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Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171460

July 24, 2007

LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR., represented by their Attorney-In-Fact, ALFREDO
M. PEREZ, Petitioners,
vs.
ALLIED BANKING CORPORATION, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioners Lillian N.
Mercado, Cynthia M. Fekaris and Julian Mercado, Jr., represented by their Attorney-In-Fact, Alfredo M. Perez, seeking to reverse and
set aside the Decision1 of the Court of Appeals dated 12 October 2005, and its Resolution2 dated 15 February 2006 in CA-G.R. CV No.
82636. The Court of Appeals, in its assailed Decision and Resolution, reversed the Decision3 of the Regional Trial Court (RTC) of
Quezon City, Branch 220 dated 23 September 2003, declaring the deeds of real estate mortgage constituted on TCT No. RT-18206
(106338) null and void. The dispositive portion of the assailed Court of Appeals Decision thus reads:
WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and a new judgment is hereby entered dismissing the
[petitioners] complaint.4
Petitioners are heirs of Perla N. Mercado (Perla). Perla, during her lifetime, owned several pieces of real property situated in different
provinces of the Philippines.
Respondent, on the other hand, is a banking institution duly authorized as such under the Philippine laws.
On 28 May 1992, Perla executed a Special Power of Attorney (SPA) in favor of her husband, Julian D. Mercado (Julian) over several
pieces of real property registered under her name, authorizing the latter to perform the following acts:
1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwise over the different parcels of land described
hereinafter, to wit:
a) Calapan, Oriental Mindoro Properties covered by Transfer Certificates of Title Nos. T-53618 - 3,522 Square
Meters, T-46810 3,953 Square Meters, T-53140 177 Square Meters, T-21403 263 square Meters, T- 46807 39
Square Meters of the Registry of Deeds of Oriental Mindoro;
b) Susana Heights, Muntinlupa covered by Transfer Certificates of Title Nos. T-108954 600 Square Meters and RT106338 805 Square Meters of the Registry of Deeds of Pasig (now Makati);
c) Personal property 1983 Car with Vehicle Registration No. R-16381; Model 1983; Make Toyota; Engine No. T2464
2. To sign for and in my behalf any act of strict dominion or ownership any sale, disposition, mortgage, lease or any other
transactions including quit-claims, waiver and relinquishment of rights in and over the parcels of land situated in General Trias,
Cavite, covered by Transfer Certificates of Title Nos. T-112254 and T-112255 of the Registry of Deeds of Cavite, in conjunction
with his co-owner and in the person ATTY. AUGUSTO F. DEL ROSARIO;
3. To exercise any or all acts of strict dominion or ownership over the above-mentioned properties, rights and interest therein.
(Emphasis supplied.)
On the strength of the aforesaid SPA, Julian, on 12 December 1996, obtained a loan from the respondent in the amount
of P3,000,000.00, secured by real estate mortgage constituted on TCT No. RT-18206 (106338) which covers a parcel of land with an
area of 805 square meters, registered with the Registry of Deeds of Quezon City (subject property). 5

Still using the subject property as security, Julian obtained an additional loan from the respondent in the sum ofP5,000,000.00,
evidenced by a Promissory Note6 he executed on 5 February 1997 as another real estate mortgage (REM).
It appears, however, that there was no property identified in the SPA as TCT No. RT 18206 (106338) and registered with the Registry
of Deeds of Quezon City. What was identified in the SPA instead was the property covered by TCT No. RT-106338 registered with the
Registry of Deeds of Pasig.
Subsequently, Julian defaulted on the payment of his loan obligations. Thus, respondent initiated extra-judicial foreclosure proceedings
over the subject property which was subsequently sold at public auction wherein the respondent was declared as the highest bidder as
shown in the Sheriffs Certificate of Sale dated 15 January 1998.7
On 23 March 1999, petitioners initiated with the RTC an action for the annulment of REM constituted over the subject property on the
ground that the same was not covered by the SPA and that the said SPA, at the time the loan obligations were contracted, no longer
had force and effect since it was previously revoked by Perla on 10 March 1993, as evidenced by the Revocation of SPA signed by the
latter.8
Petitioners likewise alleged that together with the copy of the Revocation of SPA, Perla, in a Letter dated 23 January 1996, notified the
Registry of Deeds of Quezon City that any attempt to mortgage or sell the subject property must be with her full consent documented in
the form of an SPA duly authenticated before the Philippine Consulate General in New York. 9
In the absence of authority to do so, the REM constituted by Julian over the subject property was null and void; thus, petitioners
likewise prayed that the subsequent extra-judicial foreclosure proceedings and the auction sale of the subject property be also nullified.
In its Answer with Compulsory Counterclaim,10 respondent averred that, contrary to petitioners allegations, the SPA in favor of Julian
included the subject property, covered by one of the titles specified in paragraph 1(b) thereof, TCT No. RT- 106338 registered with the
Registry of Deeds of Pasig (now Makati). The subject property was purportedly registered previously under TCT No. T-106338, and was
only subsequently reconstituted as TCT RT-18206 (106338). Moreover, TCT No. T-106338 was actually registered with the Registry of
Deeds of Quezon City and not before the Registry of Deeds of Pasig (now Makati). Respondent explained that the discrepancy in the
designation of the Registry of Deeds in the SPA was merely an error that must not prevail over the clear intention of Perla to include the
subject property in the said SPA. In sum, the property referred to in the SPA Perla executed in favor of Julian as covered by TCT No.
106338 of the Registry of Deeds of Pasig (now Makati) and the subject property in the case at bar, covered by RT 18206 (106338) of
the Registry of Deeds of Quezon City, are one and the same.
On 23 September 2003, the RTC rendered a Decision declaring the REM constituted over the subject property null and void, for Julian
was not authorized by the terms of the SPA to mortgage the same. The court a quo likewise ordered that the foreclosure proceedings
and the auction sale conducted pursuant to the void REM, be nullified. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the [herein petitioners] and against the [herein
respondent] Bank:
1. Declaring the Real Estate Mortgages constituted and registered under Entry Nos. PE-4543/RT-18206 and 2012/RT-18206
annotated on TCT No. RT-18206 (106338) of the Registry of Deeds of Quezon City as NULL and VOID;
2. Declaring the Sheriffs Sale and Certificate of Sale under FRE No. 2217 dated January 15, 1998 over the property covered
by TCT No. RT-18206 (106338) of the Registry of Deeds of Quezon City as NULL and VOID;
3. Ordering the defendant Registry of Deeds of Quezon City to cancel the annotation of Real Estate Mortgages appearing on
Entry Nos. PE-4543/RT-18206 and 2012/RT-18206 on TCT No. RT-18206 (106338) of the Registry of Deeds of Quezon City;
4. Ordering the [respondent] Bank to deliver/return to the [petitioners] represented by their attorney-in-fact Alfredo M. Perez,
the original Owners Duplicate Copy of TCT No. RT-18206 (106338) free from the encumbrances referred to above; and
5. Ordering the [respondent] Bank to pay the [petitioners] the amount of P100,000.00 as for attorneys fees plus cost of the
suit.
The other claim for damages and counterclaim are hereby DENIED for lack of merit.11
Aggrieved, respondent appealed the adverse Decision before the Court of Appeals.

In a Decision dated 12 October 2005, the Court of Appeals reversed the RTC Decision and upheld the validity of the REM constituted
over the subject property on the strength of the SPA. The appellate court declared that Perla intended the subject property to be
included in the SPA she executed in favor of Julian, and that her subsequent revocation of the said SPA, not being contained in a public
instrument, cannot bind third persons.
The Motion for Reconsideration interposed by the petitioners was denied by the Court of Appeals in its Resolution dated 15 February
2006.
Petitioners are now before us assailing the Decision and Resolution rendered by the Court of Appeals raising several issues, which are
summarized as follows:
I WHETHER OR NOT THERE WAS A VALID MORTGAGE CONSTITUTED OVER SUBJECT PROPERTY.
II WHETHER OR NOT THERE WAS A VALID REVOCATION OF THE SPA.
III WHETHER OR NOT THE RESPONDENT WAS A MORTGAGEE-IN- GOOD FAITH.
For a mortgage to be valid, Article 2085 of the Civil Code enumerates the following essential requisites:
Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof,
that they be legally authorized for the purpose.
Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.
In the case at bar, it was Julian who obtained the loan obligations from respondent which he secured with the mortgage of the subject
property. The property mortgaged was owned by his wife, Perla, considered a third party to the loan obligations between Julian and
respondent. It was, thus, a situation recognized by the last paragraph of Article 2085 of the Civil Code afore-quoted. However, since it
was not Perla who personally mortgaged her own property to secure Julians loan obligations with respondent, we proceed to
determining if she duly authorized Julian to do so on her behalf.
Under Article 1878 of the Civil Code, a special power of attorney is necessary in cases where real rights over immovable property are
created or conveyed.12 In the SPA executed by Perla in favor of Julian on 28 May 1992, the latter was conferred with the authority to
"sell, alienate, mortgage, lease and deal otherwise" the different pieces of real and personal property registered in Perlas name. The
SPA likewise authorized Julian "[t]o exercise any or all acts of strict dominion or ownership" over the identified properties, and rights
and interest therein. The existence and due execution of this SPA by Perla was not denied or challenged by petitioners.
There is no question therefore that Julian was vested with the power to mortgage the pieces of property identified in the SPA. However,
as to whether the subject property was among those identified in the SPA, so as to render Julians mortgage of the same valid, is a
question we still must resolve.
Petitioners insist that the subject property was not included in the SPA, considering that it contained an exclusive enumeration of the
pieces of property over which Julian had authority, and these include only: (1) TCT No. T-53618, with an area of 3,522 square meters,
located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (2) TCT No. T-46810, with an area
of 3,953 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (3) TCT
No. T-53140, with an area of 177 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of
Oriental Mindoro; (4) TCT No. T-21403, with an area of 263 square meters, located at Calapan, Oriental Mindoro, and registered with
the Registry of Deeds of Oriental Mindoro; (5) TCT No. T- 46807, with an area of 39 square meters, located at Calapan, Oriental
Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (6) TCT No. T-108954, with an area of 690 square meters and
located at Susana Heights, Muntinlupa; (7) RT-106338 805 Square Meters registered with the Registry of Deeds of Pasig (now
Makati); and (8) Personal Property consisting of a 1983 Car with Vehicle Registration No. R-16381, Model 1983, Make Toyota, and
Engine No. T- 2464. Nowhere is it stated in the SPA that Julians authority extends to the subject property covered by TCT No. RT
18206 (106338) registered with the Registry of Deeds of Quezon City. Consequently, the act of Julian of constituting a mortgage over
the subject property is unenforceable for having been done without authority.

