you authorize anyone including Nap Gutierrez to write the figure P200,000 in
this check?

A: No, sir.
Q: And lastly, did you authorize anyone including Nap Gutierrez to write the words
P200,000 only . . . in this check? cIHSTC

A: No, sir. (T.S.N., Alvin Patrimonio, November 11, 1999). 24

Notably, Gutierrez was only authorized to use the check for business expenses; thus,
he exceeded the authority when he used the check to pay the loan he supposedly
contracted for the construction of petitioner's house. This is a clear violation of the
petitioner's instruction to use the checks for the expenses of Slam Dunk. It cannot
therefore be validly concluded that the check was completed strictly in accordance with
the authority given by the petitioner.

Considering that Marasigan is not a holder in due course, the petitioner can validly set
up the personal defense that the blanks were not filled up in accordance with the
authority he gave. Consequently, Marasigan has no right to enforce payment against
the petitioner and the latter cannot be obliged to pay the face value of the check.
ACSaHc

WHEREFORE, in view of the foregoing, judgment is hereby rendered GRANTING the


petitioner Alvin Patrimonio's petition for review on certiorari. The appealed Decision
dated September 24, 2008 and the Resolution dated April 30, 2009 of the Court of
Appeals are consequently ANNULLED AND SET ASIDE. Costs against the
respondents.

SO ORDERED.

Carpio, Del Castillo, Perez and Perlas-Bernabe, JJ., concur.


SALLY YOSHIZAKI, petitioner, vs. JOY TRAINING CENTER OF AURORA, INC.,
respondent.

DECISION

BRION, J p:

We resolve the petition for review on certiorari 1 filed by petitioner Sally Yoshizaki to
challenge the February 14, 2006 Decision 2 and the October 3, 2006 Resolution 3 of
the Court of Appeals (CA) in CA-G.R. CV No. 83773.

The Factual Antecedents

Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a non-stock, non-profit
religious educational institution. It was the registered owner of a parcel of land and the
building thereon (real properties) located in San Luis Extension, Purok No. 1, Barangay
Buhangin, Baler, Aurora. The parcel of land was designated as Lot No. 125-L and was
covered by Transfer Certificate of Title (TCT) No. T-25334. 4 ScHAIT

On November 10, 1998, the spouses Richard and Linda Johnson sold the real
properties, a Wrangler jeep, and other personal properties in favor of the spouses Sally
and Yoshio Yoshizaki. On the same date, a Deed of Absolute Sale 5 and a Deed of
Sale of Motor Vehicle 6 were executed in favor of the spouses Yoshizaki. The spouses
Johnson were members of Joy Training's board of trustees at the time of sale. On
December 7, 1998, TCT No. T-25334 was cancelled and TCT No. T-26052 7 was
issued in the name of the spouses Yoshizaki.

On December 8, 1998, Joy Training, represented by its Acting Chairperson Reuben V.


Rubio, filed an action for the Cancellation of Sales and Damages with prayer for the
issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against
the spouses Yoshizaki and the spouses Johnson before the Regional Trial Court of
Baler, Aurora (RTC). 8 On January 4, 1999, Joy Training filed a Motion to Amend
Complaint with the attached Amended Complaint. The amended complaint impleaded
Cecilia A. Abordo, officer-in-charge of the Register of Deeds of Baler, Aurora, as
additional defendant. The RTC granted the motion on the same date. 9 cEaDTA

In the complaint, Joy Training alleged that the spouses Johnson sold its properties
without the requisite authority from the board of directors. 10 It assailed the validity of a
board resolution dated September 1, 1998 11 which purportedly granted the spouses
Johnson the authority to sell its real properties. It averred that only a minority of the
board, composed of the spouses Johnson and Alexander Abadayan, authorized the
sale through the resolution. It highlighted that the Articles of Incorporation provides that
the board of trustees consists of seven members, namely: the spouses Johnson,
Reuben, Carmencita Isip, Dominador Isip, Miraflor Bolante, and Abelardo Aquino. 12
DEScaT

Cecilia and the spouses Johnson were declared in default for their failure to file an
Answer within the reglementary period. 13 On the other hand, the spouses Yoshizaki
filed their Answer with Compulsory Counterclaims on June 23, 1999. They claimed that
Joy Training authorized the spouses Johnson to sell the parcel of land. They asserted
that a majority of the board of trustees approved the resolution. They maintained that
the actual members of the board of trustees consist of five members, namely: the
spouses Johnson, Reuben, Alexander, and Abelardo. Moreover, Connie Dayot, the
corporate secretary, issued a certification dated February 20, 1998 14 authorizing the
spouses Johnson to act on Joy Training's behalf. Furthermore, they highlighted that the
Wrangler jeep and other personal properties were registered in the name of the
spouses Johnson. 15 Lastly, they assailed the RTC's jurisdiction over the case. They
posited that the case is an intra-corporate dispute cognizable by the Securities and
Exchange Commission (SEC). 16 cADEIa

After the presentation of their testimonial evidence, the spouses Yoshizaki formally
offered in evidence photocopies of the resolution and certification, among others. 17 Joy
Training objected to the formal offer of the photocopied resolution and certification on
the ground that they were not the best evidence of their contents. 18 In an Order 19
dated May 18, 2004, the RTC denied the admission of the offered copies.

The RTC Ruling

The RTC ruled in favor of the spouses Yoshizaki. It found that Joy Training owned the
real properties. However, it held that the sale was valid because Joy Training authorized
the spouses Johnson to sell the real properties. It recognized that there were only five
actual members of the board of trustees; consequently, a majority of the board of
trustees validly authorized the sale. It also ruled that the sale of personal properties was
valid because they were registered in the spouses Johnson's name. 20 DaHSIT

Joy Training appealed the RTC decision to the CA.

The CA Ruling

The CA upheld the RTC's jurisdiction over the case but reversed its ruling with respect
to the sale of real properties. It maintained that the present action is cognizable by the
RTC because it involves recovery of ownership from third parties.

It also ruled that the resolution is void because it was not approved by a majority of the
board of trustees. It stated that under Section 25 of the Corporation Code, the basis for
determining the composition of the board of trustees is the list fixed in the articles of
incorporation. Furthermore, Section 23 of the Corporation Code provides that the board
of trustees shall hold office for one year and until their successors are elected and
qualified. Seven trustees constitute the board since Joy Training did not hold an election
after its incorporation. SIcCTD

The CA did not also give any probative value to the certification. It stated that the
certification failed to indicate the date and the names of the trustees present in the
meeting. Moreover, the spouses Yoshizaki did not present the minutes that would prove
that the certification had been issued pursuant to a board resolution. 21 The CA also
denied 22 the spouses Yoshizaki's motion for reconsideration, prompting Sally 23 to file
the present petition.

The Petition

Sally avers that the RTC has no jurisdiction over the case. She points out that the
complaint was principally for the nullification of a corporate act. The transfer of the
SEC's original and exclusive jurisdiction to the RTC 24 does not have any retroactive
application because jurisdiction is a substantive matter.

She argues that the spouses Johnson were authorized to sell the parcel of land and that
she was a buyer in good faith because she merely relied on TCT No. T-25334. The title
states that the spouses Johnson are Joy Training's representatives. EDIHSC

She also argues that it is a basic principle that a party dealing with a registered land
need not go beyond the certificate of title to determine the condition of the property. In
fact, the resolution and the certification are mere reiterations of the spouses Johnson's
authority in the title to sell the real properties. She further claims that the resolution and
the certification are not even necessary to clothe the spouses Johnson with the
authority to sell the disputed properties. Furthermore, the contract of agency was
subsisting at the time of sale because Section 108 of Presidential Decree No. (PD)
1529 requires that the revocation of authority must be approved by a court of competent
jurisdiction and no revocation was reflected in the certificate of title. 25

The Case for the Respondent

In its Comment 26 and Memorandum, 27 Joy Training takes the opposite view that the
RTC has jurisdiction over the case. It posits that the action is essentially for recovery of
property and is therefore a case cognizable by the RTC. Furthermore, Sally is estopped
from questioning the RTC's jurisdiction because she seeks to reinstate the RTC ruling in
the present case. DAaIHT

Joy Training maintains that it did not authorize the spouses Johnson to sell its real
properties. TCT No. T-25334 does not specifically grant the authority to sell the parcel
of land to the spouses Johnson. It further asserts that the resolution and the certification
should not be given any probative value because they were not admitted in evidence by
the RTC. It argues that the resolution is void for failure to comply with the voting
requirements under Section 40 of the Corporation Code. It also posits that the
certification is void because it lacks material particulars.

The Issues

The case comes to us with the following issues: aSCDcH

1) Whether or not the RTC has jurisdiction over the present case; and

2) Whether or not there was a contract of agency to sell the real properties between
Joy Training and the spouses Johnson.

3) As a consequence of the second issue, whether or not there was a valid contract
of sale of the real properties between Joy Training and the spouses Yoshizaki.

Our Ruling

We find the petition unmeritorious.

