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G.R. No.

37207
JULIAN T. AGUNA, plaintiff-appellant,
vs.
ANTONIO LARENA, judicial administrator of the intestate estate of the deceased Mariano
Larena, defendant-appellee.
Ramirez & Ortigas for appellant.
Cardenas & Casal for appellee.
OSTRAND, J.:
This action is brought to recover the sum of P29,600 on two cause against the administrator of the estate of
the deceased Mariano Larena.
Upon his first cause of action, the plaintiff claims the sum of P9,600, the alleged value of the services rendered
by him to said deceased as his agent in charge of the deceased's houses situated in Manila. Under the second
cause of action the plaintiff alleges that one of the buildings belonging to the deceased and described in his
complaint was built by him with the consent of the deceased, and for that reason he is entitled to recover the
sum disbursed by him in its construction, amounting to P20,000.
From the evidence it appears undisputed that from February, 1922, to February, 1930, the plaintiff rendered
services to the deceased, consisting in the collection of the rents due from the tenants occupying the
deceased's houses in Manila and attending to the repair of said houses when necessary. He also took any
such steps as were necessary to enforce the payment of rents and all that was required to protect the interests
of the deceased in connection with said houses. The evidence also shows that during the time the plaintiff
rendered his services, he did not receive any compensation. It is, however, a fact admitted that during said
period the plaintiff occupied a house belonging to the deceased without paying any rent at all.
As to the building whose value is claimed by the plaintiff, the record shows that said building was really erected
on a parcel of land belonging to the deceased on Calle Victoria, Manila, and that the expenses for materials
and labor in the construction thereof were paid by the appellant, the construction having begun in 1926 and
terminated in 1928, but the ownership of the money interested in the building is in question.
Upon the first cause the plaintiff-appellant insists that, the services having been rendered, an obligation to
compensate them must necessarily arise. The trial court held that the compensation for the services of the
plaintiff was the gratuitous use and occupation of some of the houses of the deceased by the plaintiff and his
family. This conclusion is correct. if it were true that the plaintiff and the deceased had an understanding to the
effect that the plaintiff was to receive compensation aside from the use and occupation of the houses of the
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deceased, it cannot be explained how the plaintiff could have rendered services as he did for eight years
without receiving and claiming any compensation from the deceased.
As to the second cause, the evidence presented by the plaintiff is his own testimony, that of his witnesses, and
several documents, consisting of municipal permit, checks, vouchers, and invoices. The testimony of the
plaintiff's witnesses, the persons who sold the materials and furnished the labor, proves a few unimportant
facts, and as to the ownership of the money thus invested, there is only the testimony of the plaintiff-appellant,
who said that it all belonged to him and that his understanding with the deceased was that the latter would get
the rents of the house, and, upon his death, he would bequeath it to the plaintiff, but unfortunately, he died
intestate. This testimony, however, was objected to on the ground that it is prohibited by section 383,
paragraph 7, of the Code of Civil Procedure, which provides that the party to an action against an executor or
administrator cannot testify on any fact that took place before the death of the person against whose estate the
claim is presented. The lower court admitted this testimony but did not believe it. And certainly it cannot be
believed, even assuming it to be admissible, in view of the circumstances appearing undisputed in the record,
namely, the fact that the plaintiff-appellant did not have any source of income that could produce him such a
large sum of money as that invested in the construction of the house; and the fact that the deceased had more
than the necessary amount to build the house.
But above all, the facts appearing from Exhibit 40 are conclusive against the claim of the plaintiff-appellant.
Exhibit 40 is a book of accounts containing several items purporting to have been advanced by the deceased
to the plaintiff-appellant for the construction of the house. The plaintiff admitted that the first two lines
constituting the heading of the account on the first page were written by himself. Said two lines say: "Dinero
Tomado a Don Mariano Larena para la nueva casa." Appellant further admits that the first entry in Exhibit 40
was made by him and that the sum of P3,200 mentioned in the third entry was received by him. It is to be
noted that the first entry is dated February 1, 1926, and the last is under the date of December 31, 1927. The
other entries are admitted by the plaintiff-appellant to have been made by the deceased. Finally the appellant
admitted in cross-examination that this book, Exhibit 40, was his and that whenever he received money from
the deceased, he handed it to the deceased in order that the latter might enter what he had received. The total
of the items contained in this book is P17, 834.72, which is almost the amount invested in the construction of
the building. Furthermore, the items entered in Exhibit 40, appear in Exhibit 41 as withdrawn by the deceased
from his account with the Monte de Piedad, and a corresponding entry appears in Exhibit 43 showing a deposit
made by the plaintiff in his current account with the Philippine National Bank. From all of this it is clear that the
money invested in the construction of the building in question did not belong to the plaintiff.
The appealed judgment is affirmed, with the costs against the appellant. So ordered.
Street, Malcolm, Villa-Real, Abad Santos, Hull, Vickers, Imperial and Butte, JJ., concur.
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[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.
DECISION
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 decision[3] 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 attorneys 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 brokers commission from the De Castros.[4] The Court of Appeals summarized the facts in this wise:
x x x. Appellants[5] 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), appellee[6] 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.
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On the other hand, appellants completely traverse appellees 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 appellees, 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 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 lions 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 Artigos 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 courts 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 ARTIGOS
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 ATTORNEYS FEES;
VI. NOT AWARDING THE DE CASTROS MORAL AND EXEMPLARY DAMAGES, AND ATTORNEYS
FEES.
The Courts 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 Artigos complaint should have been dismissed for failure to implead all the coowners 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 courts 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.
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 P23,000,000.00 with
5% commission as agents fee.
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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 Constantes 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 coowners 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 Artigos 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 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 Constantes 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 brokers 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 brokers commission is reasonable and within the standard
practice in the real estate industry for transactions of this nature.
The De Castros also contend that Artigos 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. Artigos 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, Artigos 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 Artigos claim was filed within the ten-year prescriptive period. The De Castros,
however, still maintain that Artigos 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 ones right. The Court has ruled, a delay within the prescriptive period is
sanctioned by law and is not 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
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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 courts 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 Appeals[24] 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.
Fourth Issue: whether award of moral damages and attorneys fees is proper
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The De Castros claim that Artigo failed to prove that he is entitled to moral damages and attorneys
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.
Law and jurisprudence support the award of moral damages and attorneys fees in favor of Artigo. The
award of damages and attorneys 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, attorneys fees are awarded in instances where the defendant acted in gross and evident bad
faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim. [27] There is no reason to disturb
the trial courts 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 P45,000.00 in attorneys 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 brokers 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.
Puno, (Chairman), and Panganiban, JJ., concur.
Sandoval-Gutierrez, J., no part due to close family relation with a party.
[G.R. No. 76969. June 9, 1997]
INLAND REALTY INVESTMENT SERVICE, INC. and ROMAN M. DE LOS REYES, petitioners, vs. HON.
COURT OF APPEALS, GREGORIO ARANETA, INC. and J. ARMANDO EDUQUE, respondents.
DECISION
HERMOSISIMA, JR., J.:
Herein petitioners Inland Realty Investment Service, Inc. (hereafter, "Inland Realty") and Roman M. de los
Reyes seek the reversal of the Decision [1] of the Intermediate Appellate Court (now Court of Appeals) [2] which
affirmed the trial court's dismissal[3] of petitioners' claim for unpaid agent's commission for brokering the sales
transaction involving 9,800 shares of stock in Architects' Bldg., Inc. (hereafter, "Architects'") between private
respondent Gregorio Araneta, Inc. (hereafter, "Araneta, Inc.") as seller and Stanford Microsystems, Inc.
(hereafter, "Stanford") as buyer.
Petitioners come to us with a two-fold agenda: (1) to obtain from us a declaration that the trial court and
the respondent appellate court gravely erred when appreciating the facts of the case by disregarding Exhibits
"L," a Letter dated October 28, 1976 signed by Gregorio Araneta II, renewing petitioners' authority to act as
sales agent for a period of thirty (30) days from same date, and Exhibit "M," a Letter dated November 16, 1976
signed by petitioner de los Reyes, naming four (4) other prospective buyers, respectively; and (2) to obtain
from us a categorical ruling that a broker is automatically entitled to the stipulated commission merely upon
securing for, and introducing to, the seller the particular buyer who ultimately purchases from the former the
object of the sale, regardless of the expiration of the broker's contract of agency and authority to sell.
10

Before we proceed to address petitioners' objectives, there is a need to unfold the facts of the case. For
that purpose, we quote hereunder the findings of fact of the Court of Appeals with which petitioners agree,
except as to the respondent appellate court's non-inclusion of the aforementioned Exhibits "L" and "M":
"From the evidence, the following facts appear undisputed: On September 16, 1975, defendant corporation
thru its co-defendant Assistant General Manager J. Armando Eduque, granted to plaintiffs a 30-day authority to
sell its x x x 9,800 shares of stock in Architects' Bldg., Inc. as follows:
'September 16, 1975
TO WHOM IT MAY CONCERN:
This is to authorize Mr. R.M. de los Reyes, representing Inland Realty, to sell on a first come first served basis
the total holdings of Gregorio Araneta, Inc. in Architects' [Bldg.], Inc. equivalent to 98% or 9,800 shares of stock
at the price of P1,500.00 per share for a period of 30 days.
(SGD.) J. ARMANDO EDUQUE
Asst. General Manager'
Plaintiff Inland Realty Investment Service, Inc. (Inland Realty for short) is a corporation engaged [in], among
others x x x the real estate business [and] brokerages, duly licensed by the Bureau of Domestic Trade x x
x. [Inland Realty] planned their sales campaign, sending proposal letters to prospective buyers. One such
prospective buyer to whom a proposal letter was sent to was Stanford Microsystems, Inc. x x x [that] counterproposed to buy 9,800 shares offered at P1,000.00 per share or for a total of P9,800,000.00, P4,900,000.00
payable in five years at 12% per annum interest until fully paid.
Upon plaintiffs' receipt of the said counter-proposal, it immediately [sic] wrote defendant a letter to register
Stanford Microsystems, Inc. as one of its prospective buyers x x x. Defendant Araneta, Inc., thru its Assistant
General Manager J. Armando Eduque, replied that the price offered by Stanford was too low and suggested
that plaintiffs see if the price and terms of payment can be improved upon by Stanford x x x. Other prospective
buyers were submitted to defendants among whom were Atty. Maximo F. Belmonte and Mr. Joselito
Hernandez. The authority to sell given to plaintiffs by defendants was extended several times: the first being on
October 2, 1975, for 30 days from said date (Exh. 'J'), the second on October 28, 1975 for 30 days from said
date (Exh. 'L') and on December 2, 1975 for 30 days from said date (Exh. 'K').
Plaintiff Roman de los Reyes, manager of Inland Realty's brokerage division, who by contract with Inland
Realty would be entitled to 1/2 of the claim asserted herein, testified that when his company was initially
granted the authority to sell, he asked for an exclusive authority and for a longer period but Armando Eduque
would not give, but according to this witness, the life of the authority could always be extended for the purpose
of negotiation that would be continuing.
On July 8, 1977, plaintiffs finally sold the 9,800 shares of stock [in] Architects' [Bldg.], Inc. to Stanford
Microsystems, Inc. for P13,500,000.00 x x x.
On September 6, 1977, plaintiffs demanded formally [from] defendants, through a letter of demand, for
payment of their 5% broker['s] commission at P13,500,000.00 or a total amount of P675,000.00 x x x which
was declined by [defendants] on the ground that the claim has no factual or legal basis."[4]
Ascribing merit to private respondents' defense that, after their authority to sell expired thirty (30) days
from December 2, 1975, or on January 1, 1976, petitioners abandoned the sales transaction and were no
11

longer privy to the consummation and documentation thereof, the trial court dismissed petitioners' complaint for
collection of unpaid broker's commission.
Petitioners appealed, but the Court of Appeals was unswayed in the face of evidence of the expiration of
petitioners' agency contract and authority to sell on January 1, 1976 and the consummation of the sale to
Stanford on July 8, 1977 or more than one (1) year and five (5) months after petitioners' agency contract and
authority to sell expired. Respondent appellate court dismissed petitioners' appeal in this wise:
" x x x The resolution would seem to hinge on the question of whether plaintiff was instrumental in the final
consummation of the sale to Stanford which was the same name of the company submitted to defendants as a
prospective buyer although their price was considered by defendant to be too low and defendants wrote to
plaintiff if the price may be improved upon by Stanford x x x. This was on October 13, 1975. After that, there
was an extension for 30 days from October 28, 1975 of the authority (Exh. 'L') and another on December 2,
1975 for another 30 days from the said date x x x. x x x There is nothing in the record or in the testimonial
evidence that the authority extended 30 days from the last date of extension was ever reserved nor extended,
nor has there been any communication made to defendants that the plaintiff was actually negotiating with
Stanford a better price than what was previously offered by it x x x.
In fact there was no longer any agency after the last extension. Certainly, the length of time which had
transpired from the date of last extension of authority to the final consummation of the sale with Stanford of
about one (1) year and five (5) months without any communication at all from plaintiffs to defendants with
respect to the suggestion of defendants that Stanford's offer was too low and suggested if plaintiffs may make
it better. We have a case of proposal and counter-proposal which would not constitute a definite closing of the
transaction just because it was plaintiff who solely suggested to defendants the name of Stanford as buyer x x
x."[5]
Unable to accept the dismissal of its claim for unpaid broker's commission, petitioners filed the instant
petition for review asking us (1) to pass upon the factual issue of the alleged extension of their agency contract
and authority to sell and (2) to rule in favor of a broker's automatic entitlement to the stipulated commission
merely upon securing for, and introducing to, the seller, the particular buyer who ultimately purchases from the
former the object of the sale, regardless of the expiration of the broker's contract of agency and authority to
sell.
We find for private respondents.
I
Petitioners take exception to the finding of the respondent Court of Appeals that their contract of agency
and authority to sell expired thirty (30) days from its last renewal on December 2, 1975. They insist that, in the
Letter dated October 28, 1976, Gregorio Araneta III, in behalf of Araneta, Inc., renewed petitioner Inland
Realty's authority to act as agent to sell the former's 9,800 shares in Architects' for another thirty (30) days
from same date. This Letter dated October 28, 1976, petitioners claim, was marked as Exhibit "L" during the
trial proceedings before the trial court.
This claim is a blatant lie. In the first place, petitioners have conspicuously failed to attach a certified copy
of this Letter dated October 28, 1976. They have, in fact, not attached even a machine copy thereof. All they
gave this court is their word that said Letter dated October 28, 1976 does exist, and on that basis, they expect
us to accordingly rule in their favor.
Such naivety, this court will not tolerate. We will not treat lightly petitioners' attempt to mislead this court by
claiming that the Letter dated October 28, 1976 was marked as Exhibit "L" by the trial court, when the truth is
12

that the trial court marked as Exhibit "L", and the respondent Court of Appeals considered as Exhibit "L,"
private respondent Araneta, Inc.'s Letter dated October 28, 1975, not 1976. Needless to say, this blatant
attempt to mislead this court, is contemptuous conduct that we sternly condemn.
II
The Letter dated November 16, 1976, claimed by petitioners to have been marked as Exhibit "M", has no
probative value, considering that its very existence remains under a heavy cloud of doubt and that
hypothetically assuming its existence, its alleged content, namely, a listing of four (4) other prospective buyers,
does not at all prove that the agency contract and authority to sell in favor of petitioners was renewed or
revived after it expired on January 1, 1976. As in the case of the Letter dated October 28, 1976, petitioners
have miserably failed to attach any copy of the Letter dated November 16, 1976. A copy thereof would not help
petitioners' failing cause, anyway, especially considering that said letter was signed by petitioner De los Reyes
and would therefore take on the nature of a self-serving document that has no evidentiary value insofar as
petitioners are concerned.
III
Finally, petitioners asseverate that, regardless of whether or not their agency contract and authority to sell
had expired, they are automatically entitled to their broker's commission merely upon securing for and
introducing to private respondent Araneta, Inc. the buyer in the person of Stanford which ultimately acquired
ownership over Araneta, Inc.'s 9,800 shares in Architects'.
Petitioners' asseverations are devoid of merit.
It is understandable, though, why petitioners have resorted to a campaign for an automatic and blanket
entitlement to brokerage commission upon doing nothing but submitting to private respondent Araneta, Inc.,
the name of Stanford as prospective buyer of the latter's shares in Architects'. Of course petitioners would
advocate as such because precisely petitioners did nothing but submit Stanford's name as prospective
buyer. Petitioners did not succeed in outrightly selling said shares under the predetermined terms and
conditions set out by Araneta, Inc., e.g., that the price per share is P1,500.00. They admit that they could not
dissuade Stanford from haggling for the price of P1,000.00 per share with the balance of 50% of the total
purchase price payable in five (5) years at 12% interest per annum. From September 16, 1975 to January 1,
1976, when petitioners' authority to sell was subsisting, if at all, petitioners had nothing to show that they
actively served their principal's interests, pursued to sell the shares in accordance with their principal's terms
and conditions, and performed substantial acts that proximately and causatively led to the consummation of
the sale to Stanford of Araneta, Inc.'s 9,800 shares in Architects'.
The Court of Appeals cannot be faulted for emphasizing the lapse of more than one (1) year and five (5)
months between the expiration of petitioners' authority to sell and the consummation of the sale to Stanford, to
be a significant index of petitioners' non-participation in the really critical events leading to the consummation
of said sale, i.e., the negotiations to convince Stanford to sell at Araneta, Inc.'s asking price, the finalization of
the terms and conditions of the sale, the drafting of the deed of sale, the processing of pertinent documents,
and the delivery of the shares of stock to Stanford. Certainly, when the lapse of the period of more than one (1)
year and five (5) months between the expiration of petitioners' authority to sell and the consummation of the
sale, is viewed in the context of the utter lack of evidence of petitioners' involvement in the negotiations
between Araneta, Inc. and Stanford during that period and in the subsequent processing of the documents
pertinent to said sale, it becomes undeniable that the respondent Court of Appeals did not at all err in affirming
the trial court's dismissal of petitioners' claim for unpaid brokerage commission.

13

Petitioners were not the efficient procuring cause[6] in bringing about the sale in question on July 8, 1977
and are, therefore, not entitled to the stipulated broker's commission of "5% on the total price."
WHEREFORE, the instant petition is HEREBY DISMISSED.
Costs against petitioners.
SO ORDERED.
Bellosillo, Vitug, and Kapunan, JJ., concur.
Padilla, J., (Chairman), on leave.

14

G.R. No. 94753. April 7, 1993.


MANOTOK BROTHERS, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, THE HONORABLE JUDGE OF THE REGIONAL TRIAL COURT
OF MANILA (Branch VI), and SALVADOR SALIGUMBA, respondents.
Antonio C. Ravelo for petitioner.
Remigio M. Trinidad for private respondent.
SYLLABUS
1. CIVIL LAW; AGENCY; AGENT'S COMMISSION; WHEN ENTITLED' RULE; APPLICATION IN CASE AT
BAR. In an earlier case, this Court ruled that when there is a close, proximate and causal connection
between the agent's efforts and labor and the principal's sale of his property, the agent is entitled to a
commission. We agree with respondent Court that the City of Manila ultimately became the purchaser of
petitioner's property mainly through the efforts of private respondent. Without discounting the fact that when
Municipal Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, private respondent's authority
had already expired, it is to be noted that the ordinance was approved on April 26, 1968 when private
respondent's authorization was still in force. Moreover, the approval by the City Mayor came only three days
after the expiration of private respondent's authority. It is also worth emphasizing that from the records, the only
party given a written authority by petitioner to negotiate the sale from July 5, 1966 to May 14, 1968 was private
respondent.
DECISION
CAMPOS, JR., J p:
Petitioner Manotok Brothers., Inc., by way of the instant Petition docketed as G.R. No. 94753 sought relief from
this Court's Resolution dated May 3, 1989, which reads:
"G.R. No. 78898 (Manotok Brothers, Inc. vs. Salvador Saligumba and Court of Appeals). Considering the
manifestation of compliance by counsel for petitioner dated April 14, 1989 with the resolution of March 13,
1989 which required the petitioner to locate private respondent and to inform this Court of the present address
of said private respondent, the Court Resolved to DISMISS this case, as the issues cannot be joined as private
respondent's and counsel's addresses cannot be furnished by the petitioner to this court." 1
In addition, petitioner prayed for the issuance of a preliminary injunction to prevent irreparable injury to itself
pending resolution by this Court of its cause. Petitioner likewise urged this Court to hold in contempt private
respondent for allegedly adopting sinister ploy to deprive petitioner of its constitutional right to due process.
Acting on said Petition, this Court in a Resolution 2 dated October 1, 1990 set aside the entry of judgment
made on May 3, 1989 in case G.R. No. 78898; admitted the amended petition; and issued a temporary
restraining order to restrain the execution of the judgment appealed from.
The amended petition 3 admitted, by this Court sought relief from this Court's Resolution abovequoted. In the
alternative, petitioner begged leave of court to re-file its Petition for Certiorari 4 (G.R. No. 78898) grounded on
the allegation that petitioner was deprived of its opportunity to be heard.

15

The facts as found by the appellate court, revealed that petitioner herein (then defendant-appellant) is the
owner of a certain parcel of land and building which were formerly leased by the City of Manila and used by the
Claro M. Recto High School, at M.F. Jhocson Street, Sampaloc Manila.
By means of a letter 5 dated July 5, 1966, petitioner authorized herein private respondent Salvador Saligumba
to negotiate with the City of Manila the sale of the aforementioned property for not less than P425,000.00. In
the same writing, petitioner agreed to pay private respondent a five percent (5%) commission in the event the
sale is finally consummated and paid.
Petitioner, on March 4, 1967, executed another letter 6 extending the authority of private respondent for 120
days. Thereafter, another extension was granted to him for 120 more days, as evidenced by another letter 7
dated June 26, 1967.
Finally, through another letter 8 dated November 16, 1967, the corporation with Rufino Manotok, its President,
as signatory, authorized private respondent to finalize and consummate the sale of the property to the City of
Manila for not less than P410,000.00. With this letter came another extension of 180 days.
The Municipal Board of the City of Manila eventually, on April 26, 1968, passed Ordinance No. 6603,
appropriating the sum of P410,816.00 for the purchase of the property which private respondent was
authorized to sell. Said ordinance however, was signed by the City Mayor only on May 17, 1968, one hundred
eighty three (183) days after the last letter of authorization.
On January 14, 1969, the parties signed the deed of sale of the subject property. The initial payment of
P200,000.00 having been made, the purchase price was fully satisfied with a second payment on April 8, 1969
by a check in the amount of P210,816.00.
Notwithstanding the realization of the sale, private respondent never received any commission, which should
have amounted to P20,554.50. This was due to the refusal of petitioner to pay private respondent said amount
as the former does not recognize the latter's role as agent in the transaction.
Consequently, on June 29, 1969, private respondent filed a complaint against petitioner, alleging that he had
successfully negotiated the sale of the property. He claimed that it was because of his efforts that the Municipal
Board of Manila passed Ordinance No. 6603 which appropriated the sum for the payment of the property
subject of the sale.
Petitioner claimed otherwise. It denied the claim of private respondent on the following grounds: (1) private
respondent would be entitled to a commission only if the sale was consummated and the price paid within the
period given in the respective letters of authority; and (2) private respondent was not the person responsible for
the negotiation and consummation of the sale, instead it was Filomeno E. Huelgas, the PTA president for 19671968 of the Claro M. Recto High School. As a counterclaim, petitioner (then defendant-appellant) demanded
the sum of P4,000.00 as attorney's fees and for moral damages.
Thereafter, trial ensued. Private respondent, then plaintiff, testified as to the efforts undertaken by him to
ensure the consummation of the sale. He recounted that it first began at a meeting with Rufino Manotok at the
office of Fructuoso Ancheta, principal of C.M. Recto High School. Atty. Dominador Bisbal, then president of the
PTA, was also present. The meeting was set precisely to ask private respondent to negotiate the sale of the
school lot and building to the City of Manila. Private respondent then went to Councilor Mariano Magsalin, the
author of the Ordinance which appropriated the money for the purchase of said property, to present the project.
He also went to the Assessor's Office for appraisal of the value of the property. While these transpired and his
letters of authority expired, Rufino Manotok always renewed the former's authorization until the last was given,
which was to remain in force until May 14, 1968. After securing the report of the appraisal committee, he went
16

to the City Mayor's Office, which indorsed the matter to the Superintendent of City Schools of Manila. The latter
office approved the report and so private respondent went back to the City Mayor's Office, which thereafter
indorsed the same to the Municipal Board for appropriation. Subsequently, on April 26, 1968, Ordinance No.
6603 was passed by the Municipal Board for the appropriation of the sum corresponding to the purchase price.
Petitioner received the full payment of the purchase price, but private respondent did not receive a single
centavo as commission.
Fructuoso Ancheta and Atty. Dominador Bisbal both testified acknowledging the authority of private respondent
regarding the transaction.
Petitioner presented as its witnesses Filomeno Huelgas and the petitioner's President, Rufino Manotok.
Huelgas testified to the effect that after being inducted as PTA president in August, 1967 he followed up the
sale from the start with Councilor Magsalin until after it was approved by the Mayor on May 17, 1968. He. also
said that he came to know Rufino Manotok only in August, 1968, at which meeting the latter told him that he
would be given a "gratification" in the amount of P20,000.00 if the sale was expedited.
Rufino Manotok confirmed that he knew Huelgas and that there was an agreement between the two of them
regarding the "gratification".
On rebuttal, Atty. Bisbal said that Huelgas was present in the PTA meetings from 1965 to 1967 but he never
offered to help in the acquisition of said property. Moreover, he testified that Huelgas was aware of the fact that
it was private respondent who was negotiating the sale of the subject property.
Thereafter, the then Court of First Instance (now, Regional Trial Court) rendered judgment sentencing
petitioner and/or Rufino Manotok to pay unto private respondent the sum of P20,540.00 by way of his
commission fees with legal interest thereon from the date of the filing of the complaint until payment. The lower
court also ordered petitioner to pay private respondent the amount of P4,000.00 as and for attorney's fees. 9
Petitioner appealed said decision, but to no avail. Respondent Court of Appeals affirmed the said ruling of the
trial court. 10
Its Motion for Reconsideration having been denied by respondent appellate court in a Resolution dated June
22, 1987, petitioner seasonably elevated its case on Petition for Review on Certiorari on August 10, 1987
before this Court, docketed as G.R. No. 78898.
Acting on said Petition, this Court issued a Minute Resolution 11 dated August 31, 1987 ordering private
respondent to comment on said Petition.
It appearing that the abovementioned Resolution was returned unserved with the postmaster's notation
"unclaimed", this Court in another Resolution 12 dated March 13, 1989, required petitioner to locate private
respondent and to inform this Court of the present address of private respondent within ten (10) days from
notice. As petitioner was unsuccessful in its efforts to locate private respondent, it opted to manifest that private
respondent's last address was the same as that address to which this. Court's Resolution was forwarded.
Subsequently, this Court issued a Resolution dated May 3, 1989 dismissing petitioner's case on the ground
that the issues raised in the case at bar cannot be joined. Thus, the above-entitled case became final and
executory by the entry of judgment on May 3, 1989.
Thereafter, on January 9, 1990 private respondent filed a Motion to Execute the said judgment before the court
of origin. Upon discovery of said development, petitioner verified with the court of origin the circumstances by
17

which private respondent obtained knowledge of the resolution of this Court. Sensing a fraudulent scheme
employed by private respondent, petitioner then instituted this instant Petition for Relief, on August 30, 1990.
On September 13, 1990, said petition was amended to include, in the alternative, its petition to re-file its
Petition for Certiorari (G.R. No. 78898).
The sole issue to be addressed in this petition is whether or not private respondent is entitled to the five
percent (5%) agent's commission.
It is petitioner's contention that as a broker, private respondent's job is to bring together the parties to a
transaction. Accordingly, if the broker does not succeed in bringing the minds of the purchaser and the vendor
to an agreement with respect to the sale, he is not entitled to a commission.
Private respondent, on the other hand, opposes petitioner's position maintaining that it was because of his
efforts that a purchase actually materialized between the parties.
We rule in favor of private respondent.
At first sight, it would seem that private respondent is not entitled to any commission as he was not successful
in consummating the sale between the parties, for the sole reason that when the Deed of Sale was finally
executed, his extended authority had already expired. By this alone, one might be misled to believe that this
case squarely falls within the ambit of the established principle that a broker or agent is not entitled to any
commission until he has successfully done the job given to him. 13
Going deeper however into the case would reveal that it is within the coverage of the exception rather than of
the general rule, the exception being that enunciated in the case of Prats vs. Court of Appeals. 14 In the said
case, this Court ruled in favor of claimant-agent, despite the expiration of his authority, when a sale was finally
consummated.
In its decision in the abovecited case, this Court said, that while it was respondent court's (referring to the
Court of Appeals) factual findings that petitioner Prats (claimant-agent) was not the efficient procuring cause in
bringing about the sale (prescinding from the fact of expiration of his exclusive authority), still petitioner was
awarded compensation for his services. And We quote:
"In equity, however, the Court notes that petitioner had diligently taken steps to bring back together respondent
Doronila and the SSS,.
xxx xxx xxx
The court has noted on the other hand that Doronila finally sold the property to the Social Security System at
P3.25 per square meter which was the very same price counter-offered by the Social Security System and
accepted by him in July, 1967 when he alone was dealing exclusively with the said buyer long before Prats
came into the picture but that on the other hand Prats' efforts somehow were instrumental in bringing them
together again and finally consummating the transaction at the same price of P3.25 per square meter, although
such finalization was after the expiration of Prats' extended exclusive authority.
xxx xxx xxx
Under the circumstances, the Court grants in equity the sum of One hundred Thousand Pesos (P100,000.00)
by way of compensation for his efforts and assistance in the transaction, which however was finalized and
consummated after the expiration of his exclusive authority . . ." 15 (Emphasis supplied.).
18

From the foregoing, it follows then that private respondent herein, with more reason, should be paid his
commission, While in Prats vs. Court of Appeals, the agent was not even the efficient procuring cause in
bringing about the sale, unlike in the case at bar, it was still held therein that the agent was entitled to
compensation. In the case at bar, private respondent is the efficient procuring cause for without his efforts, the
municipality would not have anything to pass and the Mayor would not have anything to approve.
In an earlier case, 16 this Court ruled that when there is a close, proximate and causal connection between the
agent's efforts and labor and the principal's sale of his property, the agent is entitled to a commission.
We agree with respondent Court that the City of Manila ultimately became the purchaser of petitioner's
property mainly through the efforts of private respondent. Without discounting the fact that when Municipal
Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, private respondent's authority had
already expired, it is to be noted that the ordinance was approved on April 26, 1968 when private respondent's
authorization was still in force. Moreover, the approval by the City Mayor came only three days after the
expiration of private respondent's authority. It is also worth emphasizing that from the records, the only party
given a written authority by petitioner to negotiate the sale from July 5, 1966 to May 14, 1968 was private
respondent.
Contrary to what petitioner advances, the case of Danon vs. Brimo, 17 on which it heavily anchors its
justification for the denial of private respondent's claim, does not apply squarely to the instant petition.
Claimant-agent in said case fully comprehended the possibility that he may not realize the agent's commission
as he was informed that another agent was also negotiating the sale and thus, compensation will pertain to the
one who finds a purchaser and eventually effects the sale. Such is not the case herein. On the contrary, private
respondent pursued with his goal of seeing that the parties reach an agreement, on the belief that he alone
was transacting the business with the City Government as this was what petitioner made it to appear.
While it may be true that Filomeno Huelgas followed up the matter with Councilor Magsalin, the author of
Municipal Ordinance No. 6603 and Mayor Villegas, his intervention regarding the purchase came only after the
ordinance had already been passed when the buyer has already agreed to the purchase and to the price for
which said property is to be paid. Without the efforts of private respondent then, Mayor Villegas would have
nothing to approve in the first place. It was actually private respondent's labor that had set in motion the
intervention of the third party that produced the sale, hence he should be amply compensated.
WHEREFORE, in the light of the foregoing and finding no reversible error committed by respondent Court, the
decision of the Court of Appeals is hereby AFFIRMED. The temporary restraining order issued by this Court in
its Resolution dated October 1, 1990 is hereby lifted.
SO ORDERED.
Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

19

G.R. No. L-39822 January 31, 1978


ANTONIO E. PRATS, doing business under the name of Philippine Real Estate Exchange, petitioner,
vs.
HON. COURT OF APPEALS, ALFONSO DORONILA and PHILIPPINE NATIONAL BANK, respondents.

