Republic of the Philippines

SUPREME COURT Offici Appearing in

Manila al the Original Appearing in the
Recei Duplicate
pt Triplicate and/or
EN BANC Da Amou
Num Quadruplicate
ber te nt
G.R. No. L-19375 May 21, 1969
Da Amo Differe
DY PEH, AND/OR VICTORY RUBBER Re 1st cause of action
te unt nce
MANUFACTURING,petitioner,
vs.
COLLECTOR OF INTERNAL REVENUE,respondent. 4- 4-
6990 P3,227 P227. P3,000
20- 20-
04 .47 47 .00
54 54
Rene A. Diokno for petitioner.
Office of the Solicitor General Arturo A. Alafriz, Assistant
Solicitor General Felicisimo R. Rosete and Special Attorney 7- 7-
7042 3,681. 681.4 3,000.
Alejandro B. Afurong for respondent. 20- 20-
01 41 1 00
54 54

10- 10-
7090 1,892. 192.7 1,700.
20- 20-
08 78 8 00
DIZON,J.: 54 54

Petition filed by Dy Peh for the review of the decision and A- 1- 1-

2,575. 175.4 2,400.
resolution of the Court of Tax Appeals dated April 29 and 2103 20- 20-
46 6 00
December 23, 1961, respectively, in C.T.A. Case No. 538, 19 55 55
ordering him to pay deficiency percentage taxes in the total
amount of P51,939,27. A- 4- 4-
3,968. 168.6 3,800.
2181 20- 20-
68 9 00
The following facts are not disputed: . 05 55 55

Petitioner, during all the time material to this case, was Re 2nd cause of action
engaged in the business of manufacturing and selling
rubber shoes and allied products in the city of Cebu, under 4- 4-
the registered firm name Victory Rubber Manufacturing. 1923 P4,380 P380. P4,000
21- 21-
194 .37 37 .00
52 52
Sometime in the year 1955 the Bureau of Internal Revenue
unearthed anomalies committed in the office of the 7- 7-
Treasurer of the city of Cebu in connection with the 1972 4,140. 140.2 4,000.
21- 21-
payment of taxes by some taxpayers, amongst them 817 29 9 00
52 52
petitioner herein. As a result the respondent assessed
against, and demanded from petitioner the payment of the
10- 10-
following sums: P4,725, including P100 as penalty, P29,980, 6399 2,113. 113.0 2,000.
20- 20-
including P50 as penalty, and P17,425 including P50 as 188 07 7 00
52 52
penalty, on January 27, 1956, November 12, 1955 and
November 12, 1955, respectively. This assessment was
based upon short payments in connection with taxes due 1- 4-
7769 1,457. 1,451.
from petitioner during the periods covered by the 17- 7- 6.00
180 42 42
assessment. The investigation of the anomalies disclosed 53 53
that the amounts of the taxes allegedly paid by him, as
appearing in the original of every official receipt he had in 4- 4-
7778 4,057. 4,000.
his possession, were bigger than the amounts appearing in 18- 18- 57.56
387 56 00
the corresponding duplicate, triplicate and quadruplicate 53 52
copies thereof kept in the office of the City Treasurer of
Cebu. Such discrepancies are hereunder tabulated as 7- 7-
follows: 8423 2,850. 2,800.
20- 20- 50.63
087 63 00
53 53

1|Page
 Bartolome Baguio or any authorized employee in the office
10- 10- of the City Treasurer of Cebu? It appears that Tan Chuan
8470 2,901. 101.8 2,800.
20- 20- Liong prepared the official receipts of payments of
851 87 7 00
53 53 taxpayers who employed him as business agent. It has not
been shown that Tan Chuan Liong prepared any official
1- 1- receipt covering payment of taxpayers other than those
6936 2,996. 2,900.
20- 20- 96.26 who employed him business agent."
13 26 00
54 54
After ruling against petitioner on this question, the Court of
Re 3rd cause of action Tax Appeals said further:

A- 1- 1- Even assuming that Tan Chuan Liong was not

P3,815 P115. P3,700
1709 17- 17-
.18 18 .00
018 52 52
Petitioner's contention below and here is this: since the
checks issued by him covered in full the amount due for
each quarter, and were accepted and deposited by the City
Treasurer of Cebu; since the originals of the official receipts
issued by the latter show that the full amount of the taxes
due from him had been paid, he must be deemed to have
paid such taxesin full, and any anomaly in the application of
the amounts paid by him consisting in the diversion of part
thereof to pay the taxes of other taxpayers — whether
attributable solely to employees in the office of said
Treasurer or to other parties — should not be held against
him.
Respondent's contention, on the other hand, is that the
amounts actually paid by petitioner were those appearing
on the duplicates, triplicates and quadruplicates of the
official receipts mentioned heretofore; that the originals
thereof were falsified or altered to make them show
payment in full of the taxes due from petitioner.
In connection with the issues thus joined petitioner tried to
prove that the payments in question were made by him
personally, while, on the other hand, respondent claimed
that said payments were made not by petitioner personally
but by Tan Chuan Liong, his authorized agent in the matter
of payment of his taxes; that Bartolome Baguio, Chief of the
Internal Revenue Division of the City Treasurer's Office of
Cebu, had allowed the wrongful practice of permitting Tan
Chuan Liong to prepare the official receipts in connection
with tax payments made by him in behalf of his merchant
clients; that it was Tan Chuan Liong who applied a portion
of the amounts given to him by petitioner to pay tax
obligations of other taxpayers, also his clients, and that
therefore petitioner's recourse is against him.lawphi1.ñet
Whether it was petitioner, in person, who made the
payment of his taxes herein involved, or it was his aforesaid
agent, is manifestly a question of fact squarely resolved by
the Court of Tax Appeals as follows: "Petitioner sought to
prove that he never employed Tan Chuan Liong as a
business agent in the payment of the tax in question. The
preponderance of the evidence shows otherwise. If, as
alleged, petitioner paid the tax personally, why were the
official receipts prepared by Tan Chuan Liong and not by
2|Page
employed by petitioner as business agent,
petitioner is not entirely blameless. The records
show that the payments were made by checks. The
number of the official receipts covering the
payments are indicated on the back of the checks.
After the checks had been deposited and the
amounts credited in favor of the Government, the
cancelled checks were returned to petitioner.
Petitioner is, therefore, charged with knowledge of
the fact that the amount covered by each check
was applied in payment not only of his tax but also
of taxes of other taxpayers, the numbers of the
official receipts covering which are indicated on
the back of the check. The fact that he accepted
the cancelled checks without protest is evidence of
his acquiescence to the manner in which the
amount covered by each check was applied by the
collecting officer. He cannot now be heard to
complain.lawphi1.ñet
We can hardly add any other consideration to strengthen
the lower court's ruling.
Another question of fact vital to this case is whether or not
the official receipts in petitioner's possession were falsified,
and if so by whom.
In this connection, We believe it established as a fact that
petitioner had employed Tan Chuan Liong as a business
agent in the matter of payment of his taxes. The
testimonies of Bartolome Baguio, Isidro Badana and Lauro
Abalos on this matter (T.s.n. pp. 200-201, 472-473, 483-484,
501-503, 508-510, 525, 535-539) were corroborated by the
statement and report of NBI handwriting expert Felipe
Logan. That Tan Chuan Liong, as such petitioner's agent,
actually paid to the government less than the amounts of
the taxes due from petitioner is also fully proven by their
testimonies and the duplicate, triplicate and quadruplicate
copies of the official receipts which appear upon their face
to be genuine or authentic. The same thing cannot be
claimed for the official receipts in question, because the
lower court found that, as in the case ofTiu Bon Sin vs.
Collector etc., C.T.A. No. 286, andYap Pe Giok vs. Arañas,
C.T.A. No. 533, appellant employed the same business agent
who misappropriated a portion of the amounts entrusted to
him and paid less than what was due from his principals. In
plain words, the lower court expressed the view that the
official receipts in petitioner's hands did not reflect the
truth.

The trial court's ruling upon these questions must be

sustained pursuant to our consistent ruling to the effect
that in reviews of the nature of the present, only errors of
law are reviewable by this Court (G.R. L-12174, Maria B.
Castro vs. Collector, April 26, 1962; G.R. L-9738, Blas
Gutierrez, et al. vs. Court of Tax Appeals; G.R. L-8556,
Benito Sanchez vs. Commissioner of Customs, Sept. 30,
1957 and 54 O.G. No. 2, p. 361, Eugenie Perez vs. Court of
Tax Appeals, G.R. L-10507, May 30, 1958; G.R. No. L-13387,
Sy Chiuco vs. Collector, March 23, 1960; G.R. No. L-11622,
Collector vs. Fisher and G.R. No. L-1168, Fisher vs. Collector,
January 28, 1961).

The foregoing disposes of the first two assignments of error

submitted in petitioner's brief. In the third, it is his
contention that the Court a quo erred in holding that he is
estopped from questioning the misapplication of his
payments.

This is only a corollary of the questions raised in the

previous assignments of error. Inasmuch as We have held in
resolving the latter that, in point of fact, Tan Chuan Liong
was petitioner's agent, the conclusion must necessarily be
that the agent's acts bind his principal; without prejudice,
of course, to the latter seeking recourse against him in an
appropriate civil or criminal action.

The fourth and last assignment of error has been impliedly

resolved adversely to petitioner in our rulings upon the first
three.

PREMISES CONSIDERED, the decision appealed from is

hereby affirmed, with costs.

3|Page
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 88539 October 26, 1993
KUE CUISON, doing business under the firm name and
style"KUE CUISON PAPER SUPPLY," petitioner,
vs.
THE COURT OF APPEALS, VALIANT INVESTMENT
ASSOCIATES, respondents.
Leighton R. Siazon for petitioner.
Melanio L. Zoreta for private respondent.
BIDIN, J.:
This petition for review assails the decision of the
respondent Court of Appeals ordering petitioner to pay
private respondent, among others, the sum of P297,482.30
with interest. Said decision reversed the appealed decision
of the trial court rendered in favor of petitioner.
The case involves an action for a sum of money filed by
respondent against petitioner anchored on the following
antecedent facts:
Petitioner Kue Cuison is a sole proprietorship engaged in
the purchase and sale of newsprint, bond paper and scrap,
with places of business at Baesa, Quezon City, and Sto.
Cristo, Binondo, Manila. Private respondent Valiant
Investment Associates, on the other hand, is a partnership
duly organized and existing under the laws of the
Philippines with business address at Kalookan City.
From December 4, 1979 to February 15, 1980, private
respondent delivered various kinds of paper products
amounting to P297,487.30 to a certain Lilian Tan of LT
Trading. The deliveries were made by respondent pursuant
to orders allegedly placed by Tiu Huy Tiac who was then
employed in the Binondo office of petitioner. It was likewise
pursuant to Tiac's instructions that the merchandise was
delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the
merchandise by issuing several checks payable to cash at
the specific request of Tiu Huy Tiac. In turn, Tiac issued nine
(9) postdated checks to private respondent as payment for
the paper products. Unfortunately, sad checks were later
dishonored by the drawee bank.
Thereafter, private respondent made several demands upon
petitioner to pay for the merchandise in question, claiming
4|Page
that Tiu Huy Tiac was duly authorized by petitioner as the
manager of his Binondo office, to enter into the questioned
transactions with private respondent and Lilian Tan.
Petitioner denied any involvement in the transaction
entered into by Tiu Huy Tiac and refused to pay private
respondent the amount corresponding to the selling price
of the subject merchandise.
Left with no recourse, private respondent filed an action
against petitioner for the collection of P297,487.30
representing the price of the merchandise. After due
hearing, the trial court dismissed the complaint against
petitioner for lack of merit. On appeal, however, the
decision of the trial court was modified, but was in effect
reversed by the Court of Appeals, the dispositive portion of
which reads:
WHEREFORE, the decision appealed from
is MODIFIED in that defendant-appellant
Kue Cuison is hereby ordered to pay
plaintiff-appellant Valiant Investment
Associates the sum of P297,487.30 with
12% interest from the filing of the
complaint until the amount is fully paid,
plus the sum of 7% of the total amount
due as attorney's fees, and to pay the
costs. In all other respects, the decision
appealed from is affirmed. (Rollo, p. 55)
In this petition, petitioner contends that:
THE HONORABLE COURT ERRED IN
FINDING TIU HUY TIAC AGENT OF
DEFENDANT-APPELLANT CONTRARY TO
THE UNDISPUTED/ESTABLISHED FACTS
AND CIRCUMSTANCES.
THE HONORABLE COURT ERRED IN
FINDING DEFENDANT-APPELLANT LIABLE
FOR AN OBLIGATION UNDISPUTEDLY
BELONGING TO TIU HUY TIAC.
THE HONORABLE COURT ERRED IN REVERSING THE WELL-
FOUNDED DECISION OF THE TRIAL COURT, (Rollo, p, 19)
The issue here is really quite simple — whether or not Tiu
Huy Tiac possessed the required authority from petitioner
sufficient to hold the latter liable for the disputed
transaction.
This petition ought to have been denied outright, forin the
final analysis, it raises a factual issue. It is elementary that in
petitions for review under Rule 45, this Court only passes
upon questions of law. An exception thereto occurs where
the findings of fact of the Court of Appeals are at variance
with the trial court, in which case the Court reviews the
evidence in order to arrive at the correct findings based on
the records.
As to the merits of the case, it is a well-established rule that
one who clothes another with apparent authority as his
agent and holds him out to the public as such cannot be
permitted to deny the authority of such person to act as his
agent, to the prejudice of innocent third parties dealing
with such person in good faith and in the honest belief that
he is what he appears to be (Macke, et al, v. Camps, 7 Phil.
553 (1907]; Philippine National Bank. v Court of Appeals, 94
SCRA 357 [1979]). From the facts and the evidence on
record, there is no doubt that this rule obtains. The petition
must therefore fail.
It is evident from the records that by his own acts and
admission, petitioner held out Tiu Huy Tiac to the public as
the manager of his store in Sto. Cristo, Binondo, Manila.
More particularly, petitioner explicitly introduced Tiu Huy
Tiac to Bernardino Villanueva, respondent's manager, as his
(petitioner's) branch manager as testified to by Bernardino
Villanueva. Secondly, Lilian Tan, who has been doing
business with petitioner for quite a while, also testified that
she knew Tiu Huy Tiac to be the manager of petitioner's
Sto. Cristo, Binondo branch. This general perception of Tiu
Huy Tiac as the manager of petitioner's Sto. Cristo store is
even made manifest by the fact that Tiu Huy Tiac is known
in the community to be the "kinakapatid" (godbrother) of
petitioner. In fact, even petitioner admitted his close
relationship with Tiu Huy Tiac when he said that they are
"like brothers" (Rollo, p. 54). There was thus no reason for
anybody especially those transacting business with
petitioner to even doubt the authority of Tiu Huy Tiac as his
manager in the Sto. Cristo Binondo branch.
In a futile attempt to discredit Villanueva, petitioner alleges
that the former's testimony is clearly self-serving inasmuch
as Villanueva worked for private respondent as its manager.
We disagree, The argument that Villanueva's testimony is
self-serving and therefore inadmissible on the lame excuse
of his employment with private respondent utterly
misconstrues the nature of "'self-serving evidence" and the
specific ground for its exclusion. As pointed out by this
Court in Co v. Court of Appeals et, al., (99 SCRA 321 [1980]):
Self-serving evidence is evidence made by
a party out of court at one time; it does
not include a party's testimony as a
witness in court. It is excluded on the
same ground as any hearsay evidence,
that is the lack of opportunity for cross-
examination by the adverse party, and on
the consideration that its admission
would open the door to fraud and to
fabrication of testimony. On theother
hand, a party's testimony in court is
sworn and affords the other party the
opportunity for cross-examination
(emphasis supplied)
Petitioner cites Villanueva's failure, despite his commitment
to do so on cross-examination, to produce the very first
5|Page
invoice of the transaction between petitioner and private
respondent as another ground to discredit Villanueva's
testimony. Such failure, proves that Villanueva was not only
bluffing when he pretended that he can produce the
invoice, but that Villanueva was likewise prevaricating when
he insisted that such prior transactions actually took place.
Petitioner is mistaken. In fact, it was petitioner's counsel
himself who withdrew the reservation to have Villanueva
produce the document in court. As aptly observed by the
Court of Appeals in its decision:
. . . However, during the hearing on March
3, 1981, Villanueva failed to present the
document adverted to because
defendant-appellant's counsel withdrew
his reservation to have the former
(Villanueva) produce the document or
invoice, thus prompting plaintiff-appellant
to rest its case that same day (t.s.n., pp.
39-40, Sess. of March 3, 1981). Now,
defendant-appellant assails the credibility
of Villanueva for having allegedly failed to
produce even one single document to
show that plaintiff-appellant have had
transactions before, when in fact said
failure of Villanueva to produce said
document is a direct off-shoot of the
action of defendant-appellant's counsel
who withdrew his reservation for the
production of the document or invoice
and which led plaintiff-appellant to rest its
case that very day. (Rollo, p.52)
In the same manner, petitioner assails the credibility of
Lilian Tan by alleging that Tan was part of an intricate plot to
defraud him. However, petitioner failed to substantiate or
prove that the subject transaction was designed to defraud
him. Ironically, it was even the testimony of petitioner's
daughter and assistant manager Imelda Kue Cuison which
confirmed the credibility of Tan as a witness. On the witness
stand, Imelda testified that she knew for a fact that prior to
the transaction in question, Tan regularly transacted
business with her father (petitioner herein), thereby
corroborating Tan's testimony to the same effect. As
correctly found by the respondent court, there was no
logical explanation for Tan to impute liability upon
petitioner. Rather, the testimony of Imelda Kue Cuison only
served to add credence to Tan's testimony as regards the
transaction, the liability for which petitioner wishes to be
absolved.
But of even greater weight than any of these testimonies, is
petitioner's categorical admission on the witness stand that
Tiu Huy Tiac was the manager of his store in Sto. Cristo,
Binondo, to wit:
Court:
xxx xxx xxx
 Q And who was
managing the store in
Sto. Cristo?
A At first it was Mr. Ang,
then later Mr. Tiu Huy
Tiac but I cannot
remember the exact
year.
Q So, Mr. Tiu Huy Tiac
took over the
management,.
A Not that was because
every afternoon, I was
there, sir.
Q But in the morning,
who takes charge?
A Tiu Huy Tiac takes
charge of
management and if
there (sic) orders for
newsprint or bond
papers they are always
referred to the
compound in Baesa, sir.
(t.s.n., p. 16, Session of
January 20, 1981, CA
decision, Rollo, p. 50,
emphasis supplied).
Such admission, spontaneous no doubt, and standing alone,
is sufficient to negate all the denials made by petitioner
regarding the capacity of Tiu Huy Tiac to enter into the
transaction in question. Furthermore, consistent with and
as an obvious indication of the fact that Tiu Huy Tiac was
the manager of the Sto. Cristo branch, three (3) months
after Tiu Huy Tiac left petitioner's employ, petitioner even
sent, communications to its customers notifying them that
Tiu Huy Tiac is no longer connected with petitioner's
business. Such undertaking spoke unmistakenly of Tiu Huy
Tiac's valuable position as petitioner's manager than any
uttered disclaimer. More than anything else, this act taken
together with the declaration of petitioner in open court
amount to admissions under Rule 130 Section 22 of the
Rules of Court, to wit : "The act, declaration or omission of
a party as to a relevant fact may be given in evidence
against him." For well-settled is the rule that "a man's acts,
conduct, and declaration, wherever made, if voluntary, are
admissible against him, for the reason that it is fair to
presume that they correspond with the truth, and it is his
fault if they do not. If a man's extrajudicial admissions are
admissible against him, there seems to be no reason why
his admissions made in open court, under oath, should not
be accepted against him." (U.S. vs. Ching Po, 23 Phil. 578,
583 [1912];).
6|Page
Moreover, petitioner's unexplained delay in disowning the
transactions entered into by Tiu Huy Tiac despite several
attempts made by respondent to collect the amount from
him, proved all the more that petitioner was aware of the
questioned commission was tantamount to an admission by
silence under Rule 130 Section 23 of the Rules of Court,
thus: "Any act or declaration made in the presence of and
within the observation of a party who does or says nothing
when the act or declaration is such as naturally to call for
action or comment if not true, may be given in evidence
against him."
All of these point to the fact that at the time of the
transaction Tiu Huy Tiac was admittedly the manager of
petitioner's store in Sto. Cristo, Binondo. Consequently, the
transaction in question as well as the concomitant
obligation is valid and binding upon petitioner.
By his representations, petitioner is now estopped from
disclaiming liability for the transaction entered by Tiu Huy
Tiac on his behalf. It matters not whether the
representations are intentional or merely negligent so long
as innocent, third persons relied upon such representations
in good faith and for value As held in the case of Manila
Remnant Co. Inc. v. Court of Appeals, (191 SCRA 622
[1990]):
More in point, we find that by the
principle of estoppel, Manila Remnant is
deemed to have allowed its agent to act
as though it had plenary powers. Article
1911 of the Civil Code provides:
"Even when the agent
has exceeded his
authority, the principal
issolidarily liable with
the agent if the former
allowed the latter to act
as though he had full
powers." (Emphasis
supplied).
The above-quoted article is new. It is
intended to protect the rights of innocent
persons. In such a situation, both the
principal and the agent may be
considered as joint tortfeasors whose
liability is joint and solidary.
Authority by estoppel has arisen in the
instant case because by its negligence, the
principal, Manila Remnant, has permitted
its agent, A.U. Valencia and Co., to
exercise powers not granted to it. That
the principal might not have had actual
knowledge of theagent's misdeed is of no
moment.
Tiu Huy Tiac, therefore, by petitioner's own representations
and manifestations, became an agent of petitioner by
estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon
(Article 1431, Civil Code of the Philippines). A party cannot
be allowed to go back on his own acts and representations
to the prejudice of the other party who, in good faith, relied
upon them (Philippine National Bank v. Intermediate
Appellate Court, et al., 189 SCRA 680 [1990]).

Taken in this light,. petitioner is liable for the transaction

entered into by Tiu Huy Tiac on his behalf. Thus, even when
the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the
latter to fact as though he had full powers (Article 1911 Civil
Code), as in the case at bar.

Finally, although it may appear that Tiu Huy Tiac defrauded

his principal (petitioner) in not turning over the proceeds of
the transaction to the latter, such fact cannot in any way
relieve nor exonerate petitioner of his liability to private
respondent. For it is an equitable maxim that as between
two innocent parties, the one who made it possible for the
wrong to be done should be the one to bear the resulting
loss (Francisco vs. Government Service Insurance System, 7
SCRA 577 [1963]).

Inasmuch as the fundamental issue of the capacity or

incapacity of the purported agent Tiu Huy Tiac, has already
been resolved, the Court deems it unnecessary to resolve
the other peripheral issues raised by petitioner.