The RTC has jurisdiction over

disputes concerning the application

of the Civil Code

Jurisdiction over the subject matter is the power to hear and determine cases of the
general class to which the proceedings before a court belong. 28 It is conferred by law.
The allegations in the complaint and the status or relationship of the parties determine
which court has jurisdiction over the nature of an action. 29 The same test applies in
ascertaining whether a case involves an intra-corporate controversy. 30 EcHAaS

The CA correctly ruled that the RTC has jurisdiction over the present case. Joy Training
seeks to nullify the sale of the real properties on the ground that there was no contract
of agency between Joy Training and the spouses Johnson. This was beyond the ambit
of the SEC's original and exclusive jurisdiction prior to the enactment of Republic Act
No. 8799 which only took effect on August 3, 2000. The determination of the existence
of a contract of agency and the validity of a contract of sale requires the application of
the relevant provisions of the Civil Code. It is a well-settled rule that "[d]isputes
concerning the application of the Civil Code are properly cognizable by courts of general
jurisdiction." 31 Indeed, no special skill requiring the SEC's technical expertise is
necessary for the disposition of this issue and of this case. IDTcHa
The Supreme Court may review

questions of fact in a petition for

review on certiorari when the

findings of fact by the lower courts

are conflicting

We are aware that the issues at hand require us to review the pieces of evidence
presented by the parties before the lower courts. As a general rule, a petition for review
on certiorari precludes this Court from entertaining factual issues; we are not duty-
bound to analyze again and weigh the evidence introduced in and considered by the
lower courts. However, the present case falls under the recognized exception that a
review of the facts is warranted when the findings of the lower courts are conflicting. 32
Accordingly, we will examine the relevant pieces of evidence presented to the lower
court. cICHTD

There is no contract of agency

between Joy Training and the

spouses Johnson to sell the parcel of

land with its improvements

Article 1868 of the Civil Code defines a contract of agency 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." It may be express, or
implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without
authority.

As a general rule, a contract of agency may be oral. However, it must be written when
the law requires a specific form. 33 Specifically, Article 1874 of the Civil Code provides
that the contract of agency must be written for the validity of the sale of a piece of land
or any interest therein. Otherwise, the sale shall be void. A related provision, Article
1878 of the Civil Code, states that special powers of attorney are necessary to convey
real rights over immovable properties. TSAHIa

The special power of attorney mandated by law must be one that expressly mentions a
sale or that includes a sale as a necessary ingredient of the authorized act. We
unequivocably declared in Cosmic Lumber Corporation v. Court of Appeals 34 that a
special power of attorney must express the powers of the agent in clear and
unmistakable language for the principal to confer the right upon an agent to sell real
estate. When there is any reasonable doubt that the language so used conveys such
power, no such construction shall be given the document. The purpose of the law in
requiring a special power of attorney in the disposition of immovable property is to
protect the interest of an unsuspecting owner from being prejudiced by the unwarranted
act of another and to caution the buyer to assure himself of the specific authorization of
the putative agent. 35 SACEca

In the present case, Sally presents three pieces of evidence which allegedly prove that
Joy Training specially authorized the spouses Johnson to sell the real properties: (1)
TCT No. T-25334, (2) the resolution, (3) and the certification. We quote the pertinent
portions of these documents for a thorough examination of Sally's claim. TCT No. T-
25334, entered in the Registry of Deeds on March 5, 1998, states:

A parcel of land . . . is registered in accordance with the provisions of the Property


Registration Decree in the name of JOY TRAINING CENTER OF AURORA, INC., Rep.
by Sps. RICHARD A. JOHNSON and LINDA S. JOHNSON, both of legal age, U.S.
Citizen, and residents of P.O. Box 3246, Shawnee, Ks 66203, U.S.A. 36 (emphasis
ours)

On the other hand, the fifth paragraph of the certification provides: acCDSH

Further, Richard A. and Linda J[.] Johnson were given FULL AUTHORITY for ALL
SIGNATORY purposes for the corporation on ANY and all matters and decisions
regarding the property and ministry here. They will follow guidelines set forth according
to their appointment and ministerial and missionary training and in that, they will
formulate and come up with by-laws which will address and serve as governing papers
over the center and corporation. They are to issue monthly and quarterly statements to
all members of the corporation. 37 (emphasis ours)

The resolution states:

We, the undersigned Board of Trustees (in majority) have authorized the sale of land
and building owned by spouses Richard A. and Linda J[.] Johnson (as described in the
title SN No. 5102156 filed with the Province of Aurora last 5th day of March 1998.
These proceeds are going to pay outstanding loans against the project and the
dissolution of the corporation shall follow the sale. This is a religious, non-profit
corporation and no profits or stocks are issued. 38 (emphasis ours) SECHIA

The above documents do not convince us of the existence of the contract of agency to
sell the real properties. TCT No. T-25334 merely states that Joy Training is represented
by the spouses Johnson. The title does not explicitly confer to the spouses Johnson the
authority to sell the parcel of land and the building thereon. Moreover, the phrase "Rep.
by Sps. RICHARD A. JOHNSON and LINDA S. JOHNSON" 39 only means that the
spouses Johnson represented Joy Training in land registration.

The lower courts should not have relied on the resolution and the certification in
resolving the case. The spouses Yoshizaki did not produce the original documents
during trial. They also failed to show that the production of pieces of secondary
evidence falls under the exceptions enumerated in Section 3, Rule 130 of the Rules of
Court. 40 Thus, the general rule — that no evidence shall be admissible other than the
original document itself when the subject of inquiry is the contents of a document —
applies. 41 TEDAHI

Nonetheless, if only to erase doubts on the issues surrounding this case, we declare
that even if we consider the photocopied resolution and certification, this Court will still
arrive at the same conclusion.

The resolution which purportedly grants the spouses Johnson a special power of
attorney is negated by the phrase "land and building owned by spouses Richard A. and
Linda J[.] Johnson." 42 Even if we disregard such phrase, the resolution must be given
scant consideration. We adhere to the CA's position that the basis for determining the
board of trustees' composition is the trustees as fixed in the articles of incorporation and
not the actual members of the board. The second paragraph of Section 25 43 of the
Corporation Code expressly provides that a majority of the number of trustees as fixed
in the articles of incorporation shall constitute a quorum for the transaction of corporate
business. DEcTCa

Moreover, the certification is a mere general power of attorney which comprises all of
Joy Training's business. 44 Article 1877 of the Civil Code clearly states that "[a]n
agency couched in general terms comprises only acts of administration, even if the
principal should state that he withholds no power or that the agent may execute such
acts as he may consider appropriate, or even though the agency should authorize a
general and unlimited management." 45

The contract of sale is unenforceable

Necessarily, the absence of a contract of agency renders the contract of sale


unenforceable; 46 Joy Training effectively did not enter into a valid contract of sale with
the spouses Yoshizaki. Sally cannot also claim that she was a buyer in good faith. She
misapprehended the rule that persons dealing with a registered land have the legal right
to rely on the face of the title and to dispense with the need to inquire further, except
when the party concerned has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry. 47 This rule applies when the
ownership of a parcel of land is disputed and not when the fact of agency is contested.
ESDHCa
At this point, we reiterate the established principle that persons dealing with an agent
must ascertain not only the fact of agency, but also the nature and extent of the agent's
authority. 48 A third person with whom the agent wishes to contract on behalf of the
principal may require the presentation of the power of attorney, or the instructions as
regards the agency. 49 The basis for agency is representation and a person dealing
with an agent is put upon inquiry and must discover on his own peril the authority of the
agent. 50 Thus, Sally bought the real properties at her own risk; she bears the risk of
injury occasioned by her transaction with the spouses Johnson.

WHEREFORE, premises considered, the assailed Decision dated February 14, 2006
and Resolution dated October 3, 2006 of the Court of Appeals are hereby AFFIRMED
and the petition is hereby DENIED for lack of merit.

SO ORDERED. SDHITE

Carpio, Perez, Mendoza * and Perlas-Bernabe, JJ., concur.

Footnotes

ESTATE OF LINO OLAGUER, Represented by Linda O. Olaguer, and LINDA O.


MONTAYRE, petitioners, vs. EMILIANO M. ONGJOCO, respondent.

DECISION

CHICO-NAZARIO, J p:

Assailed in this Petition for Review on Certiorari 1 is the Decision 2 of the Court of
Appeals dated 27 February 2006 in CA-G.R. CV No. 71710. Said decision modified the
Decision 3 and the subsequent Order 4 of the Regional Trial Court (RTC) of Legazpi
City, Branch 6, in Civil Case No. 6223, and upheld the validity of the sales of properties
to respondent Emiliano M. Ongjoco. ETISAc

The relevant factual antecedents of the case, as found by the trial court and adapted by
the Court of Appeals, are as follows: CHDAEc

The plaintiffs Sor Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O. Trinidad, Lina
Olaguer and Ma. Linda O. Montayre are the legitimate children of the spouses Lino
Olaguer and defendant Olivia P. Olaguer.