FERNANDEZ, J.:
This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No. 45974-R
entitled"Antonio E. Prats, doing business under the name of Philippine Real Estate Exchange, vs. Alfonso
Doronila and the Philippine National Bank", the dispositive part of which reads:
In view of all the foregoing, it is our considered opinion and so hold that the decision of the lower
court be, as it is hereby reversed, and the complaint, dismissed. On appellant's counterclaim,
judgment is hereby rendered directing appellee to pay attorney's fees in the sum of P10,000 to
appellant, no moral damages as therein claimed being awarded for lack of evidence to justify
the same. The injunction issued by the lower court on the P2,000,000.00 cash deposit of the
appellant is hereby lifted. No special pronouncement as to costs.
SO ORDERED. 1
On September 23, 1968 Antonio E. Prats, doing business under the name of "Philippine Real Estate
Exchange" instituted against Alfonso Doronila and Philippine National Bank Civil Case No. Q-12412 in the
Court of First Instance of Rizal at Quezon City to recover a sum of money and damages.
The complaint stated that defendant Alfonso Doronila was the registered owner of 300 hectares of land
situated in Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013, 216747 and 216750;
that defendant Doronila had for sometime tried to sell his aforesaid 300 hectares of land and for that purpose
had designated several agents; that at one time, he had offered the same property to the Social Security
System but failed to consummate any sale; that his offer to sell to the Social Security System having failed,
defendant Doronila on February 14, 1968 gave the plaintiff an exclusive option and authority in writing to
negotiate the sale of his aforementioned property, which exclusive option and authority the plaintiff caused to
be published in the Manila Times on February 22, 1968; that it was the agreement between plaintiff and
defendant Doronila that the basic price shall be P3.00 per square meter, that plaintiff shall be entitled to a
commission of 10% based on P2.10 per square meter or at any price finally agreed upon and if the property be
sold over and above P3.00 per square meter, the excess shall be created and paid to the plaintiff in addition to
his 10% commission based on P2.10 per square meter; that as a result of the grant of the exclusive option and
authority to negotiate the sale of his 300 hectares of land situated in Montalban, Rizal in favor of the plaintiff,
the defendant Doronila, on February 20, 1968, wrote a letter to the Social Security System withdrawing his
previous offer to sell the same land and requesting the return to him of all papers concerning his offered
property that the Social Security System, complying with said request of defendant Doronila, returned all the
papers thereon and defendant Doronila, in turn gave them to the plaintiff as his duly authorized real estate
broker; that by virtue of the exclusive written option and authority granted him and relying upon the announced
policy of the President of the Philippines to promote low housing program the plaintiff immediately worked to
negotiate the sale of defendant Doronila's 300 hectares of land to the Social Security System, making the
necessary contacts and representations to bring the parties together, namely, the owner and the buyer, and
bring about the ultimate sale of the land by defendant Doronila to the Social Security System; that on February
27, 1968, after plaintiff had already contacted the Social Security System, its Deputy Administrator, Reynaldo J.
Gregorio, wrote a letter to defendant Doronila inviting the latter to a conference regarding the property in
20

question with Administrator Teodoro, Chairman Gaviola and said Reynaldo J. Gregorio on March 4, 1968 at
10:00 o'clock in the morning, stating that the SSS would like to take up the offer of the lot; that having granted
plaintiff the exclusive written option and authority to negotiate the sale of his 300 hectares of land, defendant
Doronila in a letter dated February 28, 1968 declined the invitation extended by the Social Security System to
meet with its Administrator and Chairman and requested them instead "to deal directly" with the plaintiff, that
on March 16, 1968, at the suggestion of defendant Doronila, the plaintiff wrote a letter to the Social Security
System to the effect that plaintiff would be glad to sit with the officials of the Social Security System to discuss
the sale of the property of the defendant Doronila; that on March 18, 1968, the Social Security System sent a
telegram to defendant Doronila to submit certain documents regarding the property offered; that on May 6,
1968, a written offer to sell the 300 hectares of land belonging to defendant Doronila was formally made by the
plaintiff to the Social Security System and accordingly, on May 7, 1968, the Social Security System
Administrator dispatched the following telegram to defendant Doronila: "SSS considering purchase your
property for its housing project Administrator Teodoro"; that a few days thereafter, the plaintiff accompanied the
defendant Doronila to the China Banking Corporation to arrange the matter of clearing payment by chock and
delivery of the titles over the property to the Society Security System; that having been brought together by the
plaintiff, the defendant Doronila and the offices of the Society Security System, on May 29, 1968 and on June
4, 1968, met at the office of the SSS Administrator wherein the price for the purchase of the defendant
Doronila's 300 hectares of land was, among others, taken up; that on June 20, 1968, the Social Security
Commission passed Resolution No. 636 making a counter-offer of P3.25 per square meter subject to an
appraise report; that on June 27, 1968, Resolution No. 662 was adopted by the Social Security Commission
authorizing the Toples & Harding (Far East) Inc. to conduct an appraisal of the property and to submit a report
thereon; that pursuant thereto, the said company submitted its appraisal report specifying that the present
value of the property is P3.34 per square meter and that a housing program development would represent the
highest and best use thereof, that on July 18, 1968, the Social Security Commission, at its regular meeting,
taking note of the favorable appraisal report of the Toples'& Harding (Far East) Inc., passed Resolution No.
738, approving the purchase of defendant Doronila's 300 hectares of land in Montalban, Rizal at a price of
P3.25 per square meter or for a total purchase price of Nine Million Seven Hundred Fifty Thousand Pesos
(P9,750,000.00), appropriating the said amount for the purpose and authorizing the SSS Administrator to sign
the necessary documents to implement the said resolution; that on July 30, 1968, defendant Doronila and the
Social Security System executed the corresponding deed of absolute sale over the 300 hectares of land in
Montalban, Rizal covered by Transfer Certificate of Title Nos. 77011, 77013, 216747 and 216750 under the
terms of which the total price of P9,750,000.00 shall be payable as follows: (a) 60% of the agreed purchase
price, or Five Million Eight Hundred Fifty Thousand Pesos (P5,860,000.00) immediately after signing the deed
of sale. and (b) the balance of 40% of the agreed price, or Three Million Nine Hundred Thousand Pesos
(P3,900,000.00) thirty days after the signing of the deed of absolute sale; that on August 21, 1968, after
payment of the purchase price, the deed absolute sale executed by defendant Doronila in favor of the Social
Security System was presented for registration in the Office of the Register of Deeds of Rizal, and Transfer
Certificates of Title Nos. 926574, 226575, 226576 and 226577 in the name of the Social Security System were
issued; that defendant Doronila has received the full purchase price for his 300 hectares of land in the total
amount of P9,750,000.00, which amount he deposited in his bank Account No. 0012-443 with the defendant
Philippine National Bank; that on September 17, 1968, the plaintiff presented his statement to, and demanded
of defendant Doronila the payment of his processional fee as real estate broker as computed under the
agreement of February 14, 1968 in the total amount of P1,380,000.00; that notwithstanding such demand, the
defendant Doronila, in gross and evident bad faith after having availed of the services of plaintiff as real estate
broker, refused to pay the professional fees due him; that as a result of defendant Doronila's gross and evident
bad faith and unjustified refusal to pay plaintiff the professional fees due him under the agreement, the latter
has suffered and continues to suffer mental anguish, serious anxiety, and social humiliation for which
defendant Doronila shall be held liable to pay moral damages; and, that by reason likewise of the aforesaid act
of defendant Doronila, the plaintiff has been compelled to file this action and to engage the services of counsel
at a stipulated professional fee of P250,000.00.
21

In his answer filed on November 18, 1968, the defendant Doronila alleged that when the plaintiff offered the
answering defendant's property to the Social Security System on May 6, 1968, said defendant had already
offered his property to, and had a closed transaction or contract of sale of, said property with the Social
Security System; that the letter agreement had become null and void because defendant Doronila had not
received any written offer from any prospective buyers of the plaintiff during the agreed period of 60 days until
the last day of the authorization which was April 13, 1968 counting from February 14, 1968; that it is not true
that plaintiff brought together defendant Doronila and the officials of the Social Security System to take up the
purchase price of defendant Doronila's property for the simple reason that the plaintiff's offer was P6.00 per
square meter and later on reduced to P4.50 per square meter because the SSS Chairman had already a
closed transaction with the defendant Doronila at the price of P3.25 per square meter and that the offer of the
plaintiff was refused by the officials of the Social Security System; and that defendant Doronila did not answer
the statement of collection of the plaintiff because the latter had not right to demand the payment for services
not rendered according to the agreement of the parties. The answering defendant interposed a counterclaim
for damages and attorney's fees.
On January 18, 1969, the plaintiff and defendant Alfonso Doronila submitted the following stipulation of facts:
STIPULATION OF FACTS
COME NOW the plaintiff and defendant DORONILA, through their respective undersigned
counsel, and to this Honorable Court by way of abbreviating the proceeding i the case at bar,
without prejudice to presentation of explanatory evidence, respectfully submit the following
STIPULATION OF FACTS.
1.
The defendant Doronila was the registered owner of 300 hectares of land, situated in
Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013, 216747 (formerly
TCT No. 116631) and 216750 (formerly TCT No. 77012).
2.
That on July 3, 1967, defendant DORONILA under his letter (marked Annex "1" of the answer)
addressed to the SSS Chairman, offered his said property to the Social Security System (SSS)
at P4.00 per square meter.
That on July 17, 1967 (Annex "2" of the Answer) the SSS Chairman, Mr. Ramon C. Gaviola, Jr.,
replied to defendant DORONILA, as follows:
This will acknowledge your letter of July 3rd, 1967 relative to your offer for sale of
your real estate property.
In this regard, may I please be informed as to how many hectares, out of the total
300 hectares offered, are located in Quezon City and how many hectares are
located in Montalban, Rizal. Likewise, as regards your offer of P4.00 per square
meter, would there be any possibility that the same be reduced to P3.25 per
square meter Finally and before I submit your proposal for process it is requested
that the NAWASA certify to the effect that they have no objection to having this
parcel of land subdivided for residential house purposes.
Thank you for your offer and may I hear from you at the earliest possible time.
22

2-a
That on July 19, 1967, defendant DORONILA wrote a letter (a xerox copy, attached hereto
marked as Annex "2-a" for DORONILA) to NAWASA, and that in reply thereto, on July 25, 1967,
the NAWASA wrote the following letter (Xerox copy attached hereto to be marked as Annex "2b" for DORONILA) to defendant DORONILA.
In connection with your proposed subdivision plan of your properties adjacent to
our Novaliches Watershed, this Office would like to impose the following
conditions:
1. Since your property is an immediate boundary of our Novaliches Watershed, a
20-meter road should be constructed along our common boundary.
2. That no waste or drainage water from the subdivision should flow towards the
watershed.
3. That the liquid from the septic tanks or similar waste water should be treated
before it is drained to the Alat River above our Alat Dam.
The above conditions are all safeguards to the drinking water of the people of
Manila and Suburbs. It is therefore expected that we all cooperate to make our
drinking water safer from any pollution.
3.
That on July 19, 1967, defendant DORONILA wrote another letter (marked as Annex '3' on his
Answer) addressed to the SSS Chairman, Mr. Ramon Gaviola Jr., stating, among others, the
following:
In this connection, I have your counter-offer of P3.25 per square meter against
my offer of P4.00 per square meter, although your counter-offer is lower
comparing to the prices of adjacent properties, I have to consider the difference
as my privilege and opportunity to contribute or support the Presidential policy to
promote low cost housing in this country particularly to the SSS members by
accepting gladly your counter-offer of P3.25 per square meter with the condition
that it should be paid in cash and such payment shall be made within a period of
30 days from the above stated date (2nd paragraph of letter dated July 18, 1967,
Annex "3" of the Answer).
3.a
That on August 10, 1967, the SSS Chairman, Mr. Ramon Gaviola Jr., wrote the following (Xerox
copy attached hereto and marked as Annex '2-c' for DORONILA: addressed to defendant
DORONILA:
With reference to your letter, dated July 1967, please be informed that the same
is now with the Administrator for study and comment. The Commission will act on
receipt of information re such studies.

23

With the assurance that you will be periodically informed of developments, we


remain.
3-b
That on October 30, 1967, Mr. Pastor B. Sajorda, 'By authority of Atty. Alfonso Doronila, property
owner', wrote the following request (Xerox copy attached hereto and marked as Annex '2-d' for
DORONILA) addressed to Realtor Vicente L. Narciso for a certification regarding the actual
prices of DORONILA's property, quoted as follows:
May I have the honor to request for your certification as a member of the Board
of Realtor regarding the actual prices of my real estate raw-land properties
described as Lots 3-B-7, 26B, 6 and 4-C-3 all adjacent to each other, containing
a total area of 3,000,000 square meters, all registered in the name of Alfonso
Doronila, covered by T.C.T. Nos. 116631, 77013, 77011, and 77012, located at
Montalban, Rizal, all adjacent to the Northern portion of the NAWASA properties
in Quezon City including those other surrounding adjacent properties and even
those properties located before reaching my own properties coming from Manila.
This request is purposely made for my references in case I decided to sell my
said properties mentioned above.
3-c
That on November 3, 1967, Realtor Vicente Narciso wrote the following reply (Xerox copy
attached hereto and marked as Annex 2 for DORONILA) to Mr. Pastor B. Sajorda:
As per your request dated October 30, 1967, regarding prices of raw land, it is
my finding that the fair market value of raw land in the vicinity of the NAWASA
properties at Quezon City and Montalban, Rizal. including the properties of Atty.
Alfonso Doronila. more particularly known as lots 3-B-7, 26-B, and 4-C-3
containing approximately 3,000,000 square meters is P3.00 to P3.50 per square
meter.
Current prices before reaching Doronila's property range from P6.00 to P7.00 per
square meter.
4.
That on February 14, 1968, defendant DORONILA granted plaintiff an exclusive option and
authority (Annex 'A' of the complaint), under the following terms and conditions:
1. The price of the property is THREE (P3.00) PESOS per square meter.
2. A commission of TEN (10%) PERCENT will be paid to us based on P2.10 per
square meter, or at any price that you DORONILA finally agree upon, and all
expenses shall be for our account, including preparation of the corresponding
deed of conveyance, documentary stamps and registration fee, whether the sale
is causes directly or indirectly by us within the time of this option. If the property
is sold over and above P3.00 per square meter, the excess amount shall be
credited and paid to the herein workers. In addition to the 10% commission
24

based on P2.10 per square meter, provided the brokers shall pay the
corresponding taxes to the owner of the excess amount over P3.00 per square
meter, unless paid by check which would then be deductible as additional
expenses.
3. This exclusive option and authority is good for a period of sixty (60) days from
the date of your conformity; provided, however, that should negotiations have
been started with a buyer, said period is automatically extended until said
negotiations is terminated, but not more than fifteen (15) days;
4. The written offers must be made by the prospective buyers, unless they prefer
to have us take the offer for and in their behalf some buyers do not want to be
known in the early stages of the negotiations:
5. If no written offer is made to you until the last day of this authorization, this
option and authority shall expire and become null and void;
6. It is clearly understood that prospective buyers and all parties interested in this
property shall be referred to us, and that you will not even quote a price directly
to any agent or buyer. You agree to refer all agents or brokers to us DURING the
time this option is in force; and
7. There are some squatters occupying small portions of the property, which fact
will be reported to the prospective buyers, and said squatters will be removed at
our expense. (Annex "A" of the complaint)
Very truly yours,
PHILIPPINE REAL ESTATE
EXCHANCE
(Sgd) ANTONIO E. PRATS
General manager
CONFORME:
(Sgt.) ALFONSO DORONILA
Date: February 14, 1968
5.
That on February 19, 1968, plaintiff wrote the following letter to defendant DORONILA (Annex
"4" of the Answer), quoted as follows:
February 19, 1968
Don Alfonso Doronila
25

Plaza Ferguzon
Ermita, Manila
Dear Don Alfonso:
In view of the exclusive option extended to us for the sale of your property consisting 300
hectares located at Montalban, Rizal, we earnestly request that you take immediate steps to
withdraw any and all papers pertaining to this property offered to the SOCIAL SECURITY
SYSTEM
Very truly yours,
PHILIPPINE REAL
ESTATE EXCHANGE
(Sgd) ANTONIO E. PRATS
General Manager
AEP/acc
RECEIVED ORIGINAL
By: (Sgd.) ROGELIO DAPITAN
6.
That on February 20, 1968, pursuant to the letter dated February 19, 1968 of plaintiff, defendant
DORONILA wrote a letter (Annex 'B' of the complaint) to the SSS Administrator stating:
In as much as the SSS has not acted on my offer to sell a 300 hectare lot located
in Montalban, Rizal, for the last five (5) months I respectfully requested for the
return of all my papers concerning this offered property.
7.
That on February 27, 1968, defendant DORONILA received the following letter (Annex "C" of
the complaint) from the SSS Deputy Administrator, Mr. Reynaldo J. Gregorio, to wit:
May I take this opportunity of inviting you in behalf of Administrator Teodoro, to meet with him,
Chairman Gaviola and myself on Friday, March 4, 10:00 A.M. lot offer.
Thanks and regards.
8.
That on February 28, 1968, defendant DORONILA wrote the following letter (Annex "D" of the
complaint) to the SSS Deputy Administrator:
26

Thank you for your invitation to meet Administrator Teodoro, Chairman Gaviola
and your goodself, to take up my former offer to sell my property to the Social
Security System.
Since the SSS had not acted on my offer dated July 19, 1967, more than seven
(7) months ago, I have asked for the return of my papers, as per my letter of
February 20, 1968, and which you have kindly returned to me.
As of February 20, 1968, I gave the Philippine Real Estate Exchange an
exclusive option and authority to negotiate the sale of this 300 hectare land, and I
am no longer at liberty to negotiate its sale personally; I shall therefore request
you communicate directly with the Philippine Real Estate Exchange, P. O. Box
84, Quezon City, and deal with them directly if you are still interested in my
property.
With my kind personal regards, I am
9.
That on March 16, 1968, plaintiff, acting upon the letter of defendant DORONILA dated
February 28, 1968 (Annex 'D' for plaintiff), wrote the following letter to SSS Administrator:
Don Alfonso Doronila, owner of the 300 hectare land located at Montalban, Rizal,
adjoining the Quezon City boundary, has informed us that the Administrator of
the SOCIAL SECURITY' SYSTEM, through Mr. Reynaldo J. Gregorio, has invited
him to meet with the Administrator and Chairman Gaviola to take up the former
offer to sell his property to the SSS.
In his letter to the Administrator dated February 20, 1968 (which has been
received by the SSS on the same day), Mr. Doronila advised you that as of
February 20,1968, he gave the PHILIPPINE REAL ESTATE EXCHANGE
(PHILREX) the exclusive option and authority to negotiate the sale of his 300
hectare land in Montalban, and that he is no longer at liberty to negotiate its sale
personally, and that, if you are still interested in the property, the SSS should
communicate directly with the PHILIPPINE REAL ESTATE EXCHANGE.
It is by virtue of this arrangement that Mr. Doronila now refers to us invitation and
his reply to the SSS and has requested us to get in touch with you.
While, at present we have several prospective buyers interested in this property,
we shall, in compliance with the request of Mr. Doronila, be happy to sit down
with you and Chairman Ramon Gaviola, Jr.
Please let us know when it will be convenient to hold the conference.
10.
That on April 18, 1968, defendant DORONILA extended the plaintiff exclusive option and
authority to expire May 18, 1968.(annex 'B' Reply letter of Doronila to SSS Deputy
Administrator dated May 8, 1968).
27

11.
That on May 6,1968, plaintiff made a formal written offer to the Social Security System to sell
the 300 hectares land of defendant DORONILA at the price of P6.00 per square meter, Xerox
copy of which bearing the stamp or receipt of Social Security System is attached hereof as
Annex "D" plaintiff.
12.
That on May 16, 1968 the defendant DORONILA received the following telegram (Annex 'E' of
the complaint) form the SSS Administrative, reading:
SSS CONSIDERING PURCHASE YOUR PROPERTY FOR ITS HOUSING
PROJECT
13.
That on May 18, 1968, after plaintiff exclusive option and authority had been extended, plaintiff
wrote the following letter (Annex "A" Reply' of plaintiff's REPLY TO ANSWER) to defendant
DORONILA, to wit:
CONFIDENTIAL
In our conference last Monday, May 13, 1968, you have been definitely advised
by responsible parties that the SOCIAL SECURITY SYSTEM is acquiring your
300-hectare land at Montalban, Rizal, adjoining the Quezon City Boundary
and that said property will be acquired in accordance with the exclusive option
and authority you gave the PHILIPPINE REAL ESTATE EXCHANCE. You were
assured in that conference that the property will be acquired definitely, but, as it
has been mentioned during the conference, it may take from 30 to 60 days to
have all the papers prepared and to effect the corresponding payment. The
telegram from the SSS confirming these negotiations has already been received
by you, a copy of which you yourself have kindly furnished us.
Pursuant to paragraph 3 of the terms of the option that you have kindly extended, we still have
fifteen days more from today, May 18, 1968, within which to finish the negotiations for the sale
of your property to the SSS. For your convenience, we quote the pertinent portion of paragraph
3 of the option:
... provided, however, that should negotiation have been started with a buyer,
said period is automatically extended until said negotiation is terminated, but no
more than fifteen (15) days.
Please be assured that we will do our very best to complete these negotiations
for the sale of your property within this fifteen-day period. In the meantime' we
hope you will also observe the provisions of paragraph 6 of the exclusive option
you have extended to us.
14.

28

That on May 18, 1968, plaintiff wrote the following letter (Xerox copy attached and marked
hereof as Annex 'H' for plaintiff) addressed defendant DORONILA, to wit:
By virtue of the exclusive option and authority you have granted the PHILIPPINE
REAL ESTATE EXCHANGE to negotiate the sale of your 300-hectare land
located at Montalban, Rizal, adjoining the Quezon City boundary, which
properties are covered by Transfer Certificate of Titles Nos. 116631, 77011,
77012 and 77013, of the Registry of Deeds for the Province of Rizal, we hereby
make a firm offer, for and in behalf of our buyer, to purchase said property at the
price of FOUR PESOS AND FIFTY CENTAVOS (P4.50) per square meter, or the
total amount of THIRTEEN MILLION FIVE HUNDRED THOUSAND
(P13,500,000.00) PESOS, Philippine Currency, payable in Cash and D.B.P.
Progress Bonds, on a ratio to be decided between you and our principal.
To expedite the negotiations, we suggest that we sit down sometime early next
week with our principal to take up the final arrangement and other details in
connection with the purchase of the subject property.
To give you further assurance of the validity of this offer, we refer you to the
CHINA BANKING CORPORATION (Trust Department) who has already been
apprised of these negotiations, to which ]sank we strongly recommend that this
transaction be coursed through, for your own security and protection.
15.
That on May 30, 1968, plaintiff wrote the following letter (Xerox copy attached hereto, and
marked as Annex 'I' for plaintiff) to defendant DORONILA, quoted as follows:
This is to advise you that the SOCIAL SECURITY SYSTEM agreed to purchase
your 300-hectare land located at Montalban, Rizal, which purchase can be
conformed by the Chairman of the SOCIAL SECURITY COMMISSION. The
details will have to be taken up between you and the Chairman, and we suggest
that you communicate with the Chairman at your earliest convenience.
This negotiation was made by virtue of the exclusive option and authority you
have granted the PHILIPPINE REAL ESTATE EXCHANGE, which option is in full
force and effect, and covers the transaction referred above.
16.
That on June 6,1968, defendant DORONILA wrote the following letter (Annex" 7" for
DORONILA), to the plaintiff, to wit:
I have to inform you officially, that I have not received any written offer from the
SSS or others, to purchase my Montalban property of which you were given an
option and exclusive authority as appearing in your letter- contract dated
February 14, 1968, during the 60 days of your exclusive authority which expired
on April 14, 1968, nor during the extension which was properly a new exclusive
authority of 30 days from April 18, which expired on May 18, 1968, nor during the
provided 15 days grace, in case that you have closed any transaction to
terminate it during that period, which also expired on June 3, 1968.
29

As stated in said letter, we have the following condition:


5. If no written offer is made to you until the last day of this authorization, this
option and authority shall expire and becomes null and void.
As I have informed you, that on April 16, 1968 or two days after your option
expired I have signed an agreement to sell my property to a group of buyers to
whom I asked later that the effectivity of said agreement will be after your new
authority has expired will be on June 2, 1968, and they have accepted; As your
option has expired, and they know that there was no written offer made by the
SSS for any price of my property, aside of their previous letter announcing me
that they are ready to pay, I was notified on June 4, 1968 by their representative,
calling my attention but our agreement; that is why I am writing you, that having
expired your option and exclusive authority to offer for sale my said property, I
notified only this afternoon said to comply our agreement.
Hoping for your consideration on the matter, as we have to be guided by
contracts that we have to comply, I hereby express to you my sincere sentiments.
17.
That on June 19, 1968, defendant DORONILA wrote the following letter (Annex "5" of the
Answer) to the SSS Administrator, renewing his offer to sell his 300 hectare land to the SSS at
P4.00 per square meter, to wit:
This is to renew my offer to sell my properties located at Montalban, Rizal
Identified as Lot Nos. 3-B-7, 26-8, 6, and 4-C-3 registered in my name in the
office of the Registry of Deeds of Rizal under T.C.T. Nos. 116631, 77013, 77011
and 216750, containing a total area of 300 hectares or 3,000,000 square meters.
You will recall that last year, I offered to the Social Security System the same
properties at the price of Four (P4.00) pesos per square meter. After 3 ocular
inspection of Chairman Gaviola one of said inspections accompanied by
Commissioner Arroyo and after receiving the written apprisal report of Manila
realtor Vicente L. Narciso, the System then made a counter-offer of Three pesos
and twenty-five (P3.25) per square meter which I accepted under the condition
that the total amount be paid within a period of thirty (30) days from the date of
my acceptance (July 19, 1967). My acceptance was motivated by the fact that
within said period of time I had hoped to purchase my sugarcane hacienda in
Iloilo with the proceeds I expected from the sale. No action was however taken
by the System thereon.
Recently the same properties were offered by Antonio E. Prats of the Philippine
Real Estate Exchange to the Presidential Assistant on Housing, at the price of six
pesos (p6.00) per square meter, who referred it to the System, but against no
action had been taken by the System.
Considering the lapse of time since our original offer during which prices of real
estate have increased considerably, on the one hand and in cooperation with the
System's implementation of our government's policy to provide low cost houses
to its members, on the other hand, I am renewing my offer to sell my properties
30

to the system only at the same price of P4.00 per square meter, or for a total
amount of twelve million pesos (P12,000,000.00), provided the total amount is
paid in cash within a period of fifteen (15) days from this date.
18.
That on June 20, 1968, the Social Security Commission passed Resolution No. 636 by which
the SSS formalized its counter-offer of P3.25 per square meter. (See Annex 'F' of the complaint)
19.
That on June 25, 1968, the SSS Administrator, Mr. Gilberto Teodoro, wrote the following reply
letter (Annex '6' of the Answer) to defendant DORONILA, to wit:
This has reference to your letter dated June 19, 1966 renewing
your offer to sell your property located at Montalban, Rizal
containing an area of 300 hectares at P4.00 per square meter.
Please be informed that the said letter was submitted for the
consideration of the Social Security Commission at its last
meeting on June 20, 1968 and pursuant to its Resolution No. 636,
current series, it decided that the System reiterate its counter-offer
for P3.25 per square meter subject to a favorable appraisal report
by a reputable appraisal entity as regards particularly to price and
housing project feasibility. Should this counter-offer be acceptable
to you, kindly so indicate by signing hereunder your conformity
thereon.
Trusting that the foregoing sufficiently advises you on the matter, I remain
Very truly yours,
GILBERTO
TEODORO
Administrator
CONFORME: With condition that the sale will be consummated within Twenty
(20) days from this date.
ALFONSO
DORONILA
Returned and received the original by
June
25/68
Admtr'
s
Office
31

20.
That on June 27, 1968, the Social Security Commission passed Resolution No. 662 authorizing
the Toples & Harding (Far East) to conduct an appraisal of the property of defendant
DORONILA and to submit a report thereon. (See Annex 'F' of the complaint)
21.
That on July 17, 1968, the Social Security Commission taking note of the report of Toples &
Harding (Far East), passed Resolution No. 736, approving the purchase of the 300 hectare land
of defendant DORONILA, at the price of P3.25 per square meter, for a total purchase price of
NINE MILLION SEVEN HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), and
appropriating the said amount of money for the purpose. (See Annex 'F' of the complaint).
22.
That on July 30, 1968, defendant DORONILA executed the deed of absolute sale (Annex "C" of
the complaint) over his 300-hectare land, situated in Montalban, Rizal, covered by TCT Nos.
77011, 77013, 216747 (formerly TCT No. 116631) and 216750 (formerly TCT No. 77012), in
favor of the Social Security System, for the total purchase price of NINE MILLION SEVEN
HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), Philippine currency, which deed of
sale was presented for registration in the Office of the Register of Deeds of Fiscal on August 21,
1968.
23.
That defendant DORONILA had received the full purchase price of NINE MILLION SEVEN
HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), Philippine Currency, in two
installments.
24.
That on September 17, 1968, plaintiff presented his STATEMENT OF ACCOUNT, dated
September 16, 1968 (Xerox copy of which is attached hereto and marked as Annex plaintiff' to
defendant DORONILA for the payment of his professional services as real estate broker in the
amount of P1,380,000.00, as computed on the basis of the letter-agreement, Annex "A" of the
complaint, which defendant failed to pay. Manila, for Quezon City, January 18,1968.
Respectfully
submitted:
CRISPIN D. BAIZAS &
ASSOCIATES
and A.N. BOLINAO,
JR.
By: (Sgd.)

32

Counsel for the


plaintiff
Suite 305,
ShurdutBldg.
Intramuros, Manila
(Sgd.) E. V. Obon
Atty. EUGENIO V.
OBON
Counsel for the
defendant
9 West Point Street
Quezon City
ALFONSO
DORONILA
Counsel for the
defendant
428 Plaza de
Ferguson
Ermita, Manila 2
The trial court rendered its decision dated December 12, 1969, the initiative part of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff, ordering defendant Alfonso
Doronila, under the first cause of action, to pay to plaintiff the sum of P1,380,000.00 with
interest thereon at the rate of 6% per annum from September 23, 1968 until fully paid; and
under the second Cause of Action, to pay plaintiff the sum of P200,000.00 as moral damages;
the sum of P100,000.00 as exemplary damages; the sum of P150,000.00 as attorney's fees,
including the expenses of. litigation and costs of this suit.
The writ of preliminary injunction issued in this case is hereby made permanent; and the
defendant Philippine National Bank is hereby ordered to pay to the plaintiff the amount of
P1,380,000.00 and interest on the P1,380,000.00 to be computed separately out of the
P2,000,000.00 which it presently holds under a fixed time deposit.
SO ORDERED.
December 12, 1969, Quezon City, Philippines.
(SGD.) LOURDES P. SAN DIEGO
33

Judg
e3
The defendant appealed to the Court of Appeals where the appeal was docketed as CA-G.R. No. 45974-R.
In a decision promulgated on September 19, 1974, the Court of Appeals reversed the derision of the trial court
and dismissed the complaint because:
In any event, since it has been found that the authority of appellee expired on June 2, 1968,
rather than June 12, 1968 as the lower court opined, the inquiry would be whether up to that
time, a written offer was made by appellee in behalf of the SSS. The stipulation is clear on this
point. There should be a written offer by the prospective buyer or by appellee for or in their
behalf, and that if no such written offer is made until the last day of the authorization, the option
and authority shall expire and become null and void. Note that the emphasis is placed on the
need of a written offer to save the authority from an automatic termination on the last day of the
authorization. We note such emphasis with special significance in receive of the condition
relative to automatic extension of not more than 15 days if negotiations have been started. The
question then is when are negotiations deemed started In the light of the provisions just cited, it
should be when a response is given by the prospective buyer showing fits interest to buy the
property when an offer is made by the seller or broker and make an offer of the price. Strictly,
therefore, prior to May 29, 1968, there were no negotiations yet started within contemplation of
the letter-agreement of brokerage (Exh. A). Nevertheless appellant extended appellee's
exclusive authority to on May 18, 1968 (par. 10, Stipulation of Facts; R.A. p. 89), which was
automatically extended by 15 days under their agreement, to expire on June 2, 1968, if the
period extended up to May 18, 1968 a necessary authority. For, it may even be considered as
taking the of the 15-days automatic extension, since appellee's pretension is that negotiations
have been started within the original period of 60 days. Appellant in fixing the expiry date on
June 2, 1968, has thus made a liberal concession in favor of appellee, when he chose not to the
extension up to May 18, 1968 as the automatic extension which ougth to have been no more
than 15 days, but which he stretched twice as long. 4
The petitioner assigned the following errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER
WAS NOT THE EFFICIENT PROCURING CAUSE IN BRING ABOUT THE SALE OF PRIVATE
RESPONDENT DORONILA'S LAND TO THE SSS.
II
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THERE WAS
FAILURE ON THE PART OF HEREIN PETITIONER TO COMPLY WITH THE TERMS AND
CONDITIONS OF HIS CONTRACT WITH PRIVATE RESPONDENT.
III
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER IS
NOT ENTITLED TO HIS COMMISSION.
IV
34

THE RESPONDENT COURT OF APPEALS ERRED IN AWARDING ATTORNEY'S FEES TO


PRIVATE RESPONDENT DORONILA INSTEAD OF AFFIRMING THE AWARD OF MORAL
AND EXEMPLARY DAMAGES AS WELL As ATTORNEY FEES TO PETITIONER. 5
The Court in its Resolution of May 23, 1975 originally denied the petition for lack of merit but upon petitioner's
motion for reconsideration and supplemental petition invoking equity, resolved in its Resolution of August 20,
1975 to give due course thereto.
From the stipulation of facts and the evidence of record, it is clear that the offer of defendant Doronila to sell
the 300 hectares of land in question to the Social Security System was formally accepted by the System only
on June 20, 1968 after the exclusive authority, Exhibit A, in favor of the plaintiff, petitioner herein, had expired.
The respondent court's factual findings that petitioner was not the efficient procuring cause in bringing about
the sale proceeding from the fact of expiration of his exclusive authority) which are admittedly final for
purposes of the present petition, provide no basis law to grant relief to petitioner. The following pertinent
excerpts from respondent court's extensive decision amply demonstrate this:
It is noted, however, that even in his brief, when he said
According to the testimony of the plaintiff-appellee a few days before May 29,
1968, he arranged with Mr. Gilberto Teodoro, SSS Administrator, a meeting with
the defendant Manila. He talked with Mr. Teodoro over the telephone and fixed
the date of the meeting with defendant-appellant Doronila for May 29, 1968, and
that he was specifically requested by Mr. Teodoro not to be present at the
meeting, as he, Teodoro, wanted to deal directly with the defendant-appellant
alone. (Tsn., pp. 4446, March 1, 1969). Finding nothing wrong with such a
request, as the sale could be caused directly or indirectly (Exh. 'A'), and believing
that as a broker all that he needed to do to be entitled to his commission was to
bring about a meeting between the buyer and the seller as to ripen into a sale,
plaintiff-appellee readily acceded to the request.
appellee is not categorical that it was through his efforts that the meeting took place on inlay 29,
1968. He refers to a telephone call he made "a few days before May 29, 1968," but in the
conversation he had with Mr. Teodoro, the latter requested him not to be present in the meeting.
From these facts, it is manifest that the SSS officials never wanted to be in any way guided by,
or otherwise subject to, the mediation or intervention of, appellee relative to the negotiation for
the purchase of the property. It is thus more reasonable to conclude that if a meeting was held
on May 29, 1968, it was done independently, and not by virtue of, appellee's wish or efforts to
hold such meeting. 6
xxx xxx xxx
... It is even doubtful if he tried to make any arrangement for meeting at all, because on May 18,
1968, he told appellant:
... we hereby make a firm offer, for and in behalf of our buyer, to purchase said
property at the price of Four Pesos and Fifty Centavos (P4.50) per square
meter ....
As this offer is evidently made in behalf of buyer other than the SSS which had never offered the
price of P4.50 per square meter, appellee could not have at the same time arranged a meeting
between the SSS officials and appellant with a view to consummating the sale in favor of the
35