Respondent, on the other hand, mainly hinges its argument on the declarations made by the Court of Appeals that there was no
property covered by TCT No. 106338 registered with the Registry of Deeds of Pasig (now Makati); but there exists a property, the
subject property herein, covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of Quezon City. Further
verification would reveal that TCT No. RT-18206 is merely a reconstitution of TCT No. 106338, and the property covered by both
certificates of title is actually situated in Quezon City and not Pasig. From the foregoing circumstances, respondent argues that Perla
intended to include the subject property in the SPA, and the failure of the instrument to reflect the recent TCT Number or the exact
designation of the Registry of Deeds, should not defeat Perlas clear intention.
After an examination of the literal terms of the SPA, we find that the subject property was not among those enumerated therein. There
is no obvious reference to the subject property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of
Quezon City.
There was also nothing in the language of the SPA from which we could deduce the intention of Perla to include the subject property
therein. We cannot attribute such alleged intention to Perla who executed the SPA when the language of the instrument is bare of any
indication suggestive of such intention. Contrariwise, to adopt the intent theory advanced by the respondent, in the absence of clear
and convincing evidence to that effect, would run afoul of the express tenor of the SPA and thus defeat Perlas true intention.
In cases where the terms of the contract are clear as to leave no room for interpretation, resort to circumstantial evidence to ascertain
the true intent of the parties, is not countenanced. As aptly stated in the case of JMA House, Incorporated v. Sta. Monica Industrial and
Development Corporation,13 thus:
[T]he law is that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning
of its stipulation shall control. When the language of the contract is explicit, leaving no doubt as to the intention of the drafters, the
courts may not read into it [in] any other intention that would contradict its main import. The clear terms of the contract should never be
the subject matter of interpretation. Neither abstract justice nor the rule on liberal interpretation justifies the creation of a contract for the
parties which they did not make themselves or the imposition upon one party to a contract or obligation not assumed simply or merely
to avoid seeming hardships. The true meaning must be enforced, as it is to be presumed that the contracting parties know their scope
and effects.14
Equally relevant is the rule that a power of attorney must be strictly construed and pursued. The instrument will be held to grant only
those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney.15 Where powers
and duties are specified and defined in an instrument, all such powers and duties are limited and are confined to those which are
specified and defined, and all other powers and duties are excluded.16 This is but in accord with the disinclination of courts to enlarge
the authority granted beyond the powers expressly given and those which incidentally flow or derive therefrom as being usual and
reasonably necessary and proper for the performance of such express powers.17
Even the commentaries of renowned Civilist Manresa18 supports a strict and limited construction of the terms of a power of attorney:
The law, which must look after the interests of all, cannot permit a man to express himself in a vague and general way with reference to
the right he confers upon another for the purpose of alienation or hypothecation, whereby he might be despoiled of all he possessed
and be brought to ruin, such excessive authority must be set down in the most formal and explicit terms, and when this is not done, the
law reasonably presumes that the principal did not mean to confer it.
In this case, we are not convinced that the property covered by TCT No. 106338 registered with the Registry of Deeds of Pasig (now
Makati) is the same as the subject property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of Quezon
City. The records of the case are stripped of supporting proofs to verify the respondents claim that the two titles cover the same
property. It failed to present any certification from the Registries of Deeds concerned to support its assertion. Neither did respondent
take the effort of submitting and making part of the records of this case copies of TCTs No. RT-106338 of the Registry of Deeds of
Pasig (now Makati) and RT-18206 (106338) of the Registry of Deeds of Quezon City, and closely comparing the technical descriptions
of the properties covered by the said TCTs. The bare and sweeping statement of respondent that the properties covered by the two
certificates of title are one and the same contains nothing but empty imputation of a fact that could hardly be given any evidentiary
weight by this Court.
Having arrived at the conclusion that Julian was not conferred by Perla with the authority to mortgage the subject property under the
terms of the SPA, the real estate mortgages Julian executed over the said property are therefore unenforceable.
Assuming arguendo that the subject property was indeed included in the SPA executed by Perla in favor of Julian, the said SPA was
revoked by virtue of a public instrument executed by Perla on 10 March 1993. To address respondents assertion that the said
revocation was unenforceable against it as a third party to the SPA and as one who relied on the same in good faith, we quote with
approval the following ruling of the RTC on this matter:

Moreover, an agency is extinguished, among others, by its revocation (Article 1999, New Civil Code of the Philippines). The principal
may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express
or implied (Article 1920, supra).
In this case, the revocation of the agency or Special Power of Attorney is expressed and by a public document executed on March 10,
1993.
The Register of Deeds of Quezon City was even notified that any attempt to mortgage or sell the property covered by TCT No. [RT18206] 106338 located at No. 21 Hillside Drive, Blue Ridge, Quezon City must have the full consent documented in the form of a
special power of attorney duly authenticated at the Philippine Consulate General, New York City, N.Y., U.S.A.
The non-annotation of the revocation of the Special Power of Attorney on TCT No. RT-18206 is of no consequence as far as the
revocations existence and legal effect is concerned since actual notice is always superior to constructive notice. The actual notice of
the revocation relayed to defendant Registry of Deeds of Quezon City is not denied by either the Registry of Deeds of Quezon City or
the defendant Bank. In which case, there appears no reason why Section 52 of the Property Registration Decree (P.D. No. 1529)
should not apply to the situation. Said Section 52 of P.D. No. 1529 provides:
"Section 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument
or entry affecting registered land shall, if registered, filed or entered in the Office of the Register of Deeds for the province or city where
the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering. (Pres. Decree
No. 1529, Section 53) (emphasis ours)
It thus developed that at the time the first loan transaction with defendant Bank was effected on December 12, 1996, there was on
record at the Office of the Register of Deeds of Quezon City that the special power of attorney granted Julian, Sr. by Perla had been
revoked. That notice, works as constructive notice to third parties of its being filed, effectively rendering Julian, Sr. without authority to
act for and in behalf of Perla as of the date the revocation letter was received by the Register of Deeds of Quezon City on February 7,
1996.19
Given that Perla revoked the SPA as early as 10 March 1993, and that she informed the Registry of Deeds of Quezon City of such
revocation in a letter dated 23 January 1996 and received by the latter on 7 February 1996, then third parties to the SPA are
constructively notified that the same had been revoked and Julian no longer had any authority to mortgage the subject property.
Although the revocation may not be annotated on TCT No. RT-18206 (106338), as the RTC pointed out, neither the Registry of Deeds
of Quezon City nor respondent denied that Perlas 23 January 1996 letter was received by and filed with the Registry of Deeds of
Quezon City. Respondent would have undoubtedly come across said letter if it indeed diligently investigated the subject property and
the circumstances surrounding its mortgage.
The final issue to be threshed out by this Court is whether the respondent is a mortgagee-in-good faith. Respondent fervently asserts
that it exercised reasonable diligence required of a prudent man in dealing with the subject property.
Elaborating, respondent claims to have carefully verified Julians authority over the subject property which was validly contained in the
SPA. It stresses that the SPA was annotated at the back of the TCT of the subject property. Finally, after conducting an investigation, it
found that the property covered by TCT No. 106338, registered with the Registry of Deeds of Pasig (now Makati) referred to in the SPA,
and the subject property, covered by TCT No. 18206 (106338) registered with the Registry of Deeds of Quezon City, are one and the
same property. From the foregoing, respondent concluded that Julian was indeed authorized to constitute a mortgage over the subject
property.
We are unconvinced. The property listed in the real estate mortgages Julian executed in favor of PNB is the one covered by "TCT#RT18206(106338)." On the other hand, the Special Power of Attorney referred to TCT No. "RT-106338 805 Square Meters of the
Registry of Deeds of Pasig now Makati." The palpable difference between the TCT numbers referred to in the real estate mortgages
and Julians SPA, coupled with the fact that the said TCTs are registered in the Registries of Deeds of different cities, should have put
respondent on guard. Respondents claim of prudence is debunked by the fact that it had conveniently or otherwise overlooked the
inconsistent details appearing on the face of the documents, which it was relying on for its rights as mortgagee, and which significantly
affected the identification of the property being mortgaged. In Arrofo v. Quio,20 we have elucidated that:
[Settled is the rule that] a person dealing with registered lands [is not required] to inquire further than what the Torrens title on its face
indicates. This rule, however, is not absolute but admits of exceptions. Thus, while its is true, x x x that a person dealing with
registered lands need not go beyond the certificate of title, it is likewise a well-settled rule that a purchaser or mortgagee
cannot close his eyes to facts which should put a reasonable man on his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor or mortgagor. His mere refusal to face up the fact that such
defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendors or mortgagors title, will not
make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such

notice of the defect as would have led to its discovery had he acted with the measure of precaution which may be required of a prudent
man in a like situation.
By putting blinders on its eyes, and by refusing to see the patent defect in the scope of Julians authority, easily discernable from the
plain terms of the SPA, respondent cannot now claim to be an innocent mortgagee.
Further, in the case of Abad v. Guimba,21 we laid down the principle that where the mortgagee does not directly deal with the registered
owner of real property, the law requires that a higher degree of prudence be exercised by the mortgagee, thus:
While [the] one who buys from the registered owner does not need to look behind the certificate of title, one who buys from [the] one
who is not [the] registered owner is expected to examine not only the certificate of title but all factual circumstances necessary for [one]
to determine if there are any flaws in the title of the transferor, or in [the] capacity to transfer the land. Although the instant case does
not involve a sale but only a mortgage, the same rule applies inasmuch as the law itself includes a mortgagee in the term "purchaser." 22
This principle is applied more strenuously when the mortgagee is a bank or a banking institution. Thus, in the case of Cruz v. Bancom
Finance Corporation,23 we ruled:
Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private individuals, it is expected to
exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is expected to
exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of a property offered to it
as security for a loan must be a standard and indispensable part of its operations.24
Hence, considering that the property being mortgaged by Julian was not his, and there are additional doubts or suspicions as to the real
identity of the same, the respondent bank should have proceeded with its transactions with Julian only with utmost caution. As a bank,
respondent must subject all its transactions to the most rigid scrutiny, since its business is impressed with public interest and its
fiduciary character requires high standards of integrity and performance.25 Where respondent acted in undue haste in granting the
mortgage loans in favor of Julian and disregarding the apparent defects in the latters authority as agent, it failed to discharge the
degree of diligence required of it as a banking corporation.1awphil
Thus, even granting for the sake of argument that the subject property and the one identified in the SPA are one and the same, it would
not elevate respondents status to that of an innocent mortgagee. As a banking institution, jurisprudence stringently requires that
respondent should take more precautions than an ordinary prudent man should, to ascertain the status and condition of the properties
offered as collateral and to verify the scope of the authority of the agents dealing with these. Had respondent acted with the required
degree of diligence, it could have acquired knowledge of the letter dated 23 January 1996 sent by Perla to the Registry of Deeds of
Quezon City which recorded the same. The failure of the respondent to investigate into the circumstances surrounding the mortgage of
the subject property belies its contention of good faith.
On a last note, we find that the real estate mortgages constituted over the subject property are unenforceable and not null and void, as
ruled by the RTC. It is best to reiterate that the said mortgage was entered into by Julian on behalf of Perla without the latters authority
and consequently, unenforceable under Article 1403(1) of the Civil Code. Unenforceable contracts are those which cannot be enforced
by a proper action in court, unless they are ratified, because either they are entered into without or in excess of authority or they do not
comply with the statute of frauds or both of the contracting parties do not possess the required legal capacity.26 An unenforceable
contract may be ratified, expressly or impliedly, by the person in whose behalf it has been executed, before it is revoked by the other
contracting party.27 Without Perlas ratification of the same, the real estate mortgages constituted by Julian over the subject property
cannot be enforced by any action in court against Perla and/or her successors in interest.
In sum, we rule that the contracts of real estate mortgage constituted over the subject property covered by TCT No. RT 18206
(106338) registered with the Registry of Deeds of Quezon City are unenforceable. Consequently, the foreclosure proceedings and the
auction sale of the subject property conducted in pursuance of these unenforceable contracts are null and void. This, however, is
without prejudice to the right of the respondent to proceed against Julian, in his personal capacity, for the amount of the loans.
WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The Decision dated 12 October 2005 and its
Resolution dated 15 February 2006 rendered by the Court of Appeals in CA-G.R. CV No. 82636, are hereby REVERSED. The Decision
dated 23 September 2003 of the Regional Trial Court of Quezon City, Branch 220, in Civil Case No. Q-99-37145, is
hereby REINSTATED and AFFIRMED with modification that the real estate mortgages constituted over TCT No. RT 18206 (106338)
are not null and void but UNENFORCEABLE. No costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 15823