Lino Olaguer died on October 3, 1957 so Special Proceedings No. 528 for probate of
will was filed in the then Court of First Instance of Albay. Defendant Olivia P. Olaguer
was appointed as administrator pursuant to the will. Later, defendant Eduardo Olaguer
was appointed as co-administrator. . . . TAHIED

On October 15, 1959 defendant Olivia P. Olaguer got married to defendant Jose A.
Olaguer before the then Justice of the Peace of Sto. Domingo (Libog) Albay. (Exhibit
"NNNN") On January 24, 1965 they were married in church. (Exhibit "XX") AaCTcI

In the order of the probate court dated April 4, 1961, some properties of the estate were
authorized to be sold to pay obligations of the estate. Pursuant to this authority,
administrators Olivia P. Olaguer and Eduardo Olaguer on December 12, 1962 sold to
Pastor Bacani for [P]25,000 Pesos, twelve (12) parcels of land, particularly, Lots 4518,
4526, 4359, 8750, 7514, 6608, 8582, 8157, 7999, 6167, 8266, and 76 with a total area
of 99 hectares. (Exhibit "A" — Deed of Sale notarized by defendant Jose A. Olaguer)

This sale of twelve (12) parcels of land to Pastor Bacani was approved by the Probate
Court on December 12, 1962. (Exhibit "15") HcaDTE

The following day, December 13, 1962, Pastor Bacani sold back to Eduardo Olaguer
and Olivia Olaguer for [P]12,000.00 Pesos, one of the twelve (12) lots he bought the
day before, particularly, Lot No. 76 in the proportion of 7/13 and 6/13 pro-indiviso
respectively. (Exhibit "B" — Deed of Sale notarized by Felipe A. Cevallos, Sr.) DHaECI

Simultaneously, on the same day December 13, 1962, Pastor Bacani sold back to Olivia
Olaguer and Eduardo Olaguer the other eleven (11) parcels he bought from them as
follows:

To Olivia Olaguer — Four (4) parcels for 10,700 Pesos, particularly Lots 4518, 4526,
4359, 8750 with a total area of 84 hectares. (Exhibit "E" — Deed of Sale notarized by
Felipe A. Cevallos, Sr.) THIAaD

To Eduardo Olaguer — Seven (7) parcels of land for 2,500 Pesos, particularly Lots
7514, 6608, 8582, 8157, 7999, 6167, and 8266 with a total area of 15 hectares. (Exhibit
"C" — Deed of Sale notarized by defendant Jose A. Olaguer)

Relying upon the same order of April 4, 1961 but without prior notice or permission from
the Probate Court, defendants Olivia P. Olaguer and Eduardo Olaguer on November 1,
1965 sold to Estanislao Olaguer for 7,000 Pesos, ten (10) parcels of land, particularly,
(a) TCT No. T-4011 — Lot No. 578, (b) TCT No. T-1417 — Lot No. 1557, (c) TCT No.
T-4031 — Lot No. 1676, (d) TCT No. T-4034 — Lot No. 4521, (e) TCT No. T-4035 —
Lot No. 4522, (f) TCT No. 4013 — Lot No. 8635, (g) TCT No. T-4014 — Lot 8638, (h)
TCT No. T-4603 — Lot No. 7589, (i) TCT No. 4604 — Lot No. 7593, and (j) TCT No. T-
4605 — Lot No. 7396. (Exhibit "D" — Deed of Sale notarized by Rodrigo R. Reantaso)
DISTcH
This sale to Estanislao Olaguer was approved by the Probate Court on November 12,
1965.

After the foregoing sale to Estanislao Olaguer, the following transactions took place:

1) On July 7, 1966, defendant Olivia P. Olaguer executed a Special Power of


Attorney notarized by Rodrigo R. Reantaso (Exhibit "T") in favor of defendant Jose A.
Olaguer, authorizing the latter to "sell, mortgage, assign, transfer, endorse and deliver"
the properties covered by TCT No. 14654 for Lot 76 6/13 share only, T-13983, T-14658,
T-14655, T-14656, and T-14657.

2) On July 7, 1966, Estanislao Olaguer executed a Special Power of Attorney in


favor of Jose A. Olaguer (Exhibit "X") notarized by Rodrigo R. Reantaso authorizing the
latter to "sell, mortgage, assign, transfer, endorse and deliver" the properties covered by
TCT No. T-20221, T-20222, T-20225 for Lot No. 8635, T-20226 for Lot No. 8638, T-
20227, T-20228, and T-20229. IaSAHC

By virtue of this Special Power of Attorney, on March 1, 1967, Jose A. Olaguer as


Attorney-in-Fact of Estanislao Olaguer mortgaged Lots 7589, 7593 and 7396 to
defendant Philippine National Bank (PNB) as security for a loan of 10,000 Pesos. The
mortgage was foreclosed by the PNB on June 13, 1973 and the properties mortgage
were sold at public auction to PNB. On December 10, 1990, the PNB transferred the
properties to the Republic of the Philippines pursuant to Exec. Order No. 407 dated
June 14, 1990 for agrarian reform purposes. (records, vol. 1, page 66) SAHIDc

3) On October 29, 1966, Estanislao Olaguer executed a General Power of Attorney


notarized by Rodrigo R. Reantaso (Exhibit "Y") in favor of Jose A. Olaguer, authorizing
the latter to exercise general control and supervision over all of his business and
properties, and among others, to sell or mortgage any of his properties.

4) On December 29, 1966, Estanislao Olaguer sold to Jose A. Olaguer for 15,000
Pesos, (Exhibit "UU") the ten (10) parcels of land (Lots 578, 4521, 4522, 1557, 1676,
8635, 8638, 7589, 7593 and 7396) he bought from Olivia P. Olaguer and Eduardo
Olaguer under Exhibit "D". DCSTAH

5) On March 16, 1968, Estanislao Olaguer sold to Jose A. Olaguer for 1 Peso and
other valuable consideration Lot No. 4521 — TCT No. T-20223 and Lot 4522 — TCT
No. 20224 with a total area of 2.5 hectares. (records, vol. 1, page 33)

6) On June 5, 1968, Estanislao Olaguer sold Lot No. 8635 under TCT No. T-20225,
and Lot No. 8638 under TCT No. 20226 to Jose A. Olaguer for 1 Peso and other
valuable consideration. (Exhibit "F") Deed of Sale was notarized by Rodrigo R.
Reantaso. EcTIDA
7) On May 13, 1971, Jose A. Olaguer in his capacity as Attorney in-Fact of
Estanislao Olaguer sold to his son Virgilio Olaguer for 1 Peso and other valuable
consideration Lot No. 1557 — TCT No. 20221 and Lot No. 1676 — TCT No. 20222. The
deed of sale was notarized by Otilio Sy Bongon.

8) On July 15, 1974, Jose A. Olaguer sold to his son Virgilio Olaguer Lot No. 4521
and Lot No. 4522 for 1,000 Pesos. Deed of Sale was notarized by Otilio Sy Bongon.
(records, vol. 1, page 34) IDTcHa

9) On September 16, 1978 Virgilio Olaguer executed a General Power of Attorney


in favor of Jose A. Olaguer notarized by Otilio Sy Bongon (Exhibit "V") authorizing the
latter to exercise general control and supervision over all of his business and properties
and among others, to sell or mortgage the same.

Olivia P. Olaguer and Eduardo Olaguer were removed as administrators of the estate
and on February 12, 1980, plaintiff Ma. Linda Olaguer Montayre was appointed
administrator by the Probate Court. CIETDc

Defendant Jose A. Olaguer died on January 24, 1985. (Exhibit "NN") He was survived
by his children, namely the defendants Nimfa Olaguer Taguay, Corazon Olaguer Uy,
Jose Olaguer, Jr., Virgilio Olaguer, Jacinto Olaguer, and Ramon Olaguer.

Defendant Olivia P. Olaguer died on August 21, 1997 (Exhibit "OO") and was survived
by all the plaintiffs as the only heirs.

The decedent Lino Olaguer have had three marriages. He was first married to Margarita
Ofemaria who died April 6, 1925. His second wife was Gloria Buenaventura who died
on July 2, 1937. The third wife was the defendant Olivia P. Olaguer. IESTcD

Lot No. 76 with an area of 2,363 square meters is in the heart of the Poblacion of
Guinobatan, Albay. The deceased Lino Olaguer inherited this property from his parents.
On it was erected their ancestral home.

As already said above, Lot No. 76 was among the twelve (12) lots sold for 25,000
Pesos, by administrators Olivia P. Olaguer and Eduardo Olaguer to Pastor Bacani on
December 12, 1962. The sale was approved by the probate court on December 12,
1962. AaITCS

But, the following day, December 13, 1962 Pastor Bacani sold back the same 12 lots to
Olivia P. Olaguer and Eduardo Olaguer for 25,200 Pesos, as follows:

a) Lot No. 76 was sold back to Olivia P. Olaguer and Eduardo Olaguer for 12,000
Pesos, in the proportion of [6/13] and [7/13] respectively. (Exhibit "B")
b) 4 of the 12 lots namely, Lots 4518, 4526, 4359, and 8750 were sold back to
Olivia Olaguer for 10,700 Pesos. (Exhibit "E")

c) 7 of the 12 lots namely, Lots 7514, 6608, 8582, 8157, 7999, 6167, and 8266
were sold back to Eduardo Olaguer for 2,500 Pesos. (Exhibit "C") cTaDHS

d) Lot No. 76 was thus issued TCT No. T-14654 on December 13, 1962 in the
names of Eduardo B. Olaguer married to Daisy Pantig and Olivia P. Olaguer married to
Jose A. Olaguer to the extent of 7/13 and 6/13 pro-indiviso, respectively. (Exhibit "FF"
also "14-a") TcADCI

e) It appears from Plan (LRC) Psd-180629 (Exhibit "3") that defendant Jose A.
Olaguer caused the subdivision survey of Lot 76 into eleven (11) lots, namely, 76-A, 76-
B, 76-C, 76-D, 76-E, 76-F, 76-G, 76-H, 76-I, 76-J, and 76-K, sometime on April 3, 1972.
The subdivision survey was approved on October 5, 1973. After the approval of the
subdivision survey of Lot 76, a subdivision agreement was entered into on November
17, 1973, among Domingo Candelaria, Olivia P. Olaguer, Domingo O. de la Torre and
Emiliano M. [Ongjoco]. (records, vol. 2, page 109). aDcEIH

This subdivision agreement is annotated in TCT No. 14654 (Exhibit "14"-"14-d") as


follows:

Owner Lot No. Area in TCT No. Vol. Page

sq. m.