SSS which had made an offer of only PS.25 per sq. m. and thus lose the much bigger profit he
would realize with a higher price of P4.50 per sq. meter. This 'firm offer' of P4.50 per sq. m.
made by appellee betrayed his lack of any efficient intervention in the negotiations with the SSS
for the purchase by it of appellant's property ... 7
xxx xxx xxx
... This becomes more evident when it is considered that on May 6, 1968 he was making his first
offer to sell the property at P6.00 per sq. m. to the SSS to which offer he received no answer. It
is this cold indifference of the SSS to him that must have prompted him to look for other buyers,
resulting in his making the firm offer of 714.50 per sq. m. on May 18, 1968, a fact which only
goes to show that for being ignored by the SSS, he gave up all effort to deal with the SSS. ... 8
xxx xxx xxx
... For him to claim that it was he who aroused the interest of the SSS in buying appellant's
property is to ignore the fact that as early as June, (July) 1967, the SSS had directly dealt with
appellant to such an extent that the price of P3.25 as offered by the SSS was accepted by
appellant, the latter imposing only the condition that the price should be paid in cash, and within
30 days from the date of the acceptance. It can truly be said then that the interest of SSS to
acquire the property had been sufficiently aroused for there to be any need for appellee to
stimulate it further. Appellee should know this fact for according to him, the 10-day grace period
was agreed upon to give the SSS a chance to pay the price of the land at P3.25 per sq. m., as a
"compromise" to appellant's insistence that the SSS be excluded from appellee's option or
authority to sell the land. 9
... There should be a written offer by the prospective buyer or by appellee for or in their behalf,
and that if no such written offer is made until the last day of the authorization, the option and
authority shall expired and become null and void. ... Yet, no such written offer was made. ... 10
In equity, however, the Court notes that petitioner had Monthly taken steps to bring back together respondent
Doronila and the SSS, among which may be mentioned the following:
In July, 1967, prior to February 14, 1968, respondent Doronila had offered to sell the land in question to the
Social Security System Direct negotiations were made by Doronila with the SSS. The SSS did not then accept
the offer of Doronila. Thereafter, Doronila executed the exclusive authority in favor of petitioner Prats on
February 14, 1968.
Prats communicated with the Office of the Presidential Housing Commission on February 23, 1968 offering the
Doronila property. Prats wrote a follow-up letter on April is, 1968 which was answered by the Commission with
the suggestion that the property be offered directly to the SSS. Prats wrote the SSS on March 16, 1968,
inviting Chairman Ramon Gaviola, Jr. to discuss the offer of the sale of the property in question to the SSS. On
May 6, 1968, Prats made a formal written offer to the Social Security System to self the 300 hectare land of
Doronila at the price of P6.00 per square meter. Doronila received on May 17, 1968 from the SSS
Administrator a telegram that the SSS was considering the purchase of Doronilas property for its housing
project. Prats and his witness Raagas testified that Prats had several dinner and lunch meetings with Doronila
and/or his nephew, Atty. Manuel D. Asencio, regarding the progress of the negotiations with the SSS.
Atty. Asencio had declared that he and his uncle, Alfonso Doronila, were invited several times by Prats,
sometimes to luncheons and sometimes to dinner. On a Sunday, June 2, 1968, Prats and Raagas had
luncheon in Sulu Hotel in Quezon City and they were joined later by Chairman Gaviola of the SSS.
36

The Court has noted on the other hand that Doronila finally sold the property to the Social Security System at
P3.25 per square meter which was the very same price counter-offered by the Social Security System and
accepted by him in July, 1967 when he alone was dealing exclusively with the said buyer long before Prats
came into the picture but that on the other hand Prats' efforts somehow were instrumental in bringing them
together again and finally consummating the transaction at the same price of P3.25 square meter, although
such finalization was after the expiration of Prats' extended exclusive authority. Still such price was higher than
that stipulated in the exclusive authority granted by Doronila to Prats.
Under the circumstances, the Court grants in equity the sum of One Hundred Thousand Pesos (P100,000.00)
by way of compensation for his efforts and assistance in the transaction, which however was finalized and
consummated after the expiration of his exclusive authority and sets aside the P10,000.00 attorneys' fees
award adjudged against him by respondent court.
WHEREFORE, the derision appealed from is hereby affirmed, with the modification that private respondent
Alfonso Doronila in equity is ordered to pay petitioner or his heirs the amount of One Hundred Thousand Pesos
(P100,000.00) and that the portion of the said decision sell petitioner Prats to pay respondent Doronila
attorneys' fees in the sum of P10,000.00 is set aside.
The lifting of the injunction issued by the lower court on the P2,000,000.00 cash deposit of respondent Doronila
as ordered by respondent court is hereby with the exception of the sum of One Hundred Thousand Pesos
(P100,000.00) which is ordered segregated therefrom to satisfy the award herein given to petitioner, the lifting
of said injunction, as herein ordered, is immediately executory upon promulgation hereof.
No pronouncement as to costs.
Teehankee (Chairman), Makasiar, Muoz Palma and Guerrero JJ., concur.

37

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
Decision1dated 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 21, City of Manila; and the CA
Resolution2 dated August 6, 2001 which denied petitioners 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",3petitioner, 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 petitioners loan in the sum of P337,050.00 with that entity; that as a condition for the
foregoing sale, respondent shall assume the undue balance of the mortgage and pay the monthly amortization
of P4,748.11 for the remainder of the 25 years which began on September 3, 1994; that the property was at
that time being occupied by a tenant paying a monthly rent of P3,000.00; that upon verification with the
NHMFC, respondent learned that petitioner had incurred arrearages amounting to P26,744.09, inclusive of
penalties and interest; that upon informing the petitioner of her arrears, petitioner denied that she incurred
them and refused to pay the same; that despite repeated demand, petitioner refused to cooperate with
respondent to execute the necessary documents and other formalities required by the NHMFC to effect the
transfer of the title over the property; that petitioner collected rent over the property for the month of January
1997 and refused to remit the proceeds to respondent; and that respondent suffered damages as a result and
was forced to litigate.
Petitioner, then defendant, while admitting some allegations in the Complaint, denied that she borrowed money
from respondent, and averred that from June to September 1995, she referred her friends to respondent whom
she knew to be engaged in the business of lending money in exchange for personal checks through her
capitalist Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo, Theresa Moratin, Julia
Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed money from respondent and issued personal
checks in payment of the loan; that the checks bounced for insufficiency of funds; that despite her efforts to
assist respondent to collect from the borrowers, she could no longer locate them; that, because of this,
respondent became furious and threatened petitioner that if the accounts were not settled, a criminal case will
be filed against her; that she was forced to issue eight checks amounting to P350,000 to answer for the
bounced checks of the borrowers she referred; that prior to the issuance of the checks she informed
respondent that they were not sufficiently funded but the latter nonetheless deposited the checks and for which
reason they were subsequently dishonored; that respondent then threatened to initiate a criminal case against
her for violation of Batas Pambansa Blg. 22; that she was forced by respondent to execute an "Absolute Deed
of Sale" over her property in Bacoor, Cavite, to avoid criminal prosecution; that the said deed had no valid
38

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 formers loan with the NHMFC, at the latters 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.

39

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 respondents 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 ones claim through competent authority under Article
133511of 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 petitioners 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 attorneys 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
petitioners father, who co-owned the subject property, was not impleaded as a defendant nor was he indebted
to the respondent and, hence, she cannot be made to sign the documents to effect the transfer of ownership
over the entire property.
On August 6, 2001, the CA issued its Resolution denying the motion on the ground that the foregoing matters
had already been passed upon.
On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28, 2001, petitioner filed the
present Petition and raised the following issues:
I.
WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE
RESPONDENT.
II.
WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO COLLECT
DEBT IN HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM THE DEBTOR.
III.
WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE.14
Although, as a rule, it is not the business of this Court to review the findings of fact made by the lower courts,
jurisprudence has recognized several exceptions, at least three of which are present in the instant case,
namely: when the judgment is based on a misapprehension of facts; when the findings of facts of the courts a
quo are conflicting; and when the CA manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, could justify a different conclusion.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.
40

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 support its holding that petitioner "re-lends" the amount
borrowed from respondent to her friends: first, the friends of petitioner never presented themselves to
respondent and that all transactions were made by and between petitioner and respondent;18 second; the
money passed through the bank accounts of petitioner and respondent;19 third, petitioner herself admitted that
she was "re-lending" the money loaned to other individuals for profit;20 and fourth, the documentary evidence
shows that the actual borrowers, the friends of petitioner, consider her as their creditor and not the
respondent.21
On the first, third, and fourth points, the CA cites the testimony of the petitioner, then defendant, during her
cross-examination:22
Atty. Diza:
q. You also mentioned that you were not the one indebted to the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria Luisa
Inocencio, Zenaida Romulo, they are your friends?
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?
witness:
a. Yes, sir.
41

Atty. Diza:
q. What is that transaction?
witness:
a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.
Atty. Diza:
q. Did the plaintiff personally see the transactions with your friends?
witness:
a. No, sir.
Atty. Diza:
q. Your friends and the plaintiff did not meet personally?
witness:
a. Yes, sir.
Atty. Diza:
q. You are intermediaries?
witness:
a. We are both intermediaries. As evidenced by the checks of the debtors they were deposited to the
name of Arsenio Pua because the money came from Arsenio Pua.
xxxx
Atty. Diza:
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:
q. You are re-lending the money?
witness:
42

a. Yes, sir.
Atty. Diza:
q. What profit do you have, do you have commission?
witness:
a. Yes, sir.
Atty. Diza:
q. How much?
witness:
a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none, sir.
Based on the foregoing, the CA concluded that petitioner is the real borrower, while the respondent, the
real lender.
But as correctly noted by the RTC, respondent, then plaintiff, made the following admission during her
cross examination:23
Atty. Villacorta:
q. Who is this Arsenio Pua?
witness:
a. Principal financier, sir.
Atty. Villacorta:
q. So the money came from Arsenio Pua?
witness:
a. Yes, because I am only representing him, sir.
Other portions of the testimony of respondent must likewise be considered:24
Atty. Villacorta:
q. So it is not actually your money but the money of Arsenio Pua?
witness:
a. Yes, sir.
43

Court:
q. It is not your money?
witness:
a. Yes, Your Honor.
Atty. Villacorta:
q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodate somebody, are
you aware of that?
witness:
a. I am aware of that.
Atty. Villacorta:
q. More or less she [accommodated] several friends of the defendant?
witness:
a. Yes, sir, I am aware of that.
xxxx
Atty. Villacorta:
q. And these friends of the defendant borrowed money from you with the assurance of the defendant?
witness:
a. They go direct to Jocelyn because I dont know them.
xxxx
Atty. Villacorta:
q. And is it not also a fact Madam witness that everytime that the defendant borrowed money from you
her friends who [are] in need of money issued check[s] to you? There were checks issued to you?
witness:
a. Yes, there were checks issued.
Atty. Villacorta:
q. By the friends of the defendant, am I correct?
44

witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of your assistance, the friends of the defendant who are in need of money were 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.26Agency 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
45

In this case, petitioner knew that the financier of respondent is Pua; and respondent knew that the borrowers
are friends of petitioner.
The CA is incorrect when it considered the fact that the "supposed friends of [petitioner], the actual borrowers,
did not present themselves to [respondent]" as evidence that negates the agency relationshipit 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 respondent are not privy to the contract of loan between
their principals. Since the sale is predicated on that loan, then the sale is void for lack of consideration.
2. A further scrutiny of the record shows, however, that the sale might have been backed up by another
consideration that is separate and distinct from the debt: respondent averred in her complaint and testified that
the parties had agreed that as a condition for the conveyance of the property the respondent shall assume the
balance of the mortgage loan which petitioner allegedly owed to the NHMFC.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
46

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 respondents 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 necessary documents to effect the transfer of title is premature.
WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals
are REVERSED andSET ASIDE. The complaint of respondent in Civil Case No. 97-82716 is DISMISSED.
SO ORDERED.

47

G.R. No. 144805 June 8, 2006


EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,
vs.
ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A.
and FAR EAST BANK & TRUST COMPANY, Respondents.
DECISION
CALLEJO, SR., J.:
On appeal via a Petition for Review on Certiorari is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV
No. 51022, which affirmed the Decision of the Regional Trial Court (RTC), Pasig City, Branch 165, in Civil Case
No. 54887, as well as the Resolution2 of the CA denying the motion for reconsideration thereof.
The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws. Since 1950,
it had been engaged in the manufacture of roofing materials and pipe products. Its manufacturing operations
were conducted on eight parcels of land with a total area of 47,233 square meters. The properties, located in
Mandaluyong City, Metro Manila, were covered by Transfer Certificates of Title Nos. 451117, 451118, 451119,
451120, 451121, 451122, 451124 and 451125 under the name of Far East Bank & Trust Company, as trustee.
Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a
corporation organized and registered under the laws of Belgium.3 Jack Glanville, an Australian citizen, was the
General Manager and President of EC, while Claude Frederick Delsaux was the Regional Director for Asia of
ESAC. Both had their offices in Belgium.
In 1986, the management of ESAC grew concerned about the political situation in the Philippines and wanted
to stop its operations in the country. The Committee for Asia of ESAC instructed Michael Adams, a member of
ECs Board of Directors, to dispose of the eight parcels of land. Adams engaged the services of realtor/broker
Lauro G. Marquez so that the properties could be offered for sale to prospective buyers. Glanville later showed
the properties to Marquez.
Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of the
Litonjua & Company, Inc. In a Letter dated September 12, 1986, Marquez declared that he was authorized to
sell the properties for P27,000,000.00 and that the terms of the sale were subject to negotiation.4
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and his
brother Antonio K. Litonjua. The Litonjua siblings offered to buy the property for P20,000,000.00 cash. Marquez
apprised Glanville of the Litonjua siblings offer and relayed the same to Delsaux in Belgium, but the latter did
not respond. On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his position/
counterproposal to the offer of the Litonjua siblings. It was only on February 12, 1987 that Delsaux sent a telex
to Glanville stating that, based on the "Belgian/Swiss decision," the final offer was "US$1,000,000.00
and P2,500,000.00 to cover all existing obligations prior to final liquidation."5
Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr. accepted the
counterproposal of Delsaux. Marquez conferred with Glanville, and in a Letter dated February 26, 1987,
confirmed that the Litonjua siblings had accepted the counter-proposal of Delsaux. He also stated that the
Litonjua siblings would confirm full payment within 90 days after execution and preparation of all documents of
sale, together with the necessary governmental clearances.6
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company,
Ermita Branch, and drafted an Escrow Agreement to expedite the sale.7
48

Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would be
implemented. In a telex dated April 22, 1987, Glanville informed Delsaux that he had met with the buyer, which
had given him the impression that "he is prepared to press for a satisfactory conclusion to the sale."8 He also
emphasized to Delsaux that the buyers were concerned because they would incur expenses in bank
commitment fees as a consequence of prolonged period of inaction.9
Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines, the
political situation in the Philippines had improved. Marquez received a telephone call from Glanville, advising
that the sale would no longer proceed. Glanville followed it up with a Letter dated May 7, 1987, confirming that
he had been instructed by his principal to inform Marquez that "the decision has been taken at a Board
Meeting not to sell the properties on which Eternit Corporation is situated."10
Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had decided
not to proceed with the sale of the subject land, to wit:
May 22, 1987
Mr. L.G. Marquez
L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines
Dear Sir:
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was
proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far
as the Philippines are (sic) concerned. Considering [the] new political situation since the departure of MR.
MARCOS and a certain stabilization in the Philippines, the Committee has decided not to stop our operations
in Manila. In fact, production has started again last week, and (sic) to recognize the participation in the
Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later
state, we would consult you again.
xxx
Yours sincerely,
(Sgd.)
C.F. DELSAUX
cc. To: J. GLANVILLE (Eternit Corp.)11

49

When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment for
damages they had suffered on account of the aborted sale. EC, however, rejected their demand.
The Litonjuas then filed a complaint for specific performance and damages against EC (now the Eterton MultiResources Corporation) and the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City. An
amended complaint was filed, in which defendant EC was substituted by Eterton Multi-Resources Corporation;
Benito C. Tan, Ruperto V. Tan, Stock Ha T. Tan and Deogracias G. Eufemio were impleaded as additional
defendants on account of their purchase of ESAC shares of stocks and were the controlling stockholders of
EC.
In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not doing business in the
Philippines, it cannot be subject to the jurisdiction of Philippine courts; the Board and stockholders of EC never
approved any resolution to sell subject properties nor authorized Marquez to sell the same; and the telex dated
October 28, 1986 of Jack Glanville was his own personal making which did not bind EC.
On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed the amended
complaint.12 The fallo of the decision reads:
WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources Corporation and
Eteroutremer, S.A. is dismissed on the ground that there is no valid and binding sale between the plaintiffs and
said defendants.
The complaint as against Far East Bank and Trust Company is likewise dismissed for lack of cause of action.
The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer, S.A. is
also dismissed for lack of merit.13
The trial court declared that since the authority of the agents/realtors was not in writing, the sale is void and not
merely unenforceable, and as such, could not have been ratified by the principal. In any event, such ratification
cannot be given any retroactive effect. Plaintiffs could not assume that defendants had agreed to sell the
property without a clear authorization from the corporation concerned, that is, through resolutions of the Board
of Directors and stockholders. The trial court also pointed out that the supposed sale involves substantially all
the assets of defendant EC which would result in the eventual total cessation of its operation.14
The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court erred in concluding that the
real estate broker in the instant case needed a written authority from appellee corporation and/or that said
broker had no such written authority; and (2) the lower court committed grave error of law in holding that
appellee corporation is not legally bound for specific performance and/or damages in the absence of an
enabling resolution of the board of directors."15 They averred that Marquez acted merely as a broker or gobetween and not as agent of the corporation; hence, it was not necessary for him to be empowered as such by
any written authority. They further claimed that an agency by estoppel was created when the corporation
clothed Marquez with apparent authority to negotiate for the sale of the properties. However, since it was a
bilateral contract to buy and sell, it was equivalent to a perfected contract of sale, which the corporation was
obliged to consummate.
In reply, EC alleged that Marquez had no written authority from the Board of Directors to bind it; neither were
Glanville and Delsaux authorized by its board of directors to offer the property for sale. Since the sale involved
substantially all of the corporations assets, it would necessarily need the authority from the stockholders.
On June 16, 2000, the CA rendered judgment affirming the decision of the RTC. 16 The Litonjuas filed a motion
for reconsideration, which was also denied by the appellate court.
50

The CA ruled that Marquez, who was a real estate broker, was a special agent within the purview of Article
1874 of the New Civil Code. Under Section 23 of the Corporation Code, he needed a special authority from
ECs board of directors to bind such corporation to the sale of its properties. Delsaux, who was merely the
representative of ESAC (the majority stockholder of EC) had no authority to bind the latter. The CA pointed out
that Delsaux was not even a member of the board of directors of EC. Moreover, the Litonjuas failed to prove
that an agency by estoppel had been created between the parties.
In the instant petition for review, petitioners aver that
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED CONTRACT OF
SALE.
II
THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT MARQUEZ NEEDED
A WRITTEN AUTHORITY FROM RESPONDENT ETERNIT BEFORE THE SALE CAN BE PERFECTED.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND DELSAUX HAVE THE
NECESSARY AUTHORITY TO SELL THE SUBJECT PROPERTIES, OR AT THE VERY LEAST, WERE
KNOWINGLY PERMITTED BY RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN
APPARENT AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSING POWER TO
SELL THE SAID PROPERTIES.17
Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale of the parcels
of land and the improvements thereon for "US$1,000,000.00 plus P2,500,000.00 to cover obligations prior to
final liquidation." Petitioners insist that they had accepted the counter-offer of respondent EC and that before
the counter-offer was withdrawn by respondents, the acceptance was made known to them through real estate
broker Marquez.
Petitioners assert that there was no need for a written authority from the Board of Directors of EC for Marquez
to validly act as broker/middleman/intermediary. As broker, Marquez was not an ordinary agent because his
authority was of a special and limited character in most respects. His only job as a broker was to look for a
buyer and to bring together the parties to the transaction. He was not authorized to sell the properties or to
make a binding contract to respondent EC; hence, petitioners argue, Article 1874 of the New Civil Code does
not apply.
In any event, petitioners aver, what is important and decisive was that Marquez was able to communicate both
the offer and counter-offer and their acceptance of respondent ECs counter-offer, resulting in a perfected
contract of sale.
Petitioners posit that the testimonial and documentary evidence on record amply shows that Glanville, who
was the President and General Manager of respondent EC, and Delsaux, who was the Managing Director for
ESAC Asia, had the necessary authority to sell the subject property or, at least, had been allowed by
respondent EC to hold themselves out in the public as having the power to sell the subject properties.
Petitioners identified such evidence, thus:

51

1. The testimony of Marquez that he was chosen by Glanville as the then President and General
Manager of Eternit, to sell the properties of said corporation to any interested party, which authority, as
hereinabove discussed, need not be in writing.
2. The fact that the NEGOTIATIONS for the sale of the subject properties spanned SEVERAL
MONTHS, from 1986 to 1987;
3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its properties to the Petitioners;
4. The GOOD FAITH of Petitioners in believing Eternits offer to sell the properties as evidenced by the
Petitioners ACCEPTANCE of the counter-offer;
5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the Security Bank and that
an ESCROW agreement was drafted over the subject properties;
6. Glanvilles telex to Delsaux inquiring "WHEN WE (Respondents) WILL IMPLEMENT ACTION TO
BUY AND SELL";
7. More importantly, Exhibits "G" and "H" of the Respondents, which evidenced the fact that Petitioners
offer was allegedly REJECTED by both Glanville and Delsaux.18
Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer to petitioners offer
and thereafter reject such offer unless they were authorized to do so by respondent EC. Petitioners insist that
Delsaux confirmed his authority to sell the properties in his letter to Marquez, to wit:
Dear Sir,
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was
proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far
as the Philippines are (sic) concerned. Considering the new political situation since the departure of MR.
MARCOS and a certain stabilization in the Philippines, the Committee has decided not to stop our operations
in Manila[.] [I]n fact production started again last week, and (sic) to reorganize the participation in the
Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later
stage we would consult you again.
In the meantime, I remain
Yours sincerely,
C.F. DELSAUX19
Petitioners further emphasize that they acted in good faith when Glanville and Delsaux were knowingly
permitted by respondent EC to sell the properties within the scope of an apparent authority. Petitioners insist
that respondents held themselves to the public as possessing power to sell the subject properties.
52

By way of comment, respondents aver that the issues raised by the petitioners are factual, hence, are
proscribed by Rule 45 of the Rules of Court. On the merits of the petition, respondents EC (now EMC) and
ESAC reiterate their submissions in the CA. They maintain that Glanville, Delsaux and Marquez had no
authority from the stockholders of respondent EC and its Board of Directors to offer the properties for sale to
the petitioners, or to any other person or entity for that matter. They assert that the decision and resolution of
the CA are in accord with law and the evidence on record, and should be affirmed in toto.
Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and Delsaux, conformed
to the written authority of Marquez to sell the properties. The authority of Glanville and Delsaux to bind
respondent EC is evidenced by the fact that Glanville and Delsaux negotiated for the sale of 90% of stocks of
respondent EC to Ruperto Tan on June 1, 1997. Given the significance of their positions and their duties in
respondent EC at the time of the transaction, and the fact that respondent ESAC owns 90% of the shares of
stock of respondent EC, a formal resolution of the Board of Directors would be a mere ceremonial formality.
What is important, petitioners maintain, is that Marquez was able to communicate the offer of respondent EC
and the petitioners acceptance thereof. There was no time that they acted without the knowledge of
respondents. In fact, respondent EC never repudiated the acts of Glanville, Marquez and Delsaux.
The petition has no merit.
Anent the first issue, we agree with the contention of respondents that the issues raised by petitioner in this
case are factual. Whether or not Marquez, Glanville, and Delsaux were authorized by respondent EC to act as
its agents relative to the sale of the properties of respondent EC, and if so, the boundaries of their authority as
agents, is a question of fact. In the absence of express written terms creating the relationship of an agency, the
existence of an agency is a fact question.20 Whether an agency by estoppel was created or whether a person
acted within the bounds of his apparent authority, and whether the principal is estopped to deny the apparent
authority of its agent are, likewise, questions of fact to be resolved on the basis of the evidence on
record.21 The findings of the trial court on such issues, as affirmed by the CA, are conclusive on the Court,
absent evidence that the trial and appellate courts ignored, misconstrued, or misapplied facts and
circumstances of substance which, if considered, would warrant a modification or reversal of the outcome of
the case.22
It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules of Court
because the Court is not a trier of facts. It is not to re-examine and assess the evidence on record, whether
testimonial and documentary. There are, however, recognized exceptions where the Court may delve into and
resolve factual issues, namely:
(1) When the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6)
when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary
to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to
those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on
which they are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not disputed
by the parties, which, if properly considered, would justify a different conclusion; and (10) when the findings of
fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on
record.23
We have reviewed the records thoroughly and find that the petitioners failed to establish that the instant case
falls under any of the foregoing exceptions. Indeed, the assailed decision of the Court of Appeals is supported
by the evidence on record and the law.
53

It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that it had
empowered Adams, Glanville and Delsaux or Marquez to offer the properties for sale to prospective buyers
and to accept any counter-offer. Petitioners likewise failed to prove that their counter-offer had been accepted
by respondent EC, through Glanville and Delsaux. It must be stressed that when specific performance is
sought of a contract made with an agent, the agency must be established by clear, certain and specific proof.24
Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines,
provides:
SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this Code, the corporate powers
of all corporations formed under this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the holders of
stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one
(1) year and until their successors are elected and qualified.
Indeed, a corporation is a juridical person separate and distinct from its members or stockholders and is not
affected by the personal rights,
obligations and transactions of the latter.25 It may act only through its board of directors or, when authorized
either by its by-laws or by its board resolution, through its officers or agents in the normal course of business.
The general principles of agency govern the relation between the corporation and its officers or agents, subject
to the articles of incorporation, by-laws, or relevant provisions of law.26
Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject to the
limitations prescribed by law and the Constitution, as follows:
SEC. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the power and
capacity:
xxxx
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such
real and personal property, including securities and bonds of other corporations, as the transaction of a lawful
business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by
the law and the Constitution.
The property of a corporation, however, is not the property of the stockholders or members, and as such, may
not be sold without express authority from the board of directors.27 Physical acts, like the offering of the
properties of the corporation for sale, or the acceptance of a counter-offer of prospective buyers of such
properties and the execution of the deed of sale covering such property, can be performed by the corporation
only by officers or agents duly authorized for the purpose by corporate by-laws or by specific acts of the board
of directors.28 Absent such valid delegation/authorization, the rule is that the declarations of an individual
director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of
authorized duties of such director, are not binding on the corporation.29
While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to
be with the board of directors through its officers and agents as authorized by a board resolution or by its bylaws.30An unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same
expressly or impliedly by its board of directors. Any sale of real property of a corporation by a person purporting
to be an agent thereof but without written authority from the corporation is null and void. The declarations of the
agent alone are generally insufficient to establish the fact or extent of his/her authority.31
54

By the contract of agency, a person binds himself to render some service or to do something in representation
on behalf of another, with the consent or authority of the latter.32 Consent of both principal and agent is
necessary to create an agency. The principal must intend that the agent shall act for him; the agent must
intend to accept the authority and act on it, and the intention of the parties must find expression either in words
or conduct between them.33
An agency may be expressed or implied from the act of the principal, from his silence or lack of action, or his
failure to repudiate the agency knowing that another person is acting on his behalf without authority.
Acceptance by the agent may be expressed, or implied from his acts which carry out the agency, or from his
silence or inaction according to the circumstances.34 Agency may be oral unless the law requires a specific
form.35However, to create or convey real rights over immovable property, a special power of attorney is
necessary.36Thus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the
latter shall be in writing, otherwise, the sale shall be void.37
In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the Board of
Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for
sale, for and in its behalf, the eight parcels of land owned by respondent EC including the improvements
thereon. The bare fact that Delsaux may have been authorized to sell to Ruperto Tan the shares of stock of
respondent ESAC, on June 1, 1997, cannot be used as basis for petitioners claim that he had likewise been
authorized by respondent EC to sell the parcels of land.
Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of Delsaux, who,
in turn, acted on the authority of respondent ESAC, through its Committee for Asia,38 the Board of Directors of
respondent ESAC,39 and the Belgian/Swiss component of the management of respondent ESAC.40 As such,
Adams and Glanville engaged the services of Marquez to offer to sell the properties to prospective buyers.
Thus, on September 12, 1986, Marquez wrote the petitioner that he was authorized to offer for sale the
property forP27,000,000.00 and the other terms of the sale subject to negotiations. When petitioners offered to
purchase the property for P20,000,000.00, through Marquez, the latter relayed petitioners offer to Glanville;
Glanville had to send a telex to Delsaux to inquire the position of respondent ESAC to petitioners offer.
However, as admitted by petitioners in their Memorandum, Delsaux was unable to reply immediately to the
telex of Glanville because Delsaux had to wait for confirmation from respondent ESAC.41 When Delsaux finally
responded to Glanville on February 12, 1987, he made it clear that, based on the "Belgian/Swiss decision" the
final offer of respondent ESAC was US$1,000,000.00 plus P2,500,000.00 to cover all existing obligations prior
to final liquidation.42 The offer of Delsaux emanated only from the "Belgian/Swiss decision," and not the entire
management or Board of Directors of respondent ESAC. While it is true that petitioners accepted the counteroffer of respondent ESAC, respondent EC was not a party to the transaction between them; hence, EC was
not bound by such acceptance.
While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were
members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly
authorized agents of respondent EC; a board resolution evincing the grant of such authority is needed to bind
EC to any agreement regarding the sale of the subject properties. Such board resolution is not a mere formality
but is a condition sine qua non to bind respondent EC. Admittedly, respondent ESAC owned 90% of the shares
of stocks of respondent EC; however, the mere fact that a corporation owns a majority of the shares of stocks
of another, or even all of such shares of stocks, taken alone, will not justify their being treated as one
corporation.43
It bears stressing that in an agent-principal relationship, the personality of the principal is extended through the
facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all
acts which the latter would have him do. Such a relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by law or by any court.44
55

The petitioners cannot feign ignorance of the absence of any regular and valid authority of respondent EC
empowering Adams, Glanville or Delsaux to offer the properties for sale and to sell the said properties to the
petitioners. A person dealing with a known agent is not authorized, under any circumstances, blindly to trust the
agents; statements as to the extent of his powers; such person must not act negligently but must use
reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority.45 The
settled rule is that, persons dealing with an assumed agent are bound at their peril, and if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case
either is controverted, the burden of proof is upon them to prove it.46 In this case, the petitioners failed to
discharge their burden; hence, petitioners are not entitled to damages from respondent EC.
It appears that Marquez acted not only as real estate broker for the petitioners but also as their agent. As
gleaned from the letter of Marquez to Glanville, on February 26, 1987, he confirmed, for and in behalf of the
petitioners, that the latter had accepted such offer to sell the land and the improvements thereon. However, we
agree with the ruling of the appellate court that Marquez had no authority to bind respondent EC to sell the
subject properties. A real estate broker is one who negotiates the sale of real properties. His business,
generally speaking, is only to find a purchaser who is willing to buy the land upon terms fixed by the owner. He
has no authority to bind the principal by signing a contract of sale. Indeed, an authority to find a purchaser of
real property does not include an authority to sell.47
Equally barren of merit is petitioners contention that respondent EC is estopped to deny the existence of a
principal-agency relationship between it and Glanville or Delsaux. For an agency by estoppel to exist, the
following must be established: (1) the principal manifested a representation of the agents authority or
knowlingly allowed the agent to assume such authority; (2) the third person, in good faith, relied upon such
representation; (3) relying upon such representation, such third person has changed his position to his
detriment.48 An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of
reliance upon the representations, and that, in turn, needs proof that the representations predated the action
taken in reliance.49Such proof is lacking in this case. In their communications to the petitioners, Glanville and
Delsaux positively and unequivocally declared that they were acting for and in behalf of respondent ESAC.
Neither may respondent EC be deemed to have ratified the transactions between the petitioners and
respondent ESAC, through Glanville, Delsaux and Marquez. The transactions and the various communications
inter se were never submitted to the Board of Directors of respondent EC for ratification.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.
SO ORDERED.