September 12, 1921

JULIO DANON, plaintiff-appellee,


vs.
ANTONIO A. BRIMO & CO., defendant-appellant.
Claro M. Recto for appellant.
Canillas & Cardenas for appellee.
JOHNSON, J.:
This action was brought to recover the sum of P60,000, alleged to be the value of services rendered to the defendant by the plaintiff as
a broker. The plaintiff alleges that in the month of August, 1918, the defendant company, through its manager, Antonio A. Brimo,
employed him to look for a purchaser of its factory known as "Holland American Oil Co.," for the sum of P1,200,000, payable in cash;
that the defendant promised to pay the plaintiff, as compensation for his services, a commission of five per cent on the said sum of
P1,200,000, if the sale was consummated, or if the plaintiff should find a purchaser ready, able and willing to buy said factory for the
said sum of P1,200,000; that subsequently the plaintiff found such a purchaser, but that the defendant refused to sell the said factory
without any justifiable motive or reason therefor and without having previously notified the plaintiff of its desistance or variation in the
price and terms of the sale.
To that complaint the defendant interposed a general denial. Upon the issue thus presented, the Honorable Simplicio del Rosario,
judge, after hearing and considering the evidence adduced during the trial of the cause, rendered a judgment in favor of the plaintiff and
against the defendant for the sum of P60,000, with costs. From that judgment the defendant appealed to this court.
The proof with regard to the authority of the plaintiff to sell the factory in question for the defendant, on commission, is extremely
unsatisfactory. It consists solely of the testimony of the plaintiff, on the one hand, and of the manager of the defendant company,
Antonio A. Brimo, on the other. From a reading of their testimony we believe that neither of them has been entirely free from
prevarications. However, after giving due weight to the finding of the trial court in this regard and after carefully considering the inherent
probability or improbability of the testimony of each of said witnesses, we believe we are approximating the truth in finding: (1) That
Antonio A. Brimo, in a conversation with the plaintiff, Julio Danon, about the middle of August, 1918, informed the latter that he (Brimo)
desired to sell his factory, the Holland American Oil Co., for the sum of P1,200,000; (2) that he agreed and promised to pay to the
plaintiff a commission of 5 per cent provided the latter could sell said factory for that amount; and (3) that no definite period of time was
fixed within which the plaintiff should effect the sale. It seems that another broker, Sellner, was also negotiating the sale, or trying to find
a purchaser for the same property and that the plaintiff was informed of the fact either by Brimo himself or by someone else; at least, it
is probable that the plaintiff was aware that he was not alone in the field, and his whole effort was to forestall his competitor by being
the first to find a purchaser and effect the sale. Such, we believe. was the contract between the plaintiff and the defendant, upon which
the present action is based.
The next question to determine is whether the plaintiff had performed all that was required of him under that contract to entitle him to
recover the commission agreed upon. The proof in this regard is no less unsatisfactory. It seems that immediately after having an
interview with Mr. Brimo, as above stated, the plaintiff went to see Mr. Mauro Prieto, president of the Santa Ana Oil Mill, a corporation,
and offered to sell to him the defendant's property at P1,200,000. The said corporation was at that time in need of such a factory as the
plaintiff was offering for sale, and Mr. Prieto, its president, instructed the manager, Samuel E. Kane, to see Mr. Brimo and ascertain
whether he really wanted to sell said factory, and, if so, to get permission from him to inspect the premises. Mr. Kane inspected the
factory and, presumably, made a favorable report to Mr. Prieto. The latter asked for an appointment with Mr. Brimo to perfect the

negotiation. In the meantime Sellner, the other broker referred to, had found a purchaser for the same property, who ultimately bought it
for P1,300,000. For that reason Mr. Prieto, the would be purchaser found by the plaintiff, never came to see Mr. Brimo to perfect the
proposed negotiation.
Under the proofs in this case, the most that can be said as to what the plaintiff had accomplished is, that he had found a person
who might have bought the defendant's factory if the defendant had not sold it to someone else. The evidence does not show that the
Santa Ana Oil Mill had definitely decided to buy the property in question at the fixed price of P1,200,000. The board of directors of said
corporation had not resolved to purchase said property; and even if its president could legally make the purchase without previous
formal authorization of the board of directors, yet said president does not pretend that he had definitely and formally agreed to buy the
factory in question on behalf of his corporation at the price stated. On direct examination he testified for the plaintiff as follows:
Q.
You say that we were going to accept or that it was beneficial for us; will you say to whom your refer, when you say
"we?"
A.

Our company, the Santa Ana Oil Mill.

Q.

And is that company able to pay the sum of P1,200,000?

A.

Yes, sir.

Q.

And you accepted it at that price of P1,200.000?

A.
Surely, because as I already said before, we were in the difficult position of not being able to operate our factory,
because of the obstacle placed by the Government.
Q.

And did you inform Mr. Danon of this acceptance?

A.

I did not explain to Mr. Danon.

On cross-examination the same witness testified:


Q.
What actions did the board of directors of the Santa Ana Oil Mill take in order to acquire or to make an offer to Mr.
Brimo of the Holland American Oil Company?
A.
him.

But nothing was effected, because Mr. Danon stated that the property had been sold when I was going to deal with

Q.

But do you not say that you made an offer of P1,200,000?

A.
No; it was Mr. Danon who made the offer and we were sure to put the deal through because we have bound
ourselves.
The plaintiff claims that the reasons why the sale to the Santa Ana Mill was not consummated was because Mr. Brimo refused to sell to
a Filipino firm and preferred an American buyer; that upon learning such attitude of the defendant the plaintiff endeavored to procure
another purchaser and found a Mr. Leas, who delivered to the plaintiff a letter addressed to Mr. Brimo, offering to buy the factory in
question at P1,200,000. the offer being good for twenty-four; that said offer was not accepted by Brimo because while he was reading
the letter of Leas, Sellner came in, drew Brimo into another room, and then and there closed the deal at P1,300,000. The last statement
is admitted by the defendant.
Such are the facts in this case, as nearly accurate as we can gather them from the conflicting evidence before us. Under those facts, is
the plaintiff entitled to recover the sum of P60,000, claimed by him as compensation for his services? It will be noted that, according to
the plaintiff's own testimony, the defendant agreed and promised to pay him a commission of 5 per cent provided he (the plaintiff) could
sell the factory at P1,200.000 ("con tal que V. me venda la fabrica en P1,200.000"). It will also be noted that all that the plaintiff had
accomplished by way of performance of his contract was, that he had found a person who might have bought the factory in question
had not the defendant sold it to someone else. (Beaumont vs. Prieto, 41 Phil., 670; 249 U.S., 554.)
Under these circumstances it is difficult to see how the plaintiff can recover anything in the premises. The plaintiff's action is not one for
damages for breach of contract; it is an action to recover "the reasonable value" of services rendered. this is unmistakable both from
the plaintiff's complaint and his testimony as a witness during the trial.

Q.

And what is the reasonable value of the services you rendered to Mr. Brimo?

A.

Five per cent of the price at which it was sold.

Q.

Upon what do you base your qualification that those services were reasonable?

A.
sale.

First, because that is the common rate in the city, and, secondly, because of the big gain that he obtained from the

What benefit did the plaintiff, by his "services," bestow upon the defendant to entitle him to recover from the latter the sum of P60,000?
It is perfectly clear and undisputed that his "services" did not any way contribute towards bringing about the sale of the factory in
question. He was not "the efficient agent or the procuring cause of the sale."
The broker must be the efficient agent or the procuring cause of sale. The means employed by him and his efforts must result
in the sale. He must find the purchaser, and the sale must proceed from his efforts acting as broker. (Wylie vs. Marine National
Bank, 61 N. Y., 414; 416; citing: McClure vs. Paine, 49 N. Y., 561; Lloyd vs. Mathews, 51 id., 124; Lyon vs. Mitchell, 36 id., 235;
Briggs vs. Rowe, 4 Keyes, 424; Murray vs.Currie, 7 Carr. and Payne, 584; Wilkinson vs. Martin, 8 id., 5.)
A leading case on the subject is that of Sibbald vs. Bethlehem Iron Co. (83 N. Y., 378; 38 Am. Rep., 441). In the case, after an
exhaustive review of various cases, the Court of Appeals of New York stated the rule as follows:
In all the cases, under all and varying forms of expression, the fundamental and correct doctrine, is, that the duty assumed by
the broker is to bring the minds of the buyer and seller to an agreement for a sale, and the price and terms on which it is to be
made, and until that is done his right to commissions does not accrue. (McGavock vs. Woodlief, 20 How., 221;
Barnes vs. Roberts, 5 Bosw., 73; Holly vs. Gosling, 2 E. D., Smith, 262; Jacobs vs. Kolff, 2 Hilt., 133; Kock vs. Emmerling, 22
How., 72; Corning vs. Calvert, 2 Hilt., 56; Trundyvs. N.Y. and Hartf. Steamboat Co., 6 Robt., 312; Van Lien vs. Burns, 1 Hilt.,
134.)
xxx

xxx

xxx

It follows, as a necessary deduction from the established rule, that a broker is never entitled to commissions for unsuccessful
efforts. The risk of a failure is wholly his. The reward comes only with his success. That is the plain contract and contemplation
of the parties. The broker may devote his time and labor, and expend his money with ever so much of devotion to the interest
of his employer, and yet if he fails, if without effecting an agreement or accomplishing a bargain, he abandons the effort, or his
authority is fairly and in good faith terminated, he gains no right to commissions. He loses the labor and effort which was
staked upon success. And in such event it matters not that after his failure, and the termination of his agency, what he has
done proves of use and benefit to the principal. In a multitude of cases that must necessarily result. He may have introduced
to each other parties who otherwise would have never met; he may have created impressions, which under later and more
favorable circumstances naturally lead to and materially assist in the consummation of a sale; he may have planted the very
seed from which others reap the harvest; but all that gives him no claim. It was part of his risk that failing himself, not
successful in fulfilling his obligation, others might be left to some extent to avail themselves of the fruit of his labors. As we said
in Wylie vs. Marine National Bank (61 N.Y., 416), in such a case the principal violates no right of the broker by selling to the
first party who offers the price asked, and it matters not that sale is to the very party with whom the broker had been
negotiating. He failed to find or produce a purchaser upon the terms prescribed in his employment, and the principal was
under no obligation to wait longer that he might make further efforts. The failure therefore and its consequences were the risk
of the broker only. This however must be taken with one important and necessary limitation. If the efforts of the broker are
rendered a failure by the fault of the employer; ifcapriciously he changes his mind after the purchaser, ready and willing,
and consenting to the prescribed terms, is produced; or if the latter declines to complete the contract because of some defect
of title in the ownership of the seller, some unremoved incumbrance, some defect which is the fault of the latter, then the
broker does not lose his commissions. And that upon the familiar principle that no one can avail himself of the nonperformance
of a condition precedent, who has himself occasioned its nonperformance. But this limitation is not even an exception to the
general rule affecting the broker's right for it goes on the ground that the broker has done his duty, that he has brought buyer
and seller to an agreement, but that the contract is not consummated and fails though the after-fault of the seller. The cases
are uniform in this respect. (Moses vs.Burling, 31 N.Y., 462; Glentworth vs. Luther, 21 Barb., 147; Van Lien vs. Burns, 1 Hilt.,
134.)
One other principle applicable to such a contract as existed in the present case needs to be kept in view.Where no time for the
continuance of the contract is fixed by its terms either party is at liberty to terminate it at will, subject only to the ordinary
requirements of good faith. Usually the broker is entitled to a fair and reasonable opportunity to perform his obligation, subject
of course to the right of the seller to sell independently. But having been granted him, the right of the principal to terminate his
authority is absoluteand unrestricted, except only that he may not do it in bad faith, and as a mere device to escape the