Domingo Candelaria 76-A 300 T-36277 206 97

Olivia P. Olaguer 76-B 200 T-36278 206 98

Olivia P. Olaguer 76-C 171 T-36279 206 99

Olivia P. Olaguer 76-D 171 T-36280 206 100

Olivia P. Olaguer 76-E 171 T-36281 206 101

Olivia P. Olaguer 76-F 171 T-36282 206 102

Olivia P. Olaguer 76-G 202 T-36283 206 103

Domingo O. de la Torre 76-H 168 T-36284 206 104

Domingo O. de la Torre 76-I 168 T-36285 206 105

Domingo O. de la Torre 76-J 168 T-36286 206 106

Emiliano M. [Ongjoco] 76-K 473 T-36287 206 107


After Lot 76 was subdivided as aforesaid, Jose A. Olaguer as attorney-in-fact of Olivia
P. Olaguer, sold to his son Virgilio Olaguer Lots 76-B, 76-C, 76-D, 76-E, 76-F, and 76-G
on January 9, 1974 for 3,000 Pesos. (Exhibit "G") The deed of absolute sale was
notarized by Otilio Sy Bongon. AaSCTD

Lots 76-B and 76-C were consolidated and then subdivided anew and designated as
Lot No. 1 with an area of 186 square meters and Lot No. 2 with an area of 185 square
meters of the Consolidation Subdivision Plan (LRC) Pcs-20015. (Please sketch plan
marked as Exhibit "4", records, vol. 2, page 68)

On January 15, 1976, Jose A. Olaguer claiming to be the attorney-in-fact of his son
Virgilio Olaguer under a general power of attorney Doc. No. 141, Page No. 100, Book
No. 7, Series of 1972 of Notary Public Otilio Sy Bongon, sold Lot No. 1 to defendant
Emiliano M. [Ongjoco] for 10,000 Pesos per the deed of absolute sale notarized by
Otilio Sy Bongon. (Exhibit "H") The alleged general power of attorney however was not
presented or marked nor formally offered in evidence. AaIDHS

On September 7, 1976, Jose A. Olaguer again claiming to be the attorney-in-fact of


Virgilio Olaguer under the same general power of attorney referred to in the deed of
absolute sale of Lot 1, sold Lot No. 2 to Emiliano M. [Ongjoco] for 10,000 Pesos.
(Exhibit "I") The deed of absolute sale was notarized by Otilio Sy Bongon.

On July 16, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under a


general power of attorney Doc. No. 378, Page No. 76, Book No. 14, Series of 1978 sold
Lot No. 76-D to Emiliano M. [Ongjoco] for 5,000 Pesos. The deed of absolute sale is
Doc. No. 571, Page No. 20, Book No. 16, Series of 1979 of Notary Public Otilio Sy
Bongon. (Exhibit "K") TSEcAD

The same Lot No. 76-D was sold on October 22, 1979 by Jose A. Olaguer as attorney-
in-fact of Virgilio Olaguer under a general power of attorney Doc. No. 378, Page No. 76,
Book No. 14, Series of 1978 of Notary Public Otilio Sy Bongon sold Lot No. 76-D to
Emiliano M. [Ongjoco] for 10,000 Pesos. The deed of absolute sale is Doc. No. 478,
Page No. 97, Book NO. XXII, Series of 1979 of Notary Public Antonio A. Arcangel.
(Exhibit "J") SAaTHc

On July 3, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer sold Lots 76-E
and 76-F to Emiliano M. [Ongjoco] for 15,000 Pesos. The deed of absolute sale is Doc.
No. 526, Page No. 11, Book No. 16, Series of 1979 of Notary Public Otilio Sy Bongon.
(Exhibit "M")

The same Lots 76-E and 76-F were sold on October 25, 1979, by Jose A. Olaguer as
attorney-in-fact of Virgilio Olaguer under the same general power of attorney of 1978
referred to above to Emiliano M. [Ongjoco] for 30,000 Pesos. The deed of absolute sale
is Doc. No. 47, Page No. 11, Book No. XXIII, Series of 1972 of Notary Public Antonio A.
Arcangel. (Exhibit "L") EHTSCD

On July 2, 1979 Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer sold Lot No. 76-
G to Emiliano M. [Ongjoco] for 10,000 Pesos. The deed of sale is Doc. No. 516, Page
No. 9, Book No. 16, Series of 1979 of Notary Public Otilio Sy Bongon. (Exhibit "N")

The same Lot 76-G was sold on February 29, 1980 by Jose A. Olaguer as attorney-in-
fact of Virgilio Olaguer under the same general power of attorney of 1978 referred to
above to Emiliano M. [Ongjoco] for 10,000 Pesos. The deed of absolute sale is Doc. No.
102, Page No. 30, Book No. 17, Series of 1980 of Notary Public Otilio Sy Bongon.
(Exhibit "O") 5 (Emphases ours.) IcHTCS

Thus, on 28 January 1980, the Estate of Lino Olaguer represented by the legitimate
children of the spouses Lino Olaguer and defendant Olivia P. Olaguer, namely, Sor
Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma.
Linda O. Montayre, as attorney-in-fact and in her own behalf, filed an action for the
Annulment of Sales of Real Property and/or Cancellation of Titles 6 in the then Court of
First Instance of Albay. 7

Docketed as Civil Case No. 6223, the action named as defendants the spouses Olivia
P. Olaguer and Jose A. Olaguer; Eduardo Olaguer; Virgilio Olaguer; Cipriano Duran; the
Heirs of Estanislao O. Olaguer, represented by Maria Juan Vda. de Olaguer; and the
Philippine National Bank (PNB). EcHTDI

In the original complaint, the plaintiffs therein alleged that the sales of the following
properties belonging to the Estate of Lino Olaguer to Estanislao Olaguer were
absolutely simulated or fictitious, particularly: Lots Nos. 578, 1557, 1676, 4521, 4522,
8635, 8638, 7589, 7593, and 7396. In praying that the sale be declared as null and void,
the plaintiffs likewise prayed that the resulting Transfer Certificates of Title issued to
Jose Olaguer, Virgilio Olaguer, Cipriano Duran and the PNB be annulled.

Defendant PNB claimed in its Answer, 8 inter alia, that it was a mortgagee in good faith
and for value of Lots Nos. 7589, 7593 and 7396, which were mortgaged as security for
a loan of P10,000.00; the mortgage contract and other loan documents were signed by
the spouses Estanislao and Maria Olaguer as registered owners; the proceeds of the
loan were received by the mortgagors themselves; Linda Olaguer Montayre had no
legal capacity to sue as attorney-in-fact; plaintiffs as well as Maria Olaguer were in
estoppel; and the action was already barred by prescription. PNB set up a compulsory
counterclaim for damages, costs of litigation and attorney's fees. It also filed a cross-
claim against Maria Olaguer for the payment of the value of the loan plus the agreed
interests in the event that judgment would be rendered against it. TIHDAa
Defendants Olivia P. Olaguer, Jose A. Olaguer and Virgilio Olaguer, in their Answer, 9
denied the material allegations in the complaint. They maintained that the sales of the
properties to Pastor Bacani and Estanislao Olaguer were judicially approved; the
complaint did not state a sufficient cause of action; it was barred by laches and/or
prescription; lis pendens existed; that the long possession of the vendees have ripened
into acquisitive prescription in their favor, and the properties no longer formed part of
the Estate of Lino Olaguer; until the liquidation of the conjugal properties of Lino
Olaguer and his former wives, the plaintiffs were not the proper parties in interest to sue
in the action; and in order to afford complete relief, the other conjugal properties of Lino
Olaguer with his former wives, and his capital property that had been conveyed without
the approval of the testate court should also be included for recovery in the instant case.
ScAaHE

Defendant Maria Juan Vda. de Olaguer, representing the heirs of Estanislao Olaguer, in
her Answer, 10 likewise denied the material allegations of the complaint and insisted
that the plaintiffs had no valid cause of action against the heirs of the late Estanislao
Olaguer, as the latter did not participate in the alleged transfer of properties by Olivia P.
Olaguer and Eduardo Olaguer in favor of the late Estanislao Olaguer.