56

[G.R. No. 151319. November 22, 2004]


MANILA MEMORIAL PARK CEMETERY, INC., petitioner, vs. PEDRO L. LINSANGAN, respondent.
DECISION
TINGA, J.:
For resolution in this case is a classic and interesting texbook question in the law on agency.
This is a petition for review assailing the Decision[1] of the Court of Appeals dated 22 June 2001, and
its Resolution[2] dated 12 December 2001 in CA G.R. CV No. 49802 entitledPedro L. Linsangan v. Manila
Memorial Cemetery, Inc. et al., finding Manila Memorial Park Cemetery, Inc. (MMPCI) jointly and severally
liable with Florencia C. Baluyot to respondent Atty. Pedro L. Linsangan.
The facts of the case are as follows:
Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the
Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner of a memorial
lot under Contract No. 25012 was no longer interested in acquiring the lot and had opted to sell his rights
subject to reimbursement of the amounts he already paid. The contract was for P95,000.00. Baluyot reassured
Atty. Linsangan that once reimbursement is made to the former buyer, the contract would be transferred to him.
Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be reimbursed to the original
buyer and to complete the down payment to MMPCI. [3] Baluyot issued handwritten and typewritten receipts for
these payments.[4]
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued Contract No. 28660, a
new contract covering the subject lot in the name of the latter instead of old Contract No. 25012. Atty.
Linsangan protested, but Baluyot assured him that he would still be paying the old price of P95,000.00
with P19,838.00 credited as full down payment leaving a balance of about P75,000.00.[5]
Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83, Garden
Estate I denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April 1985 for the
amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan objected to the
new contract price, as the same was not the amount previously agreed upon. To convince Atty. Linsangan,
Baluyot executed a document[6] confirming that while the contract price is P132,250.00, Atty. Linsangan would
pay only the original price of P95,000.00.
The document reads in part:
The monthly installment will start April 6, 1985; the amount of P1,800.00 and the difference will be issued as
discounted to conform to the previous price as previously agreed upon. --- P95,000.00
Prepared by:
(Signed)
(MRS.) FLORENCIA C. BALUYOT
57

Agency Manager
Holy Cross Memorial Park
4/18/85
Dear Atty. Linsangan:
This will confirm our agreement that while the offer to purchase under Contract No. 28660 states that the total
price of P132,250.00 your undertaking is to pay only the total sum of P95,000.00 under the old price. Further
the total sum of P19,838.00 already paid by you under O.R. # 118912 dated April 6, 1985 has been credited in
the total purchase price thereby leaving a balance of P75,162.00 on a monthly installment of P1,800.00
including interests (sic) charges for a period of five (5) years.
(Signed)
FLORENCIA C. BALUYOT
By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official Receipt No.
118912. As requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of P1,800.00 each in
favor of MMPCI. The next year, or on 29 April 1986, Atty. Linsangan again issued twelve (12) postdated checks
in favor of MMPCI.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for
reasons the latter could not explain, and presented to him another proposal for the purchase of an equivalent
property. He refused the new proposal and insisted that Baluyot and MMPCI honor their undertaking.
For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed
a Complaint[7] for Breach of Contract and Damages against the former.
Baluyot did not present any evidence. For its part, MMPCI alleged that Contract No. 28660 was cancelled
conformably with the terms of the contract[8] because of non-payment of arrearages.[9] MMPCI stated that
Baluyot was not an agent but an independent contractor, and as such was not authorized to represent MMPCI
or to use its name except as to the extent expressly stated in the Agency Manager Agreement. [10] Moreover,
MMPCI was not aware of the arrangements entered into by Atty. Linsangan and Baluyot, as it in fact received a
down payment and monthly installments as indicated in the contract. [11] Official receipts showing the application
of payment were turned over to Baluyot whom Atty. Linsangan had from the beginning allowed to receive the
same in his behalf. Furthermore, whatever misimpression that Atty. Linsangan may have had must have been
rectified by the Account Updating Arrangement signed by Atty. Linsangan which states that he expressly admits
that Contract No. 28660 on account of serious delinquencyis now due for cancellation under its terms and
conditions.[12]
The trial court held MMPCI and Baluyot jointly and severally liable. [13] It found that Baluyot was an agent of
MMPCI and that the latter was estopped from denying this agency, having received and enchased the checks
issued by Atty. Linsangan and given to it by Baluyot. While MMPCI insisted that Baluyot was authorized to
receive only the down payment, it allowed her to continue to receive postdated checks from Atty. Linsangan,
which it in turn consistently encashed.[14]
The dispositive portion of the decision reads:

58

WHEREFORE, judgment by preponderance of evidence is hereby rendered in favor of plaintiff declaring


Contract No. 28660 as valid and subsisting and ordering defendants to perform their undertakings thereof
which covers burial lot No. A11 (15), Block 83, Section Garden I, Holy Cross Memorial Park located at
Novaliches, Quezon City. All payments made by plaintiff to defendants should be credited for his accounts. NO
DAMAGES, NO ATTORNEYS FEES but with costs against the defendants.
The cross claim of defendant Manila Memorial Cemetery Incorporated as against defendant Baluyot is
GRANTED up to the extent of the costs.
SO ORDERED.[15]
MMPCI appealed the trial courts decision to the Court of Appeals.[16] It claimed that Atty. Linsangan is
bound by the written contract with MMPCI, the terms of which were clearly set forth therein and read,
understood, and signed by the former.[17] It also alleged that Atty. Linsangan, a practicing lawyer for over
thirteen (13) years at the time he entered into the contract, is presumed to know his contractual obligations and
is fully aware that he cannot belatedly and unilaterally change the terms of the contract without the consent,
much less the knowledge of the other contracting party, which was MMPCI. And in this case, MMPCI did not
agree to a change in the contract and in fact implemented the same pursuant to its clear terms. In view thereof,
because of Atty. Linsangans delinquency, MMPCI validly cancelled the contract.
MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as the latter exceeded
the terms of her agency, neither did MMPCI ratify Baluyots acts. It added that it cannot be charged with making
any misrepresentation, nor of having allowed Baluyot to act as though she had full powers as the written
contract expressly stated the terms and conditions which Atty. Linsangan accepted and understood. In
canceling the contract, MMPCI merely enforced the terms and conditions imposed therein.[18]
Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was the formers obligation, as a
party knowingly dealing with an alleged agent, to determine the limitations of such agents authority, particularly
when such alleged agents actions were patently questionable. According to MMPCI, Atty. Linsangan did not
even bother to verify Baluyots authority or ask copies of official receipts for his payments.[19]
The Court of Appeals affirmed the decision of the trial court. It upheld the trial courts finding that Baluyot
was an agent of MMPCI at the time the disputed contract was entered into, having represented MMPCIs
interest and acting on its behalf in the dealings with clients and customers. Hence, MMPCI is considered
estopped when it allowed Baluyot to act and represent MMPCI even beyond her authority.[20] The appellate
court likewise found that the acts of Baluyot bound MMPCI when the latter allowed the former to act for and in
its behalf and stead. While Baluyots authority may not have been expressly conferred upon her, the same may
have been derived impliedly by habit or custom, which may have been an accepted practice in the company for
a long period of time.[21] Thus, the Court of Appeals noted, innocent third persons such as Atty. Linsangan
should not be prejudiced where the principal failed to adopt the needed measures to prevent
misrepresentation. Furthermore, if an agent misrepresents to a purchaser and the principal accepts the
benefits of such misrepresentation, he cannot at the same time deny responsibility for such misrepresentation.
[22]
Finally, the Court of Appeals declared:
There being absolutely nothing on the record that would show that the court a quo overlooked, disregarded, or
misinterpreted facts of weight and significance, its factual findings and conclusions must be given great weight
and should not be disturbed by this Court on appeal.
WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the appealed decision in Civil Case
No. 88-1253 of the Regional Trial Court, National Capital Judicial Region, Branch 57 of Makati, is
hereby AFFIRMED in toto.
59

SO ORDERED.[23]
MMPCI filed its Motion for Reconsideration,[24] but the same was denied for lack of merit.[25]
In the instant Petition for Review, MMPCI claims that the Court of Appeals seriously erred in disregarding
the plain terms of the written contract and Atty. Linsangans failure to abide by the terms thereof, which justified
its cancellation. In addition, even assuming that Baluyot was an agent of MMPCI, she clearly exceeded her
authority and Atty. Linsangan knew or should have known about this considering his status as a long-practicing
lawyer. MMPCI likewise claims that the Court of Appeals erred in failing to consider that the facts and the
applicable law do not support a judgment against Baluyot only up to the extent of costs.[26]
Atty. Linsangan argues that he did not violate the terms and conditions of the contract, and in fact faithfully
performed his contractual obligations and complied with them in good faith for at least two years. [27] He claims
that contrary to MMPCIs position, his profession as a lawyer is immaterial to the validity of the subject contract
and the case at bar.[28] According to him, MMPCI had practically admitted in its Petition that Baluyot was its
agent, and thus, the only issue left to be resolved is whether MMPCI allowed Baluyot to act as though she had
full powers to be held solidarily liable with the latter.[29]
We find for the petitioner MMPCI.
The jurisdiction of the Supreme Court in a petition for review under Rule 45 of the Rules of Court is limited
to reviewing only errors of law, not fact, unless the factual findings complained of are devoid of support by the
evidence on record or the assailed judgment is based on misapprehension of facts. [30] In BPI Investment
Corporation v. D.G. Carreon Commercial Corporation,[31] this Court ruled:
There are instances when the findings of fact of the trial court and/or Court of Appeals may be reviewed by the
Supreme Court, such as (1) when the conclusion is a finding grounded entirely on speculation, surmises and
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a
grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings are
contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners main
and reply briefs are not disputed by the respondents; and (10) the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted by the evidence on record.[32]
In the case at bar, the Court of Appeals committed several errors in the apprehension of the facts of the
case, as well as made conclusions devoid of evidentiary support, hence we review its findings of fact.
By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. [33]Thus, the elements of
agency are (i) consent, express or implied, of the parties to establish the relationship; (ii) the object is the
execution of a juridical act in relation to a third person; (iii) the agent acts as a representative and not for
himself; and (iv) the agent acts within the scope of his authority.[34]
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its Agency Manager
Agreement; an agency manager such as Baluyot is considered an independent contractor and not an agent.
[35]
However, in the same contract, Baluyot as agency manager was authorized to solicit and remit to MMPCI
offers to purchase interment spaces belonging to and sold by the latter.[36] Notwithstanding the claim of MMPCI
that Baluyot was an independent contractor, the fact remains that she was authorized to solicit solely for and in
behalf of MMPCI. As properly found both by the trial court and the Court of Appeals, Baluyot was an agent of
60

MMPCI, having represented the interest of the latter, and having been allowed by MMPCI to represent it in her
dealings with its clients/prospective buyers.
Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be bound by the contract
procured by Atty. Linsangan and solicited by Baluyot.
Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained on
forms provided by MMPCI. The terms of the offer to purchase, therefore, are contained in such forms and,
when signed by the buyer and an authorized officer of MMPCI, becomes binding on both parties.
The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showed a
total list price of P132,250.00. Likewise, it was clearly stated therein that Purchaser agrees that he has read or
has had read to him this agreement, that he understands its terms and conditions, and that there are no
covenants, conditions, warranties or representations other than those contained herein.[37] By signing
the Offer to Purchase, Atty. Linsangan signified that he understood its contents. That he and Baluyot had an
agreement different from that contained in the Offer to Purchase is of no moment, and should not affect
MMPCI, as it was obviously made outside Baluyots authority. To repeat, Baluyots authority was limited only to
soliciting purchasers. She had no authority to alter the terms of the written contract provided by MMPCI. The
document/letter confirming the agreement that Atty. Linsangan would have to pay the old price was executed
by Baluyot alone. Nowhere is there any indication that the same came from MMPCI or any of its officers.
It is a settled rule that persons dealing with an agent are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case
either is controverted, the burden of proof is upon them to establish it.[38] The basis for agency is representation
and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the
agent.[39] If he does not make such an inquiry, he is chargeable with knowledge of the agents authority and his
ignorance of that authority will not be any excuse.[40]
As noted by one author, the ignorance of a person dealing with an agent as to the scope of the latters
authority is no excuse to such person and the fault cannot be thrown upon the principal. [41] A person dealing
with an agent assumes the risk of lack of authority in the agent. He cannot charge the principal by relying upon
the agents assumption of authority that proves to be unfounded. The principal, on the other hand, may act on
the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent
of his authority as well as the existence of his agency.[42]
In the instant case, it has not been established that Atty. Linsangan even bothered to inquire whether
Baluyot was authorized to agree to terms contrary to those indicated in the written contract, much less bind
MMPCI by her commitment with respect to such agreements. Even if Baluyot was Atty. Linsangans friend and
known to be an agent of MMPCI, her declarations and actions alone are not sufficient to establish the fact or
extent of her authority.[43] Atty. Linsangan as a practicing lawyer for a relatively long period of time when he
signed the contract should have been put on guard when their agreement was not reflected in the contract.
More importantly, Atty. Linsangan should have been alerted by the fact that Baluyot failed to effect the transfer
of rights earlier promised, and was unable to make good her written commitment, nor convince MMPCI to
assent thereto, as evidenced by several attempts to induce him to enter into other contracts for a higher
consideration. As properly pointed out by MMPCI, as a lawyer, a greater degree of caution should be expected
of Atty. Linsangan especially in dealings involving legal documents. He did not even bother to ask for official
receipts of his payments, nor inquire from MMPCI directly to ascertain the real status of the contract, blindly
relying on the representations of Baluyot. A lawyer by profession, he knew what he was doing when he signed
the written contract, knew the meaning and value of every word or phrase used in the contract, and more
importantly, knew the legal effects which said document produced. He is bound to accept responsibility for his
negligence.
61

The trial and appellate courts found MMPCI liable based on ratification and estoppel. For the trial court,
MMPCIs acts of accepting and encashing the checks issued by Atty. Linsangan as well as allowing Baluyot to
receive checks drawn in the name of MMPCI confirm and ratify the contract of agency. On the other hand, the
Court of Appeals faulted MMPCI in failing to adopt measures to prevent misrepresentation, and declared that in
view of MMPCIs acceptance of the benefits of Baluyots misrepresentation, it can no longer deny responsibility
therefor.
The Court does not agree. Pertinent to this case are the following provisions of the Civil Code:
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the
limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure
the principals ratification.
Art. 1910. The principal must comply with all the obligations that the agent may have contracted within the
scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he
ratifies it expressly or tacitly.
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the
former allowed the latter to act as though he had full powers.
Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies
them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own unauthorized acts.
Moreover, the principal must have knowledge of the acts he is to ratify.[44]
Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by
another without authority. The substance of the doctrine is confirmation after conduct, amounting to a
substitute for a prior authority. Ordinarily, the principal must have full knowledge at the time of ratification of all
the material facts and circumstances relating to the unauthorized act of the person who assumed to act as
agent. Thus, if material facts were suppressed or unknown, there can be no valid ratification and this
regardless of the purpose or lack thereof in concealing such facts and regardless of the parties between whom
the question of ratification may arise. [45] Nevertheless, this principle does not apply if the principals ignorance of
the material facts and circumstances was willful, or that the principal chooses to act in ignorance of the facts.
[46]
However, in the absence of circumstances putting a reasonably prudent man on inquiry, ratification cannot
be implied as against the principal who is ignorant of the facts.[47]
No ratification can be implied in the instant case.
A perusal of Baluyots Answer[48] reveals that the real arrangement between her and Atty. Linsangan was
for the latter to pay a monthly installment of P1,800.00 whereas Baluyot was to shoulder the counterpart
amount of P1,455.00 to meet the P3,255.00 monthly installments as indicated in the contract. Thus, every time
an installment falls due, payment was to be made through a check from Atty. Linsangan for P1,800.00 and a
cash component of P1,455.00 from Baluyot.[49] However, it appears that while Atty. Linsangan issued the postdated checks, Baluyot failed to come up with her part of the bargain. This was supported by Baluyots
statements in her letter[50] to Mr. Clyde Williams, Jr., Sales Manager of MMPCI, two days after she received the
copy of the Complaint. In the letter, she admitted that she was remiss in her duties when she consented to Atty.
Linsangans proposal that he will pay the old price while the difference will be shouldered by her. She likewise
admitted that the contract suffered arrearages because while Atty. Linsangan issued the agreed checks, she
62

was unable to give her share of P1,455.00 due to her own financial difficulties. Baluyot even asked for
compassion from MMPCI for the error she committed.
Atty. Linsangan failed to show that MMPCI had knowledge of the arrangement. As far as MMPCI is
concerned, the contract price was P132,250.00, as stated in the Offer to Purchase signed by Atty. Linsangan
and MMPCIs authorized officer. The down payment of P19,838.00 given by Atty. Linsangan was in accordance
with the contract as well. Payments of P3,235.00 for at least two installments were likewise in accord with the
contract, albeit made through a check and partly in cash. In view of Baluyots failure to give her share in the
payment, MMPCI received only P1,800.00 checks, which were clearly insufficient payment. In fact, Atty.
Linsangan would have incurred arrearages that could have caused the earlier cancellation of the contract, if
not for MMPCIs application of some of the checks to his account. However, the checks alone were not
sufficient to cover his obligations.
If MMPCI was aware of the arrangement, it would have refused the latters check payments for being
insufficient. It would not have applied to his account the P1,800.00 checks. Moreover, the fact that Baluyot had
to practically explain to MMPCIs Sales Manager the details of her arrangement with Atty. Linsangan and admit
to having made an error in entering such arrangement confirm that MMCPI had no knowledge of the said
agreement. It was only when Baluyot filed her Answer that she claimed that MMCPI was fully aware of the
agreement.
Neither is there estoppel in the instant case. The essential elements of estoppel are (i) conduct of a party
amounting to false representation or concealment of material facts or at least calculated to convey the
impression that the facts are otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; (ii) intent, or at least expectation, that this conduct shall be acted upon by, or at least
influence, the other party; and (iii) knowledge, actual or constructive, of the real facts.[51]
While there is no more question as to the agency relationship between Baluyot and MMPCI, there is no
indication that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot had the authority to
alter the standard contracts of the company. Neither is there any showing that prior to signing Contract No.
28660, MMPCI had any knowledge of Baluyots commitment to Atty. Linsangan. One who claims the benefit of
an estoppel on the ground that he has been misled by the representations of another must not have been
misled through his own want of reasonable care and circumspection. [52] Even assuming that Atty. Linsangan
was misled by MMPCIs actuations, he still cannot invoke the principle of estoppel, as he was clearly negligent
in his dealings with Baluyot, and could have easily determined, had he only been cautious and prudent,
whether said agent was clothed with the authority to change the terms of the principals written contract.
Estoppel must be intentional and unequivocal, for when misapplied, it can easily become a most convenient
and effective means of injustice.[53] In view of the lack of sufficient proof showing estoppel, we refuse to hold
MMPCI liable on this score.
Likewise, this Court does not find favor in the Court of Appeals findings that the authority of defendant
Baluyot may not have been expressly conferred upon her; however, the same may have been derived
impliedly by habit or custom which may have been an accepted practice in their company in a long period of
time. A perusal of the records of the case fails to show any indication that there was such a habit or custom in
MMPCI that allows its agents to enter into agreements for lower prices of its interment spaces, nor to assume a
portion of the purchase price of the interment spaces sold at such lower price. No evidence was ever
presented to this effect.
As the Court sees it, there are two obligations in the instant case. One is the Contract No. 28660 between
MMPCI and by Atty. Linsangan for the purchase of an interment space in the formers cemetery. The other is
the agreement between Baluyot and Atty. Linsangan for the former to shoulder the amount P1,455.00, or the
difference between P95,000.00, the original price, and P132,250.00, the actual contract price.
63

To repeat, the acts of the agent beyond the scope of his authority do not bind the principal unless the latter
ratifies the same. It also bears emphasis that when the third person knows that the agent was acting beyond
his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person was
aware of such limits of authority, he is to blame and is not entitled to recover damages from the agent, unless
the latter undertook to secure the principals ratification.[54]
This Court finds that Contract No. 28660 was validly entered into both by MMPCI and Atty. Linsangan. By
affixing his signature in the contract, Atty. Linsangan assented to the terms and conditions thereof. When Atty.
Linsangan incurred delinquencies in payment, MMCPI merely enforced its rights under the said contract by
canceling the same.
Being aware of the limits of Baluyots authority, Atty. Linsangan cannot insist on what he claims to be the
terms of Contract No. 28660. The agreement, insofar as the P95,000.00 contract price is concerned, is void
and cannot be enforced as against MMPCI. Neither can he hold Baluyot liable for damages under the same
contract, since there is no evidence showing that Baluyot undertook to secure MMPCIs ratification. At best, the
agreement between Baluyot and Atty. Linsangan bound only the two of them. As far as MMPCI is concerned, it
bound itself to sell its interment space to Atty. Linsangan for P132,250.00 under Contract No. 28660, and had
in fact received several payments in accordance with the same contract. If the contract was cancelled due to
arrearages, Atty. Linsangans recourse should only be against Baluyot who personally undertook to pay the
difference between the true contract price ofP132,250.00 and the original proposed price of P95,000.00. To
surmise that Baluyot was acting on behalf of MMPCI when she promised to shoulder the said difference would
be to conclude that MMPCI undertook to pay itself the difference, a conclusion that is very illogical, if not
antithetical to its business interests.
However, this does not preclude Atty. Linsangan from instituting a separate action to recover damages
from Baluyot, not as an agent of MMPCI, but in view of the latters breach of their separate agreement. To
review, Baluyot obligated herself to pay P1,455.00 in addition to Atty. Linsangans P1,800.00 to complete the
monthly installment payment under the contract, which, by her own admission, she was unable to do due to
personal financial difficulties. It is undisputed that Atty. Linsangan issued the P1,800.00 as agreed upon, and
were it not for Baluyots failure to provide the balance, Contract No. 28660 would not have been cancelled.
Thus, Atty. Linsangan has a cause of action against Baluyot, which he can pursue in another case.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated 22 June
2001 and its Resolution dated 12 December 2001 in CA- G.R. CV No. 49802, as well as the Decision in Civil
Case No. 88-1253 of the Regional Trial Court, Makati City Branch 57, are hereby REVERSED and SET
ASIDE. The Complaint in Civil Case No. 88-1253 is DISMISSED for lack of cause of action. No
pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

64

G.R. No. L-24332 January 31, 1978


RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.

MUOZ PALMA, J.:


This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion Rallos,
sold the latter's undivided share in a parcel of land pursuant to a power of attorney which the principal had
executed in favor. The administrator of the estate of the went to court to have the sale declared uneanforceable
and to recover the disposed share. The trial court granted the relief prayed for, but upon appeal the Court of
Appeals uphold the validity of the sale and the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and
registered co-owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by
Transfer Certificate of Title No. 11116 of the Registry of Cebu. On April 21, 1954, the sisters executed a special
power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983.
On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares
of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the sum of
P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled,
and a new transfer certificate of Title No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint
docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that the sale of the
undivided share of the deceased Concepcion Rallos in lot 5983 be d unenforceable, and said share be
reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty
Corporation be cancelled and another title be issued in the names of the corporation and the "Intestate estate
of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by way of attorney's fees and
payment of costs of suit. Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon
Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped from the complaint. The
complaint was amended twice; defendant Corporation's Answer contained a crossclaim against its codefendant, Simon Rallos while the latter filed third-party complaint against his sister, Gerundia Rallos While the
case was pending in the trial court, both Simon and his sister Gerundia died and they were substituted by the
respective administrators of their estates.
After trial the court a quo rendered judgment with the following dispositive portion:
A. On Plaintiffs Complaint
(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half proindiviso share of Concepcion Rallos in the property in question, Lot 5983 of
the Cadastral Survey of Cebu is concerned;
65

(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of
Title No. 12989 covering Lot 5983 and to issue in lieu thereof another in the
names of FELIX GO CHAN & SONS REALTY CORPORATION and the Estate of
Concepcion Rallos in the proportion of one-half (1/2) share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession
of an undivided one-half (1/2) share of Lot 5983 to the herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of
Simeon Rallos, to pay to plaintiff in concept of reasonable attorney's fees the
sum of P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of
Simeon Rallos, to pay to defendant Felix Co Chan & Sons Realty Corporation the
sum of P5,343.45, representing the price of one-half (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of
Simeon Rallos, to pay in concept of reasonable attorney's fees to Felix Go Chan
& Sons Realty Corporation the sum of P500.00.
C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon
Rallos, against Josefina Rallos special administratrix of the Estate of Gerundia Rallos:
(1) Dismissing the third-party complaint without prejudice to filing either a complaint against the
regular administrator of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of
Cerundia Rallos, covering the same subject-matter of the third-party complaint, at bar. (pp. 98100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the foregoing
judgment insofar as it set aside the sale of the one-half (1/2) share of Concepcion Rallos. The appellate
tribunal, as adverted to earlier, resolved the appeal on November 20, 1964 in favor of the appellant corporation
sustaining the sale in question. 1 The appellee administrator, Ramon Rallos, moved for a reconsider of the
decision but the same was denied in a resolution of March 4, 1965. 2
What is the legal effect of an act performed by an agent after the death of his principal? Applied more
particularly to the instant case, We have the query. is the sale of the undivided share of Concepcion Rallos in
lot 5983 valid although it was executed by the agent after the death of his principal? What is the law in this
jurisdiction as to the effect of the death of the principal on the authority of the agent to act for and in behalf of
the latter? Is the fact of knowledge of the death of the principal a material factor in determining the legal effect
of an act performed after such death?
Before proceedings to the issues, We shall briefly restate certain principles of law relevant to the matter tinder
consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of another
without being authorized by the latter, or unless he has by law a right to represent him. 3 A contract entered into
in the name of another by one who has no authority or the legal representation or who has acted beyond his
66

powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it
has been executed, before it is revoked by the other contracting party. 4 Article 1403 (1) of the same Code also
provides:
ART. 1403. The following contracts are unenforceable, unless they are justified:
(1) Those entered into in the name of another person by one who hi - been given no authority or
legal representation or who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby
one party, caged the principal (mandante), authorizes another, called the agent (mandatario), to act for and in
his behalf in transactions with third persons. The essential elements of agency are: (1) there is consent,
express or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agents acts as a representative and not for himself, and (4) the agent acts
within the scope of his authority. 5
Agency is basically personal representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if done within the
scope of the authority. Qui facit per alium facit se. "He who acts through another acts himself". 6
2. There are various ways of extinguishing agency, 7 but her We are concerned only with one cause death of
the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art. 1709 of the Spanish Civil
Code provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ...
(Emphasis supplied)
By reason of the very nature of the relationship between Principal and agent, agency is extinguished by the
death of the principal or the agent. This is the law in this jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found in
thejuridical basis of agency which is representation Them being an in. integration of the personality of the
principal integration that of the agent it is not possible for the representation to continue to exist once the death
of either is establish. Pothier agrees with Manresa that by reason of the nature of agency, death is a necessary
cause for its extinction. Laurent says that the juridical tie between the principal and the agent is severed ipso
jure upon the death of either without necessity for the heirs of the fact to notify the agent of the fact of death of
the former. 9
The same rule prevails at common law the death of the principal effects instantaneous and absolute
revocation of the authority of the agent unless the Power be coupled with an interest. 10 This is the prevalent
rule in American Jurisprudence where it is well-settled that a power without an interest confer. red upon an
agent is dissolved by the principal's death, and any attempted execution of the power afterward is not binding
on the heirs or representatives of the deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent extinguishes the
agency, subject to any exception, and if so, is the instant case within that exception? That is the determinative
point in issue in this litigation. It is the contention of respondent corporation which was sustained by respondent
67

court that notwithstanding the death of the principal Concepcion Rallos the act of the attorney-in-fact, Simeon
Rallos in selling the former's sham in the property is valid and enforceable inasmuch as the corporation acted
in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the principal,
if it has been constituted in the common interest of the latter and of the agent, or in the interest
of a third person who has accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of
any other cause which extinguishes the agency, is valid and shall be fully effective with respect
to third persons who may have contracted with him in good. faith.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon
Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal
is valid and effective only under two conditions, viz: (1) that the agent acted without knowledge of the death of
the principal and (2) that the third person who contracted with the agent himself acted in good faith. Good faith
here means that the third person was not aware of the death of the principal at the time he contracted with said
agent. These two requisites must concur the absence of one will render the act of the agent invalid and
unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at
the time he sold the latter's share in Lot No. 5983 to respondent corporation. The knowledge of the death is
clearly to be inferred from the pleadings filed by Simon Rallos before the trial court. 12 That Simeon Rallos
knew of the death of his sister Concepcion is also a finding of fact of the court a quo 13 and of respondent
appellate court when the latter stated that Simon Rallos 'must have known of the death of his sister, and yet he
proceeded with the sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without
informing appellant (the realty corporation) of the death of the former. 14
On the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion
Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its application lack of
knowledge on the part of the agent of the death of his principal; it is not enough that the third person acted in
good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now Art.
1931 of the new Civil Code sustained the validity , of a sale made after the death of the principal because it
was not shown that the agent knew of his principal's demise. 15 To the same effect is the case of Herrera, et al.,
v. Luy Kim Guan, et al., 1961, where in the words of Justice Jesus Barrera the Court stated:
... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no proof and
there is no indication in the record, that the agent Luy Kim Guan was aware of the death of his
principal at the time he sold the property. The death 6f the principal does not render the act of
an agent unenforceable, where the latter had no knowledge of such extinguishment of the
agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned out that
there is no provision in the Code which provides that whatever is done by an agent having knowledge of the
death of his principal is void even with respect to third persons who may have contracted with him in good faith
and without knowledge of the death of the principal. 16
68

We cannot see the merits of the foregoing argument as it ignores the existence of the general rule enunciated
in Article 1919 that the death of the principal extinguishes the agency. That being the general rule it follows
a fortiorithat any act of an agent after the death of his principal is void ab initio unless the same fags under the
exception provided for in the aforementioned Articles 1930 and 1931. Article 1931, being an exception to the
general rule, is to be strictly construed, it is not to be given an interpretation or application beyond the clear
import of its terms for otherwise the courts will be involved in a process of legislation outside of their judicial
function.
5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the power
of attorney which was duly registered on the original certificate of title recorded in the Register of Deeds of the
province of Cebu, that no notice of the death was aver annotated on said certificate of title by the heirs of the
principal and accordingly they must suffer the consequences of such omission. 17
To support such argument reference is made to a portion in Manresa's Commentaries which We quote:
If the agency has been granted for the purpose of contracting with certain persons, the
revocation must be made known to them. But if the agency is general iii nature, without
reference to particular person with whom the agent is to contract, it is sufficient that the principal
exercise due diligence to make the revocation of the agency publicity known.
In case of a general power which does not specify the persons to whom represents' on should
be made, it is the general opinion that all acts, executed with third persons who contracted in
good faith, Without knowledge of the revocation, are valid. In such case, the principal may
exercise his right against the agent, who, knowing of the revocation, continued to assume a
personality which he no longer had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16, rollo)
The above discourse however, treats of revocation by an act of the principal as a mode of terminating an
agency which is to be distinguished from revocation by operation of law such as death of the principal which
obtains in this case. On page six of this Opinion We stressed that by reason of the very nature of the
relationship between principal and agent, agency is extinguished ipso jure upon the death of either principal or
agent. Although a revocation of a power of attorney to be effective must be communicated to the parties
concerned, 18 yet a revocation by operation of law, such as by death of the principal is, as a rule,
instantaneously effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an
execution of the principal's continuing will. 19 With death, the principal's will ceases or is the of authority is
extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal What the
Code provides in Article 1932 is that, if the agent die his heirs must notify the principal thereof, and in the
meantime adopt such measures as the circumstances may demand in the interest of the latter. Hence, the fact
that no notice of the death of the principal was registered on the certificate of title of the property in the Office
of the Register of Deeds, is not fatal to the cause of the estate of the principal
6. Holding that the good faith of a third person in said with an agent affords the former sufficient protection,
respondent court drew a "parallel" between the instant case and that of an innocent purchaser for value of a
land, stating that if a person purchases a registered land from one who acquired it in bad faith even to the
extent of foregoing or falsifying the deed of sale in his favor the registered owner has no recourse against
such innocent purchaser for value but only against the forger. 20
To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et al., v.
Nano and Vallejo, 61 Phil. 625. We quote from the brief:
69

In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a coowner of lands with Agustin Nano. The latter had a power of attorney supposedly executed by
Vallejo Nano in his favor. Vallejo delivered to Nano his land titles. The power was registered in
the Office of the Register of Deeds. When the lawyer-husband of Angela Blondeau went to that
Office, he found all in order including the power of attorney. But Vallejo denied having executed
the power The lower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing the
decision of the court a quo, the Supreme Court, quoting the ruling in the case of Eliason v.
Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the defenses of the defendant- appellee
must be overruled. Agustin Nano had possession of Jose Vallejo's title papers.
Without those title papers handed over to Nano with the acquiescence of Vallejo,
a fraud could not have been perpetuated. When Fernando de la Canters, a
member of the Philippine Bar and the husband of Angela Blondeau, the principal
plaintiff, searched the registration record, he found them in due form including the
power of attorney of Vallajo in favor of Nano. If this had not been so and if
thereafter the proper notation of the encumbrance could not have been made,
Angela Blondeau would not have sent P12,000.00 to the defendant Vallejo.' An
executed transfer of registered lands placed by the registered owner thereof in
the hands of another operates as a representation to a third party that the holder
of the transfer is authorized to deal with the land.
As between two innocent persons, one of whom must suffer the consequence of
a breach of trust, the one who made it possible by his act of coincidence bear the
loss. (pp. 19-21)
The Blondeau decision, however, is not on all fours with the case before Us because here We are confronted
with one who admittedly was an agent of his sister and who sold the property of the latter after her death with
full knowledge of such death. The situation is expressly covered by a provision of law on agency the terms of
which are clear and unmistakable leaving no room for an interpretation contrary to its tenor, in the same
manner that the ruling in Blondeau and the cases cited therein found a basis in Section 55 of the Land
Registration Law which in part provides:
xxx xxx xxx
The production of the owner's duplicate certificate whenever any voluntary instrument is
presented for registration shall be conclusive authority from the registered owner to the register
of deeds to enter a new certificate or to make a memorandum of registration in accordance with
such instruments, and the new certificate or memorandum Shall be binding upon the registered
owner and upon all persons claiming under him in favor of every purchaser for value and in
good faith: Provided however, That in all cases of registration provided by fraud, the owner may
pursue all his legal and equitable remedies against the parties to such fraud without prejudice,
however, to the right, of any innocent holder for value of a certificate of title. ... (Act No. 496 as
amended)
7. One last point raised by respondent corporation in support of the appealed decision is an 1842 ruling of the
Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to an agent after the death
of the principal were held to be "good", "the parties being ignorant of the death". Let us take note that the
Opinion of Justice Rogers was premised on the statement that the parties were ignorant of the death of the
principal. We quote from that decision the following:
70

... Here the precise point is, whether a payment to an agent when the Parties are ignorant of the
death is a good payment. in addition to the case in Campbell before cited, the same judge Lord
Ellenboruogh, has decided in 5 Esp. 117, the general question that a payment after the death of
principal is not good. Thus, a payment of sailor's wages to a person having a power of attorney
to receive them, has been held void when the principal was dead at the time of the payment. If,
by this case, it is meant merely to decide the general proposition that by operation of law the
death of the principal is a revocation of the powers of the attorney, no objection can be taken to
it. But if it intended to say that his principle applies where there was 110 notice of death, or
opportunity of twice I must be permitted to dissent from it.
... That a payment may be good today, or bad tomorrow, from the accident circumstance of the
death of the principal, which he did not know, and which by no possibility could he know? It
would be unjust to the agent and unjust to the debtor. In the civil law, the acts of the agent,
done bona fide in ignorance of the death of his principal are held valid and binding upon the
heirs of the latter. The same rule holds in the Scottish law, and I cannot believe the common law
is so unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may be made
that the above represents the minority view in American jurisprudence. Thus in Clayton v. Merrett, the Court
said.
There are several cases which seem to hold that although, as a general principle, death revokes
an agency and renders null every act of the agent thereafter performed, yet that where a
payment has been made in ignorance of the death, such payment will be good. The leading
case so holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa) 282, 39 Am. 76, where, in an
elaborate opinion, this view ii broadly announced. It is referred to, and seems to have been
followed, in the case of Dick v. Page,17 Mo. 234, 57 AmD 267; but in this latter case it appeared
that the estate of the deceased principal had received the benefit of the money paid, and
therefore the representative of the estate might well have been held to be estopped from suing
for it again. . . . These cases, in so far, at least, as they announce the doctrine under discussion,
are exceptional. The Pennsylvania Case, supra (Cassiday v. McKenzie 4 Watts & S. 282, 39
AmD 76), is believed to stand almost, if not quite, alone in announcing the principle in its
broadest scope. (52, Misc. 353, 357, cited in 2 C.J. 549)
So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion, except so far
as it related to the particular facts, was a mere dictum, Baldwin J. said:
The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial
indication of his views on the general subject, than as the adjudication of the Court upon the
point in question. But accordingly all power weight to this opinion, as the judgment of a of great
respectability, it stands alone among common law authorities and is opposed by an array too
formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J. 549)
Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence, no such
conflict exists in our own for the simple reason that our statute, the Civil Code, expressly provides for two
exceptions to the general rule that death of the principal revokes ipso jure the agency, to wit: (1) that the
agency is coupled with an interest (Art 1930), and (2) that the act of the agent was executed without
knowledge of the death of the principal and the third person who contracted with the agent acted also in good
faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, and again We stress the indispensable
requirement that the agent acted without knowledge or notice of the death of the principal In the case before
71

Us the agent Ramon Rallos executed the sale notwithstanding notice of the death of his principal Accordingly,
the agent's act is unenforceable against the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, and We affirm en
toto the judgment rendered by then Hon. Amador E. Gomez of the Court of First Instance of Cebu, quoted in
pages 2 and 3 of this Opinion, with costs against respondent realty corporation at all instances.
So Ordered.
Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ., concur.