WHEREFORE, the instant petition in hereby DENIED for lack

of merit. Costs against petitioner.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 94050 November 21, 1991

7|Page
SYLVIA H. BEDIA and HONTIVEROS & ASSOCIATED
PRODUCERS PHILS. YIELDS, INC., petitioners,
vs.
EMILY A. WHITE and HOLMAN T. WHITE, respondents.
Ramon A. Gonzales for petitioner of the Court.
Renato S. Corpuz for private respondents.
CRUZ, J.:
The basic issue before us is the capacity in which petitioner
Sylvia H. Bedia entered into the subject contract with
private respondent Emily A. White. Both the trial court and
the respondent court held she was acting in her own
personal behalf. She faults this finding as reversible error
and insists that she was merely acting as an agent.
The case arose when Bedia and White entered into a
Participation Contract 1 reading in full as follows:
THE STATE FAIR OF TEXAS '80
PARTICIPATION CONTRACT
PARTICIPANT (COMPANY NAME) EMILY WHITE
ENTERPRISES
I/We, the abovementioned company hereby
agrees to participate in the 1980 Dallas State Fair
to be held in Dallas, Texas on October 3, to
October 19,1980. I/We request for a 15 square
meter booth space worth $2,250.00 U.S. Dollars.
I/We further understand that this participation
contract shall be deemed non-cancellable after
payment of the said down payment, and that any
intention on our part to cancel the same shall
render whatever amount we have paid forfeited in
favor of HONTIVEROS & ASSOCIATED PRODUCERS
PHILIPPINE YIELDS, INC.
FOR THE ABOVE CONSIDERATION, I/We
understand the HONTIVEROS & ASSOCIATED
PRODUCERS PHIL. YIELDS, INC. shall: Reserve said
booth for our exclusive perusal; We also
understand that the above cost includes overall
exterior booth decoration and materials but does
not include interior designs which will be per our
specifications and expenses.
PARTICIPANT'S PARTICIPATION
AUTHORIZED SIGNATURE: ACCEPTED BY:
(SGD.) EMILY WHITE (SGD.) SYLVIA H. BEDIA
DATE: 8/13/80 DATE: Aug. 1, 1980
8|Page
On August 10, 1986, White and her husband filed a
complaint in the Regional Trial Court of Pasay City for
damages against Bedia and Hontiveros & Associated
Producers Phil. Yields, Inc. for damages caused by their
fraudulent violation of their agreement. She averred that
Bedia had approached her and persuaded her to participate
in the State of Texas Fair, and that she made a down
payment of $500.00 to Bedia on the agreed display space.
In due time, she enplaned for Dallas with her merchandise
but was dismayed to learn later that the defendants had
not paid for or registered any display space in her name,
nor were they authorized by the state fair director to recruit
participants. She said she incurred losses as a result for
which the defendants should be held solidarily liable. 2
In their joint answer, the defendants denied the plaintiff's
allegation that they had deceived her and explained that no
display space was registered in her name as she was only
supposed to share the space leased by Hontiveros in its
name. She was not allowed to display her goods in that
space because she had not paid her balance of $1,750.00,
in violation of their contract. Bedia also made the particular
averment that she did not sign the Participation Contract on
her own behalf but as an agent of Hontiveros and that she
had later returned the advance payment of $500.00 to the
plaintiff. The defendants filed their own counterclaim and
complained of malice on the part of the plaintiffs. 3
In the course of the trial, the complaint against Hontiveros was dismissed on motion of the plaintiffs. 4
In his decision dated May 29, 1986, Judge Fermin Martin, Jr. found Bedia liable for fraud and awarded
the plaintiffs actual and moral damages plus attorney's fees and the costs. The court said:
In claiming to be a mere agent of Hontiveros & Associated Producers Phil. Yields, Inc.,
defendant Sylvia H. Bedia evidently attempted to escape liability for herself.
Unfortunately for her, the "Participation Contract" is not actually in representation or in
the name of said corporation. It is a covenant entered into by her in her personal
capacity, for no one may contract in the name of another without being authorized by
the latter, or unless she has by law a right to represent her. (Art. 1347, new Civil Code)
Sustaining the trail court on this point, the respondent court 5
declared in its decision
dated March 30, 1990:
The evidence, on the whole, shows that she
definitely acted on her own. She represented
herself as authorized by the State of Texas to solicit
and assign booths at the Texas fair; she assured the
appellee that she could give her booth. Under
Article 1883 of the New Civil Code, if the
agent acts in his own name, the principal has no
right of action against the persons with whom the
agent had contracted.
We do not share these views.
It is noteworthy that in her letter to the Minister of Trade SO ORDERED.
dated December 23,1984, Emily White began:

I am a local exporter who was recruited by

Hontiveros & Associated Producers Phil. Yields,
Inc. to participate in the State Fair of Dallas, Texas
which was held last Oct. 3 to 19, 1980. Hontiveros
& Associated charged me US$150.00 per square
meter for display booth of said fair. I have paid an
advance of US$500.00 as partial payment for the
total space of 15 square meter of which is
$2,250.00 (Two Thousand Two Hundred Fifty
Dollars). 6

As the Participation Contract was signed by Bedia, the above statement was an acknowledgment by

White that Bedia was only acting for Hontiveros when it recruited her as a participant in the Texas State

Fair and charged her a partial payment of $500.00. This amount was to be fortified to Hontiveros in

case of cancellation by her of the agreement. The fact that the contract was typewritten on the

letterhead stationery of Hontiveros bolsters this conclusion in the absence of any showing that said

stationery had been illegally used by Bedia.

Significantly, Hontiveros itself has not repudiated Bedia's agency as it would have if she had really not

signed in its name. In the answer it filed with Bedia, it did not deny the latter's allegation in Paragraph 4

thereof that she was only acting as its agent when she solicited White's participation. In fact, by filing

the answer jointly with Bedia through their common counsel, Hontiveros affirmed this allegation.

If the plaintiffs had any doubt about the capacity in which Bedia was acting, what they should have

done was verify the matter with Hontiveros. They did not. Instead, they simply accepted Bedia's

representation that she was an agent of Hontiveros and dealt with her as such. Under Article 1910 of

the Civil Code, "the principal must comply with all the obligations which the agent may have contracted

within the scope of his authority." Hence, the private respondents cannot now hold Bedia liable for the

acts performed by her for, and imputable to, Hontiveros as her principal.

The plaintiffs' position became all the more untenable when they moved on June 5, 1984, for the

dismissal of the complaint against Hontiveros, 7

leaving Bedia as the sole
defendant. Hontiveros had admitted as early as when it
filed its answer that Bedia was acting as its agent. The effect
of the motion was to leave the plaintiffs without a cause of
action against Bedia for the obligation, if any, of Hontiveros.
G.R. No. 137686 February 8, 2000
Our conclusion is that since it has not been found that
Bedia was acting beyond the scope of her authority when RURAL BANK OF MILAOR (CAMARINES SUR), petitioner,
she entered into the Participation Contract on behalf of vs.
Hontiveros, it is the latter that should be held answerable FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O.
for any obligation arising from that agreement. By moving NIÑO, FELICISIMO OCFEMIA, RENATO OCFEMIA JR, and
to dismiss the complaint against Hontiveros, the plaintiffs WINSTON OCFEMIA, respondents.
virtually disarmed themselves and forfeited whatever
claims they might have proved against the latter under the PANGANIBAN, J.:
contract signed for it by Bedia. It should be obvious that
having waived these claims against the principal, they When a bank, by its acts and failure to act, has clearly
cannot now assert them against the agent. clothed its manager with apparent authority to sell an
acquired asset in the normal course of business, it is legally
WHEREFORE, the appealed decision dated March 30, 1990, obliged to confirm the transaction by issuing a board
of the respondent court is REVERSED and a new judgment is resolution to enable the buyers to register the property in
rendered dismissing Civil Case No. 9246-P in the Regional their names. It has a duty to perform necessary and lawful
Trial Court of Pasay City.
9|Page
acts to enable the other parties to enjoy all benefits of the
contract which it had authorized.
The Case
Before this Court is a Petition for Review
on Certiorari challenging the December 18, 1998 Decision
of the Court of Appeals 1 (CA) in CA-GR SP No. 46246, which
affirmed the May 20, 1997 Decision 2 of the Regional Trial
Court (RTC) of Naga City (Branch 28). The CA disposed as
follows:
Wherefore, premises considered, the Judgment
appealed from is hereby AFFIRMED. Costs against
the respondent-appellant. 3
The dispositive portion of the judgment affirmed by the CA
ruled in this wise:
WHEREFORE, in view of all the foregoing findings,
decision is hereby rendered whereby the
[petitioner] Rural Bank of Milaor (Camarines Sur),
Inc. through its Board of Directors is hereby
ordered to immediately issue a Board Resolution
confirming the Deed of Sale it executed in favor of
Renato Ocfemia marked Exhibits C, C-1 and C-2); to
pay [respondents] the sum of FIVE HUNDRED
(P500.00) PESOS as actual damages; TEN
THOUSAND (P10,000.00) PESOS as attorney's fees;
THIRTY THOUSAND (P30,000.00) PESOS as moral
damages; THIRTY THOUSAND (P30,000.00) PESOS
as exemplary damages; and to pay the costs. 4
5
Also assailed is the February 26, 1999 CA Resolution which
denied petitioner's Motion for Reconsideration.
The Facts
The trial court's summary of the undisputed facts was
reproduced in the CA Decision as follows:
This is an action for mandamus with damages. On
April 10, 1996, [herein petitioner] was declared in
default on motion of the [respondents] for failure
to file an answer within the reglementary-period
after it was duly served with summons. On April
26, 1996, [herein petitioner] filed a motion to set
aside the order of default with objection thereto
filed by [herein respondents].
On June 17, 1996, an order was issued denying
[petitioner's] motion to set aside the order of
default. On July 10, 1996, the defendant filed a
motion for reconsideration of the order of June 17,
1996 with objection thereto by [respondents]. On
July 12, 1996, an order was issued denying
[petitioner's] motion for reconsideration. On July
31, 1996, [respondents] filed a motion to set case
for hearing. A copy thereof was duly furnished the
10 | P a g e
[petitioner] but the latter did not file any
opposition and so [respondents] were allowed to
present their evidence ex-parte. A certiorari case
was filed by the [petitioner] with the Court of
Appeals docketed as CA GR No. 41497-SP but the
petition was denied in a decision rendered on
March 31, 1997 and the same is now final.
The evidence presented by the [respondents]
through the testimony of Marife O. Niño, one of
the [respondents] in this case, show[s] that she is
the daughter of Francisca Ocfemia, a co-
[respondent] in this case, and the late Renato
Ocfemia who died on July 23, 1994. The parents of
her father, Renato Ocfemia, were Juanita Arellano
Ocfemia and Felicisimo Ocfemia. Her other co-
[respondents] Rowena O. Barrogo, Felicisimo
Ocfemia, Renato Ocfemia, Jr. and Winston Ocfemia
are her brothers and sisters.1âwphi1.nêt
Marife O. Niño knows the five (5) parcels of land
described in paragraph 6 of the petition which are
located in Bombon, Camarines Sur and that they
are the ones possessing them which [were]
originally owned by her grandparents, Juanita
Arellano Ocfemia and Felicisimo Ocfemia. During
the lifetime of her grandparents, [respondents]
mortgaged the said five (5) parcels of land and two
(2) others to the [petitioner] Rural Bank of Milaor
as shown by the Deed of Real Estate Mortgage
(Exhs. A and A-1) and the Promissory Note (Exh. B).
The spouses Felicisimo Ocfemia and Juanita
Arellano Ocfemia were not able to redeem the
mortgaged properties consisting of seven (7)
parcels of land and so the mortgage was
foreclosed and thereafter ownership thereof was
transferred to the [petitioner] bank. Out of the
seven (7) parcels that were foreclosed, five (5) of
them are in the possession of the [respondents]
because these five (5) parcels of land described in
paragraph 6 of the petition were sold by the
[petitioner] bank to the parents of Marife O. Niño
as evidenced by a Deed of Sale executed in January
1988 (Exhs. C, C-1 and C-2).
The aforementioned five (5) parcels of land subject
of the deed of sale (Exh. C), have not been,
however transferred in the name of the parents of
Merife O. Niño after they were sold to her parents
by the [petitioner] bank because according to the
Assessor's Office the five (5) parcels of land,
subject of the sale, cannot be transferred in the
name of the buyers as there is a need to have the
document of sale registered with the Register of
Deeds of Camarines Sur.
In view of the foregoing, Marife O. Niño went to
the Register of Deeds of Camarines Sur with the
Deed of Sale (Exh. C) in order to have the same
 registered. The Register of Deeds, however,
informed her that the document of sale cannot be
registered without a board resolution of the
[petitioner] Bank. Marife Niño then went to the
bank, showed to if the Deed of Sale (Exh. C), the
tax declaration and receipt of tax payments and
requested the [petitioner] for a board resolution so
that the property can be transferred to the name
of Renato Ocfemia the husband of petitioner
Francisca Ocfemia and the father of the other
[respondents] having died already.
The [petitioner] bank refused her request for a
board resolution and made many alibi[s]. She was
told that the [petitioner] bank ha[d] a new
manager and it had no record of the sale. She was
asked and she complied with the request of the
[petitioner] for a copy of the deed of sale and
receipt of payment. The president of the
[petitioner] bank told her to get an authority from
her parents and other [respondents] and receipts
evidencing payment of the consideration
appearing in the deed of sale. She complied with
said requirements and after she gave all these
documents, Marife O. Niño was again told to wait
for two (2) weeks because the [petitioner] bank
would still study the matter.
After two (2) weeks, Marife O. Niño returned to
the [petitioner] bank and she was told that the
resolution of the board would not be released
because the [petitioner] bank ha[d] no records
from the old manager. Because of this, Marife O.
Niño brought the matter to her lawyer and the
latter wrote a letter on December 22, 1995 to the
[petitioner] bank inquiring why no action was
taken by the board of the request for the issuance
of the resolution considering that the bank was
already fully paid [for] the consideration of the sale
since January 1988 as shown by the deed of sale
itself (Exh. D and D-1 ).
On January 15, 1996 the [petitioner] bank
answered [respondents'] lawyer's letter (Exh. D
and D-1) informing the latter that the request for
board resolution ha[d] already been referred to
the board of directors of the [petitioner] bank with
another request that the latter should be furnished
with a certified machine copy of the receipt of
payment covering the sale between the
[respondents] and the [petitioner] (Exh. E). This
request of the [petitioner] bank was already
complied [with] by Marife O. Niño even before she
brought the matter to her lawyer.
On January 23, 1996 [respondents'] lawyer wrote
back the branch manager of the [petitioner] bank
informing the latter that they were already
furnished the receipts the bank was asking [for]
and that the [respondents] want[ed] already to
11 | P a g e
know the stand of the bank whether the board
[would] issue the required board resolution as the
deed of sale itself already show[ed] that the
[respondents were] clearly entitled to the land
subject of the sale (Exh. F). The manager of the
[petitioner] bank received the letter which was
served personally to him and the latter told Marife
O. Niño that since he was the one himself who
received the letter he would not sign anymore a
copy showing him as having already received said
letter (Exh. F).
After several days from receipt of the letter (Exh. F)
when Marife O. Niño went to the [petitioner] again
and reiterated her request, the manager of the
[petitioner] bank told her that they could not issue
the required board resolution as the [petitioner]
bank ha[d] no records of the sale. Because of this
Merife O. Niño already went to their lawyer and
ha[d] this petition filed.
The [respondents] are interested in having the
property described in paragraph 6 of the petition
transferred to their names because their mother
and co-petitioner, Francisca Ocfemia, is very sickly
and they want to mortgage the property for the
medical expenses of Francisca Ocfemia. The illness
of Francisca Ocfemia beg[a]n after her husband
died and her suffering from arthritis and
pulmonary disease already became serious before
December 1995.
Marife O. Niño declared that her mother is now in
serious condition and they could not have her
hospitalized for treatment as they do not have any
money and this is causing the family sleepless
nights and mental anguish, thinking that their
mother may die because they could not submit her
for medication as they do not have money. 6
The trial court granted the Petition. As noted earlier, the CA
affirmed the RTC Decision.
Hence, this recourse. 7 In a Resolution dated June 23, 1999,
this Court issued a Temporary Restraining Order directing
the trial court "to refrain and desist from executing
[pending appeal] the decision dated May 20, 1997 in Civil
Case No. RTC-96-3513, effective immediately until further
orders from this Court." 8
Ruling of the Court of Appeals
The CA held that herein respondents were "able to prove
their present cause of action" against petitioner. It ruled
that the RTC had jurisdiction over the case, because (1) the
Petition involved a matter incapable of pecuniary
estimation; (2) mandamus fell within the jurisdiction of RTC;
and (3) assuming that the action was for specific
performance as argued by the petitioner, it was still
cognizable by the said court.
Issues
In its Memorandum, 9 the bank posed the following
questions:
1. Question of Jurisdiction of the Regional Trial
Court. — Has a Regional Trial Court original
jurisdiction over an action involving title to real
property with a total assessed value of less than
P20,000.00?
2. Question of Law. — May the board of directors
of a rural banking corporation be compelled to
confirm a deed of absolute sale of real property
owned by the corporation which deed of sale was
executed by the bank manager without prior
authority of the board of directors of the rural
banking corporation? 10
This Court's Ruling
The present Petition has no merit.
First Issue:
Jurisdiction of the Regional Trial Court
Petitioner submits that the RTC had no jurisdiction over the
case. Disputing the ruling of the appellate court that the
present action was incapable of pecuniary estimation,
petitioner argues that the matter in fact involved title to
real property worth less than P20,000. Thus, under RA
7691, the case should have been filed before a
metropolitan trial court, a municipal trial court or a
municipal circuit trial court.
We disagree. The well-settled rule is that jurisdiction is
determined by the allegations of the complaint. 11 In the
present case, the Petition for Mandamus filed by
respondents before the trial court prayed that petitioner-
bank be compelled to issue a board resolution confirming
the Deed of Sale covering five parcels of unregistered land,
which the bank manager had executed in their favor. The
RTC has jurisdiction over such action pursuant to Section 21
of BP 129, which provides:
Sec. 21. Original jurisdiction in other cases. —
Regional Trial Courts shall exercise original
jurisdiction;
(1) in the issuance of writ of certiorari, prohibition,
mandamus, quo warranto, habeas corpus and
injunction which may be enforced in any part of
their respective regions; and
(2) In actions affecting ambassadors and other
public ministers and consuls.
12 | P a g e
A perusal of the Petition shows that the respondents did
not raise any question involving the title to the property,
but merely asked that petitioner's board of directors be
directed to issue the subject resolution. Moreover, the bank
did not controvert the allegations in the said Petition. To
repeat, the issue therein was not the title to the property; it
was respondents' right to compel the bank to issue a board
resolution confirming the Deed of Sale.
Second Issue:
Authority of the Bank Manager
Respondents initiated the present proceedings, so that they
could transfer to their names the subject five parcels of
land; and subsequently, to mortgage said lots and to use
the loan proceeds for the medical expenses of their ailing
mother. For the property to be transferred in their names,
however, the register of deeds required the submission of a
board resolution from the bank confirming both the Deed
of Sale and the authority of the bank manager, Fe S. Tena,
to enter into such transaction. Petitioner refused. After
being given the runaround by the bank, respondents sued
in exasperation.
Allegations in the Petition for Mandamus Deemed Admitted
Respondents based their action before the trial court on the
Deed of Sale, the substance of which was alleged in and a
copy thereof was attached to the Petition for Mandamus.
The Deed named Fe S. Tena as the representative of the
bank. Petitioner, however, failed to specifically deny under
oath the allegations in that contract. In fact, it filed no
answer at all, for which reason it was declared in default.
Pertinent provisions of the Rules of Court read:
Sec. 7. Action or defense based on document. —
Whenever an action or defense is based upon a
written instrument or document, the substance of
such instrument or document shall be set forth in
the pleading, and the original or a copy thereof
shall be attached to the pleading as an exhibit,
which shall be deemed to be a part of the
pleading, or said copy may with like effect be set
forth in the pleading.
Sec. 8. How to contest genuineness of such
documents.— When an action or defense is
founded upon a written instrument, copied in or
attached to the corresponding pleading as
provided in the preceding section, the genuineness
and due execution of the instrument shall be
deemed admitted unless the adverse party, under
oath, specifically denies them, and sets forth what
he claims to be the facts; but this provision does
not apply when the adverse party does not appear
to be a party to the instrument or when
compliance with an order for an inspection of the
original instrument is refused. 12
In failing to file its answer specifically denying under oath
the Deed of Sale, the bank admitted the due execution of
the said contract. Such admission means that it
acknowledged that Tena was authorized to sign the Deed of
Sale on its behalf. 13 Thus, defenses that are inconsistent
with the due execution and the genuineness of the written
instrument are cut off by an admission implied from a
failure to make a verified specific denial.
Other Acts of the Bank
In any event, the bank acknowledged, by its own acts or
failure to act, the authority of Fe S. Tena to enter into
binding contracts. After the execution of the Deed of Sale,
respondents occupied the properties in dispute and paid
the real estate taxes due thereon. If the bank management
believed that it had title to the property, it should have
taken some measures to prevent the infringement or
invasion of its title thereto and possession thereof.
Likewise, Tena had previously transacted business on behalf
of the bank, and the latter had acknowledged her authority.
A bank is liable to innocent third persons where
representation is made in the course of its normal business
by an agent like Manager Tena, even though such agent is
abusing her authority. 14 Clearly, persons dealing with her
could not be blamed for believing that she was authorized
to transact business for and on behalf of the bank. Thus,
this Court has ruled in Board of Liquidators v. Kalaw: 15
Settled jurisprudence has it that where similar acts
have been approved by the directors as a matter of
general practice, custom, and policy, the general
manager may bind the company without formal
authorization of the board of directors. In varying
language, existence of such authority is
established, by proof of the course of business, the
usages and practices of the company and by the
knowledge which the board of directors has, or
must be presumed to have, of acts and doings of
its subordinates in and about the affairs of the
corporation. So also,
. . . authority to act for and bind a corporation may
be presumed from acts of recognition in other
instances where the power was in fact exercised.
. . . Thus, when, in the usual course of business of a
corporation, an officer has been allowed in his
official capacity to manage its affairs, his authority
to represent the corporation may be implied from
the manner in which he has been permitted by the
directors to manage its business.
Notwithstanding the putative authority of the manager to
bind the bank in the Deed of Sale, petitioner has failed to
file an answer to the Petition below within the
reglementary period, let alone present evidence
controverting such authority. Indeed, when one of herein
13 | P a g e
respondents, Marife S. Nino, went to the bank to ask for the
board resolution, she was merely told to bring the receipts.
The bank failed to categorically declare that Tena had no
authority. This Court stresses the following:
. . . Corporate transactions would speedily come to
a standstill were every person dealing with a
corporation held duty-bound to disbelieve every
act of its responsible officers, no matter how
regular they should appear on their face. This
Court has observed in Ramirez vs. Orientalist Co.,
38 Phil. 634, 654-655, that —
In passing upon the liability of a
corporation in cases of this kind it is
always well to keep in mind the situation
as it presents itself to the third party with
whom the contract is made. Naturally he
can have little or no information as to
what occurs in corporate meetings; and
he must necessarily rely upon the
external manifestation of corporate
consent. The integrity of commercial
transactions can only be maintained by
holding the corporation strictly to the
liability fixed upon it by its agents in
accordance with law; and we would be
sorry to announce a doctrine which would
permit the property of man in the city of
Paris to be whisked out of his hands and
carried into a remote quarter of the earth
without recourse against the corporation
whose name and authority had been used
in the manner disclosed in this case. As
already observed, it is familiar doctrine
that if a corporation knowingly permits
one of its officers, or any other agent, to
do acts within the scope of an apparent
authority, and thus holds him out to the
public as possessing power to do those
acts, the corporation will, as against any
one who has in good faith dealt with the
corporation through such agent, be
estopped from denying his authority; and
where it is said "if the corporation permits
this means the same as "if the thing is
permitted by the directing power of the
corporation." 16
In this light, the bank is estopped from questioning the
authority of the bank manager to enter into the contract of
sale. If a corporation knowingly permits one of its officers or
any other agent to act within the scope of an apparent
authority, it holds the agent out to the public as possessing
the power to do those acts; thus, the corporation will, as
against anyone who has in good faith dealt with it through
such agent, be estopped from denying the agent's
authority. 17
Unquestionably, petitioner has authorized Tena to enter
into the Deed of Sale. Accordingly, it has a clear legal duty
to issue the board resolution sought by respondent's.
Having authorized her to sell the property, it behooves the
bank to confirm the Deed of Sale so that the buyers may
enjoy its full use.
The board resolution is, in fact, mere paper work.
Nonetheless, it is paper work necessary in the orderly
operations of the register of deeds and the full enjoyment
of respondents' rights. Petitioner-bank persistently and
unjustifiably refused to perform its legal duty. Worse, it was
less than candid in dealing with respondents regarding this
matter. In this light, the Court finds it proper to assess the
bank treble costs, in addition to the award of damages.
WHEREFORE, the Petition is hereby DENIED and the
assailed Decision and Resolution AFFIRMED. The Temporary
Restraining Order issued by this Court is hereby LIFTED.
Treble costs against petitioner.
SO ORDERED.
Melo, Purisima and Gonzaga-Reyes, JJ., concur.
Vitug, J., please see concurring opinion.
Separate Opinions
VITUG, J., concurring opinion;
I share the views expressed in the ponencia written for the
Court by our esteemed colleague Mr. Justice Artemio V.
Panganiban. There is just a brief clarificatory statement that
I thought could be made.
The Civil Code, being a law of general application, can be
suppletory to special laws and certainly not preclusive of
those that govern commercial transactions. Indeed, in its
generic sense, civil law can rightly be said to encompass
commercial law. Jus civile, in ancient Rome, was merely
used to distinguish it from jus gentium or the law common
to all the nations within the empire and, at some time later,
only in contrast to international law. In more recent times,
civil law is so referred to as private law in distinction from
public law and criminal law. Today, it may not be totally
inaccurate to consider commercial law, among some other
special laws, as being a branch of civil law.
Sec. 45 of the Corporation Code provides:
Sec. 45. Ultra vires acts of corporations. — No
corporation under this Code shall possess or
exercise any corporate powers except those
conferred by this Code or by its articles of
incorporation and except such as are necessary or
14 | P a g e
incidental to the exercise of the powers so
conferred.
The language of the Code appears to confine the term ultra
vires to an act outside or beyond express, implied and
incidental corporate powers. Nevertheless, the concept can
also include those acts that may ostensibly be within such
powers but are, by general or special laws, either
proscribed or declared illegal. In general, although perhaps
loosely, ultra vires has also been used to designate those
acts of the board of directors or of corporate officers when
acting beyond their respective spheres of authority. In the
context that the law has used the term in Article 45 of the
Corporation Code, an ultra vires act would be void and not
susceptible to ratification. 1 In determining whether or not a
corporation may perform an act, one considers the logical
and necessary relation between the act assailed and the
corporate purpose expressed by the law or in the charter.
For if the act were one which is lawful in itself or not
otherwise prohibited and done for the purpose of serving
corporate ends or reasonably contributes to the promotion
of those ends in a substantial and not merely in a remote
and fanciful sense, it may be fairly considered within
corporate powers. 2
Sec. 23 of the Corporation Code states that the corporate
powers are to be exercised, all business conducted, and all
property of corporations controlled and held, by the Board
of Directors. When the act of the board is within corporate
powers but it is done without the concurrence of the
shareholders as and when such approval is required by
law 3 or when the act is beyond its competence to do, 4 the
act has been described as void 5 or, as unenforceable, 6 or as
ineffective and not legally binding. 7 These holdings
notwithstanding, the act cannot accurately be likened to
an ultra vires act of the corporation itself defined in Section
45 of the Code. Where the act is within corporate powers
but the board has acted without being competent to
independently do so, the action is not necessarily and
totally devoid of effects, and it may generally be ratified
expressly or impliedly. Thus, an acceptance of benefits
derived by the shareholders from an outside investment
made by the board without the required concurrence of the
stockholders may, nonetheless, be so considered as an
effective investment. 8 It may be said, however, that when
the board resolution is yet executory, the act should aptly
be deemed inoperative and specific performance cannot be
validly demanded but, if for any reason, the contemplated
action is carried out, such principles as ratification or
prescription when applicable, normally unknown in void
contracts, can serve to negate a claim for the total nullity
thereof.
Corporate officers, in their case, may act on such matters as
may be authorized either expressly by the By-laws or Board
Resolutions or impliedly such as by general practice or
policy or as are implied by express powers. When officers
are allowed to act in certain particular cases, their acts
conformably therewith can bind the company. Hence, a
corporate officer entrusted with general management and
control of the business has the implied authority to act or
contract for the corporation which may be necessary or
appropriate to conduct the ordinary business. 9 If the act of
corporate officers comes within corporate powers but it is
done without any express or implied authority therefor
from the by-laws, board resolutions or corporate practices,
such an act does not bind the corporation. The Board,
however, acting within its competence, may ratify the
unauthorized act of the corporate officer. So, too, a
corporation may be held in estoppel from denying as
against innocent third persons the authority of its officers
or agents who have been clothed by it with ostensible or
apparent authority. 10