Defendant Cipriano Duran claimed, in his Answer, 11 that the complaint stated no
cause of action; he was merely instituted by his late sister-in-law Josefina Duran to take
over the management of Lots Nos. 8635 and 8638 in 1971; and the real party-in-interest
in the case was the administrator of the estate of Josefina Duran. aEHAIS

On 11 January 1995, an Amended Complaint 12 was filed in order to implead


respondent Emiliano M. Ongjoco as the transferee of Virgilio Olaguer with respect to
portions of Lot No. 76, namely Lots Nos. 1, 2, 76-D, 76-E, 76-F, and 76-G.

In his Answer with Counterclaim and Motion to Dismiss, 13 respondent Ongjoco denied
the material allegations of the amended complaint and interposed, as affirmative
defenses the statute of limitations, that he was a buyer in good faith, that plaintiffs had
no cause of action against him, and that the sale of property to Pastor Bacani, from
whom Ongjoco derived his title, was judicially approved. aHSAIT

On 23 January 1996, plaintiffs filed a Re-Amended Complaint, 14 in which the heirs of


Estanislao Olaguer were identified, namely, Maria Juan Vda. de Olaguer, Peter
Olaguer, Yolanda Olaguer and Antonio Bong Olaguer.

In their Answer, 15 the heirs of Estanislao Olaguer reiterated their claim that Estanislao
Olaguer never had any transactions or dealings with the Estate of Lino Olaguer; nor did
they mortgage any property to the PNB. cCEAHT
On 5 August 1998, the heirs of Estanislao Olaguer and petitioner Ma. Linda Olaguer
Montayre submitted a compromise agreement, 16 which was approved by the trial
court.

On 6 October 1999, Cipriano Duran filed a Manifestation 17 in which he waived any


claim on Lots Nos. 8635 and 8638. Upon motion, Duran was ordered dropped from the
complaint by the trial court in an order 18 dated 20 October 1999. CcAITa

In a Decision 19 dated 13 July 2001, the RTC ruled in favor of the plaintiffs. The
pertinent portions of the decision provide:

The entirety of the evidence adduced clearly show that the sale of the 12 lots to Pastor
Bacani pursuant to Exhibit "A" and the sale of the 10 lots to Estanislao Olaguer
pursuant to Exhibit "D" were absolutely simulated sales and thus void ab initio. The two
deeds of sales Exhibits "A" and "D" are even worse than fictitious, they are completely
null and void for lack of consideration and the parties therein never intended to be
bound by the terms thereof and the action or defense for the declaration of their
inexistence does not prescribe. (Art. 1410, Civil Code) Aside from being simulated they
were clearly and unequivocally intended to deprive the compulsory heirs of their legitime
. . .. acHCSD

The deeds of sale, Exhibits "A" and "D" being void ab initio, they are deemed as non-
existent and the approval thereof by the probate court becomes immaterial and of no
consequence, because the approval by the probate court did not change the character
of the sale from void to valid. . . . . aASDTE

xxx xxx xxx

Defendant Jose A. Olaguer simulated the sales and had them approved by the probate
court so that these properties would appear then to cease being a part of the estate and
the vendee may then be at liberty to dispose of the same in any manner he may want.
They probably believed that by making it appear that the properties were bought back
from Pastor Bacani under a simulated sale, they (Olivia Olaguer and Eduardo Olaguer)
would appear then as the owners of the properties already in their personal capacities
that disposals thereof will no longer require court intervention. . . . .

xxx xxx xxx

[Jose A. Olaguer] had Olivia P. Olaguer execute a Special Power of Attorney (Exhibit
"T") authorizing him (Jose A. Olaguer) to sell or encumber the properties allegedly
bought back from Pastor Bacani which Jose A. Olaguer did with respect to the 6/13
share of Olivia P. Olaguer on Lot No. 76 by selling it to his son Virgilio for only 3,000
Pesos, then caused Virgilio to execute a power of attorney authorizing him to sell or
encumber the 6/13 share which he did by selling the same to defendant Emiliano M.
[Ongjoco]. cHDEaC

Virgilio Olaguer however executed an affidavit (Exhibit "CC") wherein he denied having
bought any property from the estate of Lino Olaguer and that if there are documents
showing that fact he does not know how it came about. . . . .

The 1972 power of attorney referred to by Jose A. Olaguer as his authority for the sale
of Lots 1 and 2 (formerly lots 76-B and 76-C) was not presented nor offered in evidence.

There are two deeds of sale over Lot 76-D, (Exhibits "K" and "J") in favor of defendant
Emiliano M. [Ongjoco] with different dates of execution, different amount of
consideration, different Notary Public. TCcIaA

There are two deeds of sale over Lots 76-E and 76-F (Exhibits "M" and "L") in favor of
defendant Emiliano M. [Ongjoco] with different dates of execution, different amount of
consideration and different Notary Public.

There are two deeds of sale over Lot 76-G (Exhibits "N" and "O") in favor of Emiliano M.
[Ongjoco] with different dates of execution with the same amount of consideration and
the same Notary Public.

While Lot 76-D was allegedly sold already to Emiliano M. [Ongjoco] in 1979, yet it was
still Jose A. Olaguer who filed a petition for the issuance of a second owner's copy as
attorney in fact of Virgilio Olaguer on August 8, 1980 (Exhibit "SS") and no mention was
made about the sale. EAHcCT

Under these circumstances, the documents of defendant Emiliano M. [Ongjoco] on lots


76 therefore, in so far as the portions he allegedly bought from Jose A. Olaguer as
attorney in fact of Virgilio Olaguer suffers seriously from infirmities and appear dubious.

Defendant Emiliano M. [Ongjoco] cannot claim good faith because according to him,
when these lots 76-[B] to 76-G were offered to him his condition was to transfer the title
in his name and then he pays. He did not bother to verify the title of his vendor. . . . .
IEHDAT

So with respect to the sale of Lots 76-B to 76-G, Emiliano M. [Ongjoco] has no
protection as innocent purchaser for good faith affords protection only to purchasers for
value from the registered owners. . . . Knowing that he was dealing only with an agent . .
., it behooves upon defendant Emiliano M. [Ongjoco] to find out the extent of the
authority of Jose A. Olaguer as well as the title of the owner of the property, because as
early as 1973 pursuant to the subdivision agreement, (records, vol. 2, page 109 and
Exhibit "14" and "14-d") he already knew fully well that Lots 76-B to 76-G he was buying
was owned by Olivia P. Olaguer and not by Virgilio Olaguer. IHAcCS
xxx xxx xxx

With respect to the 10 lots sold to [Eduardo] Olaguer (Exhibit "D") Jose A. Olaguer had
Estanislao Olaguer execute a power of attorney (Exhibit "X") authorizing him (Jose A.
Olaguer) to sell or encumber the 10 lots allegedly bought by Estanislao from the estate.
With this power of attorney, he mortgaged lots 7589, 7593 and 7398 to the PNB. He
sold lots 1557 and 1676 to his son Virgilio Olaguer. While under Exhibit "UU" dated
December 29, 1966, he bought the 10 parcels of land, among which is lots 4521 and
4522 from Estanislao Olaguer, yet, on March 16, 1968, he again bought lots 4521 and
4522 (records, vol. 1, page 38) from Estanislao Olaguer. While lots 8635 and 8638 were
among those sold to him under Exhibit "UU", it appears that he again bought the same
on June 5, 1968 under Exhibit "F". cEDaTS

The heirs of Estanislao Olaguer however denied having bought any parcel of land from
the estate of Lino Olaguer. Estanislao Olaguer's widow, Maria Juan vda. de Olaguer,
executed an affidavit (Exhibit "BB") that they did not buy any property from the estate of
Lino Olaguer, they did not sell any property of the estate and that they did not mortgage
any property with the PNB. She repeated this in her deposition. (records, vol. 2, page
51) This was corroborated by no less than former co-administrator Eduardo Olaguer in
his deposition too (Exhibit "RRRR") that the sale of the 10 parcels of land to Estanislao
Olaguer was but a simulated sale without any consideration. . . . .

xxx xxx xxx

A partial decision was already rendered by this court in its order of August 5, 1998
(records, vol. 2, page 64) approving the compromise agreement with defendants Heirs
of Estanislao Olaguer. (records, vol. 2 page 57). DECcAS

Defendant Cipriano Duran was dropped from the complaint per the order of the court
dated October 20, 1999 (records, vol. 2, page 155) because he waived any right or
claim over lots 8635 and 8638. (records, vol. 2, page 150). (Emphasis ours.)

The dispositive portion of the above decision was, however, amended by the trial court
in an Order 20 dated 23 July 2001 to read as follows:

WHEREFORE, premises considered, decision is hereby rendered in favor of the


plaintiffs as follows: ITCHSa

1) The deed of sale to Pastor Bacani (Exhibit "A") and the deed of sale to
Estanislao Olaguer (Exhibit "D") are hereby declared as null and void and without force
and effect and all the subsequent transfers and certificates arising therefrom likewise
declared null and void and cancelled as without force and effect, except as herein
provided for.
2) Lot Nos. 4518, 4526, 4359 and 8750 are hereby ordered reverted back to the
estate of Lino Olaguer and for this purpose, within ten (10) days from the finality of this
decision, the heirs of Olivia P. Olaguer (the plaintiffs herein) [sic] are hereby ordered to
execute the necessary document of reconveyance, failure for which, the Clerk of Court
is hereby ordered to execute the said deed of reconveyance.