72

SECOND DIVISION

AMON TRADING
CORPORATION and JULIANA
MARKETING,

G.R. No. 158585

Present:

P e t i t i o n e r s,

PUNO,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and

- versus -

CHICO-NAZARIO, JJ.

Promulgated:
HON. COURT OF APPEALS andTRIREALTY
DEVELOPMENT
AND
CONSTRUCTION CORPORATION,

December 13, 2005

R e s p o n d e n t s.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

73

This is an appeal by certiorari from the Decision[1] dated 28 November 2002 of the Court of Appeals in
CA-G.R. CV No. 60031, reversing the Decision of the Regional Trial Court of Quezon City, Branch 104, and
holding petitioners Amon Trading Corporation and Juliana Marketing to be solidarily liable with Lines & Spaces
Interiors Center (Lines & Spaces) in refunding private respondent Tri-Realty Development and Construction
Corporation (Tri-Realty) the amount corresponding to the value of undelivered bags of cement.

The undisputed facts:

Private respondent Tri-Realty is a developer and contractor with projects in Bulacan and Quezon City.
Sometime in February 1992, private respondent had difficulty in purchasing cement needed for its projects.
Lines & Spaces, represented by Eleanor Bahia Sanchez, informed private respondent that it could obtain
cement to its satisfaction from petitioners, Amon Trading Corporation and its sister company, Juliana
Marketing. On the strength of such representation, private respondent proceeded to order from Sanchez Six
Thousand Fifty (6,050) bags of cement from petitioner Amon Trading Corporation, and from Juliana Marketing,
Six Thousand (6,000) bags at P98.00/bag.

Private respondent, through Mrs. Sanchez of Lines & Spaces, paid in advance the amount
of P592,900.00 through Solidbank Managers Check No. 0011565 payable to Amon Trading Corporation, and
the amount of P588,000.00 payable to Juliana Marketing, through Solidbank Managers Check No. 0011566. A
certain Weng Chua signed the check vouchers for Lines & Spaces while Mrs. Sanchez issued receipts for the
two managers checks. Private respondent likewise paid to Lines & Spaces an advance fee for the 12,050
cement bags at the rate of P7.00/bag, or a total of P84,350.00, in consideration of the facilitation of the orders
and certainty of delivery of the same to the private respondent. Solidbank Managers Check Nos. 0011565 and
0011566 were paid by Sanchez to petitioners.

There were deliveries to private respondent from Amon Trading Corporation and Juliana Marketing of 3,850
bags and 3,000 bags, respectively, during the period from April to June 1992. However, the balance of 2,200
bags from Amon Trading Corporation and 3,000 bags from Juliana Marketing, or a total of 5,200 bags, was not
delivered. Private respondent, thus, sent petitioners written demands but in reply, petitioners stated that they
74

have already refunded the amount of undelivered bags of cement to Lines and Spaces per written instructions
of Eleanor Sanchez.

Left high and dry, with news reaching it that Eleanor Sanchez had already fled abroad, private respondent filed
this case for sum of money against petitioners and Lines & Spaces.

Petitioners plead in defense lack of right or cause of action, alleging that private respondent had no
privity of contract with them as it was Lines & Spaces/Tri-Realty, through Mrs. Sanchez, that ordered or
purchased several bags of cement and paid the price thereof without informing them of any special
arrangement nor disclosing to them that Lines & Spaces and respondent corporation are distinct and separate
entities. They added that there were purchases or orders made by Lines & Spaces/Tri-Realty which they were
about to deliver, but were cancelled by Mrs. Sanchez and the consideration of the cancelled purchases or
orders was later reimbursed to Lines & Spaces. The refund was in the form of a check payable to Lines &
Spaces.

Lines & Spaces denied in its Answer that it is represented by Eleanor B. Sanchez and pleads in
defense lack of cause of action and in the alternative, it raised the defense that it was only an intermediary
between the private respondent and petitioners.[2] Soon after, though, counsel for Lines & Spaces moved to
withdraw from the case for the reason that its client was beyond contact.

On 29 January 1998, the Regional Trial Court of Quezon City, Branch 104, found Lines & Spaces solely
liable to private respondent and absolved petitioners of any liability. The dispositive portion of the trial courts
Decision reads:
75

Wherefore, judgment is hereby rendered ordering defendant Lines and Spaces


Interiors Center as follows: to pay plaintiff on the complaint the amount of P47,950.00 as
refund of the fee for the undelivered 5,200 bags of cement at the rate of P7.00 per bag; the
amount of P509,600.00 for the refund of the price of the 5,200 undelivered bags of cement
at P98.00 per bag; the amount of P2,000,000.00 for compensatory damages; as well as the
amount of P639,387.50 as attorneys fees; and to pay Amon Trading and Juliana Marketing,
Inc. on the crossclaim the sum of P200,000.00 as attorneys fees.[3]

Private Respondent Tri-Realty partially appealed from the trial courts decision absolving Amon Trading
Corporation and Juliana Marketing of any liability to Tri-Realty. In the presently assailed Decision, the Court of
Appeals reversed the decision of the trial court and held petitioners Amon Trading Corporation and Juliana
Marketing to be jointly and severally liable with Lines & Spaces for the undelivered bags of cement. The Court
of Appeals disposed-

WHEREFORE, premises considered, the decision of the court a quo is hereby REVERSED
AND SET ASIDE, and another one is entered ordering the following:

Defendant-appellee Amon Trading Corporation is held liable jointly and severally with
defendant-appellee Lines and Spaces Interiors Center in the amount of P215,600.00 for the
refund of the price of 2,200 undelivered bags of cement.

Defendant-appellee Juliana Marketing is held liable jointly and severally with defendant-appellee
Lines and Spaces Interiors Center in the amount of P294,000.00 for the refund of the price of
3,000 undelivered bags of cement.

The defendant-appellee Lines and Spaces Interiors Center is held solely in the amount of
P47,950.00 as refund of the fee for the 5,200 undelivered bags of cement to the plaintiffappellant Tri-Realty Development and Construction Corporation.

The awards of compensatory damages and attorneys fees are DELETED.


76

The cross claim of defendants-appellees Amon Trading Corporation and Juliana Marketing is
DISMISSED for lack of merit.

No pronouncement as to costs.[4]

Pained by the ruling, petitioners elevated the case to this Court via the present petition for review to
challenge the Decision and Resolution of the Court of Appeals on the following issues:

I.

WHETHER OR NOT THERE WAS A CONTRACT OF AGENCY BETWEEN


LINES AND SPACES INTERIOR CENTER AND RESPONDENT;

II. WHETHER OR NOT PETITIONERS AND RESPONDENT HAS PRIVITY OF CONTRACT.[5]

At the focus of scrutiny is the issue of whether or not the Court of Appeals committed reversible error in
ruling that petitioners are solidarily liable with Lines & Spaces. The key to unlocking this issue is to determine
whether or not Lines & Spaces is the private respondents agent and whether or not there is privity of contract
between petitioners and private respondent.

We shall consider these issues concurrently as they are interrelated.

Petitioners, in their brief, zealously make a case that there was no contract of agency between Lines &
Spaces and private respondent.[6] Petitioners strongly assert that they did not have a hint that Lines & Spaces
and Tri-Realty are two different and distinct entities inasmuch as Eleanor Sanchez whom they have dealt with
just represented herself to be from Lines & Spaces/Tri-Realty when she placed her order for the delivery of the
bags of cement. Hence, no privity of contract can be said to exist between petitioners and private respondent.[7]

77

Private respondent, on the other hand, goes over the top in arguing that contrary to their claim of
innocence, petitioners had knowledge that Lines & Spaces, as represented by Eleanor Sanchez, was a
separate and distinct entity from Tri-Realty.[8] Then, too, private respondent stirs up support for its contention
that contrary to petitioners' claim, there was privity of contract between private respondent and petitioners.[9]

Primarily, there was no written contract entered into between petitioners and private respondent for the
delivery of the bags of cement. As gleaned from the records, and as private respondent itself admitted in its
Complaint, private respondent agreed with Eleanor Sanchez of Lines & Spaces for the latter to source the
cement needs of the former in consideration of P7.00 per bag of cement. It is worthy to note that the payment
in managers checks was made to Eleanor Sanchez of Lines & Spaces and was not directly paid to
petitioners. While the managers check issued by respondent company was eventually paid to petitioners for
the delivery of the bags of cement, there is obviously nothing from the face of said managers check to hint that
private respondent was the one making the payments. There was likewise no intimation from Sanchez that the
purchase order placed by her was for private respondents benefit. The meeting of minds, therefore, was
between private respondent and Eleanor Sanchez of Lines & Spaces. This contract is distinct and separate
from the contract of sale between petitioners and Eleanor Sanchez who represented herself to be from Lines &
Spaces/Tri-Realty, which, per her representation, was a single account or entity.

The records bear out, too, Annex A showing a check voucher payable to Amon Trading Corporation for
the 6,050 bags of cement received by a certain Weng Chua for Mrs. Eleanor Sanchez of Lines & Spaces, and
Annex B which is a check voucher bearing the name of Juliana Marketing as payee, but was received again by
said Weng Chua.Nowhere from the face of the check vouchers is it shown that petitioners or any of their
authorized representatives received the payments from respondent company.

Also on record are the receipts issued by Lines & Spaces, signed by Eleanor Bahia Sanchez, covering
the said managers checks. As Engr. Guido Ganhinhin of respondent Tri-Realty testified, it was Lines & Spaces,
not petitioners, which issued to them a receipt for the two (2) managers checks. Thus-

Q: And what is your proof that Amon and Juliana were paid of the purchases through
managers checks?
78

A: Lines & Spaces who represented Amon Trading and Juliana Marketing issued us
receipts for the two (2) managers checks we paid to Amon Trading and Juliana Marketing
Corporation.

Q: I am showing to you check no. 074 issued by Lines & Spaces Interiors Center, what
relation has this check to that check you mentioned earlier?

A: Official Receipt No. 074 issued by Lines & Spaces Interiors Center was for the
P592,900.00 we paid to Amon Trading Corporation for 6,050 bags of cement.

Q: Now there appears a signature in that receipt above the printed words authorized
signature, whose signature is that?

A: The signature of Mrs. Eleanor Bahia Sanchez, the representative of Lines and
Spaces.

Q: Why do you know that that is her signature?

A: She is quite familiar with me and I saw her affix her signature upon issuance of the
receipt.[10] (Emphasis supplied.)

Without doubt, no vinculum could be said to exist between petitioners and private respondent.

There is likewise nothing meaty about the assertion of private respondent that inasmuch as the delivery
receipts as well as the purchase order were for the account of Lines & Spaces/Tri-Realty, then petitioners
should have been placed on guard that it was private respondent which is the principal of Sanchez. In China
Banking Corp. v. Members of the Board of Trustees, Home Development Mutual Fund [11] and the later case
of Romulo, Mabanta, Buenaventura, Sayoc and De los Angeles v. Home Development Mutual Fund,[12] the
term and/or was held to mean that effect shall be given to both the conjunctive and and the disjunctive or; or
79

that one word or the other may be taken accordingly as one or the other will best effectuate the intended
purpose. It was accordingly ordinarily held that in using the term "and/or" the word "and" and the word "or" are
to be used interchangeably.

By analogy, the words Lines & Spaces/Tri-Realty mean that effect shall be given to both Lines &
Spaces and Tri-Realty or that Lines & Spaces and Tri-Realty may be used interchangeably. Hence, petitioners
were not remiss when they believed Eleanor Sanchezs representation that Lines & Spaces/Tri-Realty refers to
just one entity. There was, therefore, no error attributable to petitioners when they refunded the value of the
undelivered bags of cement to Lines & Spaces only.

There is likewise a dearth of evidence to show that the case at bar is an open-and-shut case of agency
between private respondent and Lines & Spaces. Neither Eleanor Sanchez nor Lines & Spaces was an agent
for private respondent, but rather a supplier for the latters cement needs. The Civil Code defines a contract of
agency as follows:

Art. 1868. By the contract of agency a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or authority of the
latter.

In a bevy of cases such as the avuncular case of Victorias Milling Co., Inc. v. Court of Appeals,[13] the
Court decreed from Article 1868 that the basis of agency is representation.

. . . On the part of the principal, there must be an actual intention to appoint or an


intention naturally inferable from his words or actions and on the part of the agent, there must
be an intention to accept the appointment and act on it, and in the absence of such intent, there
is generally no agency. One factor which most clearly distinguishes agency from other legal
concepts is control; one person - the agent - agrees to act under the control or direction of
80

another - the principal. Indeed, the very word "agency" has come to connote control by the
principal. The control factor, more than any other, has caused the courts to put contracts
between principal and agent in a separate category.

Here, the intention of private respondent, as the Executive Officer of respondent corporation testified
on, was merely for Lines & Spaces, through Eleanor Sanchez, to supply them with the needed bags of cement.

Q: Do you know the defendant Lines & Spaces in this case?

A: Yes, sir.

Q: How come you know this defendant?

A: Lines & Spaces represented by Eleanor Bahia Sanchez offered to supply us cement
when there was scarcity of cement experienced in our projects.[14] (Emphasis supplied)

We cannot go along the Court of Appeals disquisition that Amon Trading Corporation and Juliana
Marketing should have required a special power of attorney form when they refunded Eleanor B. Sanchez the
cost of the undelivered bags of cement. All the quibbling about whether Lines & Spaces acted as agent of
private respondent is inane because as illustrated earlier, petitioners took orders from Eleanor Sanchez who,
after all, was the one who paid them the managers checks for the purchase of cement. Sanchez represented
herself to be from Lines & Spaces/Tri-Realty, purportedly a single entity. Inasmuch as they have never directly
dealt with private respondent and there is no paper trail on record to guide them that the private respondent, in
fact, is the beneficiary, petitioners had no reason to doubt the request of Eleanor Sanchez later on to refund
the value of the undelivered bags of cement to Lines & Spaces. Moreover, the check refund was payable to
Lines & Spaces, not to Sanchez, so there was indeed no cause to suspect the scheme.

81

The fact that the deliveries were made at the construction sites of private respondent does not by itself
raise suspicion that petitioners were delivering for private respondent. There was no sufficient showing that
petitioners knew that the delivery sites were that of private respondent and for another thing, the deliveries
were made by petitioners men who have no business nosing around their clients affairs.

Parenthetically, Eleanor Sanchez has absconded to the United States of America and the story of what
happened to the check refund may be forever locked with her. Lines & Spaces, in its Answer to the Complaint,
washed its hands of the apparent ruse perpetuated by Sanchez, but argues that if at all, it was merely an
intermediary between petitioners and private respondent. With no other way out, Lines & Spaces was a noshow at the trial proceedings so that eventually, its counsel had to withdraw his appearance because of his
clients vanishing act. Left with an empty bag, so to speak, private respondent now puts the blame on
petitioners. But this Court finds plausible the stance of petitioners that they had no inkling of the deception that
was forthcoming. Indeed, without any contract or any hard evidence to show any privity of contract between it
and petitioners, private respondents claim against petitioners lacks legal foothold.

Considering the vagaries of the case, private respondent brought the wrong upon itself. As adeptly
surmised by the trial court, between petitioners and private respondent, it is the latter who had made possible
the wrong that was perpetuated by Eleanor Sanchez against it so it must bear its own loss. It is in this sense
that we must apply the 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. [15] First, private respondent was the one who
had reposed too much trust on Eleanor Sanchez for the latter to source its cement needs. Second, it failed to
employ safety nets to steer clear of the rip-off. For such huge sums of money involved in this case, it is
surprising that a corporation such as private respondent would pay its construction materials in
advance instead of in credit thus opening a window of opportunity for Eleanor Sanchez or Lines & Spaces to
pocket the remaining balance of the amount paid corresponding to the undelivered materials. Private
respondent likewise paid in advance the commission of Eleanor Sanchez for the materials that have yet to be
delivered so it really had no means of control over her. Finally, there is no paper trail linking private respondent
to petitioners thereby leaving the latter clueless that private respondent was their true client. Private
82

respondent should have, at the very least, required petitioners to sign the check vouchers or to issue receipts
for the advance payments so that it could have a hold on petitioners. In this case, it was the representative of
Lines & Spaces who signed the check vouchers. For its failure to establish any of these deterrent measures,
private respondent incurred the risk of not being able to recoup the value of the materials it had paid good
money for.

WHEREFORE, the present petition is hereby GRANTED. Accordingly, the Decision and the Resolution
dated 28 November 2002 and 10 June 2003, of the Court of Appeals in CA-G.R CV No. 60031, are
hereby REVERSED and SET ASIDE. The Decision dated 29 January 1998 of the Regional Trial Court of
Quezon City, Branch 104, in Civil Case Q-92-14235 is hereby REINSTATED. No costs.

SO ORDERED.

83

SECOND DIVISION
[G.R. No. 117356. June 19, 2000]
VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED
SUGAR CORPORATION, respondents.
DECISION
QUISUMBING, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision
of the Court of Appeals dated February 24, 1994, in CA-G.R. CV No. 31717, as well as the respondent
court's resolution of September 30, 1994 modifying said decision. Both decision and resolution
amended the judgment dated February 13, 1991, of the Regional Trial Court of Makati City, Branch
147, in Civil Case No. 90-118.
The facts of this case as found by both the trial and appellate courts are as follows:
St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias Milling Co.,
Inc., (VMC). In the course of their dealings, petitioner issued several Shipping List/Delivery Receipts
(SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M, which gave rise to the
instant case. Dated October 16, 1989, SLDR No. 1214M covers 25,000 bags of sugar. Each bag
contained 50 kilograms and priced at P638.00 per bag as "per sales order VMC Marketing No. 042
dated October 16, 1989."[1]The transaction it covered was a "direct sale."[2] The SLDR also contains an
additional note which reads: "subject for (sic) availability of a (sic) stock at NAWACO (warehouse)."[3]
On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights
in SLDR No. 1214M for P 14,750,000.00. CSC issued one check dated October 25, 1989 and three
checks postdated November 13, 1989 in payment. That same day, CSC wrote petitioner that it had
been authorized by STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter
were a copy of SLDR No. 1214M and a letter of authority from STM authorizing CSC "to withdraw for
and in our behalf the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR) No.
1214 dated October 16, 1989 in the total quantity of 25,000 bags."[4]
On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with petitioner as
payee. The latter, in turn, issued Official Receipt No. 33743 dated October 27, 1989 acknowledging
receipt of the said checks in payment of 50,000 bags. Aside from SLDR No. 1214M, said checks also
covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO warehouse and
was allowed to withdraw sugar. However, after 2,000 bags had been released, petitioner refused to
allow further withdrawals of sugar against SLDR No. 1214M. CSC then sent petitioner a letter dated
January 23, 1990 informing it that SLDR No. 1214M had been "sold and endorsed" to it but that it had
been refused further withdrawals of sugar from petitioner's warehouse despite the fact that only 2,000
bags had been withdrawn.[5]CSC thus inquired when it would be allowed to withdraw the remaining
23,000 bags.
On January 31, 1990, petitioner replied that it could not allow any further withdrawals of sugar against
SLDR No. 1214M because STM had already dwithdrawn all the sugar covered by the cleared checks.[6]
84

On March 2, 1990, CSC sent petitioner a letter demanding the release of the balance of 23,000 bags.
Seven days later, petitioner reiterated that all the sugar corresponding to the amount of STM's cleared
checks had been fully withdrawn and hence, there would be no more deliveries of the commodity to
STM's account. Petitioner also noted that CSC had represented itself to be STM's agent as it had
withdrawn the 2,000 bags against SLDR No. 1214M "for and in behalf" of STM.
On April 27, 1990, CSC filed a complaint for specific performance, docketed as Civil Case No. 90-1118.
Defendants were Teresita Ng Sy (doing business under the name of St. Therese Merchandising) and
herein petitioner. Since the former could not be served with summons, the case proceeded only against
the latter. During the trial, it was discovered that Teresita Ng Go who testified for CSC was the same
Teresita Ng Sy who could not be reached through summons.[7] CSC, however, did not bother to pursue
its case against her, but instead used her as its witness.
CSC's complaint alleged that STM had fully paid petitioner for the sugar covered by SLDR No. 1214M.
Therefore, the latter had no justification for refusing delivery of the sugar. CSC prayed that petitioner be
ordered to deliver the 23,000 bags covered by SLDR No. 1214M and sought the award of
P1,104,000.00 in unrealized profits, P3,000,000.00 as exemplary damages, P2,200,000.00 as
attorney's fees and litigation expenses.
Petitioner's primary defense a quo was that it was an unpaid seller for the 23,000 bags.[8] Since STM
had already drawn in full all the sugar corresponding to the amount of its cleared checks, it could no
longer authorize further delivery of sugar to CSC. Petitioner also contended that it had no privity of
contract with CSC.
Petitioner explained that the SLDRs, which it had issued, were not documents of title, but mere delivery
receipts issued pursuant to a series of transactions entered into between it and STM. The SLDRs
prescribed delivery of the sugar to the party specified therein and did not authorize the transfer of said
party's rights and interests.
Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's co-conspirator to
defraud it through a misrepresentation that CSC was an innocent purchaser for value and in good faith.
Petitioner then prayed that CSC be ordered to pay it the following sums: P10,000,000.00 as moral
damages; P10,000,000.00 as exemplary damages; and P1,500,000.00 as attorney's fees. Petitioner
also prayed that cross-defendant STM be ordered to pay it P10,000,000.00 in exemplary damages, and
P1,500,000.00 as attorney's fees.
Since no settlement was reached at pre-trial, the trial court heard the case on the merits.
As earlier stated, the trial court rendered its judgment favoring private respondent CSC, as follows:
"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the
plaintiff and against defendant Victorias Milling Company:
"1) Ordering defendant Victorias Milling Company to deliver to the plaintiff 23,000 bags of
refined sugar due under SLDR No. 1214;
"2) Ordering defendant Victorias Milling Company to pay the amount of P920,000.00 as
unrealized profits, the amount of P800,000.00 as exemplary damages and the amount of
P1,357,000.00, which is 10% of the acquisition value of the undelivered bags of refined sugar in
the amount of P13,570,000.00, as attorney's fees, plus the costs.
85

"SO ORDERED."[9]
It made the following observations:
"[T]he testimony of plaintiff's witness Teresita Ng Go, that she had fully paid the purchase price
of P15,950,000.00 of the 25,000 bags of sugar bought by her covered by SLDR No. 1214 as
well as the purchase price of P15,950,000.00 for the 25,000 bags of sugar bought by her
covered by SLDR No. 1213 on the same date, October 16, 1989 (date of the two SLDRs) is duly
supported by Exhibits C to C-15 inclusive which are post-dated checks dated October 27, 1989
issued by St. Therese Merchandising in favor of Victorias Milling Company at the time it
purchased the 50,000 bags of sugar covered by SLDR No. 1213 and 1214. Said checks appear
to have been honored and duly credited to the account of Victorias Milling Company because on
October 27, 1989 Victorias Milling Company issued official receipt no. 34734 in favor of St.
Therese Merchandising for the amount of P31,900,000.00 (Exhibits B and B-1). The testimony
of Teresita Ng Go is further supported by Exhibit F, which is a computer printout of defendant
Victorias Milling Company showing the quantity and value of the purchases made by St.
Therese Merchandising, the SLDR no. issued to cover the purchase, the official reciept no. and
the status of payment. It is clear in Exhibit 'F' that with respect to the sugar covered by SLDR
No. 1214 the same has been fully paid as indicated by the word 'cleared' appearing under the
column of 'status of payment.'
"On the other hand, the claim of defendant Victorias Milling Company that the purchase price of
the 25,000 bags of sugar purchased by St. Therese Merchandising covered by SLDR No. 1214
has not been fully paid is supported only by the testimony of Arnulfo Caintic, witness for
defendant Victorias Milling Company. The Court notes that the testimony of Arnulfo Caintic is
merely a sweeping barren assertion that the purchase price has not been fully paid and is not
corroborated by any positive evidence. There is an insinuation by Arnulfo Caintic in his
testimony that the postdated checks issued by the buyer in payment of the purchased price
were dishonored. However, said witness failed to present in Court any dishonored check or any
replacement check. Said witness likewise failed to present any bank record showing that the
checks issued by the buyer, Teresita Ng Go, in payment of the purchase price of the sugar
covered by SLDR No. 1214 were dishonored."[10]
Petitioner appealed the trial courts decision to the Court of Appeals.
On appeal, petitioner averred that the dealings between it and STM were part of a series of
transactions involving only one account or one general contract of sale. Pursuant to this contract, STM
or any of its authorized agents could withdraw bags of sugar only against cleared checks of STM.
SLDR No. 21214M was only one of 22 SLDRs issued to STM andsince the latter had already
withdrawn its full quota of sugar under the said SLDR, CSC was already precluded from seeking
delivery of the 23,000 bags of sugar.
Private respondent CSC countered that the sugar purchases involving SLDR No. 1214M were separate
and independent transactions and that the details of the series of purchases were contained in a single
statement with a consolidated summary of cleared check payments and sugar stock withdrawals
because this a more convenient system than issuing separate statements for each purchase.
The appellate court considered the following issues: (a) Whether or not the transaction between
petitioner and STM involving SLDR No. 1214M was a separate, independent, and single transaction;
(b) Whether or not CSC had the capacity to sue on its own on SLDR No. 1214M; and (c) Whether or
86

not CSC as buyer from STM of the rights to 25,000 bags of sugar covered by SLDR No. 1214M could
compel petitioner to deliver 23,000 bags allegedly unwithdrawn.
On February 24, 1994, the Court of Appeals rendered its decision modifying the trial court's judgment,
to wit:
"WHEREFORE, the Court hereby MODIFIES the assailed judgment and orders defendantappellant to:
"1) Deliver to plaintiff-appellee 12,586 bags of sugar covered by SLDR No. 1214M;
" 2) Pay to plaintiff-appellee P792,918.00 which is 10% of the value of the undelivered bags of
refined sugar, as attorneys fees;
"3) Pay the costs of suit.
"SO ORDERED."[11]
Both parties then seasonably filed separate motions for reconsideration.
In its resolution dated September 30, 1994, the appellate court modified its decision to read:
"WHEREFORE, the Court hereby modifies the assailed judgment and orders defendantappellant to:
"(1) Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR No. 1214M;
"(2) Pay costs of suit.
"SO ORDERED."[12]
The appellate court explained the rationale for the modification as follows:
"There is merit in plaintiff-appellee's position.
"Exhibit F' We relied upon in fixing the number of bags of sugar which remained undelivered as
12,586 cannot be made the basis for such a finding. The rule is explicit that courts should
consider the evidence only for the purpose for which it was offered. (People v. Abalos, et al, 1
CA Rep 783). The rationale for this is to afford the party against whom the evidence is
presented to object thereto if he deems it necessary. Plaintiff-appellee is, therefore, correct in its
argument that Exhibit F' which was offered to prove that checks in the total amount of
P15,950,000.00 had been cleared. (Formal Offer of Evidence for Plaintiff, Records p. 58) cannot
be used to prove the proposition that 12,586 bags of sugar remained undelivered.
"Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p. 33] and Marianito
L. Santos [TSN, 17 October 1990, pp. 16, 18, and 36]) presented by plaintiff-appellee was to the
effect that it had withdrawn only 2,000 bags of sugar from SLDR after which it was not allowed
to withdraw anymore. Documentary evidence (Exhibit I, Id., p. 78, Exhibit K, Id., p. 80) show that
plaintiff-appellee had sent demand letters to defendant-appellant asking the latter to allow it to
withdraw the remaining 23,000 bags of sugar from SLDR 1214M. Defendant-appellant, on the
87

other hand, alleged that sugar delivery to the STM corresponded only to the value of cleared
checks; and that all sugar corresponded to cleared checks had been withdrawn. Defendantappellant did not rebut plaintiff-appellee's assertions. It did not present evidence to show how
many bags of sugar had been withdrawn against SLDR No. 1214M, precisely because of its
theory that all sales in question were a series of one single transaction and withdrawal of sugar
depended on the clearing of checks paid therefor.
"After a second look at the evidence, We see no reason to overturn the findings of the trial court
on this point."[13]
Hence, the instant petition, positing the following errors as grounds for review:
"1. The Court of Appeals erred in not holding that STM's and private respondent's specially
informing petitioner that respondent was authorized by buyer STM to withdraw sugar against
SLDR No. 1214M "for and in our (STM) behalf," (emphasis in the original) private respondent's
withdrawing 2,000 bags of sugar for STM, and STM's empowering other persons as its agents
to withdraw sugar against the same SLDR No. 1214M, rendered respondent like the other
persons, an agent of STM as held inRallos v. Felix Go Chan & Realty Corp., 81 SCRA 252, and
precluded it from subsequently claiming and proving being an assignee of SLDR No. 1214M
and from suing by itself for its enforcement because it was conclusively presumed to be an
agent (Sec. 2, Rule 131, Rules of Court) and estopped from doing so. (Art. 1431, Civil Code).
" 2. The Court of Appeals erred in manifestly and arbitrarily ignoring and disregarding certain
relevant and undisputed facts which, had they been considered, would have shown that
petitioner was not liable, except for 69 bags of sugar, and which would justify review of its
conclusion of facts by this Honorable Court.
" 3. The Court of Appeals misapplied the law on compensation under Arts. 1279, 1285 and 1626
of the Civil Code when it ruled that compensation applied only to credits from one SLDR or
contract and not to those from two or more distinct contracts between the same parties; and
erred in denying petitioner's right to setoff all its credits arising prior to notice of assignment from
other sales or SLDRs against private respondent's claim as assignee under SLDR No. 1214M,
so as to extinguish or reduce its liability to 69 bags, because the law on compensation applies
precisely to two or more distinct contracts between the same parties (emphasis in the original).
"4. The Court of Appeals erred in concluding that the settlement or liquidation of accounts in
Exh. F between petitioner and STM, respondent's admission of its balance, and STM's
acquiescence thereto by silence for almost one year did not render Exh. `F' an account stated
and its balance binding.
"5. The Court of Appeals erred in not holding that the conditions of the assigned SLDR No.
1214, namely, (a) its subject matter being generic, and (b) the sale of sugar being subject to its
availability at the Nawaco warehouse, made the sale conditional and prevented STM or private
respondent from acquiring title to the sugar; and the non-availability of sugar freed petitioner
from further obligation.
"6. The Court of Appeals erred in not holding that the "clean hands" doctrine precluded
respondent from seeking judicial reliefs (sic) from petitioner, its only remedy being against its
assignor."[14]
Simply stated, the issues now to be resolved are:
88