The Corporation Code itself has not been that explicit with
respect to the consequences of ultra vires acts; hence, the
varied ascriptions to its effects heretofore expressed. It may
well be to consider futile any further attempt to have these
situations bear any exact equivalence to the civil law
precepts of defective contracts. Nevertheless, general
statements could be made. Here reiterated, while an act of
the corporation which is either illegal or outside of express,
implied or incidental powers as so provided by law or the
charter would be void under Article 5 11 of the Civil Code,
and the act is not susceptible to ratification, an
unauthorized act (if within corporate powers) of the board
or a corporate officer, however, would only be
unenforceable conformably with Article 1403 12 of the Civil
Code but, if the party with whom the agent has contracted
is aware of the latter's limits of powers, the unauthorized
act is declared void by Article 1898 13 of the same Code,
although still susceptible thereunder to ratification by the
principal. Any person dealing with corporate boards and
officers may be said to be charged with the knowledge that
the latter can only act within their respective limits of
power, and he is put to notice accordingly. Thus, it would
generally behoove such a person to look into the extent of
the authority of corporate agents since the onus would
ordinarily be with him.1âwphi1.nêt

G.R. No. 149353 June 26, 2006

JOCELYN B. DOLES, Petitioner,

vs.
MA. AURA TINA ANGELES, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

This refers to the Petition for Review on Certiorari under

Rule 45 of the Rules of Court questioning the
Decision1 dated April 30, 2001 of the Court of Appeals (CA)
in C.A.-G.R. CV No. 66985, which reversed the Decision
dated July 29, 1998 of the Regional Trial Court (RTC), Branch
15 | P a g e
21, City of Manila; and the CA Resolution 2 dated August 6,
2001 which denied petitioner’s Motion for Reconsideration.
The antecedents of the case follow:
On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed
with the RTC a complaint for Specific Performance with
Damages against Jocelyn B. Doles (petitioner), docketed as
Civil Case No. 97-82716. Respondent alleged that petitioner
was indebted to the former in the concept of a personal
loan amounting to P405,430.00 representing the principal
amount and interest; that on October 5, 1996, by virtue of a
"Deed of Absolute Sale",3 petitioner, as seller, ceded to
respondent, as buyer, a parcel of land, as well as the
improvements thereon, with an area of 42 square meters,
covered by Transfer Certificate of Title No. 382532, 4 and
located at a subdivision project known as Camella
Townhomes Sorrente in Bacoor, Cavite, in order to satisfy
her personal loan with respondent; that this property was
mortgaged to National Home Mortgage Finance
Corporation (NHMFC) to secure petitioner’s loan in the sum
of P337,050.00 with that entity; that as a condition for the
foregoing sale, respondent shall assume the undue balance
of the mortgage and pay the monthly amortization
of P4,748.11 for the remainder of the 25 years which began
on September 3, 1994; that the property was at that time
being occupied by a tenant paying a monthly rent
of P3,000.00; that upon verification with the NHMFC,
respondent learned that petitioner had incurred arrearages
amounting to P26,744.09, inclusive of penalties and
interest; that upon informing the petitioner of her arrears,
petitioner denied that she incurred them and refused to
pay the same; that despite repeated demand, petitioner
refused to cooperate with respondent to execute the
necessary documents and other formalities required by the
NHMFC to effect the transfer of the title over the property;
that petitioner collected rent over the property for the
month of January 1997 and refused to remit the proceeds
to respondent; and that respondent suffered damages as a
result and was forced to litigate.
Petitioner, then defendant, while admitting some
allegations in the Complaint, denied that she borrowed
money from respondent, and averred that from June to
September 1995, she referred her friends to respondent
whom she knew to be engaged in the business of lending
money in exchange for personal checks through her
capitalist Arsenio Pua. She alleged that her friends, namely,
Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia
Jacob, and Elizabeth Tomelden, borrowed money from
respondent and issued personal checks in payment of the
loan; that the checks bounced for insufficiency of funds;
that despite her efforts to assist respondent to collect from
the borrowers, she could no longer locate them; that,
because of this, respondent became furious and threatened
petitioner that if the accounts were not settled, a criminal
case will be filed against her; that she was forced to issue
eight checks amounting to P350,000 to answer for the
bounced checks of the borrowers she referred; that prior to
the issuance of the checks she informed respondent that
16 | P a g e
they were not sufficiently funded but the latter nonetheless
deposited the checks and for which reason they were
subsequently dishonored; that respondent then threatened
to initiate a criminal case against her for violation of Batas
Pambansa Blg. 22; that she was forced by respondent to
execute an "Absolute Deed of Sale" over her property in
Bacoor, Cavite, to avoid criminal prosecution; that the said
deed had no valid consideration; that she did not appear
before a notary public; that the Community Tax Certificate
number on the deed was not hers and for which
respondent may be prosecuted for falsification and perjury;
and that she suffered damages and lost rental as a result.
The RTC identified the issues as follows: first, whether the
Deed of Absolute Sale is valid; second; if valid, whether
petitioner is obliged to sign and execute the necessary
documents to effect the transfer of her rights over the
property to the respondent; and third, whether petitioner is
liable for damages.
On July 29, 1998, the RTC rendered a decision the
dispositive portion of which states:
WHEREFORE, premises considered, the Court hereby orders
the dismissal of the complaint for insufficiency of evidence.
With costs against plaintiff.
SO ORDERED.
The RTC held that the sale was void for lack of cause or
consideration:5
Plaintiff Angeles’ admission that the borrowers are the
friends of defendant Doles and further admission that the
checks issued by these borrowers in payment of the loan
obligation negates [sic] the cause or consideration of the
contract of sale executed by and between plaintiff and
defendant. Moreover, the property is not solely owned by
defendant as appearing in Entry No. 9055 of Transfer
Certificate of Title No. 382532 (Annex A, Complaint), thus:
"Entry No. 9055. Special Power of Attorney in favor of
Jocelyn Doles covering the share of Teodorico Doles on the
parcel of land described in this certificate of title by virtue
of the special power of attorney to mortgage, executed
before the notary public, etc."
The rule under the Civil Code is that contracts without a
cause or consideration produce no effect whatsoever. (Art.
1352, Civil Code).
Respondent appealed to the CA. In her appeal brief,
respondent interposed her sole assignment of error:
THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR
ON THE GROUND OF [sic] THE DEED OF SALE BETWEEN THE
PARTIES HAS NO CONSIDERATION OR INSUFFICIENCY OF
EVIDENCE.6
On April 30, 2001, the CA promulgated its Decision, the
dispositive portion of which reads:
WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is
hereby GRANTED. The Decision of the lower court dated
July 29, 1998 is REVERSED and SET ASIDE. A new one is
entered ordering defendant-appellee to execute all
necessary documents to effect transfer of subject property
to plaintiff-appellant with the arrearages of the former’s
loan with the NHMFC, at the latter’s expense. No costs.
SO ORDERED.
The CA concluded that petitioner was the borrower and, in
turn, would "re-lend" the amount borrowed from the
respondent to her friends. Hence, the Deed of Absolute
Sale was supported by a valid consideration, which is the
sum of money petitioner owed respondent amounting
to P405,430.00, representing both principal and interest.
The CA took into account the following circumstances in
their entirety: the supposed friends of petitioner never
presented themselves to respondent and that all
transactions were made by and between petitioner and
respondent;7 that the money borrowed was deposited with
the bank account of the petitioner, while payments made
for the loan were deposited by the latter to respondent’s
bank account;8 that petitioner herself admitted in open
court that she was "re-lending" the money loaned from
respondent to other individuals for profit; 9 and that the
documentary evidence shows that the actual borrowers,
the friends of petitioner, consider her as their creditor and
not the respondent.10
Furthermore, the CA held that the alleged threat or
intimidation by respondent did not vitiate consent, since
the same is considered just or legal if made to enforce one’s
claim through competent authority under Article 1335 11 of
the Civil Code;12 that with respect to the arrearages of
petitioner on her monthly amortization with the NHMFC in
the sum of P26,744.09, the same shall be deemed part of
the balance of petitioner’s loan with the NHMFC which
respondent agreed to assume; and that the amount
of P3,000.00 representing the rental for January 1997
supposedly collected by petitioner, as well as the claim for
damages and attorney’s fees, is denied for insufficiency of
evidence.13
On May 29, 2001, petitioner filed her Motion for
Reconsideration with the CA, arguing that respondent
categorically admitted in open court that she acted only as
agent or representative of Arsenio Pua, the principal
financier and, hence, she had no legal capacity to sue
petitioner; and that the CA failed to consider the fact that
petitioner’s father, who co-owned the subject property, was
not impleaded as a defendant nor was he indebted to the
respondent and, hence, she cannot be made to sign the
documents to effect the transfer of ownership over the
entire property.
17 | P a g e
On August 6, 2001, the CA issued its Resolution denying the
motion on the ground that the foregoing matters had
already been passed upon.
On August 13, 2001, petitioner received a copy of the CA
Resolution. On August 28, 2001, petitioner filed the present
Petition and raised the following issues:
I.
WHETHER OR NOT THE PETITIONER CAN BE
CONSIDERED AS A DEBTOR OF THE RESPONDENT.
II.
WHETHER OR NOT AN AGENT WHO WAS NOT
AUTHORIZED BY THE PRINCIPAL TO COLLECT DEBT
IN HIS BEHALF COULD DIRECTLY COLLECT PAYMENT
FROM THE DEBTOR.
III.
WHETHER OR NOT THE CONTRACT OF SALE WAS
EXECUTED FOR A CAUSE.14
Although, as a rule, it is not the business of this Court to
review the findings of fact made by the lower courts,
jurisprudence has recognized several exceptions, at least
three of which are present in the instant case, namely:
when the judgment is based on a misapprehension of facts;
when the findings of facts of the courts a quo are
conflicting; and when the CA manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly
considered, could justify a different conclusion.15 To arrive
at a proper judgment, therefore, the Court finds it
necessary to re-examine the evidence presented by the
contending parties during the trial of the case.
The Petition is meritorious.
The principal issue is whether the Deed of Absolute Sale is
supported by a valid consideration.
1. Petitioner argues that since she is merely the agent or
representative of the alleged debtors, then she is not a
party to the loan; and that the Deed of Sale executed
between her and the respondent in their own names, which
was predicated on that pre-existing debt, is void for lack of
consideration.
Indeed, the Deed of Absolute Sale purports to be supported
by a consideration in the form of a price certain in
money16 and that this sum indisputably pertains to the debt
in issue. This Court has consistently held that a contract of
sale is null and void and produces no effect whatsoever
where the same is without cause or consideration. 17 The
question that has to be resolved for the moment is whether
this debt can be considered as a valid cause or
consideration for the sale.
To restate, the CA cited four instances in the record to q. Did the plaintiff personally see the transactions
support its holding that petitioner "re-lends" the amount with your friends?
borrowed from respondent to her friends: first, the friends
of petitioner never presented themselves to respondent witness:
and that all transactions were made by and between
petitioner and respondent;18 second; the money passed a. No, sir.
through the bank accounts of petitioner and
respondent;19 third, petitioner herself admitted that she
Atty. Diza:
was "re-lending" the money loaned to other individuals for
profit;20 and fourth, the documentary evidence shows that
q. Your friends and the plaintiff did not meet
the actual borrowers, the friends of petitioner, consider her
personally?
as their creditor and not the respondent.21

witness:
On the first, third, and fourth points, the CA cites the
testimony of the petitioner, then defendant, during her
cross-examination:22 a. Yes, sir.

Atty. Diza: Atty. Diza:

q. You also mentioned that you were not the one q. You are intermediaries?
indebted to the plaintiff?
witness:
witness:
a. We are both intermediaries. As evidenced by the
a. Yes, sir. checks of the debtors they were deposited to the
name of Arsenio Pua because the money came
from Arsenio Pua.
Atty. Diza:

xxxx
q. And you mentioned the persons[,] namely,
Elizabeth Tomelden, Teresa Moraquin, Maria Luisa
Inocencio, Zenaida Romulo, they are your friends? Atty. Diza:

witness:
a. Inocencio and Moraquin are my friends while [as
to] Jacob and Tomelden[,] they were just referred.
Atty. Diza:
q. And you have transact[ed] with the plaintiff?
q. Did the plaintiff knew [sic] that you will lend the
money to your friends specifically the one you
mentioned [a] while ago?
witness:
a. Yes, she knows the money will go to those
persons.

Atty. Diza:
witness:

q. You are re-lending the money?

a. Yes, sir.

witness:
Atty. Diza:

a. Yes, sir.
q. What is that transaction?

Atty. Diza:
witness:

q. What profit do you have, do you have

a. To refer those persons to Aura and to refer again
commission?
to Arsenio Pua, sir.

witness:
Atty. Diza:

a. Yes, sir.

18 | P a g e
 Atty. Diza: q. Is it not a fact Ms. Witness that the defendant
borrowed from you to accommodate somebody,
q. How much? are you aware of that?

witness: witness:

a. Two percent to Tomelden, one percent to Jacob a. I am aware of that.

and then Inocencio and my friends none, sir.
Atty. Villacorta:
Based on the foregoing, the CA concluded that
petitioner is the real borrower, while the q. More or less she [accommodated] several
respondent, the real lender. friends of the defendant?

But as correctly noted by the RTC, respondent, witness:

then plaintiff, made the following admission during
her cross examination:23 a. Yes, sir, I am aware of that.

Atty. Villacorta: xxxx

q. Who is this Arsenio Pua? Atty. Villacorta:

witness: q. And these friends of the defendant borrowed

money from you with the assurance of the
a. Principal financier, sir. defendant?

Atty. Villacorta: witness:

q. So the money came from Arsenio Pua? a. They go direct to Jocelyn because I don’t know
them.
witness:
xxxx
a. Yes, because I am only representing him, sir.
Atty. Villacorta:
Other portions of the testimony of respondent
must likewise be considered:24 q. And is it not also a fact Madam witness that
everytime that the defendant borrowed money
Atty. Villacorta: from you her friends who [are] in need of money
issued check[s] to you? There were checks issued
q. So it is not actually your money but the money to you?
of Arsenio Pua?
witness:
witness:
a. Yes, there were checks issued.
a. Yes, sir.
Atty. Villacorta:
Court:
q. By the friends of the defendant, am I correct?
q. It is not your money?
witness:
witness:
a. Yes, sir.
a. Yes, Your Honor.
Atty. Villacorta:
Atty. Villacorta:
q. And because of your assistance, the friends of
the defendant who are in need of money were

19 | P a g e
 able to obtain loan to [sic] Arsenio Pua through
your assistance?
witness:
a. Yes, sir.
Atty. Villacorta:
q. So that occasion lasted for more than a year?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And some of the checks that were issued by the
friends of the defendant bounced, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of that Arsenio Pua got mad with
you?
witness:
a. Yes, sir.
Respondent is estopped to deny that she herself acted as
agent of a certain Arsenio Pua, her disclosed principal. She
is also estopped to deny that petitioner acted as agent for
the alleged debtors, the friends whom she (petitioner)
referred.
This Court has affirmed that, under Article 1868 of the Civil
Code, the basis of agency is representation. 25 The question
of whether an agency has been created is ordinarily a
question which may be established in the same way as any
other fact, either by direct or circumstantial evidence. The
question is ultimately one of intention. 26 Agency may even
be implied from the words and conduct of the parties and
the circumstances of the particular case. 27 Though the fact
or extent of authority of the agents may not, as a general
rule, be established from the declarations of the agents
alone, if one professes to act as agent for another, she may
be estopped to deny her agency both as against the
asserted principal and the third persons interested in the
transaction in which he or she is engaged. 28
In this case, petitioner knew that the financier of
respondent is Pua; and respondent knew that the
borrowers are friends of petitioner.
20 | P a g e
The CA is incorrect when it considered the fact that the
"supposed friends of [petitioner], the actual borrowers, did
not present themselves to [respondent]" as evidence that
negates the agency relationship—it is sufficient that
petitioner disclosed to respondent that the former was
acting in behalf of her principals, her friends whom she
referred to respondent. For an agency to arise, it is not
necessary that the principal personally encounter the third
person with whom the agent interacts. The law in fact
contemplates, and to a great degree, impersonal dealings
where the principal need not personally know or meet the
third person with whom her agent transacts: precisely, the
purpose of agency is to extend the personality of the
principal through the facility of the agent. 29
In the case at bar, both petitioner and respondent have
undeniably disclosed to each other that they are
representing someone else, and so both of them are
estopped to deny the same. It is evident from the record
that petitioner merely refers actual borrowers and then
collects and disburses the amounts of the loan upon which
she received a commission; and that respondent transacts
on behalf of her "principal financier", a certain Arsenio Pua.
If their respective principals do not actually and personally
know each other, such ignorance does not affect their
juridical standing as agents, especially since the very
purpose of agency is to extend the personality of the
principal through the facility of the agent.
With respect to the admission of petitioner that she is "re-
lending" the money loaned from respondent to other
individuals for profit, it must be stressed that the manner in
which the parties designate the relationship is not
controlling. If an act done by one person in behalf of
another is in its essential nature one of agency, the former
is the agent of the latter notwithstanding he or she is not so
called.30 The question is to be determined by the fact that
one represents and is acting for another, and if relations
exist which will constitute an agency, it will be an agency
whether the parties understood the exact nature of the
relation or not.31
That both parties acted as mere agents is shown by the
undisputed fact that the friends of petitioner issued checks
in payment of the loan in the name of Pua. If it is true that
petitioner was "re-lending", then the checks should have
been drawn in her name and not directly paid to Pua.
With respect to the second point, particularly, the finding of
the CA that the disbursements and payments for the loan
were made through the bank accounts of petitioner and
respondent,
suffice it to say that in the normal course of commercial
dealings and for reasons of convenience and practical utility
it can be reasonably expected that the facilities of the
agent, such as a bank account, may be employed, and that
a sub-agent be appointed, such as the bank itself, to carry
out the task, especially where there is no stipulation to the
contrary.32
In view of the two agency relationships, petitioner and necessary documents to effect the transfer of title is
respondent are not privy to the contract of loan between premature.
their principals. Since the sale is predicated on that loan,
then the sale is void for lack of consideration. WHEREFORE, the petition is granted. The Decision and
Resolution of the Court of Appeals are REVERSED and SET
2. A further scrutiny of the record shows, however, that the ASIDE. The complaint of respondent in Civil Case No. 97-
sale might have been backed up by another consideration 82716 is DISMISSED.
that is separate and distinct from the debt: respondent
averred in her complaint and testified that the parties had SO ORDERED.
agreed that as a condition for the conveyance of the
property the respondent shall assume the balance of the
mortgage loan which petitioner allegedly owed to the
NHMFC.33 This Court in the recent past has declared that an
assumption of a mortgage debt may constitute a valid
consideration for a sale.34

Although the record shows that petitioner admitted at the

time of trial that she owned the property described in the
TCT,35 the Court must stress that the Transfer Certificate of
Title No. 38253236 on its face shows that the owner of the
property which admittedly forms the subject matter of the
Deed of Absolute Sale refers neither to the petitioner nor to
her father, Teodorico Doles, the alleged co-owner. Rather, it
states that the property is registered in the name of
"Household Development Corporation." Although there is
an entry to the effect that the petitioner had been granted
a special power of attorney "covering the shares of
Teodorico Doles on the parcel of land described in this
certificate,"37 it cannot be inferred from this bare notation,
nor from any other evidence on the record, that the
petitioner or her father held any direct interest on the
property in question so as to validly constitute a mortgage
thereon38 and, with more reason, to effect the delivery of
the object of the sale at the consummation stage. 39 What is
worse, there is a notation that the TCT itself has been
"cancelled."40

In view of these anomalies, the Court cannot entertain the

possibility that respondent agreed to assume the balance of

the mortgage loan which petitioner allegedly owed to the
NHMFC, especially since the record is bereft of any factual
finding that petitioner was, in the first place, endowed with
any ownership rights to validly mortgage and convey the
property. As the complainant who initiated the case,
respondent bears the burden of proving the basis of her
complaint. Having failed to discharge such burden, the
Court has no choice but to declare the sale void for lack of
cause. And since the sale is void, the Court finds it
unnecessary to dwell on the issue of whether duress or
intimidation had been foisted upon petitioner upon the
execution of the sale.
Moreover, even assuming the mortgage validly exists, the
Court notes respondent’s allegation that the mortgage with
the NHMFC was for 25 years which began September 3,
1994. Respondent filed her Complaint for Specific
Performance in 1997. Since the 25 years had not lapsed, the
prayer of respondent to compel petitioner to execute
G.R. No. 160346 August 25, 2009
PURITA PAHUD, SOLEDAD PAHUD, and IAN LEE CASTILLA
(represented by Mother and Attorney-in-Fact VIRGINIA
CASTILLA), Petitioners,
vs.
COURT OF APPEALS, SPOUSES ISAGANI BELARMINO and
LETICIA OCAMPO, EUFEMIA SAN AGUSTIN-MAGSINO,
ZENAIDA SAN AGUSTIN-McCRAE, MILAGROS SAN
AGUSTIN-FORTMAN, MINERVA SAN AGUSTIN-ATKINSON,
FERDINAND SAN AGUSTIN, RAUL SAN AGUSTIN, ISABELITA
SAN AGUSTIN-LUSTENBERGER and VIRGILIO SAN
AGUSTIN, Respondents.
DECISION
NACHURA, J.:

21 | P a g e
For our resolution is a petition for review on certiorari
assailing the April 23, 2003 Decision 1 and October 8, 2003
Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No.
59426. The appellate court, in the said decision and
resolution, reversed and set aside the January 14, 1998
Decision3 of the Regional Trial Court (RTC), which ruled in
favor of petitioners.
The dispute stemmed from the following facts.
During their lifetime, spouses Pedro San Agustin and
Agatona Genil were able to acquire a 246-square meter
parcel of land situated in Barangay Anos, Los Baños, Laguna
and covered by Original Certificate of Title (OCT) No. O-
(1655) 0-15.4 Agatona Genil died on September 13, 1990
while Pedro San Agustin died on September 14, 1991. Both
died intestate, survived by their eight (8) children:
respondents Eufemia, Raul, Ferdinand, Zenaida, Milagros,
Minerva, Isabelita and Virgilio.
Sometime in 1992, Eufemia, Ferdinand and Raul executed a
Deed of Absolute Sale of Undivided Shares 5 conveying in
favor of petitioners (the Pahuds, for brevity) their respective
shares from the lot they inherited from their deceased
parents for ₱525,000.00.6 Eufemia also signed the deed on
behalf of her four (4) other co-heirs, namely: Isabelita on
the basis of a special power of attorney executed on
September 28, 1991,7 and also for Milagros, Minerva, and
Zenaida but without their apparent written authority. 8 The
deed of sale was also not notarized.9
On July 21, 1992, the Pahuds paid ₱35,792.31 to the Los
Baños Rural Bank where the subject property was
mortgaged.10 The bank issued a release of mortgage and
turned over the owner’s copy of the OCT to the
Pahuds.11 Over the following months, the Pahuds made
more payments to Eufemia and her siblings totaling to
₱350,000.00.12 They agreed to use the remaining
₱87,500.0013 to defray the payment for taxes and the
expenses in transferring the title of the property. 14 When
Eufemia and her co-heirs drafted an extra-judicial
settlement of estate to facilitate the transfer of the title to
the Pahuds, Virgilio refused to sign it.15
On July 8, 1993, Virgilio’s co-heirs filed a complaint 16 for
judicial partition of the subject property before the RTC of
Calamba, Laguna. On November 28, 1994, in the course of
the proceedings for judicial partition, a Compromise
Agreement17 was signed with seven (7) of the co-heirs
agreeing to sell their undivided shares to Virgilio for
₱700,000.00. The compromise agreement was, however,
not approved by the trial court because Atty. Dimetrio
Hilbero, lawyer for Eufemia and her six (6) co-heirs, refused
to sign the agreement because he knew of the previous sale
made to the Pahuds.18lawphil.net
On December 1, 1994, Eufemia acknowledged having
received ₱700,000.00 from Virgilio.19 Virgilio then sold the
entire property to spouses Isagani Belarmino and Leticia
22 | P a g e
Ocampo (Belarminos) sometime in 1994. The Belarminos
immediately constructed a building on the subject property.
Alarmed and bewildered by the ongoing construction on
the lot they purchased, the Pahuds immediately confronted
Eufemia who confirmed to them that Virgilio had sold the
property to the Belarminos.20 Aggrieved, the Pahuds filed a
complaint in intervention21 in the pending case for judicial
partition.1avvphil
After trial, the RTC upheld the validity of the sale to
petitioners. The dispositive portion of the decision reads:
WHEREFORE, the foregoing considered, the Court orders:
1. the sale of the 7/8 portion of the property
covered by OCT No. O (1655) O-15 by the plaintiffs
as heirs of deceased Sps. Pedro San Agustin and
Agatona Genil in favor of the Intervenors-Third
Party plaintiffs as valid and enforceable, but
obligating the Intervenors-Third Party plaintiffs to
complete the payment of the purchase price of
₱437,500.00 by paying the balance of ₱87,500.00
to defendant Fe (sic) San Agustin Magsino. Upon
receipt of the balance, the plaintiff shall formalize
the sale of the 7/8 portion in favor of the
Intervenor[s]-Third Party plaintiffs;
2. declaring the document entitled "Salaysay sa
Pagsang-ayon sa Bilihan" (Exh. "2-a") signed by
plaintiff Eufemia San Agustin attached to the
unapproved Compromise Agreement (Exh. "2") as
not a valid sale in favor of defendant Virgilio San
Agustin;
3. declaring the sale (Exh. "4") made by defendant
Virgilio San Agustin of the property covered by OCT
No. O (1655)-O-15 registered in the names of
Spouses Pedro San Agustin and Agatona Genil in
favor of Third-party defendant Spouses Isagani and
Leticia Belarmino as not a valid sale and as
inexistent;
4. declaring the defendant Virgilio San Agustin and
the Third-Party defendants spouses Isagani and
Leticia Belarmino as in bad faith in buying the
portion of the property already sold by the
plaintiffs in favor of the Intervenors-Third Party
Plaintiffs and the Third-Party Defendant Sps.
Isagani and Leticia Belarmino in constructing the
two-[storey] building in (sic) the property subject
of this case; and
5. declaring the parties as not entitled to any
damages, with the parties shouldering their
respective responsibilities regarding the payment
of attorney[’]s fees to their respective lawyers.
No pronouncement as to costs.
SO ORDERED.22
Not satisfied, respondents appealed the decision to the CA
arguing, in the main, that the sale made by Eufemia for and
on behalf of her other co-heirs to the Pahuds should have
been declared void and inexistent for want of a written
authority from her co-heirs. The CA yielded and set aside
the findings of the trial court. In disposing the issue, the CA
ruled:
WHEREFORE, in view of the foregoing, the Decision dated
January 14, 1998, rendered by the Regional Trial Court of
Calamba, Laguna, Branch 92 in Civil Case No. 2011-93-C for
Judicial Partition is hereby REVERSED and SET ASIDE, and a
new one entered, as follows:
(1) The case for partition among the plaintiffs-
appellees and appellant Virgilio is now considered
closed and terminated;
(2) Ordering plaintiffs-appellees to return to
intervenors-appellees the total amount they
received from the latter, plus an interest of 12%
per annum from the time the complaint [in]
intervention was filed on April 12, 1995 until actual
payment of the same;
(3) Declaring the sale of appellant Virgilio San
Agustin to appellants spouses, Isagani and Leticia
Belarmino[,] as valid and binding;
(4) Declaring appellants-spouses as buyers in good
faith and for value and are the owners of the
subject property.
No pronouncement as to costs.
SO ORDERED.23
Petitioners now come to this Court raising the following
arguments:
I. The Court of Appeals committed grave and
reversible error when it did not apply the second
paragraph of Article 1317 of the New Civil Code
insofar as ratification is concerned to the sale of
the 4/8 portion of the subject property executed
by respondents San Agustin in favor of petitioners;
II. The Court of Appeals committed grave and
reversible error in holding that respondents
spouses Belarminos are in good faith when they
bought the subject property from respondent
Virgilio San Agustin despite the findings of fact by
the court a quo that they were in bad faith which
clearly contravenes the presence of long line of
case laws upholding the task of giving utmost
weight and value to the factual findings of the trial
court during appeals; [and]
23 | P a g e
III. The Court of Appeals committed grave and
reversible error in holding that respondents
spouses Belarminos have superior rights over the
property in question than petitioners despite the
fact that the latter were prior in possession
thereby misapplying the provisions of Article 1544
of the New Civil Code.24
The focal issue to be resolved is the status of the sale of the
subject property by Eufemia and her co-heirs to the Pahuds.
We find the transaction to be valid and enforceable.
Article 1874 of the Civil Code plainly provides:
Art. 1874. When a sale of a piece of land or any interest
therein is through an agent, the authority of the latter shall
be in writing; otherwise, the sale shall be void.
Also, under Article 1878,25 a special power of attorney is
necessary for an agent to enter into a contract by which the
ownership of an immovable property is transmitted or
acquired, either gratuitously or for a valuable consideration.
Such stringent statutory requirement has been explained in
Cosmic Lumber Corporation v. Court of Appeals: 26
[T]he authority of an agent to execute a contract [of] sale of
real estate must be conferred in writing and must give him
specific authority, either to conduct the general business of
the principal or to execute a binding contract containing
terms and conditions which are in the contract he did
execute. A special power of attorney is necessary to enter
into any contract by which the ownership of an immovable
is transmitted or acquired either gratuitously or for a
valuable consideration. The express mandate required by
law to enable an appointee of an agency (couched) in
general terms to sell must be one that expressly mentions a
sale or that includes a sale as a necessary ingredient of the
act mentioned. For the principal to confer the right upon an
agent to sell real estate, a power of attorney must so
express the powers of the agent in clear and unmistakable
language. When there is any reasonable doubt that the
language so used conveys such power, no such construction
shall be given the document.27
In several cases, we have repeatedly held that the absence
of a written authority to sell a piece of land is, ipso jure,
void,28 precisely to protect the interest of an unsuspecting
owner from being prejudiced by the unwarranted act of
another.
Based on the foregoing, it is not difficult to conclude, in
principle, that the sale made by Eufemia, Isabelita and her
two brothers to the Pahuds sometime in 1992 should be
valid only with respect to the 4/8 portion of the subject
property. The sale with respect to the 3/8 portion,
representing the shares of Zenaida, Milagros, and Minerva,
is void because Eufemia could not dispose of the interest of
her co-heirs in the said lot absent any written authority
from the latter, as explicitly required by law. This was, in
fact, the ruling of the CA.
Still, in their petition, the Pahuds argue that the sale with
respect to the 3/8 portion of the land should have been
deemed ratified when the three co-heirs, namely: Milagros,
Minerva, and Zenaida, executed their respective special
power of attorneys29 authorizing Eufemia to represent them
in the sale of their shares in the subject property. 30
While the sale with respect to the 3/8 portion is void by
express provision of law and not susceptible to
ratification,31 we nevertheless uphold its validity on the
basis of the common law principle of estoppel.
Article 1431 of the Civil Code provides:
Art. 1431. Through estoppel an admission or representation
is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying
thereon.
True, at the time of the sale to the Pahuds, Eufemia was not
armed with the requisite special power of attorney to
dispose of the 3/8 portion of the property. Initially, in their
answer to the complaint in intervention, 32 Eufemia and her
other co-heirs denied having sold their shares to the
Pahuds. During the pre-trial conference, however, they
admitted that they had indeed sold 7/8 of the property to
the Pahuds sometime in 1992. 33 Thus, the previous denial
was superseded, if not accordingly amended, by their
subsequent admission.34 Moreover, in their Comment,35 the
said co-heirs again admitted the sale made to petitioners. 36
Interestingly, in no instance did the three (3) heirs
concerned assail the validity of the transaction made by
Eufemia to the Pahuds on the basis of want of written
authority to sell. They could have easily filed a case for
annulment of the sale of their respective shares against
Eufemia and the Pahuds. Instead, they opted to remain
silent and left the task of raising the validity of the sale as
an issue to their co-heir, Virgilio, who is not privy to the said
transaction. They cannot be allowed to rely on Eufemia,
their attorney-in-fact, to impugn the validity of the first
transaction because to allow them to do so would be
tantamount to giving premium to their sister’s dishonest
and fraudulent deed. Undeniably, therefore, the silence and
passivity of the three co-heirs on the issue bar them from
making a contrary claim.
It is a basic rule in the law of agency that a principal is
subject to liability for loss caused to another by the latter’s
reliance upon a deceitful representation by an agent in the
course of his employment (1) if the representation is
authorized; (2) if it is within the implied authority of the
agent to make for the principal; or (3) if it is apparently
authorized, regardless of whether the agent was authorized
by him or not to make the representation.37
24 | P a g e
By their continued silence, Zenaida, Milagros and Minerva
have caused the Pahuds to believe that they have indeed
clothed Eufemia with the authority to transact on their
behalf. Clearly, the three co-heirs are now estopped from
impugning the validity of the sale from assailing the
authority of Eufemia to enter into such transaction.
Accordingly, the subsequent sale made by the seven co-
heirs to Virgilio was void because they no longer had any
interest over the subject property which they could alienate
at the time of the second transaction.38 Nemo dat quod non
habet. Virgilio, however, could still alienate his 1/8
undivided share to the Belarminos.
The Belarminos, for their part, cannot argue that they
purchased the property from Virgilio in good faith. As a
general rule, a purchaser of a real property is not required
to make any further inquiry beyond what the certificate of
title indicates on its face.39 But the rule excludes those who
purchase with knowledge of the defect in the title of the
vendor or of facts sufficient to induce a reasonable and
prudent person to inquire into the status of the
property.40 Such purchaser cannot close his eyes to facts
which should put a reasonable man on guard, and later
claim that he acted in good faith on the belief that there
was no defect in the title of the vendor. His mere refusal to
believe that such defect exists, or his obvious neglect by
closing his eyes to the possibility of the existence of a defect
in the vendor’s title, will not make him an innocent
purchaser for value, if afterwards it turns out that the title
was, in fact, defective. In such a case, he is deemed to have
bought the property at his own risk, and any injury or
prejudice occasioned by such transaction must be borne by
him.41
In the case at bar, the Belarminos were fully aware that the
property was registered not in the name of the immediate
transferor, Virgilio, but remained in the name of Pedro San
Agustin and Agatona Genil.42 This fact alone is sufficient
impetus to make further inquiry and, thus, negate their
claim that they are purchasers for value in good
faith.43 They knew that the property was still subject of
partition proceedings before the trial court, and that the
compromise agreement signed by the heirs was not
approved by the RTC following the opposition of the
counsel for Eufemia and her six other co-heirs. 44 The
Belarminos, being transferees pendente lite, are deemed
buyers in mala fide, and they stand exactly in the shoes of
the transferor and are bound by any judgment or decree
which may be rendered for or against the
transferor.45 Furthermore, had they verified the status of
the property by asking the neighboring residents, they
would have been able to talk to the Pahuds who occupy an
adjoining business establishment46 and would have known
that a portion of the property had already been sold. All
these existing and readily verifiable facts are sufficient to
suggest that the Belarminos knew that they were buying
the property at their own risk.
WHEREFORE, premises considered, the April 23, 2003
Decision of the Court of Appeals as well as its October 8,
2003 Resolution in CA-G.R. CV No. 59426, are REVERSED
and SET ASIDE. Accordingly, the January 14, 1998 Decision
of Branch 92 of the Regional Trial Court of Calamba, Laguna
is REINSTATED with the MODIFICATION that the sale made
by respondent Virgilio San Agustin to respondent spouses
Isagani Belarmino and Leticia Ocampo is valid only with
respect to the 1/8 portion of the subject property. The trial
court is ordered to proceed with the partition of the
property with dispatch.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-20145 November 15, 1923

VICENTE VERZOSA and RUIZ, REMENTERIA Y CIA., S. en

C., plaintiffs-appellants,
vs.
SILVINO LIM and SIY CONG BIENG and COMPANY,
INC., defendants-appellants.

Ramon Sotelo for plaintiffs-appellants.

Gabriel La O for defendants-appellants.

STREET, J.:
25 | P a g e
This action was instituted in the Court of first Instance of
the City of Manila by Vicente Versoza and Ruiz, Rementeria
y Compania, as owners of the coastwise vessel Perla,
against Silvino Lim and Siy Cong Bieng & Company, Inc., as
owner and agent, respectively, of the vessel Ban Yek, for the
purpose of recovering a sum of money alleged to be the
damages resulting to the plaintiffs from a collision which
occurred on March 9, 1921, between the two vessels
mentioned, it being alleged that said collision was due to
the experience, carelessness and lack of skill on the part of
the captain of the Ban Yek and to his failure to observe the
rules of navigation appropriate to the case. The defendants
answered with a general denial, and by way of special
defense asserted, among other things, that the collision
was due exclusively to the inexperience and carelessness of
the captain and officers of the steamship Perla; for which
reason the defendants in turn, by way of counterclaim,
prayed judgment for the damages suffered by the Ban
Yek from the same collision. At the hearing the trial judge
absolved the defendants from the complaint and likewise
absolved the plaintiffs from the defendants' counterclaim.
From this judgment both parties appealed.
It appears in evidence that at about five o'clock in the
afternoon of March 9, 1921, the coastwise steamer Ban
Yek left the port of Naga on the Bicol River, in the Province
of Camarines Sur, with destination to the City of Manila. At
the time of her departure from said port the sea was
approaching to high tide but the current was still running in
through the Bicol River, with the result that the Ban Yek had
the current against her. As the ship approached the
Malbong bend of the Bicol River, in the municipality of
Gainza, another vessel, the Perla, was sighted coming up
the river on the way to Naga. While the boats were yet
more than a kilometer apart, the Ban Yek gave two blasts
with her whistle, thus indicating an intention to pass on the
left, or to her own port side. In reply to this signal
the Perla gave a single blast, thereby indicating that she
disagreed with the signal given by the Ban Yek and would
maintain her position on the right, that is, would keep to
the starboard. The Ban Yek made no reply to this signal. As
the Perla was navigating with the current, then running in
from the sea, this vessel, under paragraph 163 of Customs
Marine Circular No. 53, had the right of way over the Ban
Yek, and the officers of the Perla interpreted the action of
the Ban Yek in not replying to the Perla's signal as an
indication of acquiescene of the officers of the Ban Yek in
the determination of the Perla to keep to the starboard.
The river at this point is about two hundred and fifty feet
wide, and the courses thus being respectively pursued by
the two vessels necessarily tended to bring them into a
head-on collision. When the danger of such an occurrence
became imminent, Captain Garrido of the Perla, seeing that
he was shut off by the Ban Yek from passing to the right,
put his vessel to port, intending to avoid collision or
minimize its impact by getting farther out into the stream.
An additional reason for this maneuver, as stated by Captain
Carrido, is that the captain of the Ban Yek waived his hand
to Garrido, indicating that the latter should turn his vessel
26 | P a g e
towards the middle of the stream. At about the same time
that the Perla was thus deflected from her course the
engine on the Ban Yek was reversed and three blasts were
given by this vessel to indicate that she was backing.
Now, it appears that when the engine is reversed, a vessel
swings to the right or left in accordance with the direction
in which the blades of the propeller are set; and as the Ban
Yek began to back, her bow was thrown out into the
stream, a movement which was assisted by the current of
the river. By this means the Ban Yek was brought to occupy
an oblique position across the stream at the moment
the Perla was passing; and the bow of the Ban Yek crashed
into the starboard bumpers of the Perla, carrying away
external parts of the ship and inflicting material damage on
the hull. To effect the repairs thus made necessary to
the Perla cost her owners the sum of P17,827, including
expenses of survey.
The first legal point presented in the case has reference to
the sufficiency of the protest. In this connection it appears
that within twenty-four hours after the arrival of
the Perla at the port of Naga, Captain Garrido appeared
before Vicente Rodi, the auxiliary justice of the peace of the
municipality of Naga, and made before that officer the
sworn protest which is in evidence as Exhibit B. This protest
is sufficient in our opinion to answer all the requirements of
article 835 of the Code of Commerce. A regular justice of
the peace would without doubt be competent to take a
marine protest, and the same authority must be conceded
to the auxiliary justice in the absence of any showing in the
record to the effect that the justice of the peace himself
was acting at the time in the municipality (Adm. Code, sec.
211; sec. 334, Code of Civ. Proc., subsecs. 14, 15). We note
that in his certificate to this protest Vicente Rodi added to
the appellation of auxiliary justice of the peace, following
his name, the additional designation "notary public ex-
officio." However, under subsection (c) of section 242 of the
Administrative Code, it is plain that an auxiliary justice of
the peace is not an ex-officio notary public. It results that
the taking of this protest must be ascribed to the officer in
his character as auxiliary justice of the peace and not in the
character of notary public ex-officio. It is hardly necessary
to add that this court takes judicial notice of the fact that
Naga is not a port of entry and that no customs official of
rank is there stationed who could have taken cognizance of
this protest.
Upon the point of responsibility for the collision we have no
hesitancy in finding that the fault is to be attributed
exclusively to the negligence and inattention of the captain
and pilot in charge of the Ban Yek. The Perla undoubtedly
had the right of way, since this vessel was navigating with
the current, and the officers in charge of the Perla were
correct in assuming, from the failure of the Ban Yek to
respond to the single blast of the Perla, that the officers in
charge of the Ban Yek recognized that the Perla had a right
of way and acquiesced in her resolution to keep to the
right. The excuse urged for the Ban Yek is that this vessel is
somewhat larger than the Perla and that it was desirable for
the Ban Yek to keep on the side of the long arc of the curve
of the river; and in this connection it is suggested that the
river is deeper on the outer edge of the bend than on the
inner edge. It is also stated that on a certain previous
occasion the Ban Yek on coming out from this port had
gotten stuck in the mud in this bend by keeping too far to
the right. Moreover, it is said to be the practice of ships in
navigating this stream to keep nearer the outside than to
the inside of the bend. These suggestions are by no means
convincing. It appears in evidence that the river bottom
here is composed of mud and silt, and as the tide at the
time of this incident was nearly at its flood, there was
ample depth of water to have accommodated the Ban Yek if
she had kept to that part of the stream which it was proper
for her to occupy. We may further observe that the
disparity in the size of the vessels was not such as to
dominate the situation and deprive the Perla of the right of
way under the conditions stated. Blame for the collision
must therefore, as already stated, be attributed to the Ban
Yek.
On the other hand no fault can be attributed to the officers
navigating the Perla either in maintaining the course which
had been determined upon for that vessel in conformity
with the marine regulations applicable to the case or in
deflecting the vessel towards the middle of the stream after
the danger of collision became imminent. The trial judge
suggests in his opinion that when Captain Garrido saw that
the Ban Yek was holding her course to the left, he (Garrido)
should have changed the course of the Perla to port more
promptly. The validity of this criticism cannot be admitted.
Among rules applicable to navigation none is better
founded on reason and experience than that which requires
the navigating officers of any vessel to assume that an
approaching vessel will observe the regulations prescribed
for navigation (G. Urrutia & Co. vs. Baco River Plantation
Co., 26 Phil., 632, 637). Any other rule would introduce
guess work into the control of ships and produce
uncertainty in the operation of the regulations.
Our conclusion is that his Honor, the trial judge, was in error
in not awarding damages to the Perla; but no error was
committed in absolving the plaintiffs from the defendants'
cross-complaint.
The sum of P17,827 in our opinion represents the limit of
the plaintiffs' right of recovery. In the original complaint
recovery is sought for an additional amount of P18,000,
most of which consists of damages supposed to have been
incurred from the inability of the Perla to maintain her
regular schedule while laid up in the dock undergoing
repairs. The damages thus claimed, in addition to being
somewhat of a speculative nature, are in our opinion not
sufficiently proved to warrant the court in allowing the
same. lawphil.net
Having determined the amount which the plaintiffs are
entitled to recover, it becomes necessary to consider the
person, or persons, who must respond for these damages.
Upon this point we note that Silvino Lim is impleaded as
27 | P a g e
owner; and Siy Cong Bieng & Co. is impleaded as the
shipping agent (casa naviera), or person in responsible
control of the Ban Yek at the time of the accident. We note
further that in article 826 of the Code of Commerce it is
declared that the owner of any vessel shall be liable for the
indemnity due to any other vessel injured by the fault,
negligence, or lack of skill of the captain of the first. We say
"owner," which is the word used in the current translation
of this article in the Spanish Code of Commerce. It is to be
observed, however, that the Spanish text itself uses the
word naviero; and there is some ambiguity in the use of
said word in this article, owing to the fact that naviero in
Spanish has several meanings. The author of the article
which appears under the word naviero in the Enciclopedia
Juridica Española tells us that in Spanish it may mean either
owner, outfitter, charterer, or agent, though he says that the
fundamental and correct meaning of the word is that of
"owner." That naviero, as used in the Spanish text of article
826, means owner is further to be inferred from article 837,
which limits the civil liability expressed in article 826 to the
value of the vessel with all her appurtenances and all the
freight earned during the voyage. There would have been
no propriety in limiting liability to the value of the vessel
unless the owner were understood to be the person liable.
It is therefore clear that by special provision of the Code of
Commerce the owner is made responsible for the damage
caused by an accident of the kind under consideration in
this case; and in more than one case this court has held the
owner liable, when sued alone (Philippine Shipping
Co. vs. Garcia Vergara, 6 Phil., 281; G. Urrutia & Co. vs. Baco
River Plantation Co., 26 Phil., 632).
But while it is thus demonstrated that Silvino Lim is liable
for these damages in the character of owner, it does not
necessarily follows that Siy Cong Bieng & Co., as character
or agent (casa naviera), is exempt from liability; and we are
of the opinion that both the owner and agent can be held
responsible where both are impleaded together. In
Philippine Shipping Co., vs. Garcia Vergara (6 Phil., 281), it
seems to have been accepted as a matter of course that
both owner and agent of the offending vessel are liable for
the damage done; and this must, we think, be true. The
liability of the naviero, in the sense of charterer or agent, if
not expressed in article 826 of the Code of Commerce, is
clearly deducible from the general doctrine of
jurisprudence stated in article 1902 of the Civil Code, and it
is also recognized, but more especially as regards
contractual obligations, in article 586 of the Code of
Commerce. Moreover, we are of the opinion that both the
owner and agent (naviero) should be declared to be jointly
and severally liable, since the obligation which is the subject
of this action had its origin in a tortious act and did not
arise from contract. Article 1137 of the Civil Code, declaring
that joint obligations shall be apportionable unless
otherwise provided, has no application to obligation arising
from tort.
For the reasons stated the judgment appealed from will be
affirmed in so far as it absolves the plaintiffs from the
defendants' cross-complaint but will be reversed in so far as
it absolves the defendants from the plaintiffs' complaint;
and judgment will be entered for the plaintiffs to recover
jointly and severally from the defendants Silvino Lim and Siy
Cong Bieng & Co. the sum of seventeen thousand eight
hundred and twenty-seven pesos (P17,827), with interest
from the date of the institution of the action, without
special pronouncement as to costs of either instance. So
ordered.