3) Lot Nos. 7514, 6608, 8582, 8157, 7999, 6167 and 8266 are hereby ordered
reverted back to the estate of Lino Olaguer and for this purpose, within ten (10) days
from the finality of this decision, defendant Eduardo Olaguer is hereby ordered to
execute the necessary document of reconveyance, failure for which, the Clerk of Court
is hereby ordered to execute the said deed of reconveyance. TcEaAS

4) Lots 1 and 2, Pcs-20015, and Lots 76-D, 76-E, 76-F and 76-G, Psd-180629 sold
to Emiliano M. [Ongjoco] are hereby ordered reverted back to the estate of Lino
Olaguer. For this purpose, within ten (10) days from the finality of this decision,
defendant Emiliano M. [Ongjoco] is hereby ordered to execute the necessary deed of
reconveyance, otherwise, the Clerk of Court shall be ordered to execute the said
reconveyance and have the same registered with the Register of Deeds so that new
titles shall be issued in the name of the estate of Lino Olaguer and the titles of Emiliano
[Ongjoco] cancelled.

5) The parties have acquiesced to the sale of the 7/13 portion of Lot 76 to Eduardo
Olaguer as well as to the latter's disposition thereof and are now in estoppel to question
the same. The court will leave the parties where they are with respect to the 7/13 share
of Lot 76. CAIHaE

6) Lots 578, 1557, 1676, 4521, 4522, 8635, 8638, are hereby reverted back to the
estate of Lino Olaguer and for this purpose, the Clerk of [Court] is hereby ordered to
execute the necessary deed of reconveyance within ten days from the finality of this
decision and cause its registration for the issuance of new titles in the name of the
Estate of Lino Olaguer and the cancellation of existing ones over the same.

7) While the mortgage with the defendant PNB is null and void, Lots 7589, 7593
and 7396 shall remain with the Republic of the Philippines as a transferee in good faith.

Both the petitioners and respondent filed their respective Notices of Appeal 21 from the
above decision. The case was docketed in the Court of Appeals as CA-G.R. CV No.
71710.

In their Plaintiff-Appellant's Brief 22 filed before the Court of Appeals, petitioner Estate
argued that the trial court erred in not ordering the restitution and/or compensation to
them of the value of the parcels of land that were mortgaged to PNB, notwithstanding
the fact that the mortgage was declared null and void. Petitioners maintain that the PNB
benefited from a void transaction and should thus be made liable for the value of the
land, minus the cost of the mortgage and the reasonable expenses for the foreclosure,
consolidation and transfer of the lots. SDTIHA

Ongjoco, on the other hand, argued in his Defendant-Appellant's Brief 23 that the trial
court erred in: declaring as null and void the Deeds of Sale in favor of Pastor Bacani
and Eduardo Olaguer and the subsequent transfers and certificates arising therefrom;
ordering the reconveyance of the lots sold to him (Ongjoco); and failing to resolve the
affirmative defenses of prescription, the authority of Olivia and Eduardo to dispose of
properties formerly belonging to the estate of Lino Olaguer, recourse in a court of co-
equal jurisdiction, and forum shopping.

Petitioner Linda O. Montayre was likewise allowed to file a Brief 24 on her own behalf,
as Plaintiff-Appellee and Plaintiff-Appellant. 25 She refuted therein the assignment of
errors made by Defendant-Appellant Ongjoco and assigned as error the ruling of the
trial court that the lots mortgaged to the PNB should remain with the Republic of the
Philippines as a transferee in good faith. EHTSCD

On 27 February 2006, the Court of Appeals rendered the assailed Decision, the
dispositive portion of which reads:

WHEREFORE, premises considered, the appealed Decision is hereby MODIFIED, in


that Paragraph 4 of the amended decision is hereby Ordered Deleted, and the
questioned sales to defendant-appellant Emiliano M. Ongjoco are UPHELD. 26

In denying the appeal interposed by petitioners, the appellate court reasoned that the
claim for the value of the lots mortgaged with the PNB were not prayed for in the original
Complaint, the Amended Complaint or even in the Re-Amended Complaint. What was
sought therein was merely the declaration of the nullity of the mortgage contract with
PNB. As the relief prayed for in the appeal was not contained in the complaint, the same
was thus barred. HaAIES

The Court of Appeals also ruled that the evidence of petitioners failed to rebut the
presumption that PNB was a mortgagee in good faith. Contrarily, what was proven was
the fact that Olivia Olaguer and Jose A. Olaguer were the persons responsible for the
fraudulent transactions involving the questioned properties. Thus, the claim for
restitution of the value of the mortgaged properties should be made against them.

As regards the appeal of respondent Ongjoco, the appellate court found the same to be
meritorious. The said court ruled that when the sale of real property is made through an
agent, the buyer need not investigate the principal's title. What the law merely requires
for the validity of the sale is that the agent’s authority be in writing. DHITCc
Furthermore, the evidence adduced by petitioners was ruled to be inadequate to
support the conclusion that Ongjoco knew of facts indicative of the defect in the title of
Olivia Olaguer or Virgilio Olaguer.

Petitioners moved for a partial reconsideration 27 of the Court of Appeals' decision in


order to question the ruling that respondent Ongjoco was a buyer in good faith. The
motion was, however, denied in a Resolution 28 dated 29 June 2006.

Aggrieved, petitioners filed the instant Petition for Review on Certiorari under Rule 45 of
the Revised Rules of Court, raising the following assignment of errors:

I.

THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT RULED, ON


SPECULATION, THAT RESPONDENT EMILIANO M. ONGJOCO WAS A BUYER IN
GOOD FAITH OF THE PROPERTIES OF THE ESTATE OF LINO OLAGUER,
DESPITE THE EXISTENCE OF FACTS AND CIRCUMSTANCES FOUND BY THE
TRIAL COURT THAT OUGHT TO PUT EMILIANO M. ONGJOCO ON NOTICE THAT
THE PETITIONERS-APPELLANTS HAVE A RIGHT OR INTEREST OVER THE SAID
PROPERTIES, AND CONTRARY TO PREVAILING JURISPRUDENCE. SaDICE

II.

THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT


DISREGARDED THE CLEAR FINDINGS OF FACTS AND CONCLUSIONS MADE BY
THE TRIAL COURT, IN THE ABSENCE OF ANY STRONG AND COGENT REASONS
TO REVERSE THE SAID FINDINGS, CONTRARY TO PREVAILING
JURISPRUDENCE. 29

Essentially, the question that has been brought before us for consideration is whether or
not, under the facts and circumstances of this case, respondent Ongjoco can be
considered an innocent purchaser for value. acCITS

Petitioners agree with the pronouncement of the trial court that respondent Ongjoco
could not have been a buyer in good faith since he did not bother to verify the title and
the capacity of his vendor to convey the properties involved to him. Knowing that Olivia
P. Olaguer owned the properties in 1973 and that he merely dealt with Jose A. Olaguer
as an agent in January 1976, Ongjoco should have ascertained the extent of Jose’s
authority, as well as the title of Virgilio as the principal and owner of the properties.

Petitioners likewise cite the following incidents that were considered by the trial court in
declaring that respondent was a buyer in bad faith, namely: (1) that Virgilio Olaguer
executed an affidavit, 30 wherein he denied having bought any property from the estate
of Lino Olaguer, and that if there are documents showing that fact, he does not know
how they came about; (2) that the power of attorney referred to by Jose A. Olaguer as
his authority for the sale of Lots 1 and 2 (formerly Lots 76-B and 76-C) was not
presented or offered in evidence; (3) that there are two deeds of sale 31 over Lot 76-D
in favor of Ongjoco; (4) that there are two deeds of sale 32 over Lots 76-E and 76-F in
favor of Ongjoco; (5) that there are two deeds of sale 33 over Lot 76-G in favor of
Ongjoco; and (6) that while Lot 76-D was already sold to Ongjoco in 1979, it was still
Jose A. Olaguer as attorney in fact of Virgilio Olaguer who filed on 8 August 1980 a
petition for the issuance of a second owner’s copy 34 of the title to the property, and no
mention was made about the sale to Ongjoco. DHITCc

Respondent Ongjoco, on the other hand, invokes the ruling of the Court of Appeals that
he was an innocent purchaser for value. His adamant stance is that, when he acquired
the subject properties, the same were already owned by Virgilio Olaguer. Respondent
insists that Jose A. Olaguer was duly authorized by a written power of attorney when
the properties were sold to him (Ongjoco). He posits that this fact alone validated the
sales of the properties and foreclosed the need for any inquiry beyond the title to the
principal. All the law requires, respondent concludes, is that the agent's authority be in
writing in order for the agent's transactions to be considered valid.

Respondent Ongjoco's posture is only partly correct. SHcDAI

According to the provisions of Article 1874 35 of the Civil Code on Agency, when the
sale of a piece of land or any interest therein is made through an agent, the authority of
the latter shall be in writing. Absent this requirement, the sale shall be void. Also, under
Article 1878, 36 a special power of attorney is necessary in order for an agent to enter
into a contract by which the ownership of an immovable property is transmitted or
acquired, either gratuitously or for a valuable consideration.