(1)....Whether or not the Court of Appeals erred in not ruling that CSC was an agent of STM and
hence, estopped to sue upon SLDR No. 1214M as an assignee.
(2)....Whether or not the Court of Appeals erred in applying the law on compensation to the
transaction under SLDR No. 1214M so as to preclude petitioner from offsetting its credits on the
other SLDRs.
(3)....Whether or not the Court of Appeals erred in not ruling that the sale of sugar under SLDR
No. 1214M was a conditional sale or a contract to sell and hence freed petitioner from further
obligations.
(4)....Whether or not the Court of Appeals committed an error of law in not applying the "clean
hands doctrine" to preclude CSC from seeking judicial relief.
The issues will be discussed in seriatim.
Anent the first issue, we find from the records that petitioner raised this issue for the first time on
appeal. It is settled that an issue which was not raised during the trial in the court below could not be
raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice,
and due process.[15] Nonetheless, the Court of Appeals opted to address this issue, hence, now a
matter for our consideration.
Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR
No. 1214M to show that the latter was STM's agent. The pertinent portion of said letter reads:
"This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in
our behalf (stress supplied) the refined sugar covered by Shipping List/Delivery Receipt =
Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of 25, 000 bags."[16]
The Civil Code defines a contract of agency as follows:
"Art. 1868. By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter."
It is clear from Article 1868 that the basis of agency is representation.[17] On the part of the principal,
there must be an actual intention to appoint[18] or an intention naturally inferable from his words or
actions;[19] and on the part of the agent, there must be an intention to accept the appointment and act
on it,[20] and in the absence of such intent, there is generally no agency.[21] One factor which most clearly
distinguishes agency from other legal concepts is control; one person - the agent - agrees to act under
the control or direction of another - the principal. Indeed, the very word "agency" has come to connote
control by the principal.[22] The control factor, more than any other, has caused the courts to put
contracts between principal and agent in a separate category.[23] The Court of Appeals, in finding that
CSC, was not an agent of STM, opined:
"This Court has ruled that where the relation of agency is dependent upon the acts of the
parties, the law makes no presumption of agency, and it is always a fact to be proved, with the
burden of proof resting upon the persons alleging the agency, to show not only the fact of its
existence, but also its nature and extent (Antonio vs. Enriquez[CA], 51 O.G. 3536]. Here,
defendant-appellant failed to sufficiently establish the existence of an agency relation between
plaintiff-appellee and STM. The fact alone that it (STM) had authorized withdrawal of sugar by
plaintiff-appellee "for and in our (STM's) behalf" should not be eyed as pointing to the existence
89

of an agency relation ...It should be viewed in the context of all the circumstances obtaining.
Although it would seem STM represented plaintiff-appellee as being its agent by the use of the
phrase "for and in our (STM's) behalf" the matter was cleared when on 23 January 1990,
plaintiff-appellee informed defendant-appellant that SLDFR No. 1214M had been "sold and
endorsed" to it by STM (Exhibit I, Records, p. 78). Further, plaintiff-appellee has shown that the
25, 000 bags of sugar covered by the SLDR No. 1214M were sold and transferred by STM to
it ...A conclusion that there was a valid sale and transfer to plaintiff-appellee may, therefore, be
made thus capacitating plaintiff-appellee to sue in its own name, without need of joining its
imputed principal STM as co-plaintiff."[24]
In the instant case, it appears plain to us that private respondent CSC was a buyer of the SLDFR form,
and not an agent of STM. Private respondent CSC was not subject to STM's control. The question of
whether a contract is one of sale or agency depends on the intention of the parties as gathered from
the whole scope and effect of the language employed.[25] That the authorization given to CSC contained
the phrase "for and in our (STM's) behalf" did not establish an agency. Ultimately, what is decisive is the
intention of the parties.[26]That no agency was meant to be established by the CSC and STM is clearly
shown by CSC's communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it.
[27]
The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale,
and not an agency. Hence, on this score, no error was committed by the respondent appellate court
when it held that CSC was not STM's agent and could independently sue petitioner.
On the second issue, proceeding from the theory that the transactions entered into between petitioner
and STM are but serial parts of one account, petitioner insists that its debt has been offset by its claim
for STM's unpaid purchases, pursuant to Article 1279 of the Civil Code.[28] However, the trial court
found, and the Court of Appeals concurred, that the purchase of sugar covered by SLDR No. 1214M
was a separate and independent transaction; it was not a serial part of a single transaction or of one
account contrary to petitioner's insistence. Evidence on record shows, without being rebutted, that
petitioner had been paid for the sugar purchased under SLDR No. 1214M. Petitioner clearly had the
obligation to deliver said commodity to STM or its assignee. Since said sugar had been fully paid for,
petitioner and CSC, as assignee of STM, were not mutually creditors and debtors of each other. No
reversible error could thereby be imputed to respondent appellate court when, it refused to apply Article
1279 of the Civil Code to the present case.
Regarding the third issue, petitioner contends that the sale of sugar under SLDR No. 1214M is a
conditional sale or a contract to sell, with title to the sugar still remaining with the vendor. Noteworthy,
SLDR No. 1214M contains the following terms and conditions:
"It is understood and agreed that by payment by buyer/trader of refined sugar and/or receipt of
this document by the buyer/trader personally or through a representative, title to refined sugar is
transferred to buyer/trader and delivery to him/it is deemed effected and completed (stress
supplied) and buyer/trader assumes full responsibility therefore"[29]
The aforequoted terms and conditions clearly show that petitioner transferred title to the sugar to the
buyer or his assignee upon payment of the purchase price. Said terms clearly establish a contract of
sale, not a contract to sell. Petitioner is now estopped from alleging the contrary. The contract is the law
between the contracting parties.[30] And where the terms and conditions so stipulated are not contrary to
law, morals, good customs, public policy or public order, the contract is valid and must be upheld.
[31]
Having transferred title to the sugar in question, petitioner is now obliged to deliver it to the
purchaser or its assignee.

90

As to the fourth issue, petitioner submits that STM and private respondent CSC have entered into a
conspiracy to defraud it of its sugar. This conspiracy is allegedly evidenced by: (a) the fact that STM's
selling price to CSC was below its purchasing price; (b) CSC's refusal to pursue its case against
Teresita Ng Go; and (c) the authority given by the latter to other persons to withdraw sugar against
SLDR No. 1214M after she had sold her rights under said SLDR to CSC. Petitioner prays that the
doctrine of "clean hands" should be applied to preclude CSC from seeking judicial relief. However,
despite careful scrutiny, we find here the records bare of convincing evidence whatsoever to support
the petitioner's allegations of fraud. We are now constrained to deem this matter purely speculative,
bereft of concrete proof.
WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

91

G.R. No. 167552

April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,


vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review by certiorari assailing the Decision1 of the Court of Appeals dated 10 August
2004 and its Resolution2 dated 17 March 2005 in CA-G.R. SP No. 71397 entitled, "Eurotech Industrial
Technologies, Inc. v. Hon. Antonio T. Echavez." The assailed Decision and Resolution affirmed the
Order3 dated 29 January 2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent
EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.
The generative facts of the case are as follows:
Petitioner is engaged in the business of importation and distribution of various European industrial equipment
for customers here in the Philippines. It has as one of its customers Impact Systems Sales ("Impact Systems")
which is a sole proprietorship owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales
manager of Impact Systems and was impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to ninetyone thousand three hundred thirty-eight (P91,338.00) pesos. Subsequently, respondents sought to buy from
petitioner one unit of sludge pump valued at P250,000.00 with respondents making a down payment of fifty
thousand pesos (P50,000.00).4 When the sludge pump arrived from the United Kingdom, petitioner refused to
deliver the same to respondents without their having fully settled their indebtedness to petitioner. Thus, on 28
June 1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner, the pertinent part of which states:
1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation in the amount of
THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as payment for the purchase of
one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE6 the
said receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE
THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR is the lawful recipient;
3.) That the ASSIGNEE does hereby accept this assignment.7
Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as
shown by Invoice No. 12034 dated 30 June 1995.8
Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment, proceeded
to collect from Toledo Power Company the amount of P365,135.29 as evidenced by Check Voucher No.
09339prepared by said power company and an official receipt dated 15 August 1995 issued by Impact
Systems.10Alarmed by this development, petitioner made several demands upon respondents to pay their
obligations. As a result, respondents were able to make partial payments to petitioner. On 7 October 1996,
petitioners counsel sent respondents a final demand letter wherein it was stated that as of 11 June 1996,
respondents total obligations stood at P295,000.00 excluding interests and attorneys fees.11 Because of
92

respondents failure to abide by said final demand letter, petitioner instituted a complaint for sum of money,
damages, with application for preliminary attachment against herein respondents before the Regional Trial
Court of Cebu City.12
On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ of preliminary
attachment.13
On 25 June 1997, respondent EDWIN filed his Answer14 wherein he admitted petitioners allegations with
respect to the sale transactions entered into by Impact Systems and petitioner between January and April
1995.15 He, however, disputed the total amount of Impact Systems indebtedness to petitioner which, according
to him, amounted to only P220,000.00.16
By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in
this case. According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his
transaction with petitioner and the latter was very much aware of this fact. In support of this argument,
petitioner points to paragraphs 1.2 and 1.3 of petitioners Complaint stating
1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the proprietor of
a single proprietorship business known as Impact Systems Sales ("Impact Systems" for brevity), with
office located at 46-A del Rosario Street, Cebu City, where he may be served summons and other
processes of the Honorable Court.
1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. He is the
Sales Manager of Impact Systems and is sued in this action in such capacity.17
On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary
Judgment. The trial court granted petitioners motion to declare respondent ERWIN in default "for his failure to
answer within the prescribed period despite the opportunity granted"18 but it denied petitioners motion for
summary judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16 October
2001.19However, the conduct of the pre-trial conference was deferred pending the resolution by the trial court
of the special and affirmative defenses raised by respondent EDWIN.20
After the filing of respondent EDWINs Memorandum21 in support of his special and affirmative defenses and
petitioners opposition22 thereto, the trial court rendered its assailed Order dated 29 January 2002 dropping
respondent EDWIN as a party defendant in this case. According to the trial court
A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted
in behalf of or represented [Impact] Systems Sales; that [Impact] Systems Sale is a single proprietorship entity
and the complaint shows that defendant Erwin H. Cuizon is the proprietor; that plaintiff corporation is
represented by its general manager Alberto de Jesus in the contract which is dated June 28, 1995. A study of
Annex "H" to the complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H.
Cuizon, made a down payment of P50,000.00 that Annex "H" is dated June 30, 1995 or two days after the
execution of Annex "G", thereby showing that [Impact] Systems Sales ratified the act of Edwin B. Cuizon; the
records further show that plaintiff knew that [Impact] Systems Sales, the principal, ratified the act of Edwin B.
Cuizon, the agent, when it accepted the down payment of P50,000.00. Plaintiff, therefore, cannot say that it
was deceived by defendant Edwin B. Cuizon, since in the instant case the principal has ratified the act of its
agent and plaintiff knew about said ratification. Plaintiff could not say that the subject contract was entered into
by Edwin B. Cuizon in excess of his powers since [Impact] Systems Sales made a down payment
of P50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party defendant.23
93

Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which,
however, affirmed the 29 January 2002 Order of the court a quo. The dispositive portion of the now assailed
Decision of the Court of Appeals states:
WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by the public
respondent in his Order dated January 29, 2002, it is hereby AFFIRMED.24
Petitioners motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17
March 2005. Hence, the present petition raising, as sole ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT RESPONDENT
EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY
LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HE
PARTICIPATE IN THE PERPETUATION OF A FRAUD.25
To support its argument, petitioner points to Article 1897 of the New Civil Code which states:
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his
powers.
Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINs act of collecting the
receivables from the Toledo Power Corporation notwithstanding the existence of the Deed of Assignment
signed by EDWIN on behalf of Impact Systems. While said collection did not revoke the agency relations of
respondents, petitioner insists that ERWINs action repudiated EDWINs power to sign the Deed of
Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as an agent, petitioner claims
that he should be made personally liable for the obligations of his principal.26
Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it into selling
the one unit of sludge pump to Impact Systems and signing the Deed of Assignment. Petitioner directs the
attention of this Court to the fact that respondents are bound not only by their principal and agent relationship
but are in fact full-blooded brothers whose successive contravening acts bore the obvious signs of conspiracy
to defraud petitioner.27
In his Comment,28 respondent EDWIN again posits the argument that he is not a real party in interest in this
case and it was proper for the trial court to have him dropped as a defendant. He insists that he was a mere
agent of Impact Systems which is owned by ERWIN and that his status as such is known even to petitioner as
it is alleged in the Complaint that he is being sued in his capacity as the sales manager of the said business
venture. Likewise, respondent EDWIN points to the Deed of Assignment which clearly states that he was
acting as a representative of Impact Systems in said transaction.
We do not find merit in the petition.
In a contract of agency, a person binds himself to render some service or to do something in representation or
on behalf of another with the latters consent.29 The underlying principle of the contract of agency is to
accomplish results by using the services of others to do a great variety of things like selling, buying,
manufacturing, and transporting.30 Its purpose is to extend the personality of the principal or the party for whom
another acts and from whom he or she derives the authority to act.31 It is said that the basis of agency is
representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were personally executed by the principal.32 By this
94

legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence qui
facit per alium facit per se.33
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his authority.34
In this case, the parties do not dispute the existence of the agency relationship between respondents ERWIN
as principal and EDWIN as agent. The only cause of the present dispute is whether respondent EDWIN
exceeded his authority when he signed the Deed of Assignment thereby binding himself personally to pay the
obligations to petitioner. Petitioner firmly believes that respondent EDWIN acted beyond the authority granted
by his principal and he should therefore bear the effect of his deed pursuant to Article 1897 of the New Civil
Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party
with whom he contracts. The same provision, however, presents two instances when an agent becomes
personally liable to a third person. The first is when he expressly binds himself to the obligation and the second
is when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third
party sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of the exceptions
contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact
Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad
powers with which to conduct the business of the principal, thus:
The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a
position presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of
judgment and discretion in transactions and concerns which are incidental or appurtenant to the business
entrusted to his care and management. In the absence of an agreement to the contrary, a managing agent
may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests
of his principal entrusted to his management. x x x.35
Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority when he
signed the Deed of Assignment. To recall, petitioner refused to deliver the one unit of sludge pump unless it
received, in full, the payment for Impact Systems indebtedness.36 We may very well assume that Impact
Systems desperately needed the sludge pump for its business since after it paid the amount of fifty thousand
pesos (P50,000.00) as down payment on 3 March 1995,37 it still persisted in negotiating with petitioner which
culminated in the execution of the Deed of Assignment of its receivables from Toledo Power Company on 28
June 1995.38The significant amount of time spent on the negotiation for the sale of the sludge pump
underscores Impact Systems perseverance to get hold of the said equipment. There is, therefore, no doubt in
our mind that respondent EDWINs participation in the Deed of Assignment was "reasonably necessary" or was
required in order for him to protect the business of his principal. Had he not acted in the way he did, the
business of his principal would have been adversely affected and he would have violated his fiduciary relation
with his principal.
We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents
ERWIN, the principal, and EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code
upon which petitioner anchors its claim against respondent EDWIN "does not hold that in case of excess of
authority, both the agent and the principal are liable to the other contracting party."39 To reiterate, the first part
95

of Article 1897 declares that the principal is liable in cases when the agent acted within the bounds of his
authority. Under this, the agent is completely absolved of any liability. The second part of the said provision
presents the situations when the agent himself becomes liable to a third party when he expressly binds himself
or he exceeds the limits of his authority without giving notice of his powers to the third person. However, it must
be pointed out that in case of excess of authority by the agent, like what petitioner claims exists here, the law
does not say that a third person can recover from both the principal and the agent.40
As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right nor
incur any liability arising from the Deed of Assignment, it follows that he is not a real party in interest who
should be impleaded in this case. A real party in interest is one who "stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit."41 In this respect, we sustain his exclusion as
a defendant in the suit before the court a quo.
WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August 2004
and Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No. 71397, affirming the Order
dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu City, is AFFIRMED.
Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the continuation
of the proceedings against respondent Erwin Cuizon.
SO ORDERED.

96

G.R. No. L-15568

November 8, 1919

W. G. PHILPOTTS, petitioner,
vs.
PHILIPPINE MANUFACTURING COMPANY and F. N. BERRY, respondents.
Lawrence and Ross for petitioner.
Crossfield and O'Brien for defendants.

STREET, J.:
The petitioner, W. G. Philpotts, a stockholder in the Philippine Manufacturing Company, one of the respondents
herein, seeks by this proceeding to obtain a writ of mandamus to compel the respondents to permit the plaintiff,
in person or by some authorized agent or attorney, to inspect and examine the records of the business
transacted by said company since January 1, 1918. The petition is filed originally in this court under the
authority of section 515 of the Code of Civil Procedure, which gives to this tribunal concurrent jurisdiction with
the Court of First Instance in cases, among others, where any corporation or person unlawfully excludes the
plaintiff from the use and enjoyment of some right to which he is entitled. The respondents interposed a
demurrer, and the controversy is now before us for the determination of the questions thus presented.
The first point made has reference to a supposed defect of parties, and it is said that the action can not be
maintained jointly against the corporation and its secretary without the addition of the allegation that the latter
is the custodian of the business records of the respondent company.
By the plain language of sections 515 and 222 of our Code of Civil Procedure, the right of action in such a
proceeding as this is given against the corporation; and the respondent corporation in this case was the only
absolutely necessary party. In the Ohio case of Cincinnati Volksblatt Co. vs. Hoffmister (61 Ohio St., 432; 48 L.
R. A., 735), only the corporation was named as defendant, while the complaint, in language almost identical
with that in the case at bar, alleged a demand upon and refusal by the corporation.
Nevertheless the propriety of naming the secretary of the corporation as a codefendant cannot be questioned,
since such official is customarily charged with the custody of all documents, correspondence, and records of a
corporation, and he is presumably the person against whom the personal orders of the court would be made
effective in case the relief sought should be granted. Certainly there is nothing in the complaint to indicate that
the secretary is an improper person to be joined. The petitioner might have named the president of the
corporation as a respondent also; and this official might be brought in later, even after judgment rendered, if
necessary to the effectuation of the order of the court.
Section 222 of our Code of Civil Procedure is taken from the California Code, and a decision of the California
Supreme Court Barber vs. Mulford (117 Cal., 356) is quite clear upon the point that both the corporation
and its officers may be joined as defendants.
The real controversy which has brought these litigants into court is upon the question argued in connection
with the second ground of demurrer, namely, whether the right which the law concedes to a stockholder to
inspect the records can be exercised by a proper agent or attorney of the stockholder as well as by the
stockholder in person. There is no pretense that the respondent corporation or any of its officials has refused to
allow the petitioner himself to examine anything relating to the affairs of the company, and the petition prays for
a peremptory order commanding the respondents to place the records of all business transactions of the
company, during a specified period, at the disposal of the plaintiff or his duly authorized agent or attorney, it
97

being evident that the petitioner desires to exercise said right through an agent or attorney. In the argument in
support of the demurrer it is conceded by counsel for the respondents that there is a right of examination in the
stockholder granted under section 51 of the Corporation Law, but it is insisted that this right must be exercised
in person.
The pertinent provision of our law is found in the second paragraph of section 51 of Act No. 1459, which reads
as follows: "The record of all business transactions of the corporation and the minutes of any meeting shall be
open to the inspection of any director, member or stockholder of the corporation at reasonable hours."
This provision is to be read of course in connecting with the related provisions of sections 51 and 52, defining
the duty of the corporation in respect to the keeping of its records.
Now it is our opinion, and we accordingly hold, that the right of inspection given to a stockholder in the
provision above quoted can be exercised either by himself or by any proper representative or attorney in fact,
and either with or without the attendance of the stockholder. This is in conformity with the general rule that
what a man may do in person he may do through another; and we find nothing in the statute that would justify
us in qualifying the right in the manner suggested by the respondents.
This conclusion is supported by the undoubted weight of authority in the United States, where it is generally
held that the provisions of law conceding the right of inspection to stockholders of corporations are to be
liberally construed and that said right may be exercised through any other properly authorized person. As was
said in Foster vs. White (86 Ala., 467), "The right may be regarded as personal, in the sense that only a
stockholder may enjoy it; but the inspection and examination may be made by another. Otherwise it would be
unavailing in many instances." An observation to the same effect is contained in Martin vs. Bienville Oil Works
Co. (28 La., 204), where it is said: "The possession of the right in question would be futile if the possessor of it,
through lack of knowledge necessary to exercise it, were debarred the right of procuring in his behalf the
services of one who could exercise it." In Deadreck vs. Wilson (8 Baxt. [Tenn.], 108), the court said: "That
stockholders have the right to inspect the books of the corporation, taking minutes from the same, at all
reasonable times, and may be aided in this by experts and counsel, so as to make the inspection valuable to
them, is a principle too well settled to need discussion." Authorities on this point could be accumulated in great
abundance, but as they may be found cited in any legal encyclopedia or treaties devoted to the subject of
corporations, it is unnecessary here to refer to other cases announcing the same rule.
In order that the rule above stated may not be taken in too sweeping a sense, we deem it advisable to say that
there are some things which a corporation may undoubtedly keep secret, notwithstanding the right of
inspection given by law to the stockholder; as for instance, where a corporation, engaged in the business of
manufacture, has acquired a formula or process, not generally known, which has proved of utility to it in the
manufacture of its products. It is not our intention to declare that the authorities of the corporation, and more
particularly the Board of Directors, might not adopt measures for the protection of such process form publicity.
There is, however, nothing in the petition which would indicate that the petitioner in this case is seeking to
discover anything which the corporation is entitled to keep secret; and if anything of the sort is involved in the
case it may be brought out at a more advanced stage of the proceedings.lawphil.net
The demurrer is overruled; and it is ordered that the writ of mandamus shall issue as prayed, unless within 5
days from notification hereof the respondents answer to the merits. So ordered.
Arellano, C.J., Torres, Johnson, Araullo, Malcolm and Avancea, JJ., concur.

98

G.R. No. 34642

September 24, 1931

FABIOLA SEVERINO, accompanied by her husband RICARDO VERGARA, plaintiffs-appellees,


vs.
GUILLERMO SEVERINO, ET AL., defendants.
ENRIQUE ECHAUS, appellant.
R. Nepomuceno for appellant.
Jacinto E. Evidente for appellees.
STREET, J.:
This action was instituted in the Court of First Instance of the Province of Iloilo by Fabiola Severino, with whom
is joined her husband Ricardo Vergara, for the purpose of recovering the sum of P20,000 from Guillermo
Severino and Enrique Echaus, the latter in the character of guarantor for the former. Upon hearing he cause
the trial court gave judgment in favor of the plaintiffs to recover the sum of P20,000 with lawful from November
15, 1929, the date of the filing of the complaint, with costs. But it was declared that execution of this judgment
should issue first against the property of Guillermo Severino, and if no property should be found belonging to
said defendant sufficient to satisfy the judgment in whole or in part, execution for the remainder should be
issued against the property of Enrique Echaus as guarantor. From this judgment the defendant Echaus
appealed, but his principal, Guillermo Severino, did not.
The plaintiff Fabiola Severino is the recognized natural daughter of Melecio Severino, deceased, former
resident of Occidental Negros. Upon the death of Melecio Severino a number of years ago, he left
considerable property and litigation ensued between his widow, Felicitas Villanueva, and Fabiola Severino, on
the one part, and other heirs of the deceased on the other part. In order to make an end of this litigation a
compromise was effected by which Guillermo Severino, a son of Melecio Severino, took over the property
pertaining to the estate of his father at the same time agreeing to pay P100,000 to Felicitas Villanueva and
Fabiola Severino. This sum of money was made payable, first, P40,000 in cash upon the execution of the
document of compromise, and the balance in three several payments of P20,000 at the end of one year; two
years, and three years respectively. To this contract the appellant Enrique Echaus affixed his name as
guarantor. The first payment of P40,000 was made on July 11, 1924, the date when the contract of
compromise was executed; and of this amount the plaintiff Fabiola Severino received the sum of P10,000. Of
the remaining P60,000, all as yet unpaid, Fabiola Severino is entitled to the sum of P20,000.
It appears that at the time of the compromise agreement above-mentioned was executed Fabiola Severino had
not yet been judicially recognized as the natural daughter of Melecio Severino, and it was stipulated that the
last P20,000 corresponding to Fabiola and the last P5,000 corresponding to Felicitas Villanueva should
retained on deposit until the definite status of Fabiola Severino as natural daughter of Melecio Severino should
be established. The judicial decree to this effect was entered in the Court of First Instance of Occidental
Negros on June 16, 1925, and as the money which was contemplated to be held in suspense has never in fact
been paid to the parties entitled thereto, it results that the point respecting the deposit referred to has ceased
to be of moment.
The proof shows that the money claimed in this action has never been paid and is still owing to the plaintiff;
and the only defense worth noting in this decision is the assertion on the part of Enrique Echaus that he
received nothing for affixing his signature as guarantor to the contract which is the subject of suit and that in
effect the contract was lacking in consideration as to him.
The point is not well taken. A guarantor or surety is bound by the same consideration that makes the contract
effective between the principal parties thereto. (Pyle vs. Johnson, 9 Phil., 249.) The compromise and dismissal
99

of a lawsuit is recognized in law as a valuable consideration; and the dismissal of the action which Felicitas
Villanueva and Fabiola Severino had instituted against Guillermo Severino was an adequate consideration to
support the promise on the part of Guillermo Severino to pay the sum of money stipulated in the contract which
is the subject of this action. The promise of the appellant Echaus as guarantor therefore binding. It is never
necessary that the guarantor or surety should receive any part of the benefit, if such there be, accruing to his
principal. But the true consideration of this contract was the detriment suffered by the plaintiffs in the former
action in dismissing that proceeding, and it is immaterial that no benefit may have accrued either to the
principal or his guarantor.
The judgment appealed from is in all respects correct, and the same will be affirmed, with costs against the
appellant. So ordered.
Avancea, C.J., Johnson, Malcolm, Villamor, Ostrand, Romualdez, Villa-Real and Imperial, JJ., concur.

100

G.R. No. L-2411

June 28, 1951

DAVID (DAVE) THOMAS, plaintiff-appellant,


vs.
HERMOGENES S. PINEDA, defendant-appellant.
Matias E. Vergara and Perkins, Ponce Enrile, Contreras and Gomez for plaintiff-appellant.
Laurel, Sabido, Almario and Laurel for defendant-appellant.
TUASON, J.:
For a first cause of action the plaintiff sought to compel an accounting of the defendant's operation of a saloon
and restaurant of which the plaintiff claims to have been the sole owner. For a second cause of action the court
was asked to enjoin the defendant from using the name of that business, Silver Dollar Cafe. The court below
found for the defendant on the suit for accounting and for the plaintiff on the suit for injunction.
On the first cause of action it is alleged that the defendant managed the business as plaintiff's employee or
trustee during the Japanese occupation of the City of Manila and on a share of the profits basis after liberation.
Grounded on different relationships between the parties before and after the occupation, this cause of action
evolves two different acts of evidence, which it may be well to take up separately for the sake of clarity. We will
set out the material facts in so far as they are uncontroverted, leaving for later discussion those about which
the parties are in disagreement.
It appears that in 1931, the plaintiff bought the bar and restaurant known as Silver Dollar Cafe located at Plaza
Santa Cruz, Manila, from one Dell Clark, paying P20,000 for its physical assets and good will. Thereafter he
employed the defendant, Clark's former employee, as a bartender with a salary of P60. In the course of time,
the defendant became successively cashier and manager of the business. The outbreak of war found him
holding the latter position with a monthly compensation of P250.
To prevent the business and its property from falling into enemy hands, the plaintiff being a citizen of the United
States, David Thomas on or about December 28, 1941, made a fictitious sale thereof to the defendant; and to
clothe the sale with a semblance of reality, the bill of sale was antedated November 29, 1941.
Though this document was said to have been destroyed and no copy thereof was available, the fictitiousness
and lack of consideration of the conveyance was expressly admitted in the answer. Besides this admission, it is
agreed that simultaneously with or soon after the execution of the simulated sale, the plaintiff and the
defendant signed a private or secret document, identified as Exhibit "F", which was kept by the plaintiff.
Because of its important bearing on the case, it is convenient to copy this instrument in full.
PRIVATE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS THAT:
On November 29, 1941, a document which purported to be a deed of sale of the bar and restaurant
business known as the SILVER DOLLAR CAFE entered into by and between David (Dave) Thomas
and Hermogenes Pineda and acknowledged before Julian Lim, a notary public for and in the City of
Manila and entered in his notarial register as Document No. 127, Page No. 27, Book I and Series of
1941, witnessed by the Misses Florence Thomas and Esther Thomas.
The said document was prepared and executed only for the purpose of avoiding the seizure of the said
establishment if and when the enemy forces entered the City of Manila.
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Upon the restoration of peace and order and the absence of the danger abovementioned, the said
document automatically becomes null and void and of no effect, the consideration of Ten Thousand
Pesos (P10,000), Philippine Currency, mentioned therein, being fictitious and not paid to the Vendor.
In witness whereof, we have hereunto set our hands in the City of Manila, Philippines, this 29th day of
November, 1941.