payment of the broker's commissions. Thus, if in the midst of negotiations instituted by the broker, and which were plainly and
evidently approaching success, the seller should revoke the authority of the broker, with the view of concluding the bargain
without his aid, and avoiding the payment of commission about to be earned, it might be well said that the due performance
his obligation by the broker was purposely prevented by the principal. But if the latter acts in good faith, not seeking to escape
the payment of commissions, but moved fairly by a view of his own interest, he has the absolute right before a bargain is made
while negotiations remain unsuccessful, before commissions are earned, to revoke the broker's authority, and the latter cannot
thereafter claim compensation for a sale made by the principal, even though it be to a customer with whom the broker
unsuccessfully negotiated, and even though, to some extent, the seller might justly be said to have availed himself of the fruits
of the broker's labor. (Ibid. pp. 444, 445 and 446.)
The rule laid down in the foregoing case was adopted and followed in the cases of Zeimer vs. Antisell (75 Cal. 509), and
Ayres vs. Thomas (116 Cal., 140).
The undertaking to procure a purchaser requires of the party so undertaking, not simply to name or introduce a person who
may be willing to make any sort of contract in reference to the property, but to produce a party capable, and who ultimately
becomes the purchaser. (Kimberly vs. Henderson and Lupton, 29 Md., 512, 515, citing: Keener vs. Harrod and Brooke, 2 Md.
63; McGavock vs. Woodlief, 20 How., 221. See also Richards, Executor, vs. Jackson, 31 Md., 250.)
The defendant sent a proposal to a broker in these words: If you send or cause to be sent to me, by advertisement or
otherwise, any party with whom I may see fit and proper to effect a sale or exchange of my real estate, above described I will
pay you the sum of $200. The broker found a person who proposed to purchase the property, but the sale was not
affected. Held: That the broker was not entitled to compensation. (Walker vs. Tirrel, 3 Am. Rep., 352.)
It is clear from the foregoing authorities that, although the present plaintiff could probably have effected the sale of the defendant's
factory had not the defendant sold it to someone else, he is not entitled to the commissions agreed upon because he had no
intervention whatever in, and much sale in question. It must be borne in mind that no definite period was fixed by the defendant within
which the plaintiff might effect the sale of its factory. Nor was the plaintiff given by the defendant the exclusive agency of such sale.
Therefore, the plaintiff cannot complaint of the defendant's conduct in selling the property through another agent before the plaintiff's
efforts were crowned with success. "One who has employed a broker can himself sell the property to a purchaser whom he has
procured, without any aid from the broker." (Hungerford vs. Hicks, 39 Conn., 259; Wylie vs. Marine National Bank, 61 N.Y., 415, 416.)
For the foregoing reasons the judgment appealed from is hereby revoked and the defendant is hereby absolved from all liability under
the plaintiff's complaint, with costs in both instances against the plaintiff. So ordered.
Araullo, Street, Avancea and Villamor, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-41420 July 10, 1992


CMS LOGGING, INC., petitioner,
vs.
THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, respondents.

NOCON, J.:

This is a petition for review on certiorari from the decision dated July 31, 1975 of the Court of Appeals in CA-G.R. No. 47763-R which
affirmed in toto the decision of the Court of First Instance of Manila, Branch VII, in Civil Case No. 56355 dismissing the complaint filed
by petitioner CMS Logging, Inc. (CMS, for brevity) against private respondent D.R. Aguinaldo Corporation (DRACOR, for brevity) and
ordering the former to pay the latter attorney's fees in the amount of P1,000.00 and the costs.
The facts of the case are as follows: Petitioner CMS is a forest concessionaire engaged in the logging business, while private
respondent DRACOR is engaged in the business of exporting and selling logs and lumber. On August 28, 1957, CMS and DRACOR
entered into a contract of agency 1 whereby the former appointed the latter as its exclusive export and sales agent for all logs that the
former may produce, for a period of five (5) years. The pertinent portions of the agreement, which was drawn up by DRACOR, 2 are as
follows:
1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export sales agent with full authority, subject to
the conditions and limitations hereinafter set forth, to sell and export under a firm sales contract acceptable to SISON,
all logs produced by SISON for a period of five (5) years commencing upon the execution of the agreement and upon
the terms and conditions hereinafter provided and DRACOR hereby accepts such appointment;
xxx xxx xxx
3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of all export sales of SISON with the
buyers and arrange the procurement and schedules of the vessel or vessels for the shipment of SISON's logs in
accordance with SISON's written requests, but DRACOR shall not in anyway [sic] be liable or responsible for any
delay, default or failure of the vessel or vessels to comply with the schedules agreed upon;
xxx xxx xxx
9. It is expressly agreed by the parties hereto that DRACOR shall receive five (5%) per cent commission of the gross
sales of logs of SISON based on F.O.B. invoice value which commission shall be deducted from the proceeds of any
and/or all moneys received by DRACOR for and in behalf and for the account of SISON;
By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs in Japan, from
September 20, 1957 to April 4, 1962.
About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS's president, Atty. Carlos Moran Sison,
and general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered that DRACOR had used Shinko Trading Co., Ltd.
(Shinko for brevity) as agent, representative or liaison officer in selling CMS's logs in Japan for which Shinko earned a commission of
U.S. $1.00 per 1,000 board feet from the buyer of the logs. Under this arrangement, Shinko was able to collect a total of U.S.
$77,264.67. 3
CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to this amount as part
of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the 5% commission under the agreement, it
is no longer entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving double compensation for the
services it rendered.
After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90, 4 directly to several firms in Japan
without the aid or intervention of DRACOR.
CMS sued DRACOR for the commission received by Shinko and for moral and exemplary damages, while DRACOR counterclaimed
for its commission, amounting to P144,167.59, from the sales made by CMS of logs to Japanese firms. In its reply, CMS averred as a
defense to the counterclaim that DRACOR had retained the sum of P101,167.59 as part of its commission for the sales made by
CMS. 5 Thus, as its counterclaim to DRACOR's counterclaim, CMS demanded DRACOR return the amount it unlawfully retained.
DRACOR later filed an amended counterclaim, alleging that the balance of its commission on the sales made by CMS was
P42,630.82, 6 thus impliedly admitting that it retained the amount alleged by CMS.
In dismissing the complaint, the trial court ruled that no evidence was presented to show that Shinko received the commission of U.S.
$77,264.67 arising from the sale of CMS's logs in Japan, though the trial court stated that "Shinko was able to collect the total amount
of $77,264.67 US Dollars (Exhs. M and M-1)." 7 The counterclaim was likewise dismissed, as it was shown that DRACOR had waived
its rights to the balance of its commission in a letter dated February 2, 1963 to Atty. Carlos Moran Sison, president of CMS. 8 From said
decision, only CMS appealed to the Court of Appeals.

The Court of Appeals, in a 3 to 2 decision, 9 affirmed the dismissal of the complaint since "[t]he trial court could not have made a
categorical finding that Shinko collected commissions from the buyers of Sison's logs in Japan, and could not have held that Sison is
entitled to recover from Dracor the amount collected by Shinko as commissions, plaintiff-appellant having failed to prove by competent
evidence its claims." 10
Moreover, the appellate court held:
There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-appellee out of its own commission of
5%, as indicated in the letter of its president to the president of Sison, dated February 2, 1963 (Exhibit "N"), and in the
Agreement between Aguinaldo Development Corporation (ADECOR) and Shinko Trading Co., Ltd. (Exhibit "9").
Daniel R. Aguinaldo stated in his said letter:
. . . , I informed you that if you wanted to pay me for the service, then it would be no more than at the standard rate of
5% commission because in our own case, we pay our Japanese agents 2-1/2%. Accordingly, we would only add a
similar amount of 2-1/2% for the service which we would render you in the Philippines. 11
Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari, alleging (1) that the Court of Appeals erred in not
making a complete findings of fact; (2) that the testimony of Atty. Teodoro R. Dominguez, regarding the admission by Shinko's president
and director that it collected a commission of U.S. $1.00 per 1,000 board feet of logs from the Japanese buyers, is admissible against
DRACOR; (3) that the statement of DRACOR's chief legal counsel in his memorandum dated May 31, 1965, Exhibit "K", is an
admission that Shinko was able to collect the commission in question; (4) that the fact that Shinko received the questioned
commissions is deemed admitted by DRACOR by its silence under Section 23, Rule 130 of the Rules of Court when it failed to reply to
Atty. Carlos Moran Sison's letter dated February 6, 1962; (5) that DRACOR is not entitled to its 5% commission arising from the direct
sales made by CMS to buyers in Japan; and (6) that DRACOR is guilty of fraud and bad faith in its dealings with CMS.
With regard to CMS's arguments concerning whether or not Shinko received the commission in question, We find the same
unmeritorious.
To begin with, these arguments question the findings of fact made by the Court of Appeals, which are final and conclusive and can not
be reviewed on appeal to the Supreme Court. 12
Moreover, while it is true that the evidence adduced establishes the fact that Shinko is DRACOR's agent or liaison in Japan, 13 there is
no evidence which established the fact that Shinko did receive the amount of U.S. $77,264.67 as commission arising from the sale of
CMS's logs to various Japanese firms.
The fact that Shinko received the commissions in question was not established by the testimony of Atty. Teodoro R. Dominguez to the
effect that Shinko's president and director told him that Shinko received a commission of U.S. $1.00 for every 1,000 board feet of logs
sold, since the same is hearsay. Similarly, the letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd. 14 is also hearsay since Mr. Shibata
was not presented to testify on his letter.
CMS's other evidence have little or no probative value at all. The statements made in the memorandum of Atty. Simplicio R. Ciocon to
DRACOR dated May 31, 1965, 15 the letter dated February 2, 1963 of Daniel
R. Aguinaldo, 16 president of DRACOR, and the reply-letter dated January 9, 1964 17 by DRACOR's counsel Atty. V. E. Del Rosario to
CMS's demand letter dated September 25, 1963 can not be categorized as admissions that Shinko did receive the commissions in
question.
The alleged admission made by Atty. Ciocon, to wit
Furthermore, as per our records, our shipment of logs to Toyo Menka Kaisha, Ltd., is only for a net volume of
67,747,732 board feet which should enable Shinko to collect a commission of US $67,747.73 only
can not be considered as such since the statement was made in the context of questioning CMS's tally of logs delivered to
various Japanese firms.
Similarly, the statement of Daniel R. Aguinaldo, to wit
. . . Knowing as we do that Toyo Menka is a large and reputable company, it is obvious that they paid Shinko for
certain services which Shinko must have satisfactorily performed for them in Japan otherwise they would not have
paid Shinko