We note that the resolution of this case, therefore, hinges on the existence of the written
power of attorney upon which respondent Ongjoco bases his good faith. TEHDIA

When Lots Nos. 1 and 2 were sold to respondent Ongjoco through Jose A. Olaguer, the
Transfer Certificates of Title of said properties were in Virgilio's name. 37 Unfortunately
for respondent, the power of attorney that was purportedly issued by Virgilio in favor of
Jose Olaguer with respect to the sale of Lots Nos. 1 and 2 was never presented to the
trial court. Neither was respondent able to explain the omission. Other than the self-
serving statement of respondent, no evidence was offered at all to prove the alleged
written power of attorney. This of course was fatal to his case.

As it stands, there is no written power of attorney to speak of. The trial court was thus
correct in disregarding the claim of its existence. Accordingly, respondent Ongjoco's
claim of good faith in the sale of Lots Nos. 1 and 2 has no leg to stand on. EaHATD
As regards Lots Nos. 76-D, 76-E, 76-F and 76-G, Ongjoco was able to present a
general power of attorney that was executed by Virgilio Olaguer. While the law requires
a special power of attorney, the general power of attorney was sufficient in this case, as
Jose A. Olaguer was expressly empowered to sell any of Virgilio's properties; and to
sign, execute, acknowledge and deliver any agreement therefor. 38 Even if a document
is designated as a general power of attorney, the requirement of a special power of
attorney is met if there is a clear mandate from the principal specifically authorizing the
performance of the act. 39 The special power of attorney can be included in the general
power when the act or transaction for which the special power is required is specified
therein. 40

On its face, the written power of attorney contained the signature of Virgilio Olaguer and
was duly notarized. As such, the same is considered a public document and it has in its
favor the presumption of authenticity and due execution, which can only be contradicted
by clear and convincing evidence. 41

No evidence was presented to overcome the presumption in favor of the duly notarized
power of attorney. Neither was there a showing of any circumstance involving the said
document that would arouse the suspicion of respondent and spur him to inquire
beyond its four corners, in the exercise of that reasonable degree of prudence required
of a man in a similar situation. We therefore rule that respondent Ongjoco had every
right to rely on the power of attorney in entering into the contracts of sale of Lots Nos.
76-D to 76-G with Jose A. Olaguer. cIECTH

With respect to the affidavit of Virgilio Olaguer in which he allegedly disavowed any
claim or participation in the purchase of any of the properties of the deceased Lino
Olaguer, we hold that the same is rather irrelevant. The affidavit was executed only on 1
August 1986 or six years after the last sale of the properties was entered into in 1980. In
the determination of whether or not a buyer is in good faith, the point in time to be
considered is the moment when the parties actually entered into the contract of sale.

Furthermore, the fact that Lots Nos. 76-D to 76-G were sold to respondent Ongjoco
twice does not warrant the conclusion that he was a buyer in bad faith. While the said
incidents might point to other obscured motives and arrangements of the parties, the
same do not indicate that respondent knew of any defect in the title of the owner of the
property. HCaIDS

As to the petition filed by Jose A. Olaguer for the issuance of a second owner’s copy of
the title to Lot No. 76-D, after the property was already sold to respondent Ongjoco, the
same does not inevitably indicate that respondent was in bad faith. It is more likely that
Jose A. Olaguer was merely compiling the documents necessary for the transfer of the
subject property. Indeed, it is to be expected that if the title to the property is lost before
the same is transferred to the name of the purchaser, it would be the responsibility of
the vendor to cause its reconstitution.

In sum, we hold that respondent Emiliano M. Ongjoco was in bad faith when he bought
Lots Nos. 1 and 2 from Jose A. Olaguer, as the latter was not proven to be duly
authorized to sell the said properties.

However, respondent Ongjoco was an innocent purchaser for value with regard to Lots
Nos. 76-D, 76-E, 76-F and 76-G since it was entirely proper for him to rely on the duly
notarized written power of attorney executed in favor of Jose A. Olaguer. DaEcTC

WHEREFORE, premises considered, the instant petition is hereby PARTIALLY


GRANTED. The assailed Decision of the Court of Appeals dated 27 February 2006 in
CA-G.R. CV NO. 71710 is MODIFIED in that Paragraph 4 of the Decision dated 13 July
2001 of the Regional Trial Court of Legazpi City, Branch 6, and the Order dated 23 July
2001 shall read as follows:

4) Lots 1 and 2, Pcs-20015 sold to Emiliano M. Ongjoco are hereby ordered


reverted back to the estate of Lino Olaguer. For this purpose, within ten (10) days from
the finality of this decision, defendant Emiliano M. Ongjoco is hereby ordered to execute
the necessary deed of reconveyance, otherwise, the Clerk of Court shall be ordered to
execute the said reconveyance and have the same registered with the Register of
Deeds so that new titles shall be issued in the name of the estate of Lino Olaguer and
the titles of Emiliano Ongjoco cancelled. HCEcAa

No costs.

SO ORDERED.
SPOUSES JOSELINA ALCANTARA AND ANTONIO ALCANTARA, and SPOUSES
JOSEFINO RUBI AND ANNIE DISTOR- RUBI, petitioners, vs. BRIGIDA L. NIDO, as
attorney-in-fact of REVELEN N. SRIVASTAVA, respondent.

RESOLUTION

CARPIO, J p:

The Case

Spouses Antonio and Joselina Alcantara and Spouses Josefino and Annie Rubi
(petitioners) filed this Petition for Review 1 assailing the Court of Appeals' (appellate
court) Decision 2 dated 10 June 2004 as well as the Resolution 3 dated 17 August 2004
in CA-G.R. CV No. 78215. In the assailed decision, the appellate court reversed the 17
June 2002 Decision 4 of Branch 69 of the Regional Trial Court of Binangonan, Rizal
(RTC) by dismissing the case for recovery of possession with damages and preliminary
injunction filed by Brigida L. Nido (respondent), in her capacity as administrator and
attorney-in-fact of Revelen N. Srivastava (Revelen). DaHISE

The Facts

Revelen, who is respondent's daughter and of legal age, is the owner of an unregistered
land with an area of 1,939 square meters located in Cardona, Rizal. Sometime in March
1984, respondent accepted the offer of petitioners to purchase a 200-square meter
portion of Revelen's lot (lot) at P200 per square meter. Petitioners paid P3,000 as
downpayment and the balance was payable on installment. Petitioners constructed their
houses in 1985. In 1986, with respondent's consent, petitioners occupied an additional
150 square meters of the lot. By 1987, petitioners had already paid P17,500 5 before
petitioners defaulted on their installment payments.

On 11 May 1994, respondent, acting as administrator and attorney-in-fact of Revelen,


filed a complaint for recovery of possession with damages and prayer for preliminary
injunction against petitioners with the RTC.

The RTC's Ruling

The RTC stated that based on the evidence presented, Revelen owns the lot and
respondent was verbally authorized to sell 200 square meters to petitioners. The RTC
ruled that since respondent's authority to sell the land was not in writing, the sale was
void under Article 1874 6 of the Civil Code. 7 The RTC ruled that rescission is the
proper remedy. 8

On 17 June 2002, the RTC rendered its decision, the dispositive portion reads:
ICTHDE

WHEREFORE, judgment is rendered in favor of plaintiff and against the defendants, by


1. Declaring the contract to sell orally agreed by the plaintiff Brigida Nido, in her
capacity as representative or agent of her daughter Revelen Nido Srivastava, VOID and
UNENFORCEABLE.

2. Ordering the parties, upon finality of this judgment, to have mutual restitution —
the defendants and all persons claiming under them to peacefully vacate and surrender
to the plaintiff the possession of the subject lot covered by TD No. 09-0742 and its
derivative Tax Declarations, together with all permanent improvements introduced
thereon, and all improvements built or constructed during the pendency of this action, in
bad faith; and the plaintiff, to return the sum of P17,500.00, the total amount of the
installment on the land paid by defendant; the fruits and interests during the pendency
of the condition shall be deemed to have been mutually compensated.

3. Ordering the defendants to pay plaintiff the sum of P20,000.00 as attorney's fees,
plus P15,000.00 as actual litigation expenses, plus the costs of suit. CDISAc

SO ORDERED. 9

The Appellate Court's Ruling

On 5 January 2004, petitioners appealed the trial court's Decision to the appellate court.
In its decision dated 10 June 2004, the appellate court reversed the RTC decision and
dismissed the civil case. 10

The appellate court explained that this is an unlawful detainer case. The prayer in the
complaint and amended complaint was for recovery of possession and the case was
filed within one year from the last demand letter. Even if the complaint involves a
question of ownership, it does not deprive the Municipal Trial Court (MTC) of its
jurisdiction over the ejectment case. Petitioners raised the issue of lack of jurisdiction in
their Motion to Dismiss and Answer before the RTC. 11 The RTC denied the Motion to
Dismiss and assumed jurisdiction over the case because the issues pertain to a
determination of the real agreement between the parties and rescission of the contract
to sell the property. 12
The appellate court added that even if respondent's complaint is for recovery of
possession or accion publiciana, the RTC still has no jurisdiction to decide the case.
The appellate court explained: aTCADc

Note again that the complaint was filed on 11 May 1994. By that time, Republic Act No.
7691 was already in effect. Said law took effect on 15 April 1994, fifteen days after its
publication in the Malaya and in the Time Journal on 30 March 1994 pursuant to Sec. 8
of Republic Act No. 7691.