(Sgd.) DAVID THOMAS


Vendor

(Sgd.) H. PINEDA
Vendee

In the presence of:

(Sgd.) ESTHER THOMAS

(Sgd.) FLORENCE THOMAS

Thomas was interred at Santo Tomas during the greater part of the war, and his business was operated by the
defendant exclusively throughout that period in accordance with the aforequoted stipulation. On February 3,
1945, the building was destroyed by fire but the defendant had been able to remove some of its furniture, the
cash register, the piano, the safe, and a considerable quantity of stocks to a place of safety. According to the
defendant, all of these goods were accounted for and turned over to the plaintiff after the City of Manila had
been retaken by the American Forces.
On May 8, 1945, a bar was opened on Calle Bambang, district of Sta. Cruz, under the old name of Silver Dollar
Cafe. Housed in a makeshift structure, which was erected on a lot belonging to the defendant, the Bambang
shop was conducted for about four months, i.e., until September of the same year, when it was transferred to
the original location of the Silver Dollar Cafe at No. 15 Plaza Sta. Cruz.
It is asserted and denied that the plaintiff as well as the defendant took a more or less active part in the
management of the post-liberation business until about the middle of September of the following year, when, it
is also alleged, the plaintiff brought a certified public accountant to the establishment in Sta. Cruz for the
purpose of examining the books of the business and the defendant threatened the plaintiff and his companion
with a gun if they persisted in their purpose. As a result of that incident, the plaintiff forthwith filed the present
action, and set up a separate business under the same trade-name, Silver Dollar Cafe, on Echague Street.
The defendant remained with the Silver Dollar Cafe at Plaza Sta. Cruz, which was burn down on December 15,
1946. In the face of Exhibit "F" before transcribed, there is no denying that throughout the Japanese military
regime the Silver Dollar Cafe belonged exclusively to the plaintiff and that the defendant had charge of it
merely as plaintiff's employee, trustee, or manager. There is no pretense that the defendant invested in the
business within that period any capital of his own in the form of cash or merchandise.
The controversy lies in nature and scope of the defendant's obligation toward the plaintiff in relation to the
business. It will be noticed that Exhibit "F" is silent on this point. The defendant endeavored to prove that there
was a third, verbal, agreement, the import of which was that he was to operate the business with no liability
other than to turn it over to the plaintiff as the plaintiff would find it after the war.
Little or no weight can be attached to this assertion if by it the defendant means, as he apparently does, that he
was relieved of any duty to make an accounting. Such understanding as the defendant says existed would be
at war with the care and precaution which the plaintiff took to insure his rights in the business and its assets,
which had an inventory value of P60,000, according to the plaintiff. As the property consisted mostly of
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perishable and expendable goods to be constantly disposed of and replenished as long as the business lasted,
the plaintiff could not, by any stretch of the imagination, have agreed to be content with what the defendant
would deign to give him when normalcy was restored. For that was what the defendant's version of the alleged
verbal agreement would amount to and what the court below found. As sole manager with full power to do as
his fancies dictated, the defendant could strip the business naked of all its stocks, leaving the plaintiff holding
the bag, as it were, when the defendant's management was terminated. Unless Thomas was willing to give
away his property and its profits, no man in his right senses would have given his manager an outright license
such as the defendant claims to have gotten from his employer. Not only did the plaintiff see to the execution of
a counter agreement but he stated that his elder daughter "had it (Exhibit "F") kept in her possession;" that
"there were many efforts by Mr. Pineda to get hold of this document during the first two weeks of the Japanese
occupation," and he was "surprised;" that he "did not know what was in the future" and he "wanted my children
to have something more than an empty possession." Referring to the defendant's attempts to take Exhibit "F"
away from him, Thomas said that the defendant sent to the hospital where he (plaintiff) was confined,
defendant's friend, an attorney by the name of Swartzcoff of whom he had heard "things", "to recover that
document", and he, plaintiff, became more determined not to part with it; that as Swartzcoff kept on coming, he
gave the document to his children to keep up to the end of the war. This testimony has all the stamps of
veracity and vehemence and refutes the defendant's allegation. The conclusion thus seems clear that the
defendant owes the plaintiff an accounting of his management of the plaintiff's business during the occupation.
The exact legal character of the defendant's relation to the plaintiff matters not a bit. It was enough to show,
and it had been shown, that he had been entrusted with the possession and management of the plaintiff's
business and property for the owner's benefit and had not made an accounting.
Neither did the defendant's sweeping statement at the trial that all the proceeds from the business had been
used to support the plaintiff and his daughters an to entertain or bribe Japanese officers and civilians
dispense with defendant's duty to account. It was a clear error for the court below to declare at this stage of the
proceeding, on the basis of defendant's incomplete and indefinite evidence, that there were no surplus profits,
and to call matters even. Under the pleadings and the evidence the court's inquiry ought to have been confined
to the determination of the plaintiff's right to secure an accounting; and that right having been established, the
appropriate judgment should have been a preliminary or interlocutory one that the defendant do account.
The court was not called upon to decide, and should not have decided, anything beyond that.
Monies and foodstuffs which the defendant said he had supplied the plaintiff and his daughters during the war
are appropriate items to be considered on taking account. Receipts and expenses involving thousands of
pesos, covering a great length of time, and consisting of complicated items are, on their face, so complex and
in as to necessitate being threshed out in an appropriations by the defendants substantiated. By the
defendant's admission, the business made good profits during the war, and there are charges that he amassed
a fortune out of the trusteeship. True or false, those allegations and many others which it was the plaintiff's
right to prove, if he could, should not have been dismissed summarily. Not technicalities but substantial rights,
equity, and justice clearly demanded adherence to the normal course of practice and procedure. The
employment of auditors might be necessary.
The defendant denied that the plaintiff had any proprietary interest in the saloon in Bambang and at Plaza Sta.
Cruz after liberation. Thomas' evidence on this phase of the litigation is to the effect that, upon his release from
the internment camp, he immediately took steps to rehabilitate his business. He declared that he borrowed
P2.000 from a friend by the name of Bill Drummond, and with that amount he constructed a temporary building
in Bambang and with the stocks saved by the defendant opened the business there. He said that, as before,
the defendant now worked as manager, with the difference that under the new arrangement he was to get onehalf the net profits.
The defendant, on the other hand, undertook to show that he himself put up the Bambang business, furnishing
the construction materials, paying for the labor, and purchasing the needed merchandise. And when the
business was to be moved to Plaza Sta. Cruz, he said, he called on Mrs. Angela Butte, was able to rent the
Plaza Sta. Cruz premises from her for Pl,200, and told the lessor when he handed her the rent, "This is my
money." He went on to say that Thomas told him to do whatever he pleased with the premises, only requesting
103

him to negotiate the sale of or a loan on plaintiff's mining shares so that the plaintiff could join him as partner or
"buy him out" by December. But, according to the defendant, the plaintiff was not able to raise funds, so his
desire to acquire interest in or buy the business did not materialize. The plaintiff did not invest a centavo in the
new business because he had no money to invest, the defendant concluded. Leaving aside the evidence
which depends entirely on the credibility of the Witnesses, the following undisputed or well-established
circumstances are, in our judgment, decisive:
1. The defendant corroborated the plaintiff when he practically declared that upon the plaintiff's release from
the internment camp, Thomas lost no time in looking a site to open a saloon. That the plaintiff then had the
means to do that, was a fact brought out by the defendant's own evidence as well as by the plaintiff's
testimony. There were several cases of whiskey, rum, gin and other kinds of liquor which the defendant
admitted he had carted away and delivered to the plaintiff after liberation. What the latter did or could have
done with those goods, if not to start a business with, there was no plausible explanation. Granting that ten
cases of the liquor were confiscated by the MP the plaintiff said they were soon returned the confiscation
could not have stopped the plaintiff from continuing with the business, which was riding in the crest of a boom.
Significantly, the defendant said that the day following the alleged confiscation he handed the plaintiff P2,000 in
cash. If he had nothing else, this was an amount which ought to have been enough to enable the plaintiff to
keep the business going, which needed no large capital. That this payment was "in full and complete
liquidation of the Silver Dollar Cafe," as the defendant asserted, was, under the circumstances, highly
improbable, to put it mildly.
2. It is also an admitted fact that the bar in Bambang was called Silver Dollar Cafe, Branch No. 1. The use of
the old name suggested that the business was in fact an extension and continuation of the Silver Dollar Cafe
which the defendant had operated for the plaintiff during the enemy occupation, and precluded any thought of
the business having been established by the defendants as his own. It should be remembered that the
defendant had not yet appropriated the trade-name Silver Dollar Cafe for himself. This the subject of the
second cause of action he did on September 27, 1945.
3. Despite statements to the contrary, it was the plaintiff who, in September, 1945, before the reopening of the
bar at Plaza Sta. Cruz, entered into a written contract of lease (Exhibit A) with Mrs. Angela Butte for the Sta.
Cruz location; Thomas was named in the contract as the lessee. The contract also reveals that it was the
plaintiff who personally paid Mrs. Butte the advanced rent (P1,200) for the period August 31-September 30,
1945, the first month of the lease. And thereafter, all the rental receipts were made out in Thomas' name,
except those for the months of October, November and December, which were put in the name of the
defendant. A propose of this temporary substitution, Jose V. Ramirez, owner of the land and administrator of
the building, testified that the Bureau of Internal Revenue had licensed and taxed the business in the name of
Hermogenes Pineda and so thought it necessary that for those three months the defendant's name should be
put in the receipts. Ramirez added that Mrs. Butte agreed to the Internal Revenue Bureau's requirement on the
assurance that beginning January, 1946, the receipts would be issued again in favor of Thomas. Mrs. Butte
testified to the same effect.
At any rate, the issuance of three of the receipts in defendant's name was far from implying that he was the
proprietor or part owner of the Silver Dollar Cafe. Appropriately, as manager he could make disbursement and
get receipts therefor in his name. What would have been strange was the issuance of receipts, let alone the
execution of the lease contract, in the name of David Thomas if Thomas had nothing to do with the business,
as the defendant would have the court believe.
The defendant testified, and the lower court believed, that he consented to the issuance of the three receipts
and the execution of the contract of lease in the plaintiff's name because it was expected that the plaintiff would
buy the business or "chip in" as partner. How the mere possibility, by no means certain, of the plaintiff
becoming the owner of the saloon or defendant's partner on some future date could have induced the
defendant to let the plaintiff figure unqualifiedly as owner of the business in receipts and leases that had
nothing to do with the contemplated deal, and why the plaintiff would want to pose as owner while he was yet a
complete stranger to the enterprise, is utterly beyond comprehension.
104

For the rest, the plaintiff's testimony is as convincing and as well supported by the natural course of things as
the defendant's explanation is unreasonable. It can not be disputed that Thomas had accumulated money from
the business in Bambang which, it has also been proved to the point of certainty, he operated with the goods
retrieved by the defendant from the pre-war Silver Dollar Cafe. Conducting saloons having been the plaintiffs
only means of support before the war, and the calling in which he had acquired plenty of experience, it is
inconceivable that he would have remained idle at a time when the trade was most lucrative and he had been
impoverished by the war. That the plaintiff, established a bar behind the Great Eastern Hotel on Echague
Street, a hidden place, immediately or very soon after he and the defendant had a falling out, is mute
testimony to his eagerness to take advantage of the current boom.
4. That the defendant was only a manager is also made evident by two sets of business cards of the Silver
Dollar Cafe which he himself caused to be printed. On the first set, of which 500 prints were made, David
Thomas was held out as the proprietor and Hermogenes Pineda, the defendant, as manager. On the second
set, which were ordered later, the defendant was not even mentioned as manager, but one Bill Magner, while
David Thomas' name was retained as the proprietor.
Customers of the place testified that copies of these cards were handed to them for distribution to their friends
by the defendant himself. The defendant swore that he put away the cards in a small drawer under some
books and denied they had been distributed. He gave to understand that he was at a loss to know how the
plaintiff and his witnesses got hold of some of said cards, though, he said, he suspected that Thomas went
upstairs and grabbed some copies while the witnesses found other copies scattered after the fire which burned
the establishment for the second time in 1946.
However the case may be, whether the defendant distributed the cards or not, the important point is why he, in
the first place, ordered the cards in the form in which they were printed. He did not give cogent reasons. His
explanation was that Hugo Santiago, the printer's agent, "gave me a hint that Mr. Thomas was going to open
the Silver Dollar Cafe in Plaza Sta. Cruz." This explanation fails to forge any sensible link between the printing
of Thomas' name in the cards and Thomas' plan to join him in the business. Incidentally, the defendant did not
tell the truth when he declared that the cards were ordered when the shop was still in Bambang; the cards
gave the location of the Silver Dollar Cafe as No. 15 Plaza Sta. Cruz, and, besides, Santiago, who testified for
both sides, was positive that the cards were delivered to the defendant in September, 1945.
5. At different times from May 8 to December 15, 1945, the defendant handed the plaintiff averse amounts
totalling P24,100 without so much as asking Thomas to sign a receipts for any of them.
The defendant testified that these amounts were simple loans secured by plaintiff's mining shares of stock. The
plaintiff countered that they were advances chargeable to his share of the net profits. While he admitted that he
owned some Baguio Consolidated and Baguio Gold shares, he denied that he had given them to the defendant
as collateral or in any other concept. He swore that he kept those securities in his own safe and removed them
in plain sight of Pineda when he became suspicious of the latter.
It is difficult to understand how the payment of the amounts in question to the plaintiff could have been for any
purpose other than that affirmed by him. The lack of any receipt is incompatible with the hypothesis of loans.
The defendant's possession of the plaintiff's mining shares, granting that the defendant held them, was no
reason for dispensing with the necessity of getting from the plaintiff some form of acknowledgment that the
said amounts were personal debts, if that was the case. Without such acknowledgment, which could have
been made in a matter of minutes and required no expert to make, the shares of stock did not afford the
creditor much if any protection, as an experienced and intelligent man that the defendant is must have realized.
These amounts were the subject of a counterclaim and the court sustained the defendant's theory and gave
him judgment for them. In the light of the what has just been said and of the evidence previously discussed,
there is no escaping the conclusion that the plaintiff was the sole owner of the post-war Silver Dollar bar and
restaurant, that the defendant was only an industrial partner, and that the said amounts were withdrawals on
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account of the profits, which appear from portions of the defendant's entries in the books to have been
considerable.
On the second cause of action, which relates to the ownership of the Silver Dollar Cafe trade-name, it appears
that the defendant on September 27, 1945, registered the business and its name as his own.
The defendant contends that in 1940, the plaintiff's right to use this trade-name expired and by abandonment
or non-use the plaintiff ceased to have any title thereto. The alleged abandonment or non-use is predicated on
the testimony that the plaintiff expressly allowed the defendant to appropriate the trade-name in dispute.
The parties' actions negative all motions of abandonment by the plaintiff. In the fictitious bill of sale executed on
December 29, 1941, the plaintiff asserted and the defendant acknowledged Thomas' ownership of the
business. It is manifest from Exhibit "C" and "D, samples of the business cards which were printed at the
instance of the defendant himself, that the plaintiff continued to display the name Silver Dollar Cafe after
liberation. And when the plaintiff set up a new saloon on Echague Street after he broke with the defendant, he
gave the establishment the same appellation Silver Dollar Cafe.
The most that can be said in favor of the defendant, which is the view taken by the trial Judge, is that the
plaintiff instructed Pineda to renew the registration of the trade-name and the defendant understood the
instruction as permission to make the registration in his favor. It is to be doubted to whether even honest
mistakes were possible under the circumstance of the case. It is an understatement to say that indications
pointed to bad faith in the registration. The application for registration contained brazen untruths.
The plaintiff non-use of his trade name in 1945, granting that to have been the case, did not work as a
forfeiture of his exclusive right to the name, name which he and the man from whom he bought the business
had used for over forty years without interruption. Under the provision of Commerce Administrative Order No.
1, issued on January 11, 1946, by the Secretary of Commerce and Agriculture, the rights registrant of business
names, the records of which had been destroyed or lost during the war, were expressly protected. This
administrative Order No. 1-1, dated October 29, 1946, but the amendment referred only to the procedure for
authentication of the documents to be submitted. On the other hand, the amendatory order extended the filing
of application for reconstitution up to as late as December 31, 1946, that is ninety days after plaintiff
commenced the present action.
As legal proposition and in good conscience, the defendants registration of the trade name Silver Dollar Cafe
must be deemed to have been affected for the benefit of its owner of whom he was a mere trustee or
employee. "The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that
in regard to property forming the subject matter of the agency, he is estopped from acquiring or asserting a title
adverse to that of principal. His position is analogous to that of a trustee and he cannot consistently, with the
principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui
que trust. A receiver, trustee, attorney, agent or any other person occupying fiduciary relations respecting
property or persons utterly disabled from acquiring for his own benefit the property committed to his custody for
management. This rule is entirely independent of the fact whether any fraud has intervened. No fraud in fact
need be shown, and no excuse will be heard from any such inquiry that the rule takes so general form. The
rule stands on the moral obligation to refrain from placing one's self in position which ordinarily excite conflicts
between self-interest at the expense of one's integrity and duty to another, by making it possible to profit by
yielding to temptation". (Barretovs. Tuason, 50 Phil. 888; Severino vs. Severino, 44 Phil., 343.)
To recapitulate, we find from what we believed is conclusive evidence, both direct and circumstance, that the
plaintiff was the owner of the Silver Dollar Cafe at Plaza Sta. Cruz during the enemy occupation and is of right
entitled to have an accounting of its administration by the defendant. Exhibit "F" does not state the
remuneration the defendant was to be paid for managing the plaintiff's business. The natural presumption
under normal circumstances would be that his prewar compensation was to continue. But conditions during the
occupation being different from what they were before the war, the defendants remuneration may and should
be increased if so warranted by the changed circumstances. This matter should be left for consideration in the
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accounting, having in mind the nature and extent of the services rendered, the volumes of business transacted,
the profits obtained and the losses incurred, the personal risk run by the defendant, and other factors related to
the success or failure of the defendant's management.
We have it from the plaintiff that he promised to give the defendant one-half of the net profits of the business
established in Bambang and later at Plaza Sta. Cruz after liberation. This offer was reasonable, even liberal,
and no unforeseen circumstances having supervened to warrants its alteration, the same will not be disturbed
and will serve as basis of liquidation. The other basis of liquidation of the post-war business are that the
plaintiff was the exclusive owner of its stocks and other assets from May 8, 1945, when it was reestablished in
Bambang, to December 15 1946, when the business was levelled to the ground at Plaza Sta. Cruz.
For the reasons hereinbefore stated, the various sums of money aggregating P24,100 and received or taken
by the plaintiff were, and they hereby are declared to be, accounting from the defendants share of said profits if
there be any.
We also find that the trade-name Silver Dollar Cafe belongs to the plaintiff and that the defendant should be
and he is perpetually enjoined from using it or any essential part thereof.
In all other respects, especially in connection with the demand for accounting, this case is remanded to the
court of origin for further proceedings in accordance with law and the tenor of this decision and for a final
judgment on the balance that may be found due from either party.
The defendant will pay the costs of this appeal.
Feria, Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo and Bautista Angelo, JJ., concur.

Separate Opinions
PARAS, C. J. concurring and dissenting:
I concur in the majority opinion except in so far as it requires the defendant to render an accounting of the
business Silver Dollar Cafe during the Japanese occupation. The proof shows that the defendant was told the
enterprise and pretend to be its owner during the war in order to save it for being surely seized by the
Japanese as American property, and that the defendant not only succeeded in doing so but, with all honesty,
used the proceeds of the business for the support of the defendant and his daughters. The arrangement
cannot be said to have been a regular business proposition undertaken by the parties under normal conditions
in virtue of which the defendant was made a mere manager; and even if the defendant had in fact derived
personal advantages, its justification necessarily follows from the accomplishment of the mission entrusted by
the plaintiff. Moreover, the business during the occupation was carried on in Japanese currency which is now
worthless.

107

G.R. No. L-18727

August 31, 1964

JESUS MA. CUI, plaintiff-appellee,


vs.
ANTONIO MA. CUI, defendant-appellant,
ROMULO CUI, Intervenor-appellant.
Jose W. Diokno for plaintiff-appellee.
Jaime R. Nuevas and Hector L. Hofilea for defendant-appellant.
Romulo Cui in his own behalf as intervenor-appellants.
MAKALINTAL, J.:
This is a proving in quo warranto originally filed in the Court of First Instance of Cebu. The office in contention
is that of Administrator of the Hospicio de San Jose de Barili. Judgment was rendered on 27 April 1961 in favor
of the plaintiff, Jesus Ma. Cui, and appealed to us by the defendant, Antonio Ma. Cui, and by the intervenor,
Romulo Cui.
The Hospicio is a charitable institution established by the spouses Don Pedro Cui and Doa Benigna Cui, now
deceased, "for the care and support, free of charge, of indigent invalids, and incapacitated and helpless
persons." It acquired corporate existence by legislation (Act No. 3239 of the Philippine Legislature passed 27
November 1925) and endowed with extensive properties by the said spouses through a series of donations,
principally the deed of donation executed on 2 January 1926.
Section 2 of Act No. 3239 gave the initial management to the founders jointly and, in case of their incapacity or
death, to "such persons as they may nominate or designate, in the order prescribed to them." Section 2 of the
deed of donation provides as follows:
Que en caso de nuestro fallecimiento o incapacidad para administrar, nos sustituyan nuestro legitime
sobrino Mariano Cui, si al tiempo de nuestra muerte o incapacidad se hallare residiendo en la caudad
de Cebu, y nuestro sobrino politico Dionisio Jakosalem. Si nuestro dicho sobrino Mariano Cui no
estuviese residiendo entonces en la caudad de Cebu, designamos en su lugar a nuestro otro sobrino
legitime Mauricio Cui. Ambos sobrinos administraran conjuntamente el HOSPICIO DE SAN JOSE DE
BARILI. A la muerte o incapacidad de estos dos administradores, la administracion del HOSPICIO DE
SAN JOSE DE BARILI pasara a una sola persona que sera el varon, mayor de edad, que descienda
legitimainente de cualquiera de nuestros sobrinos legitimos Mariano Cui, Mauricio Cui, Vicente Cui y
Victor Cui, y que posea titulo de abogado, o medico, o ingeniero civil, o farmaceutico, o a falta de estos
titulos, el que pague al Estado mayor impuesto o contribution. En igualdad de circumstancias, sera
preferida el varon de mas edad descendiente de quien tenia ultimamente la administracion. Cuando
absolutamente faltare persona de estas cualificaciones, la administracion del HOSPICIO DE SAN
JOSE DE BARILI pasara al senor Obispo de Cebu o quien sea el mayor dignatario de la Iglesia
Catolica, apostolica, Romana, que tuviere asiento en la cabecera de esta Provincia de Cebu, y en su
defecto, al Gobierno Provincial de Cebu.
Don Pedro Cui died in 1926, and his widow continued to administer the Hospicio until her death in 1929.
Thereupon the administration passed to Mauricio Cui and Dionisio Jakosalem. The first died on 8 May 1931
and the second on 1 July 1931. On 2 July 1931 Dr. Teodoro Cui, only son of Mauricio Cui, became the
administrator. Thereafter, beginning in 1932, a series of controversies and court litigations ensued concerning
the position of administrator, to which, in so far as they are pertinent to the present case, reference will be
made later in this decision.
108

Plaintiff Jesus Ma. Cui and defendant Antonio Ma. Cui are brothers, being the sons of Mariano Cui, one of the
nephews of the spouses Don Pedro Cui and Doa Benigna Cui. On 27 February 1960 the then incumbent
administrator, Dr. Teodoro Cui, resigned in favor of Antonio Ma. Cui pursuant to a "convenio" entered into
between them and embodied in a notarial document. The next day, 28 February, Antonio Ma. Cui took his oath
of office. Jesus Ma. Cui, however, had no prior notice of either the "convenio" or of his brother's assumption of
the position.
Dr. Teodoro Cui died on 27 August 1960; on 5 September 1960 the plaintiff wrote a letter to the defendant
demanding that the office be turned over to him; and on 13 September 1960, the demand not having been
complied with the plaintiff filed the complaint in this case. Romulo Cui later on intervened, claiming a right to
the same office, being a grandson of Vicente Cui, another one of the nephews mentioned by the founders of
theHospicio in their deed of donation.
As between Jesus and Antonio the main issue turns upon their respective qualifications to the position of
administrator. Jesus is the older of the two and therefore under equal circumstances would be preferred
pursuant to section 2 of the deed of donation. However, before the test of age may be, applied the deed gives
preference to the one, among the legitimate descendants of the nephews therein named, "que posea titulo de
abogado, o medico, o ingeniero civil, o farmaceutico, o a falta de estos titulos el que pague al estado mayor
impuesto o contribucion."
The specific point in dispute is the mealing of the term "titulo de abogado." Jesus Ma. Cui holds the degree of
Bachelor of Laws from the University of Santo Tomas (Class 1926) but is not a member of the Bar, not having
passed the examinations to qualify him as one. Antonio Ma. Cui, on the other hand, is a member of the Bar
and although disbarred by this Court on 29 March 1957 (administrative case No. 141), was reinstated by
resolution promulgated on 10 February 1960, about two weeks before he assumed the position of
administrator of theHospicio de Barili.
The Court a quo, in deciding this point in favor of the plaintiff, said that the phrase "titulo de abogado," taken
alone, means that of a full-fledged lawyer, but that has used in the deed of donation and considering the
function or purpose of the administrator, it should not be given a strict interpretation but a liberal one," and
therefore means a law degree or diploma of Bachelor of Laws. This ruling is assailed as erroneous both by the
defendant and by the intervenor.
We are of the opinion, that whether taken alone or in context the term "titulo de abogado" means not mere
possession of the academic degree of Bachelor of Laws but membership in the Bar after due admission
thereto, qualifying one for the practice of law. In Spanish the word "titulo" is defined as "testimonies o
instrumento dado para ejercer un empleo, dignidad o profesion" (Diccionario de la Lengua Espaola, Real
Academia Espanola, 1947 ed., p. 1224) and the word "abogado," as follows: "Perito en el derecho positivo que
se dedica a defender en juicio, por escrito o de palabra, los derechos o intereses de los litigantes, y tambien a
dar dictmen sobre las cuestiones o puntos legales que se le consultan (Id., p.5) A Bachelor's degree alone,
conferred by a law school upon completion of certain academic requirements, does not entitle its holder to
exercise the legal profession. The English equivalent of "abogado" is lawyer or attorney-at-law. This term has a
fixed and general signification, and has reference to that class of persons who are by license officers of the
courts, empowered to appear, prosecute and defend, and upon whom peculiar duties, responsibilities and
liabilities are devolved by law as a consequence.
In this jurisdiction admission to the Bar and to the practice of law is under the authority of the Supreme Court.
According to Rule 138 such admission requires passing the Bar examinations, taking the lawyer's oath and
receiving a certificate from the Clerk of Court, this certificate being his license to practice the profession. The
academic degree of Bachelor of Laws in itself has little to do with admission to the Bar, except as evidence of
compliance with the requirements that an applicant to the examinations has "successfully completed all the
109

prescribed courses, in a law school or university, officially approved by the Secretary of Education." For this
purpose, however, possession of the degree itself is not indispensable: completion of the prescribed courses
may be shown in some other way. Indeed there are instances, particularly under the former Code of Civil
Procedure, where persons who had not gone through any formal legal education in college were allowed to
take the Bar examinations and to qualify as lawyers. (Section 14 of that code required possession of "the
necessary qualifications of learning ability.") Yet certainly it would be incorrect to say that such persons do not
possess the "titulo de abogado" because they lack the academic degree of Bachelor of Laws from some law
school or university.
The founders of the Hospicio de San Jose de Barili must have established the foregoing test advisely, and
provided in the deed of donation that if not a lawyer, the administrator should be a doctor or a civil engineer or
a pharmacist, in that order; or failing all these, should be the one who pays the highest taxes among those
otherwise qualified. A lawyer, first of all, because under Act No. 3239 the managers or trustees of
the Hospicioshall "make regulations for the government of said institution (Sec. 3, b); shall "prescribe the
conditions subject to which invalids and incapacitated and destitute persons may be admitted to the institute"
(Sec. 3, d); shall see to it that the rules and conditions promulgated for admission are not in conflict with the
provisions of the Act; and shall administer properties of considerable value for all of which work, it is to be
presumed, a working knowledge of the law and a license to practice the profession would be a distinct asset.
Under this particular criterion we hold that the plaintiff is not entitled, as against the defendant, to the office of
administrator. But it is argued that although the latter is a member of the Bar he is nevertheless disqualified by
virtue of paragraph 3 of the deed of donation, which provides that the administrator may be removed on the
ground, among others, of ineptitude in the discharge of his office or lack of evident sound moral character.
Reference is made to the fact that the defendant was disbarred by this Court on 29 March 1957 for immorality
and unprofessional conduct. It is also a fact, however, that he was reinstated on 10 February 1960, before he
assumed the office of administrator. His reinstatement is a recognition of his moral rehabilitation, upon proof no
less than that required for his admission to the Bar in the first place.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by
this stipulation of facts. 1wph1.t
Whether or not the applicant shall be reinstated rests to a great extent in the sound discretion of the
court. The court action will depend, generally speaking, on whether or not it decides that the public
interest in the orderly and impartial administration of justice will be conserved by the applicant's
participation therein in the capacity of an attorney and counselor at law. The applicant must, like a
candidate for admission to the bar, satisfy the court that he is a person of good moral character a fit
and proper person to practice law. The court will take into consideration the applicant's character and
standing prior to the disbarment, the nature and character of the charge for which he was disbarred, his
conduct subsequent to the disbarment, and the time that has elapsed between the disbarment and the
application for reinstatement. (5 Am. Jur., Sec. 301, p. 443)
Evidence of reformation is required before applicant is entitled to reinstatement, notwithstanding the
attorney has received a pardon following his conviction, and the requirements for reinstatement have
been held to be the same as for original admission to the bar, except that the court may require a
greater degree of proof than in an original admission. (7 C.J.S., Attorney & Client, Sec. 41, p. 815.)
The decisive questions on an application for reinstatement are whether applicant is "of good moral
character" in the sense in which that phrase is used when applied to attorneys-at-law and is a fit and
proper person to be entrusted with the privileges of the office of an attorney, and whether his mental
qualifications are such as to enable him to discharge efficiently his duty to the public, and the moral
110

attributes are to be regarded as a separate and distinct from his mental qualifications. (7 C.J.S.,
Attorney & Client, Sec. 41, p. 816).
As far as moral character is concerned, the standard required of one seeking reinstatement to the office of
attorney cannot be less exacting than that implied in paragraph 3 of the deed of donation as a requisite for the
office which is disputed in this case. When the defendant was restored to the roll of lawyers the restrictions and
disabilities resulting from his previous disbarment were wiped out.
This action must fail on one other ground: it is already barred by lapse of time amounting the prescription or
laches. Under Section 16 of Rule 66 (formerly sec. 16, Rule 68, taken from section 216 of Act 190), this kind of
action must be filed within one (1) year after the right of plaintiff to hold the office arose.
Plaintiff Jesus Ma. Cui believed himself entitled to the office in question as long ago as 1932. On January 26 of
that year he filed a complaint in quo warranto against Dr. Teodoro Cui, who assumed the administration of
theHospicio on 2 July 1931. Mariano Cui, the plaintiff's father and Antonio Ma. Cui came in as intervenors. The
case was dismissed by the Court of First Instance upon a demurrer by the defendant there to the complaint
and complaint in intervention. Upon appeal to the Supreme Court from the order of dismissal, the case was
remanded for further proceedings (Cui v. Cui, 60 Phil. 37, 48). The plaintiff, however, did not prosecute the
case as indicated in the decision of this Court, but acceded to an arrangement whereby Teodoro Cui continued
as administrator, Mariano Cui was named "legal adviser" and plaintiff Jesus Ma. Cui accepted a position as
assistant administrator.
Subsequently the plaintiff tried to get the position by a series of extra-judicial maneuvers. First he informed the
Social Welfare Commissioner, by letter dated 1 February 1950, that as of the previous 1 January he had "made
clear" his intention of occupying the office of administrator of the Hospicio." He followed that up with another
letter dated 4 February, announcing that he had taken over the administration as of 1 January 1950. Actually,
however, he took his oath of office before a notary public only on 4 March 1950, after receiving a reply of
acknowledgment, dated 2 March, from the Social Welfare Commissioner, who thought that he had already
assumed the position as stated in his communication of 4 February 1950. The rather muddled situation was
referred by the Commissioner to the Secretary of Justice, who, in an opinion dated 3 April 1950 (op. No. 45, S.
1950), correcting another opinion previously given, in effect ruled that the plaintiff, not beings lawyer, was not
entitled to the administration of theHospicio.
Meanwhile, the question again became the subject of a court controversy. On 4 March 1950,
the Hospiciocommenced an action against the Philippine National Bank in the Court of First Instance of Cebu
(Civ. No. R-1216) because the Bank had frozen the Hospicio's deposits therein. The Bank then filed a thirdparty complaint against herein plaintiff-appellee, Jesus Ma. Cui, who had, as stated above, taken oath as
administrator. On 19 October 1950, having been deprived of recognition by the opinion of the Secretary of
Justice he moved to dismiss the third-party complaint on the ground that he was relinquishing "temporarily" his
claim to the administration of the Hospicio. The motion was denied in an order dated 2 October 1953. On 6
February 1954 he was able to take another oath of office as administrator before President Magsaysay, and
soon afterward filed a second motion to dismiss in Civil case No. R-1216. President Magsaysay, be it said,
upon learning that a case was pending in Court, stated in a telegram to his Executive Secretary that "as far as
(he) was concerned the court may disregard the oath" thus taken. The motion to dismiss was granted
nevertheless and the other parties in the case filed their notice of appeal from the order of dismissal. The
plaintiff then filed an ex-parte motion to be excluded as party in the appeal and the trial Court again granted the
motion. This was on 24 November 1954. Appellants thereupon instituted a mandamus proceeding in the
Supreme Court (G.R. No. L-8540), which was decided on 28 May 1956, to the effect that Jesus Ma. Cui should
be included in the appeal. That appeal, however, after it reached this Court was dismiss upon motion of the
parties, who agreed that "the office of administrator and trustee of theHospicio ... should be ventilated in quo
warranto proceedings to be initiated against the incumbent by whomsoever is not occupying the office but
111

believes he has a right to it" (G.R. No. L-9103). The resolution of dismissal was issued 31 July 1956. At that
time the incumbent administrator was Dr. Teodoro Cui, but no action inquo warranto was filed against him by
plaintiff Jesus Ma. Cui as indicated in the aforesaid motion for dismissal.
On 10 February 1960, defendant Antonio Ma. Cui was reinstated by this Court as member of the Bar, and on
the following 27 February Dr. Teodoro Cui resigned as administrator in his favor, pursuant to the "convenio"
between them executed on the same date. The next day Antonio Ma. Cui took his oath of office.
The failure of the plaintiff to prosecute his claim judicially after this Court decided the first case of Cui v. Cui in
1934 (60 Phil. 3769), remanding it to the trial court for further proceedings; his acceptance instead of the
position of assistant administrator, allowing Dr. Teodoro Cui to continue as administrator and his failure to file
an action inquo warranto against said Dr. Cui after 31 July 1956, when the appeal in Civil Case No. R-1216 of
the Cebu Court was dismissed upon motion of the parties precisely so that the conflicting claims of the parties
could be ventilated in such an action all these circumstances militate against the plaintiff's present claim in
view of the rule that an action in quo warranto must be filed within one year after the right of the plaintiff to hold
the office arose. The excuse that the plaintiff did not file an action against Dr. Teodoro Cui after 31 July 1956
because of the latter's illness did not interrupt the running of the statutory period. And the fact that this action
was filed within one year of the defendant's assumption of office in September 1960 does not make the
plaintiff's position any better, for the basis of the action is his own right to the office and it is from the time such
right arose that the one-year limitation must be counted, not from the date the incumbent began to discharge
the duties of said office. Bautista v. Fajardo, 38 Phil. 624; Lim vs. Yulo, 62 Phil. 161.
Now for the claim of intervenor and appellant Romulo Cui. This party is also a lawyer, grandson of Vicente Cui,
one of the nephews of the founders of the Hospicio mentioned by them in the deed of donation. He is further,
in the line of succession, than defendant Antonio Ma. Cui, who is a son of Mariano Cui, another one of the said
nephews. The deed of donation provides: "a la muerte o incapacidad de estos administradores (those
appointed in the deed itself) pasara a una sola persona que sera el varon, mayor de edad, que descienda
legitimamente de cualquiera de nuestros sobrinos legitimos Mariano Cui, Mauricio Cui, Vicente Cui, Victor Cui,
y que posea titulo de abogado ... En igualdad de circumstancias, sera preferido el varon de mas edad
descendiente de quien tenia ultimamente la administration." Besides being a nearer descendant than Romulo
Cui, Antonio Ma. Cui is older than he and therefore is preferred when the circumstances are otherwise equal.
The intervenor contends that the intention of the founders was to confer the administration by line and
successively to the descendants of the nephews named in the deed, in the order they are named. Thus, he
argues, since the last administrator was Dr. Teodoro Cui, who belonged to the Mauricio Cui line, the next
administrator must come from the line of Vicente Cui, to whom the intervenor belongs. This interpretation,
however, is not justified by the terms of the deed of donation.
IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment appealed from is reversed and set aside,
and the complaint as well as the complaint in intervention are dismissed, with costs equally against plaintiffappellee and intervenor-appellant.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes and Regala, JJ., concur.