and that of Atty. V. E. Del Rosario,


. . . It does not seem proper, therefore, for CMS Logging, Inc., as principal, to concern itself with, much less question,
the right of Shinko Trading Co., Ltd. with which our client debt directly, to whatever benefits it might have derived form
the ultimate consumer/buyer of these logs, Toyo Menka Kaisha, Ltd. There appears to be no justification for your
client's contention that these benefits, whether they can be considered as commissions paid by Toyo Menka Kaisha
to Shinko Trading, are to be regarded part of the gross sales.
can not be considered admissions that Shinko received the questioned commissions since neither statements declared
categorically that Shinko did in fact receive the commissions and that these arose from the sale of CMS's logs.
As correctly stated by the appellate court:
It is a rule that "a statement is not competent as an admission where it does not, under a reasonable construction,
appear to admit or acknowledge the fact which is sought to be proved by it". An admission or declaration to be
competent must have been expressed in definite, certain and unequivocal language (Bank of the Philippine Islands
vs. Fidelity & Surety Co., 51 Phil. 57, 64). 18
CMS's contention that DRACOR had admitted by its silence the allegation that Shinko received the commissions in question when it
failed to respond to Atty. Carlos Moran Sison's letter dated February 6, 1963, is not supported by the evidence. DRACOR did in fact
reply to the letter of Atty. Sison, through the letter dated March 5, 1963 of F.A. Novenario, 19 which stated:
This is to acknowledge receipt of your letter dated February 6, 1963, and addressed to Mr. D. R. Aguinaldo, who is at
present out of the country.
xxx xxx xxx
We have no record or knowledge of any such payment of commission made by Toyo Menka to Shinko. If the payment
was made by Toyo Menka to Shinko, as stated in your letter, we knew nothing about it and had nothing to do with it.
The finding of fact made by the trial court, i.e., that "Shinko was able to collect the total amount of $77,264.67 US Dollars," can not be
given weight since this was based on the summary prepared by CMS itself, Exhibits "M" and "M-1".
Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled thereto since these were
apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS's logs.
However, We find merit in CMS's contention that the appellate court erred in holding that DRACOR was entitled to its commission from
the sales made by CMS to Japanese firms.
The principal may revoke a contract of agency at will, and such revocation may be express, or implied, 20 and may be availed of even if
the period fixed in the contract of agency as not yet expired. 21 As the principal has this absolute right to revoke the agency, the agent
can not object thereto; neither may he claim damages arising from such revocation, 22 unless it is shown that such was done in order to
evade the payment of agent's commission. 23
In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence of the
contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This act constituted an implied
revocation of the contract of agency under Article 1924 of the Civil Code, which provides:
Art. 1924 The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly
with third persons.
In New Manila Lumber Company, Inc. vs. Republic of the Philippines, 24 this Court ruled that the act of a contractor, who, after executing
powers of attorney in favor of another empowering the latter to collect whatever amounts may be due to him from the Government, and
thereafter demanded and collected from the government the money the collection of which he entrusted to his attorney-in-fact,
constituted revocation of the agency in favor of the attorney-in-fact.
Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without the intervention of DRACOR, the
latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to retain whatever moneys it may have
received as its commission for said transactions. Neither would DRACOR be entitled to collect damages from CMS, since damages are

generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the exception
mentioned, which is to evade the payment of the agent's commission.
Regarding CMS's contention that the Court of Appeals erred in not finding that DRACOR had committed acts of fraud and bad faith, We
find the same unmeritorious. Like the contention involving Shinko and the questioned commissions, the findings of the Court of Appeals
on the matter were based on its appreciation of the evidence, and these findings are binding on this Court.
In fine, We affirm the ruling of the Court of Appeals that there is no evidence to support CMS's contention that Shinko earned a
separate commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of CMS's logs. However, We reverse the ruling of
the Court of Appeals with regard to DRACOR's right to retain the amount of P101,536.77 as part of its commission from the sale of logs
by CMS, and hold that DRACOR has no right to its commission. Consequently, DRACOR is hereby ordered to remit to CMS the
amount of P101,536.77.
WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the preceding paragraph. Costs de officio.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
THIRD DIVISION
G.R. No. 141525 September 2, 2005
CARLOS SANCHEZ, Petitioners,
vs.
MEDICARD PHILIPPINES, INC., DR. NICANOR MONTOYA and CARLOS EJERCITO, Respondent.

DECISION
SANDOVAL-GUTIERREZ, J.:
This petition for review on certiorari seeks to reverse the Decision1 of the Court of Appeals dated February 24, 1999 and its Resolution
dated January 12, 2000 in CA-G.R. CV No. 47681.
The facts, as established by the trial court and affirmed by the Court of Appeals, follow:
Sometime in 1987, Medicard Philippines, Inc. (Medicard), respondent, appointed petitioner as its special corporate agent. As such
agent, Medicard gave him a commission based on the "cash brought in."
In September, 1988, through petitioners efforts, Medicard and United Laboratories Group of Companies (Unilab) executed a Health
Care Program Contract. Under this contract, Unilab shall pay Medicard a fixed monthly premium for the health insurance of its
personnel. Unilab paid Medicard P4,148,005.00 representing the premium for one (1) year. Medicard then handed petitioner 18% of
said amount or P746,640.90 representing his commission.
Again, through petitioners initiative, the agency contract between Medicard and Unilab was renewed for another year, or from October
1, 1989 to September 30, 1990, incorporating therein the increase of premium fromP4,148,005.00 to P7,456,896.00. Medicard paid
petitioner P1,342,241.00 as his commission.
Prior to the expiration of the renewed contract, Medicard proposed to Unilab, through petitioner, an increase of the premium for the next
year. Unilab rejected the proposal "for the reason that it was too high," prompting Dr. Nicanor Montoya (Medicards president and
general manager), also a respondent, to request petitioner to reduce his commission, but the latter refused.
In a letter dated October 3, 1990, Unilab, through Carlos Ejercito, another respondent, confirmed its decision not to renew the health
program contract with Medicard.
Meanwhile, in order not to prejudice its personnel by the termination of their health insurance, Unilab, through respondent Ejercito,
negotiated with Dr. Montoya and other officers of Medicard, to discuss ways in order to continue the insurance coverage of those
personnel.
Under the new scheme, Unilab shall pay Medicard only the amount corresponding to the actual hospitalization expenses incurred by
each personnel plus 15% service fee for using Medicard facilities, which amount shall not be less than P780,000.00.
Medicard did not give petitioner any commission under the new scheme.
In a letter dated March 15, 1991, petitioner demanded from Medicard payment of P338,000.00 as his commission plus damages, but
the latter refused to heed his demand.
Thus, petitioner filed with the Regional Trial Court (RTC), Branch 66, Makati City, a complaint for sum of money against Medicard, Dr.
Nicanor Montoya and Carlos Ejercito, herein respondents.
After hearing, the RTC rendered its Decision dismissing petitioners complaint and respondents counterclaim.
On appeal, the Court of Appeals affirmed the trial courts assailed Decision. The Appellate Court held that there is no proof that the
execution of the new contract between the parties under the "cost plus" system is a strategy to deprive petitioner of his commission;
that Medicard did not commit any fraudulent act in revoking its agency contract with Sanchez; that when Unilab rejected Medicards
proposal for an increase of premium, their Health Care Program Contract on its third year was effectively revoked; and that where the
contract is ineffectual, then the agent is not entitled to a commission.
Petitioner filed a motion for reconsideration, but this was denied by the Court of Appeals on January 12, 2000.
Hence, the instant petition for review on certiorari.
The basic issue for our resolution is whether the Court of Appeals erred in holding that the contract of agency has been revoked by
Medicard, hence, petitioner is not entitled to a commission.

It is dictum that in order for an agent to be entitled to a commission, he must be the procuring cause of the sale, which simply means
that the measures employed by him and the efforts he exerted must result in a sale.2 In other words, an agent receives his commission
only upon the successful conclusion of a sale.3 Conversely, it follows that where his efforts are unsuccessful, or there was no effort on
his part, he is not entitled to a commission.
In Prats vs. Court of Appeals,4 this Court held that for the purpose of equity, an agent who is not the efficient procuring cause is
nonetheless entitled to his commission, where said agent, notwithstanding the expiration of his authority, nonetheless, took diligent
steps to bring back together the parties, such that a sale was finalized and consummated between them. In Manotok Borthers
vs. Court of Appeals,5 where the Deed of Sale was only executed after the agents extended authority had expired, this Court, applying
its ruling in Prats, held that the agent (in Manotok) is entitled to a commission since he was the efficient procuring cause of the sale,
notwithstanding that the sale took place after his authority had lapsed. The proximate, close, and causal connection between the
agents efforts and the principals sale of his property can not be ignored.
It may be recalled that through petitioners efforts, Medicard was able to enter into a one-year Health Care Program Contract with
Unilab. As a result, Medicard paid petitioner his commission. Again, through his efforts, the contract was renewed and once more, he
received his commission. Before the expiration of the renewed contract, Medicard, through petitioner, proposed an increase in
premium, but Unilab rejected this proposal. Medicard then requested petitioner to reduce his commission should the contract be
renewed on its third year, but he was obstinate. Meantime, on October 3, 1990, Unilab informed Medicard it was no longer renewing the
Health Care Program contract.
In order not to prejudice its personnel, Unilab, through respondent Ejercito, negotiated with respondent Dr. Montoya of Medicard, in
order to find mutually beneficial ways of continuing the Health Care Program. The negotiations resulted in a new contract wherein
Unilab shall pay Medicard the hospitalization expenses actually incurred by each employees, plus a service fee. Under the "cost plus"
system which replaced the premium scheme, petitioner was not given a commission.
It is clear that since petitioner refused to reduce his commission, Medicard directly negotiated with Unilab, thus revoking its agency
contract with petitioner. We hold that such revocation is authorized by Article 1924 of the Civil Code which provides:
"Art. 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third
persons."
Moreover, as found by the lower courts, petitioner did not render services to Medicard, his principal, to entitle him to a commission.
There is no indication from the records that he exerted any effort in order that Unilab and Medicard, after the expiration of the Health
Care Program Contract, can renew it for the third time. In fact, his refusal to reduce his commission constrained Medicard to negotiate
directly with Unilab. We find no reason in law or in equity to rule that he is entitled to a commission. Obviously, he was not the agent or
the "procuring cause" of the third Health Care Program Contract between Medicard and Unilab.
WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 47681
are AFFIRMED IN TOTO. Costs against petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC

G.R. No. L-5180

August 31, 1953

CONSEJO INFANTE, petitioner,


vs.
JOSE CUNANAN, JUAN MIJARES and THE COURT OF APPEALS, SECOND DIVISION, respondents.
Yuseco, Abdon & Yuseco for petitioner.
Jose E. Erfe and Maria Luisa Gomez for respondents.
BAUTISTA ANGELO, J.:
This is a petition for review of a decision of the Court of appeals affirming the judgement of the court of origin which orders the
defendant to pay the plaintiffs the sum of P2,500 with legal interest thereon from February 2,1949 and the costs of action.
Consejo Infante, defendant herein, was the owner of two parcels of land, together with a house built thereon, situated in the City of
Manila and covered by Transfer Certificate of Title No. 61786. On or before November 30, 1948, she contracted the services of Jose
Cunanan and Juan Mijares, plaintiff herein, to sell the above-mentioned property for a price of P30,000 subject to the condition that the
purchaser would assume the mortgage existing thereon in the favor of the Rehabilitation Finance Corporation. She agreed to pay them
a commission of 5 per cent on the purchase price plus whatever overprice they may obtain for the property. Plaintiffs found one Pio S.
Noche who was willing to buy the property under the terms agreed upon with defendant, but when they introduced him to defendant,
the latter informed them that she was no longer interested in selling the property and succeeded in making them sign a document
stating therein that the written authority she had given them was already can-celled. However, on December 20, 1948, defendant dealt
directly with Pio S. Noche selling to him the property for P31,000. Upon learning this transaction, plaintiffs demanded from defendant
the payment of their commission, but she refused and so they brought the present action.
Defendant admitted having contracted the services of the plaintiffs to sell her property as set forth in the complaint, but stated that she
agreed to pay them a commission of P1,200 only on condition that they buy her a property somewhere in Taft Avenue to where she
might transfer after selling her property. Defendant avers that while plaintiffs took steps to sell her property as agreed upon, they sold
the property at Taft Avenue to another party and because of this failure it was agreed that the authority she had given them be
cancelled.
The lower court found that the preponderance of evidence was in favor of the plaintiffs and rendered judgement sentensing the
defendant to pay the plaintiff the sum of P2,500 with legal interest thereon from February 2,1949 plus the costs of action. This decision
was affirmed in toto by the Court of Appeals.
There is no dispute that respondents were authorized by petitioner to sell her property for the sum of P30,000 with the understanding
that they will be given a commission of 5 percent plus whatever overprice they may obtain for the property. Petitioner, however,
contends that authority has already been withdrawn on November 30, 1948 when, by the voluntary act of respondents, they executed a
document stating that said authority shall be considered cancelled and without any effect, so that when petitioner sold the property to
Pio S. Noche on December 20, 1948, she was already free from her commitment with respondents and, therefore, was not in duty
bound to pay them any commission for the transaction..
If the facts were as claimed by petitioner, there is in-deed no doubt that she would have no obligation to pay respondents the
commission which was promised them under the original authority because, under the old Civil Code, her right to withdraw such
authority is recognized. A principal may withdraw the authority given to an agent at will. (Article 1733.) But this fact is disputed. Thus,
respondents claim that while they agreed to cancel the written authority given to them, they did so merely upon the verbal assurance
given by petitioner that, should the property be sold to their own buyer, Pio S. Noche, they would be given the commission agreed
upon. True, this verbal assurance does not appear in the written cancellation, Exhibit 1, and, on the other hand, it is disputed by
petitioner, but respondents were allowed to present oral evidence to prove it, and this is now assigned as error in this petition for review.
The plea that oral evidence should not have been allowed to prove the alleged verbal assurance is well taken it appearing that the
written authority given to respondents has been cancelled in a written statement. The rule on this matter is that "When the terms of an
agreement have been reduced to writing, it is to be considered as containing all those terms, and, therefore, there can be, between
parties and their successors in interest, no evidence of the terms of the agreement other than the contents of the writing." (Section 22,
Rule 123, Rules of Court.) The only exceptions to this rule are: "(a)Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties, or the validity of the agreement is put in issue by the pleadings"; and "(b) Where
there is an intrinsic ambiguity in the writing." (Ibid.) There is no doubt that the point raised does not come under any of the cases
excepted, for there is nothing therein that has been put in issue by respondents in their complaint. The terms of the document, Exhibit
1, seem to be clear and they do not contain any reservation which may in any way run counter to the clear intention of the parties.

But even disregarding the oral evidence adduced by respondents in contravention of the parole evidence rule, we are, however, of the
opinion that there is enough justification for the conclusion reached by the lower court as well as by the Court of Appeals to the effect
that respondents are entitled to the commission originally agreed upon. It is a fact found by the Court of Appeals that after petitioner
had given the written authority to respondents to sell her land for the sum of P30,000, respondents found a buyer in the person of one
Pio S. Noche who was willing to buy the property under the terms agreed upon, and this matter was immediately brought to the
knowledge of petitioner. But the latter, perhaps by way of strategem, advised respondents that she was no longer interested in the deal
and was able to prevail upon them to sign a document agreeing to the cancellation of the written authority.
That petitioner had changed her mind even if respondents had found a buyer who was willing to close the deal, is a matter that would
not give rise to a legal consequence if respondents agree to call off the transaction in deference to the request of the petitioner. But the
situation varies if one of the parties takes advantage of the benevolence of the other and acts in a manner that would promote his own
selfish interest. This act is unfair as would amount to bad faith. This act cannot be sanctioned without ac-cording to the party prejudiced
the reward which is due him. This is the situation in which respondents were placed by petitioner. Petitioner took advantage of the
services rendered by respondents, but believing that she could evade payment of their commission, she made use of a ruse by
inducing them to sign the deed of cancellation Exhibit 1. This act of subversion cannot be sanctioned and cannot serve as basis for
petitioner to escape payment of the commission agreed upon.
Wherefore, the decision appealed from is hereby affirmed, with costs against petitioner.

Republic of the Philippines


SUPREME COURT
Manila

EN BANC
G.R. No. L-10881

September 30, 1958

EULOGIO DEL ROSARIO, AURELIO DEL ROSARIO, BENITO DEL ROSARIO, BERNARDO DEL ROSARIO, ISIDRA DEL
ROSARIO, DOMINGA DEL ROSARIO and CONCEPCION BORROMEO, plaintiff-appellees,
vs.
PRIMITIVO ABAD and TEODORICO ABAD, defendants-appellants.
Baustita and Bautista for appellees.
Agustin C. Bagasao for appellants.
PADILLA, J.:
Appeal from a judgment rendered by the Court of First Instance of Nueva Ecija in civil case No. 1084.
The facts are undisputed, the parties having entered into an agreed statement thereof, the pertinent and materials part of which are:
The plaintiffs are the children and heirs of the late Tiburcio del Rosario. On 12 December 1936, the Secretary of Agriculture and
Commerce, by authority of the President of the Commonwealth of the Philippines, issued under the provisions of the Public Land Act
(Act No. 2874) homestead patent No. 40596 to Tiburcio del Rosario. The homestead with an area of 9 hectares, 43 ares and 14
centares is situated in barrio San Mauricio, municipality of San Jose, province of Nueva Ecija. On 11 February 1937, the Registrar of
Deeds in and for the province of Nueva Ecija issued original certificate of title No. 4820 in the name of the homesteader (Annex A,
stipulation of facts, pp. 25-30, Rec. on App.). On 24 February 1937, Tiburcio del Rosario obtained a loan from Primitivo Abad in the sum
of P2,000 with interest at the rate of 12% per annum, payable on 31 December 1941. As security for the payment thereof he mortgaged
the improvements of the parcel of land in favor of the creditor (Annex B, complaint, pp. 10-13, Rec. on App.). On the same day, 24
February, the mortgagor executed an "irrevocable special power of attorney coupled with interest" in favor of the mortgagee, authorizing
him, among others, to sell and convey the parcel of land (Annex A, complaint, pp. 7-9, Rec. on App.). Thereafter the mortgagor and his
family moved to Santiago, Isabela, and there established a new residence. Sometime in December 1945 the mortgagor died leaving
the mortgage debt unpaid. On 9 June 1947, Primitivo Abad, acting as attorney-in-fact of Tiburcio del Rosario, sold the parcel of land to
his son Teodorico Abad for and in consideration of the token sum of P1.00 and the payment by the vendee of the mortgage debt of
Tiburcio del Rosario to Primitivo Abad (Annex C, complaint, pp. 13-16, Rec. on App.). The vendee took possession of the parcel of land.
Upon the filing and registration of the last deed of sale, the Registrar of Deeds in and for the province of Nueva Ecija cancelled original
certificate of title No. 4820 in the name of Tiburcio del Rosario and in lieu thereof issued transfer certificate of title No. 1882 in favor of
the vendee Teodorico Abad.
On 29 December 1952 the plaintiffs brought suit against the defendants to recover possession and ownership of the parcel of land,
damages, attorney's fees and costs. The defendants answered the complaint and prayed for the dismissal thereof, damages, attorney's
fees and costs.
On 25 October 1954, after the parties had submitted the case upon a stipulation of facts, the Court rendered judgment, the dispositive
part of which is:
WHEREFORE, the deed of sale executed by Primitivo Abad in favor of Teodorica Abad, Annex C, is hereby declared null and
void; and Teodorico Abad is hereby ordered to execute a deed of reconveyance of the land originally with OCT No. 4820, now
covered by Transfer Certificate of Title No. 1880, in favor of the plaintiffs. No pronouncement as to costs.
The defendants appealed to the Court of Appeals, which certified the case to this Court as no question of fact is involved.
Section 116 of the Public Land Act (Act No. 2874), under which the homestead was granted to the appellees' father, provides:
Lands acquired under the free patent or homestead provisions shall not be subject to encumbrance or alienation from the date
of the approval of the application and for a term of five years from and after the date of the issuance of the patent or grant, nor
shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the improvements
or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.
The encumbrance or alienation of lands acquired by free patent or homestead in violation of this section is null and void.1
There is no question that the mortgage on the improvements of the parcel of land executed by Tiburcio del Rosario in favor of Primitivo
Abad (Annex B, complaint, pp. 10-13, Rec. on App.) is valid.

The power of attorney executed by Tiburcio del Rosario in favor of Primitivo Abad (Annex A, complaint, pp. 7-9, Rec. on App.) providing,
among others, that is coupled with an interest in the subject matter thereof in favor of the said attorney and are therefore irrevocable,
and . . . conferring upon my said attorney full and ample power and authority to do and perform all things reasonably necessary and
proper for the due carrying out of the said powers according to the true tenor and purport of the same, . . ." does not create an agency
coupled with an interest nor does it clothe the agency with an irrevocable character. A mere statement in the power of attorney that it is
coupled with an interest is not enough. In what does such interest consist must be stated in the power of attorney. The fact that Tiburcio
del Rosario, the principal, had mortgaged the improvements of the parcel of land to Primitivo Abad, the agent, (Annex B, complaint, pp.
10-13, Rec. on App.) is not such an interest as could render irrevocable the power of attorney executed by the principal in favor of the
agent. In fact no mention of it is made in the power of attorney. The mortgage on the improvements of the parcel of land has nothing to
do with the power of attorney and may be foreclosed by the mortgagee upon failure of the mortgagor to comply with his obligation. As
the agency was not coupled with an interest, it was terminated upon the death of Tiburcio del Rosario, the principal, sometime in
December 1945, and Primitivo Abad, the agent, could no longer validly convey the parcel of land to Teodorico Abad on 9 June 1947.
The sale, therefore, to the later was null and void. But granting that the irrevocable power of attorney was lawful and valid it would
subject the parcel of land to an encumbrance. As the homestead patent was issued on 12 December 1936 and the power of attorney
was executed on 24 February 1937, it was in violation of the law that prohibits the alienation or encumbrance of land acquired by
homestead from the date of the approval of the application and for a term of five years from and after the issuance of the patent or
grant. Appellants contend that the power of attorney was to be availed of by the agent after the lapse of the prohibition period of five
years, and that in fact Primitivo Abad sold the parcel of land on 9 June 1947, after the lapse of such period. Nothing to that effect is
found in the power of attorney.
Appellants claim that the trial court should have directed the appellees to reimburse Teodorico Abad for what he had paid to Primitivo
Abad to discharge the mortgage in the latter's favor as part of the consideration of the sale. As the sale to Teodorico Abad is null and
void, the appellees can not be compelled to reimburse Teodorico Abad for what he had paid to Primitivo Abad. The former's right of
action is against the latter, without prejudice to the right of Primitive Abad to foreclose the mortgage on the improvements of the parcel
of land if the mortgage debt is not paid by the appellees, as heirs and successors-in-interest of the mortgagor.
The judgment appealed from is affirmed, with costs against the appellants.
Paras, C. J., Bengzon, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ.,concur.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 163720