Accordingly, Sec. 33 of Batas Pambansa 129 was amended by Republic Act No. 7691
giving the Municipal Trial Court the exclusive original jurisdiction over all civil actions
involving title to, or possession of, real property, or any interest therein where the
assessed value of the property or interest therein does not exceed P20,000 or, in civil
actions in Metro Manila, where such assessed value does not exceed P50,000,
exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses and
costs.

At bench, the complaint alleges that the whole 1,939- square meter lot of Revelen N.
Srivastava is covered by Tax Declaration No. 09-0742 (Exh. "B", p. 100, Records) which
gives its assessed value of the whole lot of P4,890.00. Such assessed value falls within
the exclusive original prerogative or jurisdiction of the first level court and, therefore, the
Regional Trial Court a quo has no jurisdiction to try and decided the same. 13

The appellate court also held that respondent, as Revelen's agent, did not have a
written authority to enter into such contract of sale; hence, the contract entered into
between petitioners and respondent is void. A void contract creates no rights or
obligations or any juridical relations. Therefore, the void contract cannot be the subject
of rescission. 14 SEcITC

Aggrieved by the appellate court's Decision, petitioners elevated the case before this
Court.

Issues

Petitioners raise the following arguments:

1. The appellate court gravely erred in ruling that the contract entered into by
respondent, in representation of her daughter, and former defendant Eduardo Rubi
(deceased), is void; and

2. The appellate court erred in not ruling that the petitioners are entitled to their
counterclaims, particularly specific performance. 15

Ruling of the Court


We deny the petition.

Petitioners submit that the sale of land by an agent who has no written authority is not
void but merely voidable given the spirit and intent of the law. Being only voidable, the
contract may be ratified, expressly or impliedly. Petitioners argue that since the contract
to sell was sufficiently established through respondent's admission during the pre-trial
conference, the appellate court should have ruled on the matter of the counterclaim for
specific performance. 16 SCETHa

Respondent argues that the appellate court cannot lawfully rule on petitioners'
counterclaim because there is nothing in the records to sustain petitioners' claim that
they have fully paid the price of the lot. 17 Respondent points out that petitioners
admitted the lack of written authority to sell. Respondent also alleges that there was
clearly no meeting of the minds between the parties on the purported contract of sale.
18

Sale of Land through an Agent

Articles 1874 and 1878 of the Civil Code provide:

Art. 1874. When a sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void.

Art. 1878. Special powers of attorney are necessary in the following cases:

xxx xxx xxx

(5) To enter into any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration; DIETcH

xxx xxx xxx

Article 1874 of the Civil Code explicitly requires a written authority before an agent can
sell an immovable property. Based on a review of the records, there is absolutely no
proof of respondent's written authority to sell the lot to petitioners. In fact, during the pre-
trial conference, petitioners admitted that at the time of the negotiation for the sale of the
lot, petitioners were of the belief that respondent was the owner of lot. 19 Petitioners
only knew that Revelen was the owner of the lot during the hearing of this case.
Consequently, the sale of the lot by respondent who did not have a written authority
from Revelen is void. A void contract produces no effect either against or in favor of
anyone and cannot be ratified. 20

A special power of attorney is also necessary to enter into any contract by which the
ownership of an immovable is transmitted or acquired for a valuable consideration.
Without an authority in writing, respondent cannot validly sell the lot to petitioners.
Hence, any "sale" in favor of the petitioners is void.

Our ruling in Dizon v. Court of Appeals 21 is instructive:

When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the
authority of an agent to execute a contract for the sale of real estate must be conferred
in writing and must give him specific authority, either to conduct the general business of
the principal or to execute a binding contract containing terms and conditions which are
in the contract he did execute. A special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration. The express mandate required by law to
enable an appointee of an agency (couched) in general terms to sell must be one that
expressly mentions a sale or that includes a sale as a necessary ingredient of the act
mentioned. For the principal to confer the right upon an agent to sell real estate, a
power of attorney must so express the powers of the agent in clear and unmistakable
language. When there is any reasonable doubt that the language so used conveys such
power, no such construction shall be given the document. aICHEc

Further, Article 1318 of the Civil Code enumerates the requisites for a valid contract,
namely:

1. consent of the contracting parties;

2. object certain which is the subject matter of the contract;

3. cause of the obligation which is established.

Respondent did not have the written authority to enter into a contract to sell the lot. As
the consent of Revelen, the real owner of the lot, was not obtained in writing as required
by law, no contract was perfected. Consequently, petitioners failed to validly acquire the
lot.

General Power of Attorney

On 25 March 1994, Revelen executed a General Power of Attorney constituting


respondent as her attorney-in-fact and authorizing her to enter into any and all contracts
and agreements on Revelen's behalf. The General Power of Attorney was notarized by
Larry A. Reid, Notary Public in California, U.S.A.

Unfortunately, the General Power of Attorney presented as "Exhibit C" 22 in the RTC
cannot also be the basis of respondent's written authority to sell the lot. AScTaD

Section 25, Rule 132 of the Rules of Court provides:


Sec. 25. Proof of public or official record. — An official record or an entry therein,
when admissible for any purpose, may be evidenced by an official publication thereof or
by a copy attested by the officer having the legal custody of the record, or by his deputy,
and accompanied, if the record is not kept in the Philippines, with a certificate that such
officer has the custody. If the office in which the record is kept is in a foreign country,
the certificate may be made by a secretary of embassy or legation consul general,
consul, vice consul, or consular agent or by any officer in the foreign service of the
Philippines stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office.

In Teoco v. Metropolitan Bank and Trust Company, 23 quoting Lopez v. Court of


Appeals, 24 we explained:

From the foregoing provision, when the special power of attorney is executed and
acknowledged before a notary public or other competent official in a foreign country, it
cannot be admitted in evidence unless it is certified as such in accordance with the
foregoing provision of the rules by a secretary of embassy or legation, consul general,
consul, vice consul, or consular agent or by any officer in the foreign service of the
Philippines stationed in the foreign country in which the record is kept of said public
document and authenticated by the seal of his office. A city judge-notary who notarized
the document, as in this case, cannot issue such certification. 25 CcSTHI

Since the General Power of Attorney was executed and acknowledged in the United
States of America, it cannot be admitted in evidence unless it is certified as such in
accordance with the Rules of Court by an officer in the foreign service of the Philippines
stationed in the United States of America. Hence, this document has no probative value.

Specific Performance

Petitioners are not entitled to claim for specific performance. It must be stressed that
when specific performance is sought of a contract made with an agent, the agency must
be established by clear, certain and specific proof. 26 To reiterate, there is a clear
absence of proof that Revelen authorized respondent to sell her lot.

Jurisdiction of the RTC

Section 33 of Batas Pambansa Bilang 129, 27 as amended by Republic Act No. 7691
provides:

Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in Civil Cases. — Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts shall exercise: HaTAEc

xxx xxx xxx


(3) Exclusive original jurisdiction in all civil actions which involve title to, possession
of, real property, or any interest therein where the assessed value of the property or
interest therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil
actions in Metro Manila, where such assessed value does not exceed Fifty thousand
pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorney's fees,
litigation expenses and costs: . . .

In Geonzon Vda. de Barrera v. Heirs of Vicente Legaspi, 28 the Court explained:

Before the amendments introduced by Republic Act No. 7691, the plenary action of
accion publiciana was to be brought before the regional trial court. With the
modifications introduced by R.A. No. 7691 in 1994, the jurisdiction of the first level
courts has been expanded to include jurisdiction over other real actions where the
assessed value does not exceed P20,000, P50,000 where the action is filed in Metro
Manila. The first level courts thus have exclusive original jurisdiction over accion
publiciana and accion reivindicatoria where the assessed value of the real property
does not exceed the aforestated amounts. Accordingly, the jurisdictional element is the
assessed value of the property.

Assessed value is understood to be "the worth or value of property established by


taxing authorities on the basis of which the tax rate is applied. Commonly, however, it
does not represent the true or market value of the property." cEISAD

The appellate court correctly ruled that even if the complaint filed with the RTC involves
a question of ownership, the MTC still has jurisdiction because the assessed value of
the whole lot as stated in Tax Declaration No. 09-0742 is P4,890. 29 The MTC cannot
be deprived of jurisdiction over an ejectment case based merely on the assertion of
ownership over the litigated property, and the underlying reason for this rule is to
prevent any party from trifling with the summary nature of an ejectment suit. 30

The general rule is that dismissal of a case for lack of jurisdiction may be raised at any
stage of the proceedings since jurisdiction is conferred by law. The lack of jurisdiction
affects the very authority of the court to take cognizance of and to render judgment on
the action; otherwise, the inevitable consequence would make the court's decision a
"lawless" thing. 31 Since the RTC has no jurisdiction over the complaint filed, all the
proceedings as well as the Decision of 17 June 2002 are void. The complaint should
perforce be dismissed.

WHEREFORE, we DENY the petition. We AFFIRM the Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 78215.

SO ORDERED. HCTaAS