Johnson, Malcolm, Avanceña, Villamor and Romualdez, JJ.,

concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 83122 October 19, 1990

ARTURO P. VALENZUELA and HOSPITALITA N.

VALENZUELA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, BIENVENIDO M.
ARAGON, ROBERT E. PARNELL, CARLOS K. CATOLICO and
THE PHILIPPINE AMERICAN GENERAL INSURANCE
COMPANY, INC., respondents.

Albino B. Achas for petitioners.

Angara, Abello, Concepcion, Regala & Cruz for private

respondents.

GUTIERREZ, JR., J.:

28 | P a g e
This is a petition for review of the January 29, 1988 decision
of the Court of Appeals and the April 27, 1988 resolution
denying the petitioners' motion for reconsideration, which
decision and resolution reversed the decision dated June
23,1986 of the Court of First Instance of Manila, Branch 34
in Civil Case No. 121126 upholding the petitioners' causes
of action and granting all the reliefs prayed for in their
complaint against private respondents.
The antecedent facts of the case are as follows:
Petitioner Arturo P. Valenzuela (Valenzuela for short) is a
General Agent of private respondent Philippine American
General Insurance Company, Inc. (Philamgen for short)
since 1965. As such, he was authorized to solicit and sell in
behalf of Philamgen all kinds of non-life insurance, and in
consideration of services rendered was entitled to receive
the full agent's commission of 32.5% from Philamgen under
the scheduled commission rates (Exhibits "A" and "1").
From 1973 to 1975, Valenzuela solicited marine insurance
from one of his clients, the Delta Motors, Inc. (Division of
Electronics Airconditioning and Refrigeration) in the amount
of P4.4 Million from which he was entitled to a commission
of 32% (Exhibit "B"). However, Valenzuela did not receive
his full commission which amounted to P1.6 Million from
the P4.4 Million insurance coverage of the Delta Motors.
During the period 1976 to 1978, premium payments
amounting to P1,946,886.00 were paid directly to
Philamgen and Valenzuela's commission to which he is
entitled amounted to P632,737.00.
In 1977, Philamgen started to become interested in and
expressed its intent to share in the commission due
Valenzuela (Exhibits "III" and "III-1") on a fifty-fifty basis
(Exhibit "C"). Valenzuela refused (Exhibit "D").
On February 8, 1978 Philamgen and its President,
Bienvenido M. Aragon insisted on the sharing of the
commission with Valenzuela (Exhibit E). This was followed
by another sharing proposal dated June 1, 1978. On June
16,1978, Valenzuela firmly reiterated his objection to the
proposals of respondents stating that: "It is with great
reluctance that I have to decline upon request to signify my
conformity to your alternative proposal regarding the
payment of the commission due me. However, I have no
choice for to do otherwise would be violative of the Agency
Agreement executed between our goodselves." (Exhibit B-
1)
Because of the refusal of Valenzuela, Philamgen and its
officers, namely: Bienvenido Aragon, Carlos Catolico and
Robert E. Parnell took drastic action against Valenzuela.
They: (a) reversed the commission due him by not crediting
in his account the commission earned from the Delta
Motors, Inc. insurance (Exhibit "J" and "2"); (b) placed
agency transactions on a cash and carry basis; (c)
threatened the cancellation of policies issued by his agency
(Exhibits "H" to "H-2"); and (d) started to leak out news that
Valenzuela has a substantial account with Philamgen. All of
these acts resulted in the decline of his business as
29 | P a g e
insurance agent (Exhibits "N", "O", "K" and "K-8"). Then on
December 27, 1978, Philamgen terminated the General
Agency Agreement of Valenzuela (Exhibit "J", pp. 1-3,
Decision Trial Court dated June 23, 1986, Civil Case No.
121126, Annex I, Petition).
The petitioners sought relief by filing the complaint against
the private respondents in the court a quo (Complaint of
January 24, 1979, Annex "F" Petition). After due
proceedings, the trial court found:
xxx xxx xxx
Defendants tried to justify the
termination of plaintiff Arturo P.
Valenzuela as one of defendant
PHILAMGEN's General Agent by making it
appear that plaintiff Arturo P. Valenzuela
has a substantial account with defendant
PHILAMGEN particularly Delta Motors,
Inc.'s Account, thereby prejudicing
defendant PHILAMGEN's interest (Exhibits
6,"11","11- "12- A"and"13-A").
Defendants also invoked the provisions of
the Civil Code of the Philippines (Article
1868) and the provisions of the General
Agency Agreement as their basis for
terminating plaintiff Arturo P. Valenzuela
as one of their General Agents.
That defendants' position could have
been justified had the termination of
plaintiff Arturo P. Valenzuela was (sic)
based solely on the provisions of the Civil
Code and the conditions of the General
Agency Agreement. But the records will
show that the principal cause of the
termination of the plaintiff as General
Agent of defendant PHILAMGEN was his
refusal to share his Delta commission.
That it should be noted that there were
several attempts made by defendant
Bienvenido M. Aragon to share with the
Delta commission of plaintiff Arturo P.
Valenzuela. He had persistently pursued
the sharing scheme to the point of
terminating plaintiff Arturo P. Valenzuela,
and to make matters worse, defendants
made it appear that plaintiff Arturo P.
Valenzuela had substantial accounts with
defendant PHILAMGEN.
Not only that, defendants have also
started (a) to treat separately the Delta
Commission of plaintiff Arturo P.
Valenzuela, (b) to reverse the Delta
commission due plaintiff Arturo P.
 Valenzuela by not crediting or applying
said commission earned to the account of
plaintiff Arturo P. Valenzuela, (c) placed
plaintiff Arturo P. Valenzuela's agency
transactions on a "cash and carry basis",
(d) sending threats to cancel existing
policies issued by plaintiff Arturo P.
Valenzuela's agency, (e) to divert plaintiff
Arturo P. Valenzuela's insurance business
to other agencies, and (f) to spread wild
and malicious rumors that plaintiff Arturo
P. Valenzuela has substantial account with
defendant PHILAMGEN to force plaintiff
Arturo P. Valenzuela into agreeing with
the sharing of his Delta commission." (pp.
9-10, Decision, Annex 1, Petition).
xxx xxx xxx
These acts of harrassment done by
defendants on plaintiff Arturo P.
Valenzuela to force him to agree to the
sharing of his Delta commission, which
culminated in the termination of plaintiff
Arturo P. Valenzuela as one of defendant
PHILAMGEN's General Agent, do not
justify said termination of the General
Agency Agreement entered into by
defendant PHILAMGEN and plaintiff
Arturo P. Valenzuela.
That since defendants are not justified in
the termination of plaintiff Arturo P.
Valenzuela as one of their General Agents,
defendants shall be liable for the resulting
damage and loss of business of plaintiff
Arturo P. Valenzuela. (Arts. 2199/2200,
Civil Code of the Philippines). (Ibid, p. 11)
The court accordingly rendered judgment, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby
rendered in favor of the plaintiffs and
against defendants ordering the latter to
reinstate plaintiff Arturo P. Valenzuela as
its General Agent, and to pay plaintiffs,
jointly and severally, the following:
1. The amount of five hundred twenty-
one thousand nine hundred sixty four and
16/100 pesos (P521,964.16) representing
plaintiff Arturo P. Valenzuela's Delta
Commission with interest at the legal rate
from the time of the filing of the
complaint, which amount shall be
adjusted in accordance with Article 1250
of the Civil Code of the Philippines;
30 | P a g e
2. The amount of seventy-five thousand
pesos (P75,000.00) per month as
compensatory damages from 1980 until
such time that defendant Philamgen shall
reinstate plaintiff Arturo P. Valenzuela as
one of its general agents;
3. The amount of three hundred fifty
thousand pesos (P350,000.00) for each
plaintiff as moral damages;
4. The amount of seventy-five thousand
pesos (P75,000.00) as and for attorney's
fees;
5. Costs of the suit. (Ibid., P. 12)
From the aforesaid decision of the trial
court, Bienvenido Aragon, Robert E.
Parnell, Carlos K. Catolico and
PHILAMGEN respondents herein, and
defendants-appellants below, interposed
an appeal on the following:
ASSIGNMENT OF ERRORS
I
THE LOWER COURT ERRED IN HOLDING
THAT PLAINTIFF ARTURO P. VALENZUELA
HAD NO OUTSTANDING ACCOUNT WITH
DEFENDANT PHILAMGEN AT THE TIME OF
THE TERMINATION OF THE AGENCY.
II
THE LOWER COURT ERRED IN HOLDING
THAT PLAINTIFF ARTURO P. VALENZUELA
IS ENTITLED TO THE FULL COMMISSION
OF 32.5% ON THE DELTA ACCOUNT.
III
THE LOWER COURT ERRED IN HOLDING
THAT THE TERMINATION OF PLAINTIFF
ARTURO P. VALENZUELA WAS NOT
JUSTIFIED AND THAT CONSEQUENTLY
DEFENDANTS ARE LIABLE FOR ACTUAL
AND MORAL DAMAGES, ATTORNEYS FEES
AND COSTS.
IV
ASSUMING ARGUENDO THAT THE AWARD
OF DAMAGES AGAINST DEFENDANT
PHILAMGEN WAS PROPER, THE LOWER
COURT ERRED IN AWARDING DAMAGES
EVEN AGAINST THE INDIVIDUAL
 DEFENDANTS WHO ARE MERE
CORPORATE AGENTS ACTING WITHIN THE
SCOPE OF THEIR AUTHORITY.
V termination of the plaintiff as General
ASSUMING ARGUENDO THAT THE AWARD
OF DAMAGES IN FAVOR OF PLAINTIFF
ARTURO P. VALENZUELA WAS PROPER,
THE LOWER COURT ERRED IN AWARDING
DAMAGES IN FAVOR OF HOSPITALITA
VALENZUELA, WHO, NOT BEING THE REAL
PARTY IN INTEREST IS NOT TO OBTAIN
RELIEF.
On January 29, 1988, respondent Court of Appeals
promulgated its decision in the appealed case. The
dispositive portion of the decision reads:
WHEREFORE, the decision appealed from
is hereby modified accordingly and
judgment is hereby rendered ordering:
1. Plaintiff-appellee Valenzuela to pay
defendant-appellant Philamgen the sum
of one million nine hundred thirty two
thousand five hundred thirty-two pesos
and seventeen centavos (P1,902,532.17),
with legal interest thereon from the date
of finality of this judgment until fully paid.
2. Both plaintiff-appellees to pay jointly
and severally defendants-appellants the
sum of fifty thousand pesos (P50,000.00)
as and by way of attorney's fees.
No pronouncement is made as to costs.
(p. 44, Rollo)
There is in this instance irreconcilable divergence in the
findings and conclusions of the Court of Appeals, vis-a-
vis those of the trial court particularly on the pivotal issue
whether or not Philamgen and/or its officers can be held
liable for damages due to the termination of the General
Agency Agreement it entered into with the petitioners. In
its questioned decision the Court of Appeals observed that:
In any event the principal's power to
revoke an agency at will is so pervasive,
that the Supreme Court has consistently
held that termination may be effected
even if the principal acts in bad faith,
subject only to the principal's liability for
damages (Danon v. Antonio A. Brimo &
Co., 42 Phil. 133; Reyes v. Mosqueda, 53
O.G. 2158 and Infante V. Cunanan, 93 Phil.
691, cited in Paras, Vol. V, Civil Code of
the Philippines Annotated [1986] 696).
31 | P a g e
The lower court, however, thought the
termination of Valenzuela as General
Agent improper because the record will
show the principal cause of the
Agent of defendant Philamgen was his
refusal to share his Delta commission.
(Decision, p. 9; p. 13, Rollo, 41)
Because of the conflicting conclusions, this Court deemed it
necessary in the interest of substantial justice to scrutinize
the evidence and records of the cases. While it is an
established principle that the factual findings of the Court
of Appeals are final and may not be reviewed on appeal to
this Court, there are however certain exceptions to the rule
which this Court has recognized and accepted, among
which, are when the judgment is based on a
misapprehension of facts and when the findings of the
appellate court, are contrary to those of the trial court
(Manlapaz v. Court of Appeals, 147 SCRA 236 [1987]); Guita
v. Court of Appeals, 139 SCRA 576 [1986]). Where the
findings of the Court of Appeals and the trial court are
contrary to each other, this Court may scrutinize the
evidence on record (Cruz v. Court of Appeals, 129 SCRA 222
[1984]; Mendoza v. Court of Appeals, 156 SCRA 597 [1987];
Maclan v. Santos, 156 SCRA 542 [1987]). When the
conclusion of the Court of Appeals is grounded entirely on
speculation, surmises or conjectures, or when the inference
made is manifestly mistaken, absurd or impossible, or when
there is grave abuse of discretion, or when the judgment is
based on a misapprehension of facts, and when the findings
of facts are conflict the exception also applies (Malaysian
Airline System Bernad v. Court of Appeals, 156 SCRA 321
[1987]).
After a painstaking review of the entire records of the case
and the findings of facts of both the court a quo and
respondent appellate court, we are constrained to affirm
the trial court's findings and rule for the petitioners.
We agree with the court a quo that the principal cause of
the termination of Valenzuela as General Agent of
Philamgen arose from his refusal to share his Delta
commission. The records sustain the conclusions of the trial
court on the apparent bad faith of the private respondents
in terminating the General Agency Agreement of
petitioners. It is axiomatic that the findings of fact of a trial
judge are entitled to great weight (People v. Atanacio, 128
SCRA 22 [1984]) and should not be disturbed on appeal
unless for strong and cogent reasons, because the trial
court is in a better position to examine the evidence as well
as to observe the demeanor of the witnesses while
testifying (Chase v. Buencamino, Sr., 136 SCRA 365 [1985];
People v. Pimentel, 147 SCRA 25 [1987]; and Baliwag Trans.,
Inc. v. Court of Appeals, 147 SCRA 82 [1987]). In the case at
bar, the records show that the findings and conclusions of
the trial court are supported by substantial evidence and
there appears to be no cogent reason to disturb them
(Mendoza v. Court of Appeals. 156 SCRA 597 [1987]).
As early as September 30,1977, Philamgen told the
petitioners of its desire to share the Delta Commission with
them. It stated that should Delta back out from the
agreement, the petitioners would be charged interests
through a reduced commission after full payment by Delta.
On January 23, 1978 Philamgen proposed reducing the
petitioners' commissions by 50% thus giving them an
agent's commission of 16.25%. On February 8, 1978,
Philamgen insisted on the reduction scheme followed on
June 1, 1978 by still another insistence on reducing
commissions and proposing two alternative schemes for
reduction. There were other pressures. Demands to settle
accounts, to confer and thresh out differences regarding the
petitioners' income and the threat to terminate the agency
followed. The petitioners were told that the Delta
commissions would not be credited to their account
(Exhibit "J"). They were informed that the Valenzuela
agency would be placed on a cash and carry basis thus
removing the 60-day credit for premiums due. (TSN., March
26, 1979, pp. 54-57). Existing policies were threatened to be
cancelled (Exhibits "H" and "14"; TSN., March 26, 1979, pp.
29-30). The Valenzuela business was threatened with
diversion to other agencies. (Exhibit "NNN"). Rumors were
also spread about alleged accounts of the Valenzuela
agency (TSN., January 25, 1980, p. 41). The petitioners
consistently opposed the pressures to hand over the agency
or half of their commissions and for a treatment of the
Delta account distinct from other accounts. The pressures
and demands, however, continued until the agency
agreement itself was finally terminated.
It is also evident from the records that the agency involving
petitioner and private respondent is one "coupled with an
interest," and, therefore, should not be freely revocable at
the unilateral will of the latter.
In the insurance business in the Philippines, the most
difficult and frustrating period is the solicitation and
persuasion of the prospective clients to buy insurance
policies. Normally, agents would encounter much
embarrassment, difficulties, and oftentimes frustrations in
the solicitation and procurement of the insurance policies.
To sell policies, an agent exerts great effort, patience,
perseverance, ingenuity, tact, imagination, time and money.
In the case of Valenzuela, he was able to build up an Agency
from scratch in 1965 to a highly productive enterprise with
gross billings of about Two Million Five Hundred Thousand
Pesos (P2,500,000.00) premiums per annum. The records
sustain the finding that the private respondent started to
covet a share of the insurance business that Valenzuela had
built up, developed and nurtured to profitability through
over thirteen (13) years of patient work and perseverance.
When Valenzuela refused to share his commission in the
Delta account, the boom suddenly fell on him.
The private respondents by the simple expedient of
terminating the General Agency Agreement appropriated
the entire insurance business of Valenzuela. With the
termination of the General Agency Agreement, Valenzuela
32 | P a g e
would no longer be entitled to commission on the renewal
of insurance policies of clients sourced from his agency.
Worse, despite the termination of the agency, Philamgen
continued to hold Valenzuela jointly and severally liable
with the insured for unpaid premiums. Under these
circumstances, it is clear that Valenzuela had an interest in
the continuation of the agency when it was
unceremoniously terminated not only because of the
commissions he should continue to receive from the
insurance business he has solicited and procured but also
for the fact that by the very acts of the respondents, he was
made liable to Philamgen in the event the insured fail to
pay the premiums due. They are estopped by their own
positive averments and claims for damages. Therefore, the
respondents cannot state that the agency relationship
between Valenzuela and Philamgen is not coupled with
interest. "There may be cases in which an agent has been
induced to assume a responsibility or incur a liability, in
reliance upon the continuance of the authority under such
circumstances that, if the authority be withdrawn, the
agent will be exposed to personal loss or liability" (See MEC
569 p. 406).
Furthermore, there is an exception to the principle that an
agency is revocable at will and that is when the agency has
been given not only for the interest of the principal but for
the interest of third persons or for the mutual interest of
the principal and the agent. In these cases, it is evident that
the agency ceases to be freely revocable by the sole will of
the principal (See Padilla, Civil Code Annotated, 56 ed., Vol.
IV p. 350). The following citations are apropos:
The principal may not defeat the agent's
right to indemnification by a termination
of the contract of agency (Erskine v.
Chevrolet Motors Co. 185 NC 479, 117 SE
706, 32 ALR 196).
Where the principal terminates or
repudiates the agent's employment in
violation of the contract of employment
and without cause ... the agent is entitled
to receive either the amount of net losses
caused and gains prevented by the
breach, or the reasonable value of the
services rendered. Thus, the agent is
entitled to prospective profits which he
would have made except for such
wrongful termination provided that such
profits are not conjectural, or speculative
but are capable of determination upon
some fairly reliable basis. And a principal's
revocation of the agency agreement
made to avoid payment of compensation
for a result which he has actually
accomplished (Hildendorf v. Hague, 293
NW 2d 272; Newhall v. Journal Printing
Co., 105 Minn 44,117 NW 228; Gaylen
Machinery Corp. v. Pitman-Moore Co.
[C.A. 2 NY] 273 F 2d 340)
 If a principal violates a contractual or
quasi-contractual duty which he owes his
agent, the agent may as a rule bring an
appropriate action for the breach of that
duty. The agent may in a proper case
maintain an action at law for
compensation or damages ... A wrongfully
discharged agent has a right of action for
damages and in such action the measure
and element of damages are controlled
generally by the rules governing any other
action for the employer's breach of an
employment contract. (Riggs v. Lindsay, 11
US 500, 3L Ed 419; Tiffin Glass Co. v.
Stoehr, 54 Ohio 157, 43 NE 2798)
At any rate, the question of whether or not the agency
agreement is coupled with interest is helpful to the
petitioners' cause but is not the primary and compelling
reason. For the pivotal factor rendering Philamgen and the
other private respondents liable in damages is that the
termination by them of the General Agency Agreement was
tainted with bad faith. Hence, if a principal acts in bad faith
and with abuse of right in terminating the agency, then he is
liable in damages. This is in accordance with the precepts in
Human Relations enshrined in our Civil Code that "every
person must in the exercise of his rights and in the
performance of his duties act with justice, give every one
his due, and observe honesty and good faith: (Art. 19, Civil
Code), and every person who, contrary to law, wilfully or
negligently causes damages to another, shall indemnify the
latter for the same (Art. 20, id). "Any person who wilfully
causes loss or injury to another in a manner contrary to
morals, good customs and public policy shall compensate
the latter for the damages" (Art. 21, id.).
As to the issue of whether or not the petitioners are liable
to Philamgen for the unpaid and uncollected premiums
which the respondent court ordered Valenzuela to pay
Philamgen the amount of One Million Nine Hundred Thirty-
Two Thousand Five Hundred Thirty-Two and 17/100 Pesos
(P1,932,532,17) with legal interest thereon until fully paid
(Decision-January 20, 1988, p. 16; Petition, Annex "A"), we
rule that the respondent court erred in holding Valenzuela
liable. We find no factual and legal basis for the award.
Under Section 77 of the Insurance Code, the remedy for the
non-payment of premiums is to put an end to and render
the insurance policy not binding —
Sec. 77 ... [N]otwithstanding any
agreement to the contrary, no policy or
contract of insurance is valid and binding
unless and until the premiums thereof
have been paid except in the case of a life
or industrial life policy whenever the
grace period provision applies (P.D. 612,
as amended otherwise known as the
Insurance Code of 1974)
33 | P a g e
In Philippine Phoenix Surety and Insurance, Inc. v.
Woodworks, Inc. (92 SCRA 419 [1979]) we held that the
non-payment of premium does not merely suspend but
puts an end to an insurance contract since the time of the
payment is peculiarly of the essence of the contract. And
in Arce v. The Capital Insurance and Surety Co. Inc. (117
SCRA 63, [1982]), we reiterated the rule that unless
premium is paid, an insurance contract does not take effect.
Thus:
It is to be noted that Delgado (Capital
Insurance & Surety Co., Inc. v. Delgado, 9
SCRA 177 [1963] was decided in the light
of the Insurance Act before Sec. 72 was
amended by the underscored portion.
Supra. Prior to the Amendment, an
insurance contract was effective even if
the premium had not been paid so that
an insurer was obligated to pay indemnity
in case of loss and correlatively he had
also the right to sue for payment of the
premium. But the amendment to Sec. 72
has radically changed the legal regime in
that unless the premium is paid there is
no insurance. " (Arce v. Capitol Insurance
and Surety Co., Inc., 117 SCRA 66;
Emphasis supplied)
In Philippine Phoenix Surety case, we held:
Moreover, an insurer cannot treat a
contract as valid for the purpose of
collecting premiums and invalid for the
purpose of indemnity. (Citing Insurance
Law and Practice by John Alan Appleman,
Vol. 15, p. 331; Emphasis supplied)
The foregoing findings are buttressed by
Section 776 of the insurance Code
(Presidential Decree No. 612,
promulgated on December 18, 1974),
which now provides that no contract of
Insurance by an insurance company is
valid and binding unless and until the
premium thereof has been paid,
notwithstanding any agreement to the
contrary (Ibid., 92 SCRA 425)
Perforce, since admittedly the premiums have not been
paid, the policies issued have lapsed. The insurance
coverage did not go into effect or did not continue and the
obligation of Philamgen as insurer ceased. Hence, for
Philamgen which had no more liability under the lapsed and
inexistent policies to demand, much less sue Valenzuela for
the unpaid premiums would be the height of injustice and
unfair dealing. In this instance, with the lapsing of the
policies through the nonpayment of premiums by the
insured there were no more insurance contracts to speak
of. As this Court held in the Philippine Phoenix
Surety case, supra "the non-payment of premiums does not
merely suspend but puts an end to an insurance contract
since the time of the payment is peculiarly of the essence of
the contract."
The respondent appellate court also seriously erred in
according undue reliance to the report of Banaria and
Banaria and Company, auditors, that as of December 31,
1978, Valenzuela owed Philamgen P1,528,698.40. This audit
report of Banaria was commissioned by Philamgen after
Valenzuela was almost through with the presentation of his
evidence. In essence, the Banaria report started with an
unconfirmed and unaudited beginning balance of account
of P1,758,185.43 as of August 20, 1976. But even with that
unaudited and unconfirmed beginning balance of
P1,758,185.43, Banaria still came up with the amount of
P3,865.49 as Valenzuela's balance as of December 1978
with Philamgen (Exh. "38-A-3"). In fact, as of December 31,
1976, and December 31, 1977, Valenzuela had no unpaid
account with Philamgen (Ref: Annexes "D", "D-1", "E",
Petitioner's Memorandum). But even disregarding these
annexes which are records of Philamgen and addressed to
Valenzuela in due course of business, the facts show that as
of July 1977, the beginning balance of Valenzuela's account
with Philamgen amounted to P744,159.80. This was
confirmed by Philamgen itself not only once but four (4)
times on different occasions, as shown by the records.
On April 3,1978, Philamgen sent Valenzuela a statement of
account with a beginning balance of P744,159-80 as of July
1977.
On May 23, 1978, another statement of account with
exactly the same beginning balance was sent to Valenzuela.
On November 17, 1978, Philamgen sent still another
statement of account with P744,159.80 as the beginning
balance.
And on December 20, 1978, a statement of account with
exactly the same figure was sent to Valenzuela.
It was only after the filing of the complaint that a radically
different statement of accounts surfaced in court. Certainly,
Philamgen's own statements made by its own accountants
over a long period of time and covering examinations made
on four different occasions must prevail over unconfirmed
and unaudited statements made to support a position
made in the course of defending against a lawsuit.
It is not correct to say that Valenzuela should have
presented its own records to refute the unconfirmed and
unaudited finding of the Banaria auditor. The records of
Philamgen itself are the best refutation against figures
made as an afterthought in the course of litigation.
Moreover, Valenzuela asked for a meeting where the figures
would be reconciled. Philamgen refused to meet with him
and, instead, terminated the agency agreement.
34 | P a g e
After off-setting the amount of P744,159.80, beginning
balance as of July 1977, by way of credits representing the
commission due from Delta and other accounts, Valenzuela
had overpaid Philamgen the amount of P530,040.37 as of
November 30, 1978. Philamgen cannot later be heard to
complain that it committed a mistake in its computation.
The alleged error may be given credence if committed only
once. But as earlier stated, the reconciliation of accounts
was arrived at four (4) times on different occasions where
Philamgen was duly represented by its account executives.
On the basis of these admissions and representations,
Philamgen cannot later on assume a different posture and
claim that it was mistaken in its representation with respect
to the correct beginning balance as of July 1977 amounting
to P744,159.80. The Banaria audit report commissioned by
Philamgen is unreliable since its results are admittedly
based on an unconfirmed and unaudited beginning balance
of P1,758,185.43 as of August 20,1976.
As so aptly stated by the trial court in its decision:
Defendants also conducted an audit of
accounts of plaintiff Arturo P. Valenzuela
after the controversy has started. In fact,
after hearing plaintiffs have already rested
their case.
The results of said audit were presented
in Court to show plaintiff Arturo P.
Valenzuela's accountability to defendant
PHILAMGEN. However, the auditor, when
presented as witness in this case testified
that the beginning balance of their audit
report was based on an unaudited
amount of P1,758,185.43 (Exhibit 46-A) as
of August 20, 1976, which was unverified
and merely supplied by the officers of
defendant PHILAMGEN.
Even defendants very own Exhibit 38- A-3,
showed that plaintiff Arturo P.
Valenzuela's balance as of 1978
amounted to only P3,865.59, not
P826,128.46 as stated in defendant
Bienvenido M. Aragon's letter dated
December 20,1978 (Exhibit 14) or
P1,528,698.40 as reflected in defendant's
Exhibit 46 (Audit Report of Banaria dated
December 24, 1980).
These glaring discrepancy (sic) in the
accountability of plaintiff Arturo P.
Valenzuela to defendant PHILAMGEN only
lends credence to the claim of plaintiff
Arturo P. Valenzuela that he has no
outstanding account with defendant
PHILAMGEN when the latter, thru
defendant Bienvenido M. Aragon,
terminated the General Agency
Agreement entered into by plaintiff
 (Exhibit A) effective January 31, 1979 (see
Exhibits "2" and "2-A"). Plaintiff Arturo P.
Valenzuela has shown that as of October
31, 1978, he has overpaid defendant
PHILAMGEN in the amount of P53,040.37
(Exhibit "EEE", which computation was
based on defendant PHILAMGEN's
balance of P744,159.80 furnished on
several occasions to plaintiff Arturo P.
Valenzuela by defendant PHILAMGEN
(Exhibits H-1, VV, VV-1, WW, WW-1 , YY ,
YY-2 , ZZ and , ZZ-2).
(P521,964.16) representing the petitioners Delta
commission shall earn only legal interests without any
adjustments under Article 1250 of the Civil Code and that
the contractual relationship between Arturo P. Valenzuela
and Philippine American General Insurance Company shall
be deemed terminated upon the satisfaction of the
judgment as modified.
SO ORDERED.
Bidin and Cortes, JJ., concur.