112

G.R. No. L-28050

March 13, 1928

FEDERICO VALERA, plaintiff-appellant,


vs.
MIGUEL VELASCO, defendant-appellee.
Jose Martinez San Agustin for appellant.
Vicente O. Romualdez, Crispulo T. Manubay and Placido P. Reyes for appellee.
VILLA-REAL, J.:
This is an appeal taken by Federico Valera from the judgment of the Court of First Instance of Manila
dismissing his complaint against Miguel Velasco, on the ground that he has not satisfactorily proven his right of
action.
In support of his appeal, the appellant assigns the following alleged as committed by the trial court in its
judgment, to wit: (1) The lower court erred in holding that one of the ways of terminating an agency is by the
express or tacit renunciation of the agent; (2) the lower court erred in holding that the institution of a civil action
and the execution of the judgment obtained by the agent against his principal is but renunciation of the powers
conferred on the agent; (3) the lower erred in holding that, even if the sale by Eduardo Hernandez to the
plaintiff Federico Valera be declared void, such a declaration could not prevail over the rights of the defendant
Miguel Velasco inasmuch as the right redemption was exercised by neither Eduardo Hernandez nor the
plaintiff Federico Valera; (4) the lower court erred in not finding that the defendant Miguel Velasco was, and at
present is, an authorized representative of the plaintiff Federico Valera; (5) the lower court erred in not
annulling the sale made by the sheriff at public auction to defendant Miguel Velasco, Exhibit K; (6) the lower
court erred in failing to annul the sale executed by Eduardo Hernandez to the plaintiff Federico Valera, Exhibit
C; (7) the lower court erred in not annulling Exhibit L, that is, the sale at public auction of the right to
repurchase the land in question to Salvador Vallejo; (8) the lower court erred in not declaring Exhibit M null and
void, which is the sale by Salvador Vallejo to defendant Miguel Velasco; (9) the lower court erred in not
ordering the defendant Miguel Velasco to liquidate his accounts as agent of the plaintiff Federico Valera; (10)
the lower court erred in not awarding plaintiff the P5,000 damages prayed for.
The pertinent facts necessary for the solution of the questions raised by the above quoted assignments of error
are contained in the decision appealed from and are as follows:
By virtue of the powers of attorney, Exhibits X and Z, executed by the plaintiff on April 11, 1919, and on
August 8, 1922, the defendant was appointed attorney-in-fact of the said plaintiff with authority to
manage his property in the Philippines, consisting of the usufruct of a real property located of Echague
Street, City of Manila.
The defendant accepted both powers of attorney, managed plaintiff's property, reported his operations,
and rendered accounts of his administration; and on March 31, 1923 presented exhibit F to plaintiff,
which is the final account of his administration for said month, wherein it appears that there is a balance
of P3,058.33 in favor of the plaintiff.
The liquidation of accounts revealed that the plaintiff owed the defendant P1,100, and as
misunderstanding arose between them, the defendant brought suit against the plaintiff, civil case No.
23447 of this court. Judgment was rendered in his favor on March 28, 1923, and after the writ of
execution was issued, the sheriff levied upon the plaintiff's right of usufruct, sold it at public auction and
adjudicated it to the defendant in payment of all of his claim.
113

Subsequently, on May 11, 1923, the plaintiff sold his right of redemption to one Eduardo Hernandez, for
the sum of P200 (Exhibit A). On September 4, 1923, this purchaser conveyed the same right of
redemption, for the sum of P200, to the plaintiff himself, Federico Valera (Exhibit C).
After the plaintiff had recovered his right of redemption, one Salvador Vallejo, who had an execution
upon a judgment against the plaintiff rendered in a civil case against the latter, levied upon said right of
redemption, which was sold by the sheriff at public auction to Salvador Vallejo for P250 and was
definitely adjudicated to him. Later, he transferred said right of redemption to the defendant Velasco.
This is how the title to the right of usufruct to the aforementioned property later came to vest the said
defendant.
As the first two assignments of error are very closely related to each other, we will consider them jointly.
Article 1732 of the Civil Code reads as follows:
Art. 1732. Agency is terminated:
1. By revocation;
2. By the withdrawal of the agent;
3. By the death, interdiction, bankruptcy, or insolvency of the principal or of the agent.
And article 1736 of the same Code provides that:
Art. 1736. An agent may withdraw from the agency by giving notice to the principal. Should the latter
suffer any damage through the withdrawal, the agent must indemnify him therefore, unless the agent's
reason for his withdrawal should be the impossibility of continuing to act as such without serious
detriment to himself.
In the case of De la Pea vs. Hidalgo (16 Phil., 450), this court said laid down the following rule:
1. AGENCY; ADMINISTRATION OF PROPERTY; IMPLIED AGENCY. When the agent and
administrator of property informs his principal by letter that for reasons of health and medical treatment
he is about to depart from the place where he is executing his trust and wherein the said property is
situated, and abandons the property, turns it over to a third party, renders accounts of its revenues up
to the date on which he ceases to hold his position and transmits to his principal statement which
summarizes and embraces all the balances of his accounts since he began the administration to the
date of the termination of his trust, and, without stating when he may return to take charge of the
administration of the said property, asks his principal to execute a power of attorney in due form in favor
of a transmit the same to another person who took charge of the administration of the said property, it is
but reasonable and just to conclude that the said agent had expressly and definitely renounced his
agency and that such agency duly terminated, in accordance with the provisions of article 1732 of the
Civil Code, and, although the agent in his aforementioned letter did not use the words "renouncing the
agency," yet such words, were undoubtedly so understood and accepted by the principal, because of
the lapse of nearly nine years up to the time of the latter's death, without his having interrogated either
the renouncing agent, disapproving what he had done, or the person who substituted the latter.
The misunderstanding between the plaintiff and the defendant over the payment of the balance of P1,000 due
the latter, as a result of the liquidation of the accounts between them arising from the collections by virtue of
the former's usufructuary right, who was the principal, made by the latter as his agent, and the fact that the
114

said defendant brought suit against the said principal on March 28, 1928 for the payment of said balance, more
than prove the breach of the juridical relation between them; for, although the agent has not expressly told his
principal that he renounced the agency, yet neither dignity nor decorum permits the latter to continue
representing a person who has adopted such an antagonistic attitude towards him. When the agent filed a
complaint against his principal for recovery of a sum of money arising from the liquidation of the accounts
between them in connection with the agency, Federico Valera could not have understood otherwise than that
Miguel Velasco renounced the agency; because his act was more expressive than words and could not have
caused any doubt. (2 C. J., 543.) In order to terminate their relations by virtue of the agency the defendant, as
agent, rendered his final account on March 31, 1923 to the plaintiff, as principal.
Briefly, then, the fact that an agent institutes an action against his principal for the recovery of the balance in
his favor resulting from the liquidation of the accounts between them arising from the agency, and renders and
final account of his operations, is equivalent to an express renunciation of the agency, and terminates the
juridical relation between them.
If, as we have found, the defendant-appellee Miguel Velasco, in adopting a hostile attitude towards his
principal, suing him for the collection of the balance in his favor, resulting from the liquidation of the agency
accounts, ceased ipso facto to be the agent of the plaintiff-appellant, said agent's purchase of the aforesaid
principal's right of usufruct at public auction held by virtue of an execution issued upon the judgment rendered
in favor of the former and against the latter, is valid and legal, and the lower court did not commit the fourth and
fifth assignments of error attributed to it by the plaintiff-appellant.
In regard to the third assignment of error, it is deemed unnecessary to discuss the validity of the sale made by
Federico Valera to Eduardo Hernandez of his right of redemption in the sale of his usufructuary right made by
the sheriff by virtue of the execution of the judgment in favor of Miguel Velasco and against the said Federico
Valera; and the same thing is true as to the validity of the resale of the same right of redemption made by
Eduardo Hernandez to Federico Valera; inasmuch as Miguel Velasco's purchase at public auction held by
virtue of an execution of Federico Valera's usufructuary right is valid and legal, and as neither the latter nor
Eduardo Hernandez exercised his right of redemption within the legal period, the purchaser's title became
absolute.
Moreover, the defendant-appellee, Miguel Velasco, having acquired Federico Valera's right of redemption from
Salvador Vallejo, who had acquired it at public auction by virtue of a writ of execution issued upon the
judgment obtained by the said Vallejo against the said Valera, the latter lost all right to said usufruct.
And even supposing that Eduardo Hernandez had been tricked by Miguel Velasco into selling Federico
Valera's right of repurchase to the latter so that Salvador Vallejo might levy an execution on it, and even
supposing that said resale was null for lack of consideration, yet, inasmuch as Eduardo Hernandez did not
present a third party claim when the right was levied upon for the execution of the judgment obtained by Vallejo
against Federico Vallera, nor did he file a complaint to recover said right before the period of redemption
expired, said Eduardo Hernandez, and much less Federico Valera, cannot now contest the validity of said
resale, for the reason that the one-year period of redemption has already elapsed.
Neither did the trial court err in not ordering Miguel Velasco to render a liquidation of accounts from March 31,
1923, inasmuch as he had acquired the rights of the plaintiff by purchase at the execution sale, and as
purchaser, he was entitled to receive the rents from the date of the sale until the date of the repurchase,
considering them as part of the redemption price; but not having exercised the right repurchase during the
legal period, and the title of the repurchaser having become absolute, the latter did not have to account for said
rents.

115

Summarizing, the conclusion is reached that the disagreements between an agent and his principal with
respect to the agency, and the filing of a civil action by the former against the latter for the collection of the
balance in favor of the agent, resulting from a liquidation of the agency accounts, are facts showing a rupture
of relations, and the complaint is equivalent to an express renunciation of the agency, and is more expressive
than if the agent had merely said, "I renounce the agency."
By virtue of the foregoing, and finding no error in the judgment appealed from, the same is hereby affirmed in
all its parts, with costs against the appellant. So ordered.
Johnson, Malcolm, Villamor, Ostrand and Johns, JJ., concur.

116

[G.R. No. 156015. August 11, 2005]


REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in his capacity as
former Chief of the Intelligence Service, Armed Forces of the Philippines (ISAFP), and former
Commanding General, Presidential Security Group (PSG), and MAJ. DAVID B. DICIANO, in his
capacity as an Officer of ISAFP and former member of the PSG, petitioners, vs. HON.
VICTORINO EVANGELISTA, in his capacity as Presiding Judge, Regional Trial Court, Branch
223, Quezon City, and DANTE LEGASPI, represented by his attorney-in-fact, Paul
Gutierrez, respondents.
DECISION
PUNO, J.:
The case at bar stems from a complaint for damages, with prayer for the issuance of a writ of preliminary
injunction, filed by private respondent Dante Legaspi, through his attorney-in-fact Paul Gutierrez, against
petitioners Gen. Jose M. Calimlim, Ciriaco Reyes and Maj. David Diciano before the Regional Trial Court
(RTC) of Quezon City.[1]
The Complaint alleged that private respondent Legaspi is the owner of a land located in Bigte, Norzagaray,
Bulacan. In November 1999, petitioner Calimlim, representing the Republic of the Philippines, and as then
head of the Intelligence Service of the Armed Forces of the Philippines and the Presidential Security Group,
entered into a Memorandum of Agreement (MOA) with one Ciriaco Reyes. The MOA granted Reyes a permit to
hunt for treasure in a land in Bigte, Norzagaray, Bulacan. Petitioner Diciano signed the MOA as a witness. [2] It
was further alleged that thereafter, Reyes, together with petitioners, started, digging, tunneling and blasting
works on the said land of Legaspi. The complaint also alleged that petitioner Calimlim assigned about 80
military personnel to guard the area and encamp thereon to intimidate Legaspi and other occupants of the area
from going near the subject land.
On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing his nephew, private
respondent Gutierrez, as his attorney-in-fact. Gutierrez was given the power to deal with the treasure hunting
activities on Legaspis land and to file charges against those who may enter it without the latters authority.
[3]
Legaspi agreed to give Gutierrez 40% of the treasure that may be found in the land.
On February 29, 2000, Gutierrez filed a case for damages and injunction against petitioners for illegally
entering Legaspis land. He hired the legal services of Atty. Homobono Adaza. Their contract provided that as
legal fees, Atty. Adaza shall be entitled to 30% of Legaspis share in whatever treasure may be found in the
land. In addition, Gutierrez agreed to pay Atty. Adaza P5,000.00 as appearance fee per court hearing and
defray all expenses for the cost of the litigation. [4] Upon the filing of the complaint, then Executive Judge Perlita
J. Tria Tirona issued a 72-hour temporary restraining order (TRO) against petitioners.
The case[5] was subsequently raffled to the RTC of Quezon City, Branch 223, then presided by public
respondent Judge Victorino P. Evangelista. On March 2, 2000, respondent judge issued another 72-hour TRO
and a summary hearing for its extension was set on March 7, 2000.
On March 14, 2000, petitioners filed a Motion to Dismiss [6] contending: first, there is no real party-ininterest as the SPA of Gutierrez to bring the suit was already revoked by Legaspi on March 7, 2000, as
evidenced by a Deed of Revocation,[7] and, second, Gutierrez failed to establish that the alleged armed men
guarding the area were acting on orders of petitioners. On March 17, 2000, petitioners also filed a Motion for
Inhibition[8] of the respondent judge on the ground of alleged partiality in favor of private respondent.
117

On March 23, 2000, the trial court granted private respondents application for a writ of preliminary
injunction on the following grounds: (1) the diggings and blastings appear to have been made on the land of
Legaspi, hence, there is an urgent need to maintain the status quo to prevent serious damage to Legaspis
land; and, (2) the SPA granted to Gutierrez continues to be valid.[9] The trial court ordered thus:
WHEREFORE, in view of all the foregoing, the Court hereby resolves to GRANT plaintiffs application for a writ
of preliminary injunction. Upon plaintiffs filing of an injunction bond in the amount of ONE HUNDRED
THOUSAND PESOS (P100,000.00), let a Writ of Preliminary Injunction issue enjoining the defendants as well
as their associates, agents or representatives from continuing to occupy and encamp on the land of the plaintiff
LEGASPI as well as the vicinity thereof; from digging, tunneling and blasting the said land of plaintiff LEGASPI;
from removing whatever treasure may be found on the said land; from preventing and threatening the plaintiffs
and their representatives from entering the said land and performing acts of ownership; from threatening the
plaintiffs and their representatives as well as plaintiffs lawyer.
On even date, the trial court issued another Order [10] denying petitioners motion to dismiss and requiring
petitioners to answer the complaint. On April 4, 2000, it likewise denied petitioners motion for inhibition.[11]
On appeal, the Court of Appeals affirmed the decision of the trial court.[12]
Hence this petition, with the following assigned errors:
I
WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE RESPONDENT GUTIERREZ
HAS BEEN EFFECTIVELY REVOKED BY LEGASPI.
II
WHETHER THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED.
III
WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM FURTHER
PROCEEDING WITH THE CASE.
We find no merit in the petition.
On the first issue, petitioners claim that the special power of attorney of Gutierrez to represent Legaspi has
already been revoked by the latter. Private respondent Gutierrez, however, contends that the unilateral
revocation is invalid as his agency is coupled with interest.
We agree with private respondent.
Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render some
service or do something in representation or on behalf of another, known as the principal, with the consent or
authority of the latter.[13]
A contract of agency is generally revocable as it is a personal contract of representation based on trust
and confidence reposed by the principal on his agent. As the power of the agent to act depends on the will and
118

license of the principal he represents, the power of the agent ceases when the will or permission is withdrawn
by the principal. Thus, generally, the agency may be revoked by the principal at will.[14]
However, an exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if
a bilateral contract depends upon the agency.[15] The reason for its irrevocability is because the agency
becomes part of another obligation or agreement. It is not solely the rights of the principal but also that of the
agent and third persons which are affected. Hence, the law provides that in such cases, the agency cannot be
revoked at the sole will of the principal.
In the case at bar, we agree with the finding of the trial and appellate courts that the agency granted by
Legaspi to Gutierrez is coupled with interest as a bilateral contract depends on it. It is clear from the records
that Gutierrez was given by Legaspi, inter alia, the power to manage the treasure hunting activities in
the subject land; to file any case against anyone who enters the land without authority from Legaspi;
to engage the services of lawyers to carry out the agency; and, to dig for any treasure within the land
and enter into agreements relative thereto. It was likewise agreed upon that Gutierrez shall be entitled to
40% of whatever treasure may be found in the land. Pursuant to this authority and to protect Legaspis land
from the alleged illegal entry of petitioners, agent Gutierrez hired the services of Atty. Adaza to prosecute the
case for damages and injunction against petitioners.As payment for legal services, Gutierrez agreed to
assign to Atty. Adaza 30% of Legaspis share in whatever treasure may be recovered in the subject
land. It is clear that the treasure that may be found in the land is the subject matter of the agency; that under
the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza; and, thus Gutierrez and Atty.
Adaza have an interest in the subject matter of the agency, i.e., in the treasures that may be found in the land.
This bilateral contract depends on the agency and thus renders it as one coupled with interest, irrevocable at
the sole will of the principal Legaspi.[16] When an agency is constituted as a clause in a bilateral contract, that
is, when the agency is inserted in another agreement, the agency ceases to be revocable at the pleasure of
the principal as the agency shall now follow the condition of the bilateral agreement. [17] Consequently, the Deed
of Revocation executed by Legaspi has no effect. The authority of Gutierrez to file and continue with the
prosecution of the case at bar is unaffected.
On the second issue, we hold that the issuance of the writ of preliminary injunction is justified. A writ of
preliminary injunction is an ancilliary or preventive remedy that is resorted to by a litigant to protect or preserve
his rights or interests and for no other purpose during the pendency of the principal action. [18] It is issued by the
court to prevent threatened or continuous irremediable injury to the applicant before his claim can be
thoroughly studied and adjudicated.[19] Its aim is to preserve the status quo ante until the merits of the case can
be heard fully, upon the applicants showing of two important conditions, viz.: (1) the right to be protected prima
facie exists; and, (2) the acts sought to be enjoined are violative of that right.[20]
Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of preliminary injunction may
be issued when it is established:
(a) that the applicant is entitled to the relief demanded, the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;
(b) that the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or
(c) that a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting
the subject of the action or proceeding, and tending to render the judgment ineffectual.
119

It is crystal clear that at the hearing for the issuance of a writ of preliminary injunction, mere prima
facie evidence is needed to establish the applicants rights or interests in the subject matter of the main action.
[21]
It is not required that the applicant should conclusively show that there was a violation of his rights as this
issue will still be fully litigated in the main case. [22]Thus, an applicant for a writ is required only to show that
he has an ostensible right to the final relief prayed for in his complaint. [23]
In the case at bar, we find that respondent judge had sufficient basis to issue the writ of preliminary
injunction. It was established, prima facie, that Legaspi has a right to peaceful possession of his
land, pendente lite. Legaspi had title to the subject land. It was likewise established that the diggings were
conducted by petitioners in the enclosed area of Legaspis land. Whether the land fenced by Gutierrez and
claimed to be included in the land of Legaspi covered an area beyond that which is included in the title
of Legaspi is a factual issue still subject to litigation and proof by the parties in the main case for
damages. It was necessary for the trial court to issue the writ of preliminary injunction during the pendency of
the main case in order to preserve the rights and interests of private respondents Legaspi and Gutierrez.
On the third issue, petitioners charge that the respondent judge lacked the neutrality of an impartial judge.
They fault the respondent judge for not giving credence to the testimony of their surveyor that the diggings
were conducted outside the land of Legaspi. They also claim that respondent judges rulings on objections
raised by the parties were biased against them.
We have carefully examined the records and we find no sufficient basis to hold that respondent judge
should have recused himself from hearing the case. There is no discernible pattern of bias on the rulings of the
respondent judge. Bias and partiality can never be presumed. Bare allegations of partiality will not suffice in an
absence of a clear showing that will overcome the presumption that the judge dispensed justice without fear or
favor.[24] It bears to stress again that a judges appreciation or misappreciation of the sufficiency of evidence
adduced by the parties, or the correctness of a judges orders or rulings on the objections of counsels during
the hearing, without proof of malice on the part of respondent judge, is not sufficient to show bias or partiality.
As we held in the case of Webb vs. People,[25] the adverse and erroneous rulings of a judge on the various
motions of a party do not sufficiently prove bias and prejudice to disqualify him. To be disqualifying, it must be
shown that the bias and prejudice stemmed from an extrajudicial source and result in an opinion on the merits
on some basis other than what the judge learned from his participation in the case. Opinions formed in the
course of judicial proceedings, although erroneous, as long as based on the evidence adduced, do not prove
bias or prejudice. We also emphasized that repeated rulings against a litigant, no matter how erroneously,
vigorously and consistently expressed, do not amount to bias and prejudice which can be a bases for the
disqualification of a judge.
Finally, the inhibition of respondent judge in hearing the case for damages has become moot and
academic in view of the latters death during the pendency of the case. The main case for damages shall now
be heard and tried before another judge.
IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q-00-40115, dated March 23
and April 4, 2000, are AFFIRMED. The presiding judge of the Regional Trial Court of Quezon City to whom
Civil Case No. Q-00-40115 was assigned is directed to proceed with dispatch in hearing the main case for
damages. No pronouncement as to costs.
SO ORDERED.
Austria-Martinez, Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

120

G.R. No. 76931

May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,


vs.
COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents.
G.R. No. 76933

May 29, 1991

AMERICAN AIRLINES, INCORPORATED, petitioner,


vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES,
INCORPORATED,respondents.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.

PADILLA, J.:
This case is a consolidation of two (2) petitions for review on certiorari of a decision 1 of the Court of Appeals in
CA-G.R. No. CV-04294, entitled "American Airlines, Inc. vs. Orient Air Services and Hotel Representatives,
Inc." which affirmed, with modification, the decision 2 of the Regional Trial Court of Manila, Branch IV, which
dismissed the complaint and granted therein defendant's counterclaim for agent's overriding commission and
damages.
The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier offering
passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives
(hereinafter referred to as Orient Air), entered into a General Sales Agency Agreement (hereinafter referred to
as the Agreement), whereby the former authorized the latter to act as its exclusive general sales agent within
the Philippines for the sale of air passenger transportation. Pertinent provisions of the agreement are
reproduced, to wit:
WITNESSETH
In consideration of the mutual convenants herein contained, the parties hereto agree as follows:
1. Representation of American by Orient Air Services
Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the
Philippines, including any United States military installation therein which are not serviced by an Air
Carrier Representation Office (ACRO), for the sale of air passenger transportation. The services to be
performed by Orient Air Services shall include:
(a) soliciting and promoting passenger traffic for the services of American and, if necessary,
employing staff competent and sufficient to do so;
(b) providing and maintaining a suitable area in its place of business to be used exclusively for
the transaction of the business of American;
121

(c) arranging for distribution of American's timetables, tariffs and promotional material to sales
agents and the general public in the assigned territory;
(d) servicing and supervising of sales agents (including such sub-agents as may be appointed
by Orient Air Services with the prior written consent of American) in the assigned territory
including if required by American the control of remittances and commissions retained; and
(e) holding out a passenger reservation facility to sales agents and the general public in the
assigned territory.
In connection with scheduled or non-scheduled air passenger transportation within the United States,
neither Orient Air Services nor its sub-agents will perform services for any other air carrier similar to
those to be performed hereunder for American without the prior written consent of American. Subject to
periodic instructions and continued consent from American, Orient Air Services may sell air passenger
transportation to be performed within the United States by other scheduled air carriers provided
American does not provide substantially equivalent schedules between the points involved.
xxx

xxx

xxx

4. Remittances
Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders,
less commissions to which Orient Air Services is entitled hereunder, not less frequently than semimonthly, on the 15th and last days of each month for sales made during the preceding half month.
All monies collected by Orient Air Services for transportation sold hereunder on American's ticket stock
or on exchange orders, less applicable commissions to which Orient Air Services is entitled hereunder,
are the property of American and shall be held in trust by Orient Air Services until satisfactorily
accounted for to American.
5. Commissions
American will pay Orient Air Services commission on transportation sold hereunder by Orient Air
Services or its sub-agents as follows:
(a) Sales agency commission
American will pay Orient Air Services a sales agency commission for all sales of transportation by
Orient Air Services or its sub-agents over American's services and any connecting through air
transportation, when made on American's ticket stock, equal to the following percentages of the tariff
fares and charges:
(i) For transportation solely between points within the United States and between such points
and Canada: 7% or such other rate(s) as may be prescribed by the Air Traffic Conference of
America.
(ii) For transportation included in a through ticket covering transportation between points other
than those described above: 8% or such other rate(s) as may be prescribed by the International
Air Transport Association.
(b) Overriding commission

122

In addition to the above commission American will pay Orient Air Services an overriding commission of
3% of the tariff fares and charges for all sales of transportation over American's service by Orient Air
Service or its sub-agents.
xxx

xxx

xxx

10. Default
If Orient Air Services shall at any time default in observing or performing any of the provisions of this
Agreement or shall become bankrupt or make any assignment for the benefit of or enter into any
agreement or promise with its creditors or go into liquidation, or suffer any of its goods to be taken in
execution, or if it ceases to be in business, this Agreement may, at the option of American, be
terminated forthwith and American may, without prejudice to any of its rights under this Agreement, take
possession of any ticket forms, exchange orders, traffic material or other property or funds belonging to
American.
11. IATA and ATC Rules
The provisions of this Agreement are subject to any applicable rules or resolutions of the International
Air Transport Association and the Air Traffic Conference of America, and such rules or resolutions shall
control in the event of any conflict with the provisions hereof.
xxx

xxx

xxx

13. Termination
American may terminate the Agreement on two days' notice in the event Orient Air Services is unable to
transfer to the United States the funds payable by Orient Air Services to American under this
Agreement. Either party may terminate the Agreement without cause by giving the other 30 days' notice
by letter, telegram or cable.
xxx

xxx

x x x3

On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to
promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US
$254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally by Orient
Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof (Termination). Four (4)
days later, or on 15 May 1981, American Air instituted suit against Orient Air with the Court of First Instance of
Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and
Restraining Order 4 averring the aforesaid basis for the termination of the Agreement as well as therein
defendant's previous record of failures "to promptly settle past outstanding refunds of which there were
available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff." 5
In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material allegations of the
complaint with respect to plaintiff's entitlement to alleged unremitted amounts, contending that after application
thereof to the commissions due it under the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid
overriding commissions. Further, the defendant contended that the actions taken by American Air in the course
of terminating the Agreement as well as the termination itself were untenable, Orient Air claiming that American
Air's precipitous conduct had occasioned prejudice to its business interests.
Finding that the record and the evidence substantiated the allegations of the defendant, the trial court ruled in
its favor, rendering a decision dated 16 July 1984, the dispositive portion of which reads:
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WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in favor of
defendant and against plaintiff dismissing the complaint and holding the termination made by the latter
as affecting the GSA agreement illegal and improper and order the plaintiff to reinstate defendant as its
general sales agent for passenger tranportation in the Philippines in accordance with said GSA
agreement; plaintiff is ordered to pay defendant the balance of the overriding commission on total flown
revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of
US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission
per month commencing from January 1, 1981 until such reinstatement or said amounts in its Philippine
peso equivalent legally prevailing at the time of payment plus legal interest to commence from the filing
of the counterclaim up to the time of payment. Further, plaintiff is directed to pay defendant the amount
of One Million Five Hundred Thousand (Pl,500,000.00) pesos as and for exemplary damages; and the
amount of Three Hundred Thousand (P300,000.00) pesos as and by way of attorney's fees.
Costs against plaintiff. 7
On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January
1986, affirmed the findings of the court a quo on their material points but with some modifications with respect
to the monetary awards granted. The dispositive portion of the appellate court's decision is as follows:
WHEREFORE, with the following modifications
1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of the latter's
overriding commission covering the period March 16, 1977 to December 31, 1980, or its Philippine
peso equivalent in accordance with the official rate of exchange legally prevailing on July 10, 1981, the
date the counterclaim was filed;
2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's overriding commission per
month starting January 1, 1981 until date of termination, May 9, 1981 or its Philippine peso equivalent
in accordance with the official rate of exchange legally prevailing on July 10, 1981, the date the
counterclaim was filed
3) American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date the answer
with counterclaim was filed, until full payment;
4) American is ordered to pay Orient exemplary damages of P200,000.00;
5) American is ordered to pay Orient the sum of P25,000.00 as attorney's fees.
the rest of the appealed decision is affirmed.
Costs against American.8
American Air moved for reconsideration of the aforementioned decision, assailing the substance thereof and
arguing for its reversal. The appellate court's decision was also the subject of a Motion for Partial
Reconsideration by Orient Air which prayed for the restoration of the trial court's ruling with respect to the
monetary awards. The Court of Appeals, by resolution promulgated on 17 December 1986, denied American
Air's motion and with respect to that of Orient Air, ruled thus:
Orient's motion for partial reconsideration is denied insofar as it prays for affirmance of the trial court's
award of exemplary damages and attorney's fees, but granted insofar as the rate of exchange is
concerned. The decision of January 27, 1986 is modified in paragraphs (1) and (2) of the dispositive
part so that the payment of the sums mentioned therein shall be at their Philippine peso equivalent in
accordance with the official rate of exchange legally prevailing on the date of actual payment. 9
124

Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air as petitioner in
G.R. No. 76931 and American Air as petitioner in G.R. No. 76933. By resolution 10 of this Court dated 25 March
1987 both petitions were consolidated, hence, the case at bar.
The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding
commission. It is the stand of American Air that such commission is based only on sales of its services actually
negotiated or transacted by Orient Air, otherwise referred to as "ticketed sales." As basis thereof, primary
reliance is placed upon paragraph 5(b) of the Agreement which, in reiteration, is quoted as follows:
5. Commissions
a) . . .
b) Overriding Commission
In addition to the above commission, American will pay Orient Air Services an overriding commission of
3% of the tariff fees and charges for all sales of transportation over American's services by Orient Air
Servicesor its sub-agents. (Emphasis supplied)
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to
appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to the disputed
overriding commission based only on ticketed sales. This is supposed to be the clear meaning of the
underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission, the sale
must be made by Orient Air and the sale must be done with the use of American Air's ticket stocks.
On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission covers
the total revenue of American Air and not merely that derived from ticketed sales undertaken by Orient Air. The
latter, in justification of its submission, invokes its designation as the exclusive General Sales Agent of
American Air, with the corresponding obligations arising from such agency, such as, the promotion and
solicitation for the services of its principal. In effect, by virtue of such exclusivity, "all sales of transportation over
American Air's services are necessarily by Orient Air." 11
It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into
consideration to ascertain the meaning of its provisions. 12 The various stipulations in the contract must be read
together to give effect to all. 13 After a careful examination of the records, the Court finds merit in the contention
of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles, entitles it to the
3% overriding commission based on total revenue, or as referred to by the parties, "total flown revenue."
As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion
and marketing of American Air's services for air passenger transportation, and the solicitation of sales therefor.
In return for such efforts and services, Orient Air was to be paid commissions of two (2) kinds: first, a sales
agency commission, ranging from 7-8% of tariff fares and charges from sales by Orient Air when made on
American Air ticket stock; and second, an overriding commission of 3% of tariff fares and charges for all
sales of passenger transportation over American Air services. It is immediately observed that the precondition
attached to the first type of commission does not obtain for the second type of commissions. The latter type of
commissions would accrue for sales of American Air services made not on its ticket stock but on the ticket
stock of other air carriers sold by such carriers or other authorized ticketing facilities or travel agents. To rule
otherwise, i.e., to limit the basis of such overriding commissions to sales from American Air ticket stock would
erase any distinction between the two (2) types of commissions and would lead to the absurd conclusion that
the parties had entered into a contract with meaningless provisions. Such an interpretation must at all times be
avoided with every effort exerted to harmonize the entire Agreement.

125

An additional point before finally disposing of this issue. It is clear from the records that American Air was the
party responsible for the preparation of the Agreement. Consequently, any ambiguity in this "contract of
adhesion" is to be taken "contra proferentem", i.e., construed against the party who caused the ambiguity and
could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code provides that the
interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity. 14 To put it differently, when several interpretations of a provision are otherwise equally proper, that
interpretation or construction is to be adopted which is most favorable to the party in whose favor the provision
was made and who did not cause the ambiguity. 15 We therefore agree with the respondent appellate court's
declaration that:
Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read
against the party who drafted it. 16
We now turn to the propriety of American Air's termination of the Agreement. The respondent appellate court,
on this issue, ruled thus:
It is not denied that Orient withheld remittances but such action finds justification from paragraph 4 of
the Agreement, Exh. F, which provides for remittances to American less commissions to which Orient is
entitled, and from paragraph 5(d) which specifically allows Orient to retain the full amount of its
commissions. Since, as stated ante, Orient is entitled to the 3% override. American's premise,
therefore, for the cancellation of the Agreement did not exist. . . ."
We agree with the findings of the respondent appellate court. As earlier established, Orient Air was entitled to
an overriding commission based on total flown revenue. American Air's perception that Orient Air was remiss or
in default of its obligations under the Agreement was, in fact, a situation where the latter acted in accordance
with the Agreementthat of retaining from the sales proceeds its accrued commissions before remitting the
balance to American Air. Since the latter was still obligated to Orient Air by way of such commissions. Orient Air
was clearly justified in retaining and refusing to remit the sums claimed by American Air. The latter's termination
of the Agreement was, therefore, without cause and basis, for which it should be held liable to Orient Air.
On the matter of damages, the respondent appellate court modified by reduction the trial court's award of
exemplary damages and attorney's fees. This Court sees no error in such modification and, thus, affirms the
same.
It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the trial
court.1wphi1We refer particularly to the lower court's decision ordering American Air to "reinstate defendant
as its general sales agent for passenger transportation in the Philippines in accordance with said GSA
Agreement."
By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend
its personality to Orient Air. Such would be violative of the principles and essence of agency, defined by law as
a contract whereby "a person binds himself to render some service or to do something in representation or on
behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER . 17 (emphasis supplied) In an
agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so
doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would
have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any
way, be compelled by law or by any court. The Agreement itself between the parties states that "either party
may terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or cable."
(emphasis supplied) We, therefore, set aside the portion of the ruling of the respondent appellate court
reinstating Orient Air as general sales agent of American Air.
WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and resolution of the
respondent Court of Appeals, dated 27 January 1986 and 17 December 1986, respectively. Costs against
petitioner American Air.
126

SO ORDERED.
Melencio-Herrera, and Regalado, JJ., concur.
Paras, J., took no part. Son is a partner in one of the counsel.
Sarmiento, J., is on leave.

127