December 16, 2004

GENEVIEVE LIM, petitioner,


vs.
FLORENCIO SABAN, respondents
DECISION
TINGA, J.:
Before the Court is a Petition for Review on Certiorari assailing the Decision1 dated October 27, 2003 of the Court of Appeals, Seventh
Division, in CA-G.R. V No. 60392.2
The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu City (the "lot"), entered into anAgreement and
Authority to Negotiate and Sell (Agency Agreement) with respondent Florencio Saban (Saban) on February 8, 1994. Under the Agency
Agreement, Ybaez authorized Saban to look for a buyer of the lot for Two Hundred Thousand Pesos (P200,000.00) and to mark up
the selling price to include the amounts needed for payment of taxes, transfer of title and other expenses incident to the sale, as well as
Sabans commission for the sale.3
Through Sabans efforts, Ybaez and his wife were able to sell the lot to the petitioner Genevieve Lim (Lim) and the spouses Benjamin
and Lourdes Lim (the Spouses Lim) on March 10, 1994. The price of the lot as indicated in theDeed of Absolute Sale is Two Hundred
Thousand Pesos (P200,000.00).4 It appears, however, that the vendees agreed to purchase the lot at the price of Six Hundred
Thousand Pesos (P600,000.00), inclusive of taxes and other incidental expenses of the sale. After the sale, Lim remitted to Saban the
amounts of One Hundred Thirteen Thousand Two Hundred Fifty Seven Pesos (P113,257.00) for payment of taxes due on the
transaction as well as Fifty Thousand Pesos (P50,000.00) as brokers commission.5 Lim also issued in the name of Saban four
postdated checks in the aggregate amount of Two Hundred Thirty Six Thousand Seven Hundred Forty Three Pesos (P236,743.00).
These checks were Bank of the Philippine Islands (BPI) Check No. 1112645 dated June 12, 1994 for P25,000.00; BPI Check No.
1112647 dated June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated June 26, 1994 for P25,000.00; and Equitable PCI Bank
Check No. 021491B dated June 20, 1994 forP168,000.00.
Subsequently, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybaez asked Lim to cancel all the checks
issued by her in Sabans favor and to "extend another partial payment" for the lot in his (Ybaezs) favor.6
After the four checks in his favor were dishonored upon presentment, Saban filed a Complaint for collection of sum of money and
damages against Ybaez and Lim with the Regional Trial Court (RTC) of Cebu City on August 3, 1994.7 The case was assigned to
Branch 20 of the RTC.
In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase the lot for P600,000.00, i.e.,with a mark-up of Four
Hundred Thousand Pesos (P400,000.00) from the price set by Ybaez. Of the total purchase price of P600,000.00, P200,000.00 went
to Ybaez, P50,000.00 allegedly went to Lims agent, andP113,257.00 was given to Saban to cover taxes and other expenses
incidental to the sale. Lim also issued four (4) postdated checks8 in favor of Saban for the remaining P236,743.00.9
Saban alleged that Ybaez told Lim that he (Saban) was not entitled to any commission for the sale since he concealed the actual
selling price of the lot from Ybaez and because he was not a licensed real estate broker. Ybaez was able to convince Lim to cancel
all four checks.
Saban further averred that Ybaez and Lim connived to deprive him of his sales commission by withholding payment of the first three
checks. He also claimed that Lim failed to make good the fourth check which was dishonored because the account against which it was
drawn was closed.
In his Answer, Ybaez claimed that Saban was not entitled to any commission because he concealed the actual selling price from him
and because he was not a licensed real estate broker.
Lim, for her part, argued that she was not privy to the agreement between Ybaez and Saban, and that she issued stop payment orders
for the three checks because Ybaez requested her to pay the purchase price directly to him, instead of coursing it through Saban. She
also alleged that she agreed with Ybaez that the purchase price of the lot was only P200,000.00.

Ybaez died during the pendency of the case before the RTC. Upon motion of his counsel, the trial court dismissed the case only
against him without any objection from the other parties.10
On May 14, 1997, the RTC rendered its Decision11 dismissing Sabans complaint, declaring the four (4) checks issued by Lim as stale
and non-negotiable, and absolving Lim from any liability towards Saban.
Saban appealed the trial courts Decision to the Court of Appeals.
On October 27, 2003, the appellate court promulgated its Decision12 reversing the trial courts ruling. It held that Saban was entitled to
his commission amounting to P236,743.00.13
The Court of Appeals ruled that Ybaezs revocation of his contract of agency with Saban was invalid because the agency was coupled
with an interest and Ybaez effected the revocation in bad faith in order to deprive Saban of his commission and to keep the profits for
himself.14
The appellate court found that Ybaez and Lim connived to deprive Saban of his commission. It declared that Lim is liable to pay Saban
the amount of the purchase price of the lot corresponding to his commission because she issued the four checks knowing that the total
amount thereof corresponded to Sabans commission for the sale, as the agent of Ybaez. The appellate court further ruled that, in
issuing the checks in payment of Sabans commission, Lim acted as an accommodation party. She signed the checks as drawer,
without receiving value therefor, for the purpose of lending her name to a third person. As such, she is liable to pay Saban as the holder
for value of the checks.15
Lim filed a Motion for Reconsideration of the appellate courts Decision, but her Motion was denied by the Court of Appeals in
a Resolution dated May 6, 2004.16
Not satisfied with the decision of the Court of Appeals, Lim filed the present petition.
Lim argues that the appellate court ignored the fact that after paying her agent and remitting to Saban the amounts due for taxes and
transfer of title, she paid the balance of the purchase price directly to Ybaez.17
She further contends that she is not liable for Ybaezs debt to Saban under the Agency Agreement as she is not privy thereto, and that
Saban has no one but himself to blame for consenting to the dismissal of the case against Ybaez and not moving for his substitution
by his heirs.18
Lim also assails the findings of the appellate court that she issued the checks as an accommodation party for Ybaez and that she
connived with the latter to deprive Saban of his commission.19
Lim prays that should she be found liable to pay Saban the amount of his commission, she should only be held liable to the extent of
one-third (1/3) of the amount, since she had two co-vendees (the Spouses Lim) who should share such liability.20
In his Comment, Saban maintains that Lim agreed to purchase the lot for P600,000.00, which consisted of theP200,000.00 which would
be paid to Ybaez, the P50,000.00 due to her broker, the P113,257.00 earmarked for taxes and other expenses incidental to the sale
and Sabans commission as broker for Ybaez. According to Saban, Lim assumed the obligation to pay him his commission. He insists
that Lim and Ybaez connived to unjustly deprive him of his commission from the negotiation of the sale.21
The issues for the Courts resolution are whether Saban is entitled to receive his commission from the sale; and, assuming that Saban
is entitled thereto, whether it is Lim who is liable to pay Saban his sales commission.
The Court gives due course to the petition, but agrees with the result reached by the Court of Appeals.
The Court affirms the appellate courts finding that the agency was not revoked since Ybaez requested that Lim make stop payment
orders for the checks payable to Saban only after the consummation of the sale on March 10, 1994. At that time, Saban had already
performed his obligation as Ybaezs agent when, through his (Sabans) efforts, Ybaez executed the Deed of Absolute Sale of the lot
with Lim and the Spouses Lim.
To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a breach of his
contract of agency with Ybaez which expressly states that Saban would be entitled to any excess in the purchase price after deducting
the P200,000.00 due to Ybaez and the transfer taxes and other incidental expenses of the sale.22
In Macondray & Co. v. Sellner,23 the Court recognized the right of a broker to his commission for finding a suitable buyer for the sellers
property even though the seller himself consummated the sale with the buyer.24 The Court held that it would be in the height of injustice

to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the
brokers efforts.
In Infante v. Cunanan, et al.,25 the Court upheld the right of the brokers to their commissions although the seller revoked their authority
to act in his behalf after they had found a buyer for his properties and negotiated the sale directly with the buyer whom he met through
the brokers efforts. The Court ruled that the sellers withdrawal in bad faith of the brokers authority cannot unjustly deprive the brokers
of their commissions as the sellers duly constituted agents.
The pronouncements of the Court in the aforecited cases are applicable to the present case, especially considering that Saban had
completely performed his obligations under his contract of agency with Ybaez by finding a suitable buyer to preparing the Deed of
Absolute Sale between Ybaez and Lim and her co-vendees. Moreover, the contract of agency very clearly states that Saban is entitled
to the excess of the mark-up of the price of the lot after deducting Ybaezs share of P200,000.00 and the taxes and other incidental
expenses of the sale.
However, the Court does not agree with the appellate courts pronouncement that Sabans agency was one coupled with an interest.
Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling
an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal
from the management is unjustifiable. Stated differently, an agency is deemed as one coupled with an interest where it is established
for the mutual benefit of the principal and of the agent, or for the interest of the principal and of third persons, and it cannot be revoked
by the principal so long as the interest of the agent or of a third person subsists. In an agency coupled with an interest, the agents
interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles
him to compensation. When an agents interest is confined to earning his agreed compensation, the agency is not one coupled with an
interest, since an agents interest in obtaining his compensation as such agent is an ordinary incident of the agency relationship.26
Sabans entitlement to his commission having been settled, the Court must now determine whether Lim is the proper party against
whom Saban should address his claim.
Sabans right to receive compensation for negotiating as broker for Ybaez arises from the Agency Agreement between them. Lim is
not a party to the contract. However, the record reveals that she had knowledge of the fact that Ybaez set the price of the lot
at P200,000.00 and that the P600,000.00the price agreed upon by her and Sabanwas more than the amount set by Ybaez
because it included the amount for payment of taxes and for Sabans commission as broker for Ybaez.
According to the trial court, Lim made the following payments for the lot: P113,257.00 for taxes, P50,000.00 for her broker,
and P400.000.00 directly to Ybaez, or a total of Five Hundred Sixty Three Thousand Two Hundred Fifty Seven Pesos
(P563,257.00).27 Lim, on the other hand, claims that on March 10, 1994, the date of execution of theDeed of Absolute Sale, she paid
directly to Ybaez the amount of One Hundred Thousand Pesos (P100,000.00) only, and gave to Saban P113,257.00 for payment of
taxes and P50,000.00 as his commission,28 and One Hundred Thirty Thousand Pesos (P130,000.00) on June 28, 1994,29 or a total of
Three Hundred Ninety Three Thousand Two Hundred Fifty Seven Pesos (P393,257.00). Ybaez, for his part, acknowledged that Lim
and her co-vendees paid him P400,000.00 which he said was the full amount for the sale of the lot.30 It thus appears that he
received P100,000.00 on March 10, 1994, acknowledged receipt (through Saban) of the P113,257.00 earmarked for taxes
and P50,000.00 for commission, and received the balance of P130,000.00 on June 28, 1994. Thus, a total of P230,000.00 went directly
to Ybaez. Apparently, although the amount actually paid by Lim wasP393,257.00, Ybaez rounded off the amount to P400,000.00 and
waived the difference.
Lims act of issuing the four checks amounting to P236,743.00 in Sabans favor belies her claim that she and her co-vendees did not
agree to purchase the lot at P600,000.00. If she did not agree thereto, there would be no reason for her to issue those checks which is
the balance of P600,000.00 less the amounts of P200,000.00 (due to Ybaez), P50,000.00 (commission), and the P113,257.00 (taxes).
The only logical conclusion is that Lim changed her mind about agreeing to purchase the lot at P600,000.00 after talking to Ybaez and
ultimately realizing that Sabans commission is even more than what Ybaez received as his share of the purchase price as vendor.
Obviously, this change of mind resulted to the prejudice of Saban whose efforts led to the completion of the sale between the latter, and
Lim and her co-vendees. This the Court cannot countenance.
The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is enlightening for the facts therein are similar to the circumstances of
the present case. In that case, Consejo Infante asked Jose Cunanan and Juan Mijares to find a buyer for her two lots and the house
built thereon for Thirty Thousand Pesos (P30,000.00) . She promised to pay them five percent (5%) of the purchase price plus whatever
overprice they may obtain for the property. Cunanan and Mijares offered the properties to Pio Noche who in turn expressed willingness
to purchase the properties. Cunanan and Mijares thereafter introduced Noche to Infante. However, the latter told Cunanan and Mijares
that she was no longer interested in selling the property and asked them to sign a document stating that their written authority to act as
her agents for the sale of the properties was already cancelled. Subsequently, Infante sold the properties directly to Noche for Thirty
One Thousand Pesos (P31,000.00). The Court upheld the right of Cunanan and Mijares to their commission, explaining that
[Infante] had changed her mind even if respondent had found a buyer who was willing to close the deal, is a matter that
would not give rise to a legal consequence if [Cunanan and Mijares] agreed to call off the transaction in deference to the
request of [Infante]. But the situation varies if one of the parties takes advantage of the benevolence of the other and acts in a
manner that would promote his own selfish interest. This act is unfair as would amount to bad faith. This act cannot be