Prescinding from the foregoing, and considering that the

private respondents terminated Valenzuela with
evident mala fide it necessarily follows that the former are
liable in damages. Respondent Philamgen has been
appropriating for itself all these years the gross billings and
income that it unceremoniously took away from the
petitioners. The preponderance of the authorities sustain
the preposition that a principal can be held liable for
damages in cases of unjust termination of agency. In Danon
v. Brimo, 42 Phil. 133 [1921]), this Court ruled that where
no time for the continuance of the contract is fixed by its
terms, either party is at liberty to terminate it at will,
subject only to the ordinary requirements of good faith. The
right of the principal to terminate his authority is absolute
and unrestricted, except only that he may not do so in bad
faith.

The trial court in its decision awarded to Valenzuela the

amount of Seventy Five Thousand Pesos (P75,000,00) per
month as compensatory damages from June 1980 until its
decision becomes final and executory. This award is justified
in the light of the evidence extant on record (Exhibits "N",
"N-10", "0", "0-1", "P" and "P-1") showing that the average
gross premium collection monthly of Valenzuela over a
period of four (4) months from December 1978 to February
1979, amounted to over P300,000.00 from which he is
entitled to a commission of P100,000.00 more or less per
month. Moreover, his annual sales production amounted to
P2,500,000.00 from where he was given 32.5%
commissions. Under Article 2200 of the new Civil Code,
"indemnification for damages shall comprehend not only
the value of the loss suffered, but also that of the profits
which the obligee failed to obtain."
The circumstances of the case, however, require that the
contractual relationship between the parties shall be
terminated upon the satisfaction of the judgment. No more
claims arising from or as a result of the agency shall be
entertained by the courts after that date.
ACCORDINGLY, the petition is GRANTED. The impugned
decision of January 29, 1988 and resolution of April 27,
1988 of respondent court are hereby SET ASIDE. The
decision of the trial court dated January 23, 1986 in Civil
Case No. 121126 is REINSTATED with the MODIFICATIONS
that the amount of FIVE HUNDRED TWENTY ONE
THOUSAND NINE HUNDRED SIXTY-FOUR AND 16/100 PESOS
35 | P a g e
G.R. No. 115838 July 18, 2002
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE
CASTRO, petitioners,
vs.
COURT OF APPEALS and FRANCISCO ARTIGO, respondents.
CARPIO, J.:
The Case
Before us is a Petition for Review on Certiorari 1 seeking to
annul the Decision of the Court of Appeals 2 dated May 4,
1994 in CA-G.R. CV No. 37996, which affirmed in toto the
decision3 of the Regional Trial Court of Quezon City, Branch
80, in Civil Case No. Q-89-2631. The trial court disposed as
follows:
"WHEREFORE, the Court finds defendants
Constante and Corazon Amor de Castro jointly and
solidarily liable to plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorney's fees;
 d) To pay the cost of this suit.
Quezon City, Metro Manila, December 20, 1991."
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo
("Artigo" for brevity) sued petitioners Constante A. De
Castro ("Constante" for brevity) and Corazon A. De Castro
("Corazon" for brevity) to collect the unpaid balance of his
broker's commission from the De Castros. 4 The Court of
Appeals summarized the facts in this wise:
"x x x. Appellants5 were co-owners of four (4) lots
located at EDSA corner New York and Denver
Streets in Cubao, Quezon City. In a letter dated
January 24, 1984 (Exhibit "A-1, p. 144, Records),
appellee6 was authorized by appellants to act as
real estate broker in the sale of these properties
for the amount of P23,000,000.00, five percent
(5%) of which will be given to the agent as
commission. It was appellee who first found Times
Transit Corporation, represented by its president
Mr. Rondaris, as prospective buyer which desired
to buy two (2) lots only, specifically lots 14 and 15.
Eventually, sometime in May of 1985, the sale of
lots 14 and 15 was consummated. Appellee
received from appellants P48,893.76 as
commission.
It was then that the rift between the contending
parties soon emerged. Appellee apparently felt
short changed because according to him, his total
commission should be P352,500.00 which is five
percent (5%) of the agreed price of P7,050,000.00
paid by Times Transit Corporation to appellants for
the two (2) lots, and that it was he who introduced
the buyer to appellants and unceasingly facilitated
the negotiation which ultimately led to the
consummation of the sale. Hence, he sued below
to collect the balance of P303,606.24 after having
received P48,893.76 in advance.1âwphi1.nêt
On the other hand, appellants completely traverse
appellee's claims and essentially argue that
appellee is selfishly asking for more than what he
truly deserved as commission to the prejudice of
other agents who were more instrumental in the
consummation of the sale. Although appellants
readily concede that it was appellee who first
introduced Times Transit Corp. to them, appellee
was not designated by them as their exclusive real
estate agent but that in fact there were more or
less eighteen (18) others whose collective efforts in
the long run dwarfed those of appellee's,
considering that the first negotiation for the sale
where appellee took active participation failed and
it was these other agents who successfully
brokered in the second negotiation. But despite
36 | P a g e
this and out of appellants' "pure liberality,
beneficence and magnanimity", appellee
nevertheless was given the largest cut in the
commission (P48,893.76), although on the
principle of quantum meruit he would have
certainly been entitled to less. So appellee should
not have been heard to complain of getting only a
pittance when he actually got the lion's share of
the commission and worse, he should not have
been allowed to get the entire commission.
Furthermore, the purchase price for the two lots
was only P3.6 million as appearing in the deed of
sale and not P7.05 million as alleged by appellee.
Thus, even assuming that appellee is entitled to
the entire commission, he would only be getting
5% of the P3.6 million, or P180,000.00."
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the
trial court.
First. The Court of Appeals found that Constante authorized
Artigo to act as agent in the sale of two lots in Cubao,
Quezon City. The handwritten authorization letter signed by
Constante clearly established a contract of agency between
Constante and Artigo. Thus, Artigo sought prospective
buyers and found Times Transit Corporation ("Times
Transit" for brevity). Artigo facilitated the negotiations
which eventually led to the sale of the two lots. Therefore,
the Court of Appeals decided that Artigo is entitled to the
5% commission on the purchase price as provided in the
contract of agency.
Second. The Court of Appeals ruled that Artigo's complaint
is not dismissible for failure to implead as indispensable
parties the other co-owners of the two lots. The Court of
Appeals explained that it is not necessary to implead the
other co-owners since the action is exclusively based on a
contract of agency between Artigo and Constante.
Third. The Court of Appeals likewise declared that the trial
court did not err in admitting parol evidence to prove the
true amount paid by Times Transit to the De Castros for the
two lots. The Court of Appeals ruled that
evidence aliunde could be presented to prove that the
actual purchase price was P7.05 million and not P3.6 million
as appearing in the deed of sale. Evidence aliunde is
admissible considering that Artigo is not a party, but a mere
witness in the deed of sale between the De Castros and
Times Transit. The Court of Appeals explained that, "the
rule that oral evidence is inadmissible to vary the terms of
written instruments is generally applied only in suits
between parties to the instrument and strangers to the
contract are not bound by it." Besides, Artigo was not suing
under the deed of sale, but solely under the contract of
agency. Thus, the Court of Appeals upheld the trial court's
finding that the purchase price was P7.05 million and not
P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -
I. NOT ORDERING THE DISMISSAL OF THE
COMPLAINT FOR FAILURE TO IMPLEAD
INDISPENSABLE PARTIES-IN-INTEREST;
II. NOT ORDERING THE DISMISSAL OF THE
COMPLAINT ON THE GROUND THAT ARTIGO'S
CLAIM HAS BEEN EXTINGUISHED BY FULL
PAYMENT, WAIVER, OR ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED
TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES
AND ATTORNEY'S FEES;
VI. NOT AWARDING THE DE CASTRO'S MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEY'S FEES.
The Court's Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for
failure to implead other co-owners as indispensable
parties
The De Castros argue that Artigo's complaint should have
been dismissed for failure to implead all the co-owners of
the two lots. The De Castros claim that Artigo always knew
that the two lots were co-owned by Constante and Corazon
with their other siblings Jose and Carmela whom Constante
merely represented. The De Castros contend that failure to
implead such indispensable parties is fatal to the complaint
since Artigo, as agent of all the four co-owners, would be
paid with funds co-owned by the four co-owners.
The De Castros' contentions are devoid of legal basis.
An indispensable party is one whose interest will be
affected by the court's action in the litigation, and without
whom no final determination of the case can be had. 7 The
joinder of indispensable parties is mandatory and courts
cannot proceed without their presence.8 Whenever it
appears to the court in the course of a proceeding that an
indispensable party has not been joined, it is the duty of
the court to stop the trial and order the inclusion of such
party.9
However, the rule on mandatory joinder of indispensable
parties is not applicable to the instant case.
37 | P a g e
There is no dispute that Constante appointed Artigo in a
handwritten note dated January 24, 1984 to sell the
properties of the De Castros for P23 million at a 5 percent
commission. The authority was on a first come, first serve
basis. The authority reads in full:
"24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is
authorized as our real estate broker in connection
with the sale of our property located at Edsa
Corner New York & Denver, Cubao, Quezon City.
Asking price P 23,000,000.00 with 5% commission
as agent's fee.
C.C. de Castro
owner & representing
co-owners
This authority is on a first-come
First serve basis –CAC"
Constante signed the note as owner and as representative
of the other co-owners. Under this note, a contract of
agency was clearly constituted between Constante and
Artigo. Whether Constante appointed Artigo as agent, in
Constante's individual or representative capacity, or both,
the De Castros cannot seek the dismissal of the case for
failure to implead the other co-owners as indispensable
parties. The De Castros admit that the other co-owners are
solidarily liable under the contract of agency,10 citing
Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed
an agent for a common transaction or undertaking,
they shall be solidarily liable to the agent for all the
consequences of the agency.
The solidary liability of the four co-owners, however,
militates against the De Castros' theory that the other co-
owners should be impleaded as indispensable parties. A
noted commentator explained Article 1915 thus –
"The rule in this article applies even when the
appointments were made by the principals in
separate acts, provided that they are for the same
transaction. The solidarity arises from the
common interest of the principals, and not from
the act of constituting the agency. By virtue of
this solidarity, the agent can recover from any
principal the whole compensation and indemnity
owing to him by the others. The parties, however,
may, by express agreement, negate this solidary
 responsibility. The solidarity does not disappear by
the mere partition effected by the principals after
the accomplishment of the agency.
If the undertaking is one in which several are
interested, but only some create the agency, only
the latter are solidarily liable, without prejudice to
the effects of negotiorum gestio with respect to
the others. And if the power granted includes
various transactions some of which are common
and others are not, only those interested in each
transaction shall be liable for it."11
When the law expressly provides for solidarity of the
obligation, as in the liability of co-principals in a contract of
agency, each obligor may be compelled to pay the entire
obligation.12 The agent may recover the whole
compensation from any one of the co-principals, as in this
case.
Indeed, Article 1216 of the Civil Code provides that a
creditor may sue any of the solidary debtors. This article
reads:
Art. 1216. The creditor may proceed against any
one of the solidary debtors or some or all of them
simultaneously. The demand made against one of
them shall not be an obstacle to those which may
subsequently be directed against the others, so
long as the debt has not been fully collected.
Thus, the Court has ruled in Operators Incorporated vs.
American Biscuit Co., Inc.13 that –
"x x x solidarity does not make a solidary obligor
an indispensable party in a suit filed by the
creditor. Article 1216 of the Civil Code says that
the creditor `may proceed against anyone of the
solidary debtors or some or all of them
simultaneously'." (Emphasis supplied)
Second Issue: whether Artigo's claim has been
extinguished by full payment, waiver or abandonment
The De Castros claim that Artigo was fully paid on June 14,
1985, that is, Artigo was given "his proportionate share and
no longer entitled to any balance." According to them,
Artigo was just one of the agents involved in the sale and
entitled to a "proportionate share" in the commission. They
assert that Artigo did absolutely nothing during the second
negotiation but to sign as a witness in the deed of sale. He
did not even prepare the documents for the transaction as
an active real estate broker usually does.
The De Castros' arguments are flimsy.
A contract of agency which is not contrary to law, public
order, public policy, morals or good custom is a valid
contract, and constitutes the law between the parties. 14 The
38 | P a g e
contract of agency entered into by Constante with Artigo is
the law between them and both are bound to comply with
its terms and conditions in good faith.
The mere fact that "other agents" intervened in the
consummation of the sale and were paid their respective
commissions cannot vary the terms of the contract of
agency granting Artigo a 5 percent commission based on
the selling price. These "other agents" turned out to be
employees of Times Transit, the buyer Artigo introduced to
the De Castros. This prompted the trial court to observe:
"The alleged `second group' of agents came into
the picture only during the so-called `second
negotiation' and it is amusing to note that these
(sic) second group, prominent among whom are
Atty. Del Castillo and Ms. Prudencio, happened to
be employees of Times Transit, the buyer of the
properties. And their efforts were limited to
convincing Constante to 'part away' with the
properties because the redemption period of the
foreclosed properties is around the corner, so to
speak. (tsn. June 6, 1991).
xxx
To accept Constante's version of the story is to
open the floodgates of fraud and deceit. A seller
could always pretend rejection of the offer and
wait for sometime for others to renew it who are
much willing to accept a commission far less than
the original broker. The immorality in the instant
case easily presents itself if one has to consider
that the alleged `second group' are the
employees of the buyer, Times Transit and they
have not bettered the offer secured by Mr. Artigo
for P7 million.
It is to be noted also that while Constante was too
particular about the unrenewed real estate
broker's license of Mr. Artigo, he did not bother at
all to inquire as to the licenses of Prudencio and
Castillo. (tsn, April 11, 1991, pp. 39-
40)."15 (Emphasis supplied)
In any event, we find that the 5 percent real estate broker's
commission is reasonable and within the standard practice
in the real estate industry for transactions of this nature.
The De Castros also contend that Artigo's inaction as well as
failure to protest estops him from recovering more than
what was actually paid him. The De Castros cite Article 1235
of the Civil Code which reads:
Art. 1235. When the obligee accepts the
performance, knowing its incompleteness and
irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied
with.
The De Castros' reliance on Article 1235 of the Civil Code is
misplaced. Artigo's acceptance of partial payment of his
commission neither amounts to a waiver of the balance nor
puts him in estoppel. This is the import of Article 1235
which was explained in this wise:
"The word accept, as used in Article 1235 of the
Civil Code, means to take as satisfactory or
sufficient, or agree to an incomplete or irregular
performance. Hence, the mere receipt of a partial
payment is not equivalent to the required
acceptance of performance as would extinguish
the whole obligation."16 (Emphasis supplied)
There is thus a clear distinction between acceptance and
mere receipt. In this case, it is evident that Artigo merely
received the partial payment without waiving the balance.
Thus, there is no estoppel to speak of.
The De Castros further argue that laches should apply
because Artigo did not file his complaint in court until May
29, 1989, or almost four years later. Hence, Artigo's claim
for the balance of his commission is barred by laches.
Laches means the failure or neglect, for an unreasonable
and unexplained length of time, to do that which by
exercising due diligence could or should have been done
earlier. It is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to
assert it.17
Artigo disputes the claim that he neglected to assert his
rights. He was appointed as agent on January 24, 1984. The
two lots were finally sold in June 1985. As found by the trial
court, Artigo demanded in April and July of 1985 the
payment of his commission by Constante on the basis of the
selling price of P7.05 million but there was no response
from Constante.18 After it became clear that his demands
for payment have fallen on deaf ears, Artigo decided to sue
on May 29, 1989.
Actions upon a written contract, such as a contract of
agency, must be brought within ten years from the time the
right of action accrues.19 The right of action accrues from
the moment the breach of right or duty occurs. From this
moment, the creditor can institute the action even as the
ten-year prescriptive period begins to run.20
The De Castros admit that Artigo's claim was filed within
the ten-year prescriptive period. The De Castros, however,
still maintain that Artigo's cause of action is barred by
laches. Laches does not apply because only four years had
lapsed from the time of the sale in June 1985. Artigo made
a demand in July 1985 and filed the action in court on May
29, 1989, well within the ten-year prescriptive period. This
does not constitute an unreasonable delay in asserting
one's right. The Court has ruled, "a delay within the
prescriptive period is sanctioned by law and is not
39 | P a g e
considered to be a delay that would bar relief." 21 In
explaining that laches applies only in the absence of a
statutory prescriptive period, the Court has stated -
"Laches is recourse in equity. Equity, however, is
applied only in the absence, never in
contravention, of statutory law. Thus, laches,
cannot, as a rule, be used to abate a collection
suit filed within the prescriptive period mandated
by the Civil Code."22
Clearly, the De Castros' defense of laches finds no support
in law, equity or jurisprudence.
Third issue: whether the determination of the purchase
price was made in violation of the Rules on Evidence
The De Castros want the Court to re-examine the probative
value of the evidence adduced in the trial court to
determine whether the actual selling price of the two lots
was P7.05 million and not P3.6 million. The De Castros
contend that it is erroneous to base the 5 percent
commission on a purchase price of P7.05 million as ordered
by the trial court and the appellate court. The De Castros
insist that the purchase price is P3.6 million as expressly
stated in the deed of sale, the due execution and
authenticity of which was admitted during the trial.
The De Castros believe that the trial and appellate courts
committed a mistake in considering incompetent evidence
and disregarding the best evidence and parole evidence
rules. They claim that the Court of Appeals erroneously
affirmed sub silentio the trial court's reliance on the various
correspondences between Constante and Times Transit
which were mere photocopies that do not satisfy the best
evidence rule. Further, these letters covered only the first
negotiations between Constante and Times Transit which
failed; hence, these are immaterial in determining the final
purchase price.
The De Castros further argue that if there was an
undervaluation, Artigo who signed as witness benefited
therefrom, and being equally guilty, should be left where he
presently stands. They likewise claim that the Court of
Appeals erred in relying on evidence which were not
offered for the purpose considered by the trial court.
Specifically, Exhibits "B", "C", "D" and "E" were not offered
to prove that the purchase price was P7.05 Million. Finally,
they argue that the courts a quo erred in giving credence to
the perjured testimony of Artigo. They want the entire
testimony of Artigo rejected as a falsehood because he was
lying when he claimed at the outset that he was a licensed
real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as
found by the trial court and affirmed by the Court of
Appeals, or P3.6 Million as claimed by the De Castros, is a
question of fact and not of law. Inevitably, this calls for an
inquiry into the facts and evidence on record. This we can
not do.
It is not the function of this Court to re-examine the
evidence submitted by the parties, or analyze or weigh the
evidence again.23 This Court is not the proper venue to
consider a factual issue as it is not a trier of facts. In
petitions for review on certiorari as a mode of appeal under
Rule 45, a petitioner can only raise questions of law. Our
pronouncement in the case of Cormero vs. Court of
Appeals24 bears reiteration:
"At the outset, it is evident from the errors
assigned that the petition is anchored on a plea to
review the factual conclusion reached by the
respondent court. Such task however is foreclosed
by the rule that in petitions for certiorari as a
mode of appeal, like this one, only questions of
law distinctly set forth may be raised. These
questions have been defined as those that do not
call for any examination of the probative value of
the evidence presented by the parties. (Uniland
Resources vs. Development Bank of the
Philippines, 200 SCRA 751 [1991] citing Goduco vs.
Court of appeals, et al., 119 Phil. 531; Hernandez
vs. Court of Appeals, 149 SCRA 67). And when this
court is asked to go over the proof presented by
the parties, and analyze, assess and weigh them to
ascertain if the trial court and the appellate court
were correct in according superior credit to this or
that piece of evidence and eventually, to the
totality of the evidence of one party or the other,
the court cannot and will not do the same. (Elayda
vs. Court of Appeals, 199 SCRA 349 [1991]). Thus,
in the absence of any showing that the findings
complained of are totally devoid of support in the
record, or that they are so glaringly erroneous as
to constitute serious abuse of discretion, such
findings must stand, for this court is not expected
or required to examine or contrast the oral and
documentary evidence submitted by the parties.
(Morales vs. Court of Appeals, 197 SCRA 391
[1991] citing Santa Ana vs. Hernandez, 18 SCRA
973 [1966])."
We find no reason to depart from this principle. The trial
and appellate courts are in a much better position to
evaluate properly the evidence. Hence, we find no other
recourse but to affirm their finding on the actual purchase
price.1âwphi1.nêt
Fourth Issue: whether award of moral damages and
attorney's fees is proper
The De Castros claim that Artigo failed to prove that he is
entitled to moral damages and attorney's fees. The De
Castros, however, cite no concrete reason except to say that
they are the ones entitled to damages since the case was
filed to harass and extort money from them.
40 | P a g e
Law and jurisprudence support the award of moral
damages and attorney's fees in favor of Artigo. The award
of damages and attorney's fees is left to the sound
discretion of the court, and if such discretion is well
exercised, as in this case, it will not be disturbed on
appeal.25 Moral damages may be awarded when in a breach
of contract the defendant acted in bad faith, or in wanton
disregard of his contractual obligation.26 On the other hand,
attorney's fees are awarded in instances where "the
defendant acted in gross and evident bad faith in refusing
to satisfy the plaintiff's plainly valid, just and demandable
claim."27 There is no reason to disturb the trial court's
finding that "the defendants' lack of good faith and unkind
treatment of the plaintiff in refusing to give his due
commission deserve censure." This warrants the award
of P25,000.00 in moral damages and P 45,000.00 in
attorney's fees. The amounts are, in our view, fair and
reasonable. Having found a buyer for the two lots, Artigo
had already performed his part of the bargain under the
contract of agency. The De Castros should have exercised
fairness and good judgment in dealing with Artigo by
fulfilling their own part of the bargain - paying Artigo his 5
percent broker's commission based on the actual purchase
price of the two lots.
WHEREFORE, the petition is denied for lack of merit. The
Decision of the Court of Appeals dated May 4, 1994 in CA-
G.R. CV No. 37996 is AFFIRMED in toto. SO ORDERED.
G.R. No. 202050
PHILIPPINE NATIONAL OIL COMPANY and PNOC
DOCKYARD & ENGINEERING
CORPORATION, Petitioners
vs.
KEPPEL PHILIPPINES HOLDINGS, INC.,
Respondent
DECISION
BRION, J.:
Before the Court is a petition for review
on certiorari filed under Rule 45 of the Rules of Court,
appealing the decision dated 19 De.cember 2011 1 and
resolution dated 14 May 2012 2 of the Court of
Appeals (CA) in CA-G.R. CV No. 86830. These
assailed CA rulings affirmed in toto the decision dated
12 January 20063 of the Regional Trial Court (RTC) of
Batangas City, Branch 84, in Civil Case No. 7364.
THE FACTS
The 1976 Lease Agreement and Option to
Purchase
Almost 40 years ago or on 6 August 1976, the
respondent Keppel Philippines Holdings,
Inc.4 (Keppel) entered into a lease agreement5 (the
agreement) with Luzon Stevedoring
Corporation (Lusteveco) covering 11 hectares of land
located in Bauan, Batangas. The lease was for a
period of 25 years for a consideration of P2.1
million.6 At the option of Lusteveco, the rental fee could
be totally or partially converted into equity shares in
Keppel.7
At the end of the 25-year lease period, Keppel was
given the "firm and absolute option to
purchase"8 the land for ₱4.09 million, provided that
it had acquired the necessary qualification to own
land under Philippine laws at the time the option is
exercised.9 Apparently, when the lease agreement
was executed, less than 60% of Keppel’s shareholding
was Filipino-owned, hence, it was not constitutionally
qualified to acquire private lands in the country.10
If, at the end of the 25-year lease period (or in 2001),
Keppel remained unqualified to own private lands, the
agreement provided that the lease would be
automatically renewed for another 25 years.11 Keppel
was further allowed to exercise the option to purchase
the land up to the 30th year of the lease (or in 2006),
also on the condition that, by then, it would have
acquired the requisite qualification to own land in the
Philippines.12
Together with Keppel’s lease rights and option to
purchase, Lusteveco warranted not to sell the land or
assign its rights to the land for the duration of the lease
unless with the prior written consent of
Keppel.13 Accordingly, when the petitioner Philippine
National Oil Corporation14 (PNOC) acquired the land
from Lusteveco and took over the rights and
obligations under the agreement, Keppel did not object
to the assignment so long as the agreement was
annotated on PNOC’s title.15 With PNOC’s consent and
cooperation, the agreement was recorded as Entry No.
65340 on PNOC’s Transfer of Certificate of Title No. T-
50724.16
The Case and the Lower Court Rulings
On 8 December 2000, Keppel wrote PNOC informing
the latter that at least 60% of its shares were now
owned by Filipinos.17 Consequently, Keppel expressed
its readiness to exercise its option to purchase the
land. Keppel reiterated its demand to purchase the
land several times, but on every occasion, PNOC did
not favourably respond.18
To compel PNOC to comply with the Agreement,
Keppel instituted a complaint for specific
performance with the RTC on 26 September 2003
against PNOC.19 PNOC countered Keppel’s claims by
contending that the agreement was illegal for
circumventing the constitutional prohibition against
aliens holding lands in the Philippines.20 It further
asserted that the option contract was void, as it was
unsupported by a separate valuable consideration. 21 It
also claimed that it was not privy to the agreement. 22
41 | P a g e
After due proceedings, the RTC rendered a
decision23 in favour of Keppel and ordered PNOC
to execute a deed of absolute sale upon payment by
Keppel of the purchase price of ₱4.09 million.24
PNOC elevated the case to the CA to appeal the RTC
decision.25 Affirming the RTC decision in toto, the CA
upheld Keppel’s right to acquire the land.26 It found
that since the option contract was embodied in the
agreement – a reciprocal contract – the consideration
was the obligation that each of the contracting party
assumed.27 Since Keppel was already a Filipino-owned
corporation, it satisfied the condition that entitled it to
purchase the land.28
Failing to secure a reconsideration of the CA
decision,29 PNOC filed the present Rule 45 petition
before this Court to assail the CA rulings.
THE PARTIES’ ARGUMENTS and THE ISSUES
PNOC argues that the CA failed to resolve the
constitutionality of the agreement. It contends that the
terms of the agreement amounted to a virtual sale of
the land to Keppel who, at the time of the agreement’s
enactment, was a foreign corporation and, thus,
violated the 1973 Constitution.
Specifically, PNOC refers to (a) the 25-year duration of
the lease that was automatically renewable for another
25 years30; (b) the option to purchase the land for a
nominal consideration of ₱100.00 if the option is
exercised anytime between the 25th and the 30th year
of the lease31; and (c) the prohibition imposed on
Lusteveco to sell the land or assign its rights therein
during the lifetime of the lease. 32 Taken together,
PNOC submits that these provisions amounted to a
virtual transfer of ownership of the land to an alien
which act the 1973 Constitution prohibited.
PNOC claims that the agreement is no different from
the lease contract in Philippine Banking Corporation v.
Lui She,33 which the Court struck down as
unconstitutional. In Lui She, the lease contract allowed
the gradual divestment of ownership rights by the
Filipino owner-lessor in favour of the foreigner-
lessee.34 The arrangement in Lui She was declared as
a scheme designed to enable the parties to circumvent
the constitutional prohibition.35 PNOC posits that a
similar intent is apparent from the terms of the
agreement with Keppel and accordingly should also be
nullified.36
PNOC additionally contends the illegality of the option
contract for lack of a separate consideration, as
required by Article 1479 of the Civil Code. 37 It claims
that the option contract is distinct from the main
contract of lease and must be supported by a
consideration other than the rental fees provided in the
agreement.38
On the other hand, Keppel maintains the validity of
both the agreement and the option contract it contains.
It opposes the claim that there was "virtual sale" of the
land, noting that the option is subject to the condition
that Keppel becomes qualified to own private lands in
the Philippines.39 This condition ripened in 2000, when
at least 60% of Keppel’s equity became Filipino-
owned.
Keppel contends that the agreement is not a scheme
designed to circumvent the constitutional prohibition.
Lusteveco was not proscribed from alienating its
ownership rights over the land but was simply required
to secure Keppel’s prior written consent. 40 Indeed,
Lusteveco was able to transfer its interest to PNOC
without any objection from Keppel.41
Keppel also posits that the requirement of a separate
consideration for an option to purchase applies only
when the option is granted in a separate contract. 42 In
the present case, the option is embodied in a
reciprocal contract and, following the Court’s ruling
in Vda. De Quirino v. Palarca,43 the option is supported
by the same consideration supporting the main
contract.
From the parties’ arguments, the
following ISSUES emerge:
First, the constitutionality of the Agreement, i.e.,
whether the terms of the Agreement amounted to a
virtual sale of the land to Keppel that was designed to
circumvent the constitutional prohibition on aliens
owning lands in the Philippines.
Second, the validity of the option contract, i.e., whether
the option to purchase the land given to Keppel is
supported by a separate valuable consideration.
If these issues are resolved in favour of Keppel,
a third issue emerges – one that was not considered
by the lower courts, but is critical in terms of
determining Keppel’s right to own and acquire full title
to the land, i.e., whether Keppel’s equity ownership
meets the 60% Filipino-owned capital requirement of
the Constitution, in accordance with the Court’s ruling
in Gamboa v. Teves.44
THE COURT’S RULING
I. The constitutionality of the Agreement
The Court affirms the constitutionality of the
Agreement.
Preserving the ownership of land, whether public or
private, in Filipino hands is the policy consistently
adopted in all three of our constitutions. 45 Under the
1935,46 1973,47 and 198748 Constitutions, no private
land shall be transferred, assigned, or conveyed
except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain.
42 | P a g e
Consequently, only Filipino citizens, or corporations or
associations whose capital is 60% owned by Filipinos
citizens, are constitutionally qualified to own private
lands.
Upholding this nationalization policy, the Court has
voided not only outright conveyances of land to
foreigners,49 but also arrangements where the rights of
ownership were gradually transferred to
foreigners.50 In Lui Shui,51 we considered a 99-year
lease agreement, which gave the foreigner-lessee the
option to buy the land and prohibited the Filipino
owner-lessor from selling or otherwise disposing the
land, amounted to –
a virtual transfer of ownership whereby the owner
divests himself in stages not only of the right to enjoy
the land (jus possidendi, jus utendi, jus
fruendi, and jus abutendi) but also of the right to
dispose of it (jus disponendi) — rights the sum total of
which make up ownership.52 [emphasis supplied]
In the present case, PNOC submits that a similar
scheme is apparent from the agreement’s terms, but a
review of the overall circumstances leads us to reject
PNOC’s claim.
The agreement was executed to enable Keppel to use
the land for its shipbuilding and ship repair
business.53 The industrial/commercial purpose behind
the agreement differentiates the present case from Lui
She where the leased property was primarily devoted
to residential use.54 Undoubtedly, the establishment
and operation of a shipyard business involve
significant investments. Keppel’s uncontested
testimony showed that it incurred P60 million costs
solely for preliminary activities to make the land
suitable as a shipyard, and subsequently introduced
improvements worth P177 million.55 Taking these
investments into account and the nature of the
business that Keppel conducts on the land, we find it
reasonable that the agreement’s terms provided for an
extended duration of the lease and a restriction on the
rights of Lusteveco.
We observe that, unlike in Lui She,56 Lusteveco was
not completely denied its ownership rights during the
course of the lease. It could dispose of the lands or
assign its rights thereto, provided it secured Keppel’s
prior written consent.57 That Lusteveco was able to
convey the land in favour of PNOC during the
pendency of the lease58 should negate a finding that
the agreement’s terms amounted to a virtual transfer of
ownership of the land to Keppel.
II. The validity of the option contract
II.A An option contract must be supported by a
separate consideration that is either clearly
specified as such in the contract or duly proven by
the offeree/promisee.
An option contract is defined in the second paragraph
of Article 1479 of the Civil Code:
Article 1479. x x x An accepted promise to buy or to
sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a
consideration distinct from the price.
An option contract is a contract where one person
(the offeror/promissor) grants to another person (the
offeree/promisee) the right or privilege to buy (or to
sell) a determinate thing at a fixed price, if he or she
chooses to do so within an agreed period.59
As a contract, it must necessarily have the essential
elements of subject matter, consent, and
consideration.60 Although an option contract is deemed
a preparatory contract to the principal contract of
sale,61 it is separate and distinct therefrom, 62 thus, its
essential elements should be distinguished from those
of a sale.63
In an option contract, the subject matter is the right or
privilege to buy (or to sell) a determinate thing for a
price certain,64 while in a sales contract, the subject
matter is the determinate thing itself. 65 The consent in
an option contract is the acceptance by the offeree of
the offeror’s promise to sell (or to buy) the determinate
thing, i.e., the offeree agrees to hold the right or
privilege to buy (or to sell) within a specified period.
This acceptance is different from the acceptance of the
offer itself whereby the offeree asserts his or her right
or privilege to buy (or to sell), which constitutes as his
or her consent to the sales contract.
The consideration in an option contract may be
anything of value, unlike in a sale where the purchase
price must be in money or its equivalent. 66 There is
sufficient consideration for a promise if there is any
benefit to the offeree or any detriment to the offeror. 67
In the present case, PNOC claims the option contract
is void for want of consideration distinct from the
purchase price for the land.68 The option is
incorporated as paragraph 5 of the Agreement and
reads as
5. If within the period of the first [25] years [Keppel]
becomes qualified to own land under the laws of the
Philippines, it has the firm and absolute option to
purchase the above property for a total price of
[₱4,090,000.00] at the end of the 25th year, discounted
at 16% annual for every year before the end of the
25th year, which amount may be converted into equity
of [Keppel] at book value prevailing at the time of sale,
or paid in cash at Lusteveco’s option.
However, if after the first [25] years, [Keppel] is still not
qualified to own land under the laws of the Republic of
the Philippines, [Keppel’s] lease of the above stated
property shall be automatically renewed for another
[25] years, under the same terms and conditions save
for the rental price which shall be for the sum of
43 | P a g e
₱4,090,000.00... and which sum may be totally
converted into equity of [Keppel] at book value
prevailing at the time of conversion, or paid in cash at
Lusteveco’s option.
If anytime within the second [25] years up to the [30th]
year from the date of this agreement, [Keppel]
becomes qualified to own land under the laws of the
Republic of the Philippines, [Keppel] has the firm and
absolute option to buy and Lusteveco hereby
undertakes to sell the above stated property for the
nominal consideration of [₱100.00.00]...69
Keppel counters that a separate consideration is not
necessary to support its option to buy because the
option is one of the stipulations of the lease contract. It
claims that a separate consideration is required only
when an option to buy is embodied in an independent
contract.70 It relies on Vda. de Quirino v.
Palarca,71 where the Court declared that the option to
buy the leased property is supported by the same
consideration as that of the lease itself: "in reciprocal
contracts [such as lease], the obligation or promise of
each party is the consideration for that of the other." 72
In considering Keppel’s submission, we note that the
Court’s ruling in 1969 in Vda. de Quirino v. Palarca has
been taken out of context and erroneously applied in
subsequent cases. In 2004, through Bible Baptist
Church v. CA,73 we revisited Vda. de Quirino v.
Palarca and observed that the option to buy given to
the lessee Palarca by the lessor Quirino was in fact
supported by a separate consideration: Palarca paid a
higher amount of rent and, in the event that he does
not exercise the option to buy the leased property,
gave Quirino the option to buy the improvements he
introduced thereon. These additional concessions
were separate from the purchase price and deemed by
the Court as sufficient consideration to support the
option contract.
Vda. de Quirino v. Palarca, therefore, should not be
regarded as authority that the mere inclusion of an
option contract in a reciprocal lease contract provides
it with the requisite separate consideration for its
validity. The reciprocal contract should be closely
scrutinized and assessed whether it contains
additional concessions that the parties intended to
constitute as a consideration for the option
contract, separate from that of the purchase price.
In the present case, paragraph 5 of the agreement
provided that should Keppel exercise its option to buy,
Lusteveco could opt to convert the purchase price into
equity in Keppel. May Lusteveco’s option to convert
the price for shares be deemed as a sufficient
separate consideration for Keppel’s option to buy?
As earlier mentioned, the consideration for an option
contract does not need to be monetary and may be
anything of value.74 However, when the
consideration is not monetary, the consideration
must be clearly specified as such in the option
contract or clause.75
In Villamor v. CA,76 the parties executed a deed
expressly acknowledging that the purchase price of
₱70.00 per square meter "was greatly higher than the
actual reasonable prevailing value of lands in that
place at that time."77 The difference between the
purchase price and the prevailing value constituted as
the consideration for the option contract. Although the
actual amount of the consideration was not stated, it
was ascertainable from the contract whose terms
evinced the parties’ intent to constitute this amount as
consideration for the option contract. 78 Thus, the Court
upheld the validity of the option contract. 79 In the light
of the offeree’s acceptance of the option, the Court
further declared that a bilateral contract to sell and buy
was created and that the parties’ respective obligations
became reciprocally demandable.80
When the written agreement itself does not state
the consideration for the option contract, the
offeree or promisee bears the burden of proving
the existence of a separate consideration for the
option.81 The offeree cannot rely on Article 1354 of the
Civil Code,82 which presumes the existence of
consideration, since Article 1479 of the Civil Code is a
specific provision on option contracts that explicitly
requires the existence of a consideration distinct from
the purchase price.83
In the present case, none of the above rules were
observed. We find nothing in paragraph 5 of the
Agreement indicating that the grant to Lusteveco of the
option to convert the purchase price for Keppel shares
was intended by the parties as the consideration for
Keppel’s option to buy the land; Keppel itself as the
offeree presented no evidence to support this finding.
On the contrary, the option to convert the purchase
price for shares should be deemed part of the
consideration for the contract of sale itself, since the
shares are merely an alternative to the actual cash
price.1âwphi1
There are, however cases where, despite the absence
of an express intent in the parties’ agreements, the
Court considered the additional concessions stipulated
in an agreement to constitute a sufficient separate
consideration for the option contract.
In Teodoro v. CA,84 the sub-lessee (Teodoro) who was
given the option to buy the land assumed the
obligation to pay not only her rent as sub-lessee, but
also the rent of the sub-lessor (Ariola) to the primary
lessor (Manila Railroad Company).85 In other words,
Teodoro paid an amount over and above the amount
due for her own occupation of the property, and this
amount was found by the Court as sufficient
consideration for the option contract.86
In Dijamco v. CA,87 the spouses Dijamco failed to pay
their loan with the bank, allowing the latter to foreclose
the mortgage.88 Since the spouses Dijamco did not
44 | P a g e
exercise their right to redeem, the bank consolidated
its ownership over the mortgaged property. 89 The
spouses Dijamco later proposed to purchase the same
property by paying a purchase price of ₱622,095.00
(equivalent to their principal loan) and a monthly
amount of ₱13,478.00 payable for 12 months
(equivalent to the interest on their principal loan). They
further stated that should they fail to make a monthly
payment, the proposal should be automatically
revoked and all payments be treated as rentals for
their continued use of the property. 90 The Court treated
the spouses Dijamco’s proposal to purchase the
property as an option contract, and the consideration
for which was the monthly interest
payments.91 Interestingly, this ruling was made despite
the categorical stipulation that the monthly interest
payments should be treated as rent for the spouses
Dijamco’s continued possession and use of the
foreclosed property.
At the other end of the jurisprudential spectrum are
cases where the Court refused to consider the
additional concessions stipulated in agreements as
separate consideration for the option contract.
In Bible Baptist Church v. CA,92 the lessee (Bible
Baptist Church) paid in advance ₱84,000.00 to the
lessor in order to free the property from an
encumbrance. The lessee claimed that the advance
payment constituted as the separate consideration for
its option to buy the property. 93 The Court, however,
disagreed noting that the ₱84,000.00 paid in advance
was eventually offset against the rent due for the first
year of the lease, "such that for the entire year from
1985 to 1986 the [Bible Baptist Church] did not pay
monthly rent."94 Hence, the Court refused to recognize
the existence of a valid option contract.95
What Teodoro, Dijamco, and Bible Baptist
Church show is that the determination of whether the
additional concessions in agreements are sufficient to
support an option contract, is fraught with danger; in
ascertaining the parties’ intent on this matter, a court
may read too much or too little from the facts before it.
For uniformity and consistency in contract
interpretation, the better rule to follow is that the
consideration for the option contract should be
clearly specified as such in the option contract or
clause. Otherwise, the offeree must bear the
burden of proving that a separate consideration for
the option contract exists.
Given our finding that the Agreement did not
categorically refer to any consideration to support
Keppel’s option to buy and for Keppel’s failure to
present evidence in this regard, we cannot uphold the
existence of an option contract in this case.
II.B. An option, though unsupported by a separate
consideration, remains an offer that, if duly
accepted, generates into a contract to sell where
the parties’ respective obligations become
reciprocally demandable
The absence of a consideration supporting the option
contract, however, does not invalidate an offer to buy
(or to sell). An option unsupported by a separate
consideration stands as an unaccepted offer to
buy (or to sell) which, when properly accepted,
ripens into a contract to sell. This is the rule
established by the Court en banc as early as 1958
in Atkins v. Cua Hian Tek,96 and upheld in 1972
in Sanchez v. Rigos.97
Sanchez v. Rigos reconciled the apparent conflict
between Articles 1324 and 1479 of the Civil Code,
which are quoted below:
Article 1324. When the offerer has allowed the offeree
a certain period to accept, the offer may be withdrawn
at any time before acceptance by communicating such
withdrawal, except when the option is founded
upon a consideration, as something paid or
promised.
Article 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding
upon the promissor if the promise is supported by
a consideration distinct from the price. [emphases
supplied]
The Court en banc declared that there is no distinction
between these two provisions because the scenario
contemplated in the second paragraph of Article 1479
is the same as that in the last clause of Article
1324.98 Instead of finding a conflict, Sanchez v.
Rigos harmonised the two provisions, consistent with
the established rules of statutory construction.99
Thus, when an offer is supported by a separate
consideration, a valid option contract exists, i.e., there
is a contracted offer100 which the offeror cannot
withdraw from without incurring liability in damages.
On the other hand, when the offer is not supported by
a separate consideration, the offer stands but, in the
absence of a binding contract, the offeror may
withdraw it any time.101 In either case, once the
acceptance of the offer is duly
communicated before the withdrawal of the offer, a
bilateral contract to buy and sell is generated which, in
accordance with the first paragraph of Article 1479 of
the Civil Code, becomes reciprocally demandable.102
Sanchez v. Rigos expressly overturned the 1955 case
of Southwestern Sugar v. AGPC,103 which declared
that
a unilateral promise to buy or to sell, even if accepted,
is only binding if supported by a consideration... In
45 | P a g e
other words, an accepted unilateral promise can
only have a binding effect if supported by a
consideration, which means that the option can still
be withdrawn, even if accepted, if the same is not
supported by any consideration.104 [emphasis
supplied]
The Southwestern Sugar doctrine was based on the
reasoning that Article 1479 of the Civil Code is distinct
from Article 1324 of the Civil Code and is a provision
that specifically governs options to buy (or to
sell).105 As mentioned, Sanchez v. Rigos found no
conflict between these two provisions and accordingly
abandoned the Southwestern Sugar doctrine.
Unfortunately, without expressly overturning or
abandoning the Sanchez ruling, subsequent cases
reverted back to the Southwestern
Sugar doctrine.106 In 2009, Eulogio v. Apeles107 referred
to Southwestern Sugar v. AGPC as the controlling
doctrine108 and, due to the lack of a separate
consideration, refused to recognize the option to buy
as an offer that would have resulted in a sale given its
timely acceptance by the offeree. In 2010, Tuazon v.
Del Rosario-Suarez109 referred to Sanchez v. Rigos but
erroneously cited as part of its ratio decidendi that
portion of the Southwestern Sugar doctrine
that Sanchez had expressly abandoned.110
Given that the issue raised in the present case
involves the application of Article 1324 and 1479 of the
Civil Code, it becomes imperative for the Court [en
banc] to clarify and declare here which
between Sanchez and Southwestern Sugar is the
controlling doctrine.
The Constitution itself declares that "no doctrine or
principle of law laid down by the court in a decision
rendered en banc or in division may be modified or
reversed except by the court sitting en
banc."111 Sanchez v. Rigos was an en banc decision
which was affirmed in 1994 in Asuncion v. CA,112 also
an en banc decision, while the decisions citing
the Southwestern Sugar doctrine are all division
cases.113 Based on the constitutional rule (as well as
the inherent logic in reconciling Civil Code provisions),
there should be no doubt that Sanchez v.
Rigos remains as the controlling doctrine.
Accordingly, when an option to buy or to sell is not
supported by a consideration separate from the
purchase price, the option constitutes as an offer to
buy or to sell, which may be withdrawn by the offeror
at any time prior to the communication of the offeree’s
acceptance. When the offer is duly accepted, a mutual
promise to buy and to sell under the first paragraph of
Article 1479 of the Civil Code ensues and the parties’
respective obligations become reciprocally
demandable.
Applied to the present case, we find that the offer to
buy the land was timely accepted by Keppel.
As early as 1994, Keppel expressed its desire to
exercise its option to buy the land. Instead of rejecting
outright Keppel’s acceptance, PNOC referred the
matter to the Office of the Government Corporate
Counsel (OGCC). In its Opinion No. 160, series of
1994, the OGCC opined that Keppel "did not yet have
the right to purchase the Bauan lands."114 On account
of the OGCC opinion, the PNOC did not agree with
Keppel’s attempt to buy the land;115 nonetheless, the
PNOC made no categorical withdrawal of the offer to
sell provided under the Agreement.
By 2000, Keppel had met the required Filipino equity
proportion and duly communicated its acceptance of
the offer to buy to PNOC. 116 Keppel met with the board
of directors and officials of PNOC who interposed no
objection to the sale.117 It was only when the amount of
purchase price was raised that the conflict between the
parties arose,118 with PNOC backtracking in its position
and questioning the validity of the option.119
Thus, when Keppel communicated its acceptance, the
offer to purchase the Bauan land stood, not having
been withdrawn by PNOC. The offer having been
duly accepted, a contract to sell the land ensued
which Keppel can rightfully demand PNOC to
comply with.
III. Keppel’s constitutional right to acquire full title
to the land
Filipinization is the spirit that pervades the
constitutional provisions on national patrimony and
economy. The Constitution has reserved the ownership
of public and private lands,120 the ownership and
operation of public utilities,121 and certain areas of
investment122 to Filipino citizens, associations, and
corporations. To qualify, sixty per cent (60%) of the
association or corporation’s capital must be owned by
Filipino citizens. Although the 60% Filipino equity
proportion has been adopted in our Constitution since
1935, it was only in 2011 that the Court interpreted
what the term capital constituted.
In Gamboa v. Teves,123 the Court declared that the
"legal and beneficial ownership of 60 percent of the
outstanding capital stock must rest in the hands of
Filipino nationals."124 Clarifying the ruling, the Court
decreed that the 60% Filipino ownership
requirement applies separately to each class of
shares, whether with or without voting rights,125 thus:
Applying uniformly the 60-40 ownership requirement in
favour of Filipino citizens to each class of shares,
regardless of differences in voting rights, privileges
and restrictions, guarantees effective Filipino control of
public utilities, as mandated by the Constitution.126
Although the ruling was made in the context of
ownership and operation of public utilities, the same
should be applied to the ownership of public and
private lands, since the same proportion of Filipino
46 | P a g e
ownership is required and the same nationalist policy
pervades.
The uncontested fact is that, as of November 2000,
Keppel's capital is 60% Filipino-owned.127 However,
there is nothing in the records showing the nature and
composition of Keppel' s shareholdings, i.e., whether
its shareholdings are divided into different classes, and
60% of each share class is legally and beneficially
owned by Filipinos - understandably because when
Keppel exercised its option to buy the land in 2000,
the Gamboa ruling had not yet been promulgated. The
Court cannot deny Keppel its option to buy the land by
retroactively applying the Gamboa ruling without
violating Keppel's vested right. Thus, Keppel's failure
to prove the nature and composition of its
shareholdings in 2000 could not prevent it from validly
exercising its option to buy the land.
Nonetheless, the Court cannot completely disregard
the effect of the Gamboa ruling; the 60% Filipino equity
proportion is a continuing requirement to hold land in
the Philippines. Even in Gamboa, the Court
prospectively applied its ruling, thus enabling the
public utilities to meet the nationality requirement
before the Securities and Exchange Commission
commences administrative investigation and cases,
and imposes sanctions for noncompliance on erring
corporations.128 In this case, Keppel must be allowed
to prove whether it meets the required Filipino equity
ownership and proportion in accordance with
the Gamboa ruling before it can acquire full title to the
land.
In view of the foregoing, the Court AFFIRMS the decision
dated 19 December 2011 and the resolution dated 14 May
2012 of the CA in CA-G.R. CV No. 86830 insofar as these
rulings uphold the respondent Keppel Philippines Holdings,
Inc.' s option to buy the land, and REMANDS the case to the
Regional Trial Court of Batangas City, Branch 84, for the
determination of whether the respondent Keppel
Philippines Holdings, Inc. meets the required Filipino equity
ownership and proportion in accordance with the Court's
ruling in Gamboa v. Teves, to allow it to acquire full title to
the land.
SO ORDERED.
 G.R. No. 115838 July 18, 2002

CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE

CASTRO, petitioners,
vs.
COURT OF APPEALS and FRANCISCO ARTIGO, respondents.

CARPIO, J.:

The Case

Before us is a Petition for Review on Certiorari 1 seeking to

annul the Decision of the Court of Appeals 2 dated May 4,
1994 in CA-G.R. CV No. 37996, which affirmed in toto the
decision3 of the Regional Trial Court of Quezon City, Branch
80, in Civil Case No. Q-89-2631. The trial court disposed as
follows:

"WHEREFORE, the Court finds defendants

Constante and Corazon Amor de Castro jointly and
solidarily liable to plaintiff the sum of:

a) P303,606.24 representing unpaid commission;

b) P25,000.00 for and by way of moral damages;

c) P45,000.00 for and by way of attorney's fees;

d) To pay the cost of this suit.

47 | P a g e
 Quezon City, Metro Manila, December 20, 1991."
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo
("Artigo" for brevity) sued petitioners Constante A. De
Castro ("Constante" for brevity) and Corazon A. De Castro
("Corazon" for brevity) to collect the unpaid balance of his
broker's commission from the De Castros. 4 The Court of
Appeals summarized the facts in this wise:
"x x x. Appellants5 were co-owners of four (4) lots
located at EDSA corner New York and Denver
Streets in Cubao, Quezon City. In a letter dated
January 24, 1984 (Exhibit "A-1, p. 144, Records),
appellee6 was authorized by appellants to act as
real estate broker in the sale of these properties
for the amount of P23,000,000.00, five percent
(5%) of which will be given to the agent as
commission. It was appellee who first found Times
Transit Corporation, represented by its president
Mr. Rondaris, as prospective buyer which desired
to buy two (2) lots only, specifically lots 14 and 15.
Eventually, sometime in May of 1985, the sale of
lots 14 and 15 was consummated. Appellee
received from appellants P48,893.76 as
commission.
It was then that the rift between the contending
parties soon emerged. Appellee apparently felt
short changed because according to him, his total
commission should be P352,500.00 which is five
percent (5%) of the agreed price of P7,050,000.00
paid by Times Transit Corporation to appellants for
the two (2) lots, and that it was he who introduced
the buyer to appellants and unceasingly facilitated
the negotiation which ultimately led to the
consummation of the sale. Hence, he sued below
to collect the balance of P303,606.24 after having
received P48,893.76 in advance.1âwphi1.nêt
On the other hand, appellants completely traverse
appellee's claims and essentially argue that
appellee is selfishly asking for more than what he
truly deserved as commission to the prejudice of
other agents who were more instrumental in the
consummation of the sale. Although appellants
readily concede that it was appellee who first
introduced Times Transit Corp. to them, appellee
was not designated by them as their exclusive real
estate agent but that in fact there were more or
less eighteen (18) others whose collective efforts in
the long run dwarfed those of appellee's,
considering that the first negotiation for the sale
where appellee took active participation failed and
it was these other agents who successfully
brokered in the second negotiation. But despite
this and out of appellants' "pure liberality,
beneficence and magnanimity", appellee
nevertheless was given the largest cut in the
48 | P a g e
commission (P48,893.76), although on the
principle of quantum meruit he would have
certainly been entitled to less. So appellee should
not have been heard to complain of getting only a
pittance when he actually got the lion's share of
the commission and worse, he should not have
been allowed to get the entire commission.
Furthermore, the purchase price for the two lots
was only P3.6 million as appearing in the deed of
sale and not P7.05 million as alleged by appellee.
Thus, even assuming that appellee is entitled to
the entire commission, he would only be getting
5% of the P3.6 million, or P180,000.00."
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the
trial court.
First. The Court of Appeals found that Constante authorized
Artigo to act as agent in the sale of two lots in Cubao,
Quezon City. The handwritten authorization letter signed by
Constante clearly established a contract of agency between
Constante and Artigo. Thus, Artigo sought prospective
buyers and found Times Transit Corporation ("Times
Transit" for brevity). Artigo facilitated the negotiations
which eventually led to the sale of the two lots. Therefore,
the Court of Appeals decided that Artigo is entitled to the
5% commission on the purchase price as provided in the
contract of agency.
Second. The Court of Appeals ruled that Artigo's complaint
is not dismissible for failure to implead as indispensable
parties the other co-owners of the two lots. The Court of
Appeals explained that it is not necessary to implead the
other co-owners since the action is exclusively based on a
contract of agency between Artigo and Constante.
Third. The Court of Appeals likewise declared that the trial
court did not err in admitting parol evidence to prove the
true amount paid by Times Transit to the De Castros for the
two lots. The Court of Appeals ruled that
evidence aliunde could be presented to prove that the
actual purchase price was P7.05 million and not P3.6 million
as appearing in the deed of sale. Evidence aliunde is
admissible considering that Artigo is not a party, but a mere
witness in the deed of sale between the De Castros and
Times Transit. The Court of Appeals explained that, "the
rule that oral evidence is inadmissible to vary the terms of
written instruments is generally applied only in suits
between parties to the instrument and strangers to the
contract are not bound by it." Besides, Artigo was not suing
under the deed of sale, but solely under the contract of
agency. Thus, the Court of Appeals upheld the trial court's
finding that the purchase price was P7.05 million and not
P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -
I. NOT ORDERING THE DISMISSAL OF THE
COMPLAINT FOR FAILURE TO IMPLEAD
INDISPENSABLE PARTIES-IN-INTEREST;
II. NOT ORDERING THE DISMISSAL OF THE
COMPLAINT ON THE GROUND THAT ARTIGO'S
CLAIM HAS BEEN EXTINGUISHED BY FULL
PAYMENT, WAIVER, OR ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED
TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES
AND ATTORNEY'S FEES;
VI. NOT AWARDING THE DE CASTRO'S MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEY'S FEES.
The Court's Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for
failure to implead other co-owners as indispensable
parties
The De Castros argue that Artigo's complaint should have
been dismissed for failure to implead all the co-owners of
the two lots. The De Castros claim that Artigo always knew
that the two lots were co-owned by Constante and Corazon
with their other siblings Jose and Carmela whom Constante
merely represented. The De Castros contend that failure to
implead such indispensable parties is fatal to the complaint
since Artigo, as agent of all the four co-owners, would be
paid with funds co-owned by the four co-owners.
The De Castros' contentions are devoid of legal basis.
An indispensable party is one whose interest will be
affected by the court's action in the litigation, and without
whom no final determination of the case can be had. 7 The
joinder of indispensable parties is mandatory and courts
cannot proceed without their presence.8 Whenever it
appears to the court in the course of a proceeding that an
indispensable party has not been joined, it is the duty of
the court to stop the trial and order the inclusion of such
party.9
However, the rule on mandatory joinder of indispensable
parties is not applicable to the instant case.
49 | P a g e
There is no dispute that Constante appointed Artigo in a
handwritten note dated January 24, 1984 to sell the
properties of the De Castros for P23 million at a 5 percent
commission. The authority was on a first come, first serve
basis. The authority reads in full:
"24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is
authorized as our real estate broker in connection
with the sale of our property located at Edsa
Corner New York & Denver, Cubao, Quezon City.
Asking price P 23,000,000.00 with 5% commission
as agent's fee.
C.C. de Castro
owner & representing
co-owners
This authority is on a first-come
First serve basis –CAC"
Constante signed the note as owner and as representative
of the other co-owners. Under this note, a contract of
agency was clearly constituted between Constante and
Artigo. Whether Constante appointed Artigo as agent, in
Constante's individual or representative capacity, or both,
the De Castros cannot seek the dismissal of the case for
failure to implead the other co-owners as indispensable
parties. The De Castros admit that the other co-owners are
solidarily liable under the contract of agency,10 citing
Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed
an agent for a common transaction or undertaking,
they shall be solidarily liable to the agent for all the
consequences of the agency.
The solidary liability of the four co-owners, however,
militates against the De Castros' theory that the other co-
owners should be impleaded as indispensable parties. A
noted commentator explained Article 1915 thus –
"The rule in this article applies even when the
appointments were made by the principals in
separate acts, provided that they are for the same
transaction. The solidarity arises from the
common interest of the principals, and not from
the act of constituting the agency. By virtue of
this solidarity, the agent can recover from any
principal the whole compensation and indemnity
owing to him by the others. The parties, however,
may, by express agreement, negate this solidary
 responsibility. The solidarity does not disappear by
the mere partition effected by the principals after
the accomplishment of the agency.
If the undertaking is one in which several are
interested, but only some create the agency, only
the latter are solidarily liable, without prejudice to
the effects of negotiorum gestio with respect to
the others. And if the power granted includes
various transactions some of which are common
and others are not, only those interested in each
transaction shall be liable for it."11
When the law expressly provides for solidarity of the
obligation, as in the liability of co-principals in a contract of
agency, each obligor may be compelled to pay the entire
obligation.12 The agent may recover the whole
compensation from any one of the co-principals, as in this
case.
Indeed, Article 1216 of the Civil Code provides that a
creditor may sue any of the solidary debtors. This article
reads:
Art. 1216. The creditor may proceed against any
one of the solidary debtors or some or all of them
simultaneously. The demand made against one of
them shall not be an obstacle to those which may
subsequently be directed against the others, so
long as the debt has not been fully collected.
Thus, the Court has ruled in Operators Incorporated vs.
American Biscuit Co., Inc.13 that –
"x x x solidarity does not make a solidary obligor
an indispensable party in a suit filed by the
creditor. Article 1216 of the Civil Code says that
the creditor `may proceed against anyone of the
solidary debtors or some or all of them
simultaneously'." (Emphasis supplied)
Second Issue: whether Artigo's claim has been
extinguished by full payment, waiver or abandonment
The De Castros claim that Artigo was fully paid on June 14,
1985, that is, Artigo was given "his proportionate share and
no longer entitled to any balance." According to them,
Artigo was just one of the agents involved in the sale and
entitled to a "proportionate share" in the commission. They
assert that Artigo did absolutely nothing during the second
negotiation but to sign as a witness in the deed of sale. He
did not even prepare the documents for the transaction as
an active real estate broker usually does.
The De Castros' arguments are flimsy.
A contract of agency which is not contrary to law, public
order, public policy, morals or good custom is a valid
contract, and constitutes the law between the parties. 14 The
50 | P a g e
contract of agency entered into by Constante with Artigo is
the law between them and both are bound to comply with
its terms and conditions in good faith.
The mere fact that "other agents" intervened in the
consummation of the sale and were paid their respective
commissions cannot vary the terms of the contract of
agency granting Artigo a 5 percent commission based on
the selling price. These "other agents" turned out to be
employees of Times Transit, the buyer Artigo introduced to
the De Castros. This prompted the trial court to observe:
"The alleged `second group' of agents came into
the picture only during the so-called `second
negotiation' and it is amusing to note that these
(sic) second group, prominent among whom are
Atty. Del Castillo and Ms. Prudencio, happened to
be employees of Times Transit, the buyer of the
properties. And their efforts were limited to
convincing Constante to 'part away' with the
properties because the redemption period of the
foreclosed properties is around the corner, so to
speak. (tsn. June 6, 1991).
xxx
To accept Constante's version of the story is to
open the floodgates of fraud and deceit. A seller
could always pretend rejection of the offer and
wait for sometime for others to renew it who are
much willing to accept a commission far less than
the original broker. The immorality in the instant
case easily presents itself if one has to consider
that the alleged `second group' are the
employees of the buyer, Times Transit and they
have not bettered the offer secured by Mr. Artigo
for P7 million.
It is to be noted also that while Constante was too
particular about the unrenewed real estate
broker's license of Mr. Artigo, he did not bother at
all to inquire as to the licenses of Prudencio and
Castillo. (tsn, April 11, 1991, pp. 39-
40)."15 (Emphasis supplied)
In any event, we find that the 5 percent real estate broker's
commission is reasonable and within the standard practice
in the real estate industry for transactions of this nature.
The De Castros also contend that Artigo's inaction as well as
failure to protest estops him from recovering more than
what was actually paid him. The De Castros cite Article 1235
of the Civil Code which reads:
Art. 1235. When the obligee accepts the
performance, knowing its incompleteness and
irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied
with.
The De Castros' reliance on Article 1235 of the Civil Code is
misplaced. Artigo's acceptance of partial payment of his
commission neither amounts to a waiver of the balance nor
puts him in estoppel. This is the import of Article 1235
which was explained in this wise:
"The word accept, as used in Article 1235 of the
Civil Code, means to take as satisfactory or
sufficient, or agree to an incomplete or irregular
performance. Hence, the mere receipt of a partial
payment is not equivalent to the required
acceptance of performance as would extinguish
the whole obligation."16 (Emphasis supplied)
There is thus a clear distinction between acceptance and
mere receipt. In this case, it is evident that Artigo merely
received the partial payment without waiving the balance.
Thus, there is no estoppel to speak of.
The De Castros further argue that laches should apply
because Artigo did not file his complaint in court until May
29, 1989, or almost four years later. Hence, Artigo's claim
for the balance of his commission is barred by laches.
Laches means the failure or neglect, for an unreasonable
and unexplained length of time, to do that which by
exercising due diligence could or should have been done
earlier. It is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to
assert it.17
Artigo disputes the claim that he neglected to assert his
rights. He was appointed as agent on January 24, 1984. The
two lots were finally sold in June 1985. As found by the trial
court, Artigo demanded in April and July of 1985 the
payment of his commission by Constante on the basis of the
selling price of P7.05 million but there was no response
from Constante.18 After it became clear that his demands
for payment have fallen on deaf ears, Artigo decided to sue
on May 29, 1989.
Actions upon a written contract, such as a contract of
agency, must be brought within ten years from the time the
right of action accrues.19 The right of action accrues from
the moment the breach of right or duty occurs. From this
moment, the creditor can institute the action even as the
ten-year prescriptive period begins to run.20
The De Castros admit that Artigo's claim was filed within
the ten-year prescriptive period. The De Castros, however,
still maintain that Artigo's cause of action is barred by
laches. Laches does not apply because only four years had
lapsed from the time of the sale in June 1985. Artigo made
a demand in July 1985 and filed the action in court on May
29, 1989, well within the ten-year prescriptive period. This
does not constitute an unreasonable delay in asserting
one's right. The Court has ruled, "a delay within the
prescriptive period is sanctioned by law and is not
51 | P a g e
considered to be a delay that would bar relief." 21 In
explaining that laches applies only in the absence of a
statutory prescriptive period, the Court has stated -
"Laches is recourse in equity. Equity, however, is
applied only in the absence, never in
contravention, of statutory law. Thus, laches,
cannot, as a rule, be used to abate a collection
suit filed within the prescriptive period mandated
by the Civil Code."22
Clearly, the De Castros' defense of laches finds no support
in law, equity or jurisprudence.
Third issue: whether the determination of the purchase
price was made in violation of the Rules on Evidence
The De Castros want the Court to re-examine the probative
value of the evidence adduced in the trial court to
determine whether the actual selling price of the two lots
was P7.05 million and not P3.6 million. The De Castros
contend that it is erroneous to base the 5 percent
commission on a purchase price of P7.05 million as ordered
by the trial court and the appellate court. The De Castros
insist that the purchase price is P3.6 million as expressly
stated in the deed of sale, the due execution and
authenticity of which was admitted during the trial.
The De Castros believe that the trial and appellate courts
committed a mistake in considering incompetent evidence
and disregarding the best evidence and parole evidence
rules. They claim that the Court of Appeals erroneously
affirmed sub silentio the trial court's reliance on the various
correspondences between Constante and Times Transit
which were mere photocopies that do not satisfy the best
evidence rule. Further, these letters covered only the first
negotiations between Constante and Times Transit which
failed; hence, these are immaterial in determining the final
purchase price.
The De Castros further argue that if there was an
undervaluation, Artigo who signed as witness benefited
therefrom, and being equally guilty, should be left where he
presently stands. They likewise claim that the Court of
Appeals erred in relying on evidence which were not
offered for the purpose considered by the trial court.
Specifically, Exhibits "B", "C", "D" and "E" were not offered
to prove that the purchase price was P7.05 Million. Finally,
they argue that the courts a quo erred in giving credence to
the perjured testimony of Artigo. They want the entire
testimony of Artigo rejected as a falsehood because he was
lying when he claimed at the outset that he was a licensed
real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as
found by the trial court and affirmed by the Court of
Appeals, or P3.6 Million as claimed by the De Castros, is a
question of fact and not of law. Inevitably, this calls for an
inquiry into the facts and evidence on record. This we can
not do.
It is not the function of this Court to re-examine the
evidence submitted by the parties, or analyze or weigh the
evidence again.23 This Court is not the proper venue to
consider a factual issue as it is not a trier of facts. In
petitions for review on certiorari as a mode of appeal under
Rule 45, a petitioner can only raise questions of law. Our
pronouncement in the case of Cormero vs. Court of
Appeals24 bears reiteration:
"At the outset, it is evident from the errors
assigned that the petition is anchored on a plea to
review the factual conclusion reached by the
respondent court. Such task however is foreclosed
by the rule that in petitions for certiorari as a
mode of appeal, like this one, only questions of
law distinctly set forth may be raised. These
questions have been defined as those that do not
call for any examination of the probative value of
the evidence presented by the parties. (Uniland
Resources vs. Development Bank of the
Philippines, 200 SCRA 751 [1991] citing Goduco vs.
Court of appeals, et al., 119 Phil. 531; Hernandez
vs. Court of Appeals, 149 SCRA 67). And when this
court is asked to go over the proof presented by
the parties, and analyze, assess and weigh them to
ascertain if the trial court and the appellate court
were correct in according superior credit to this or
that piece of evidence and eventually, to the
totality of the evidence of one party or the other,
the court cannot and will not do the same. (Elayda
vs. Court of Appeals, 199 SCRA 349 [1991]). Thus,
in the absence of any showing that the findings
complained of are totally devoid of support in the
record, or that they are so glaringly erroneous as
to constitute serious abuse of discretion, such
findings must stand, for this court is not expected
or required to examine or contrast the oral and
documentary evidence submitted by the parties.
(Morales vs. Court of Appeals, 197 SCRA 391
[1991] citing Santa Ana vs. Hernandez, 18 SCRA
973 [1966])."
Law and jurisprudence support the award of moral
damages and attorney's fees in favor of Artigo. The award
of damages and attorney's fees is left to the sound
discretion of the court, and if such discretion is well
exercised, as in this case, it will not be disturbed on
appeal.25 Moral damages may be awarded when in a breach
of contract the defendant acted in bad faith, or in wanton
disregard of his contractual obligation.26 On the other hand,
attorney's fees are awarded in instances where "the
defendant acted in gross and evident bad faith in refusing
to satisfy the plaintiff's plainly valid, just and demandable
claim."27 There is no reason to disturb the trial court's
finding that "the defendants' lack of good faith and unkind
treatment of the plaintiff in refusing to give his due
commission deserve censure." This warrants the award
of P25,000.00 in moral damages and P 45,000.00 in
attorney's fees. The amounts are, in our view, fair and
reasonable. Having found a buyer for the two lots, Artigo
had already performed his part of the bargain under the
contract of agency. The De Castros should have exercised
fairness and good judgment in dealing with Artigo by
fulfilling their own part of the bargain - paying Artigo his 5
percent broker's commission based on the actual purchase
price of the two lots.
WHEREFORE, the petition is denied for lack of merit. The
Decision of the Court of Appeals dated May 4, 1994 in CA-
G.R. CV No. 37996 is AFFIRMED in toto. SO ORDERED.

We find no reason to depart from this principle. The trial

and appellate courts are in a much better position to
evaluate properly the evidence. Hence, we find no other
recourse but to affirm their finding on the actual purchase
price.1âwphi1.nêt

Fourth Issue: whether award of moral damages and

attorney's fees is proper

The De Castros claim that Artigo failed to prove that he is

entitled to moral damages and attorney's fees. The De
Castros, however, cite no concrete reason except to say that
they are the ones entitled to damages since the case was
filed to harass and extort money from them.

52 | P a g e