sanctioned without according the party prejudiced the reward which is due him. This is the situation in which [Cunanan and
Mijares] were placed by [Infante]. [Infante] took advantage of the services rendered by [Cunanan and Mijares], but believing
that she could evade payment of their commission, she made use of a ruse by inducing them to sign the deed of
cancellation.This act of subversion cannot be sanctioned and cannot serve as basis for [Infante] to escape payment of the
commission agreed upon.31
The appellate court therefore had sufficient basis for concluding that Ybaez and Lim connived to deprive Saban of his commission by
dealing with each other directly and reducing the purchase price of the lot and leaving nothing to compensate Saban for his efforts.
Considering the circumstances surrounding the case, and the undisputed fact that Lim had not yet paid the balance of P200,000.00 of
the purchase price of P600,000.00, it is just and proper for her to pay Saban the balance ofP200,000.00.
Furthermore, since Ybaez received a total of P230,000.00 from Lim, or an excess of P30,000.00 from his asking price of P200,000.00,
Saban may claim such excess from Ybaezs estate, if that remedy is still available,32 in view of the trial courts dismissal of Sabans
complaint as against Ybaez, with Sabans express consent, due to the latters demise on November 11, 1994.33
The appellate court however erred in ruling that Lim is liable on the checks because she issued them as an accommodation party.
Section 29 of the Negotiable Instruments Law defines an accommodation party as a person "who has signed the negotiable instrument
as maker, drawer, acceptor or indorser, without receiving value therefor, for the purpose of lending his name to some other person." The
accommodation party is liable on the instrument to a holder for value even though the holder at the time of taking the instrument knew
him or her to be merely an accommodation party. The accommodation party may of course seek reimbursement from the party
accommodated.34
As gleaned from the text of Section 29 of the Negotiable Instruments Law, the accommodation party is one who meets all these three
requisites, viz: (1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value for the signature; and
(3) he signed for the purpose of lending his name to some other person. In the case at bar, while Lim signed as drawer of the checks
she did not satisfy the two other remaining requisites.
The absence of the second requisite becomes pellucid when it is noted at the outset that Lim issued the checks in question on account
of her transaction, along with the other purchasers, with Ybaez which was a sale and, therefore, a reciprocal contract. Specifically, she
drew the checks in payment of the balance of the purchase price of the lot subject of the transaction. And she had to pay the agreed
purchase price in consideration for the sale of the lot to her and her co-vendees. In other words, the amounts covered by the checks
form part of the cause or consideration from Ybaezs end, as vendor, while the lot represented the cause or consideration on the side
of Lim, as vendee.35 Ergo, Lim received value for her signature on the checks.
Neither is there any indication that Lim issued the checks for the purpose of enabling Ybaez, or any other person for that matter, to
obtain credit or to raise money, thereby totally debunking the presence of the third requisite of an accommodation party.
WHEREFORE, in view of the foregoing, the petition is DISMISSED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-18616

March 31, 1964

VICENTE M. COLEONGCO, plaintiff-appellant,


vs.
EDUARDO L. CLAPAROLS, defendant-appellee.
San Juan, Africa and Benedicto for plaintiff-appellant.
Alberto Jamir for defendant-appellee.
REYES, J.B.L., J.:
Appeal by plaintiff Vicente Coleongco from a decision of the Court of First Instance of Negros Occidental (in its Civil Case No. 4170)
dismissing plaintiff's action for damages, and ordering him to pay defendant Eduardo Claparols the amount of P81,387.27 plus legal
interest from the filing of the counterclaim till payment thereof; P50,000 as moral and compensatory damages suffered by defendant;
and costs.
A writ of preliminary attachment for the sum of P100,000 was subsequently issued against plaintiff's properties in spite of opposition
thereto.
Plaintiff Coleongco, not being in conformity with the judgment appealed to this Court directly, the claims involved being in excess of
P200,000.
The antecedent facts as found by the trial court and shown by the records, are as follows:
Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory for the manufacture of nails in Talisay, Occidental Negros,
under the style of "Claparols Steel & Nail Plant". The raw material, nail wire, was imported from foreign sources, specially from Belgium;
and Claparols had a regular dollar allocation therefor, granted by the Import Control Commission and the Central Bank. The marketing
of the nails was handled by the "ABCD Commercial" of Bacolod, which was owned by a Chinaman named Kho To.1wph1.t
Losses compelled Claparols in 1953 to look for someone to finance his imports of nail wires. At first, Kho To agreed to do the financing,
but on April 25, 1953, the Chinaman introduced his compadre, appellant Vicente Coleongco, to the appellee, recommending said
appellant to be the financier in the stead of Kho To. Claparols agreed, and on April 25 of that year a contract (Exhibit B) was perfected
between them whereby Coleongco undertook to finance and put up the funds required for the importation of the nail wire, which
Claparols bound himself to convert into nails at his plant. It was agreed that Coleongco would have the exclusive distribution of the
product, and the "absolute care in the marketing of these nails and the promotion of sales all over the Philippines", except the Davao
Agency; that Coleongco would "share the control of all the cash" from sales or deposited in banks; that he would have a representative
in the management; that all contracts and transactions should be jointly approved by both parties; that proper books would be kept and
annual accounts rendered; and that profits and losses would be shared "on a 50-50 basis". The contract was renewed from one year to
year until 1958, and Coleongco's share subsequently increased by 5% of the net profit of the factory (Exhibits D, E, F).
Two days after the execution of the basic agreement, Exhibit "B", on April 27, 1953, Claparols executed in favor of Coleongco, at the
latter's behest a special power of attorney (Exhibit C) to open and negotiate letters of credit, to sign contracts, bills of lading, invoices,
and papers covering transactions; to represent appellee and the nail factory; and to accept payments and cash advances from dealers
and distributors. Thereafter, Coleongco also became the assistant manager of the factory, and took over its business transactions, while
Claparols devoted most of his time to the nail manufacture processes.
Around mid-November of 1956, appellee Claparols was disagreeably surprised by service of an alias writ of execution to enforce a
judgment obtained against him by the Philippine National Bank, despite the fact that on the preceding September he had submitted an
amortization plan to settle the account. Worried and alarmed, Claparols immediately left for Manila to confer with the bank authorities.
Upon arrival, he learned to his dismay that the execution had been procured because of derogatory information against appellee that
had reached the bank from his associate, appellant Coleongco. On July 6, 1956, the latter, without appellee's knowledge, had written to
the bank

in connection with the verbal offer for the acquisition by me of the whole interest of Mr. Eduardo L. Claparols in the
Claparols Steel & Nail Plant and the Claparols Hollow Blocks Factory" (Exhibit 36);
and later, on October 29, 1956, Coleongco had written again the bank another letter (Exhibit 35), also behind the back of appellee,
wherein Coleongco charged Claparols with taking machines mortgaged to the bank, and added - .
In my humble personal opinion I presume that Mr. Eduardo L. Claparols is not serious in meeting his obligations with your
bank, otherwise he had not taken these machines and equipments a sign of bad faith since the factory is making a satisfactory
profit of my administration.
Fortunately, Claparols managed to arrange matters with the bank and to have the execution levy lifted. Incensed at what he regarded
as disloyalty of his attorney-in-fact, he consulted lawyers. The upshot was that appellee revoked the power of attorney (Exhibit "C"), and
informed Coleongco thereof (Exhibits T, T-1), by registered mail, demanding a full accounting at the same time. Coleongco, as could be
expected, protested these acts of Claparols, but the latter insisted, and on the first of January, 1957 wrote a letter to Coleongco
dismissing him as assistant manager of the plant and asked C. Miller & Company, auditors, to go over the books and records of the
business with a view to adjusting the accounts of the associates. These last steps were taken in view of the revelation made by his
machinery superintendent, Romulo Agsam, that in the course of the preceding New Year celebrations Coleongco had drawn Agsam
aside and proposed that the latter should pour acid on the machinery to paralyze the factory. The examination by the auditors,
summarized in Exhibits 80 and 87, found that Coleongco owed the Claparols Nail Factory the amount of P87,387.37, as of June 30,
1957.
In the meantime, Claparols had found in the factory files certain correspondence in February, 1955 between Coleongco and the nail
dealer Kho To whereby the former proposed to Kho that the latter should cut his monthly advances to Claparols from P2,000 to P1,000
a month, because
I think it is time that we do our plan to take advantage of the difficulties of Eddie with the banks for our benefit. If we can
squeeze him more. I am sure that we can extend our contract with him before it ends next year, and perhaps on better terms.
If we play well our cards we might yet own his factory (Exhibit 32);
and conformably to Coleongco's proposal, Kho To had written to Claparols that "due to present business conditions" the latter could
only be allowed to draw P1,000 a month beginning April, 1955 (Exhibit 33).
As the parties could not amicably settle their accounts, Coleongco filed a suit against Claparols charging breach of contract, asking for
accounting, and praying for P528,762.19 as damages, and attorney's fees, to which Claparols answered, denying the charge, and
counter-claiming for the rescission of the agreement with Coleongco for P561,387.99 by way of damages. After trial, the court rendered
judgment, as stated at the beginning of this opinion.
In this appeal, it is first contended by the appellant Coleongco that the power of attorney (Exhibit "C") was made to protect his interest
under the financing agreement (Exhibit "B") and was one coupled with an interest that the appellee Claparols had no legal power to
revoke. This point can not be sustained. The financing agreement itself already contained clauses for the protection of appellant's
interest, and did not call for the execution of any power of attorney in favor of Coleongco. But granting appellant's view, it must not be
forgotten that a power of attorney can be made irrevocable by contract only in the sense that the principal may not recall it at his
pleasure; but coupled with interest or not, the authority certainly can be revoked for a just cause, such as when the attorney-in-fact
betrays the interest of the principal, as happened in this case. It is not open to serious doubt that the irrevocability of the power of
attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that
would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal.
Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that responsibility arising from fraud is demandable in
all obligations, and that any waiver of action for future fraud is void. It is also on this principle that the Civil Code, in its Article 1800,
declares that the powers of a partner, appointed as manager, in the articles of co-partnership are irrevocable without just or lawful
cause; and an agent with power coupled with an interest can not stand on better ground than such a partner in so far as irrevocability of
the power is concerned.
That the appellee Coleongco acted in bad faith towards his principal Claparols is, on the record, unquestionable. His letters to the
Philippine National Bank (Exhibits 35 and 36) attempting to undermine the credit of the principal and to acquire the factory of the latter,
without the principal's knowledge; Coleongco's letter to his cousin, Kho To (Exhibit 32), instructing the latter to reduce to one-half the
usual monthly advances to Claparols on account of nail sales in order to squeeze said appellee and compel him to extend the contract
entitling Coleongco to share in the profits of the nail factory on better terms, and ultimately "own his factory", a plan carried out by Kho's
letter, Exhibit 33, reducing the advances to Claparols; Coleongco's attempt to, have Romulo Agsam pour acid on the machinery; his
illegal diversion of the profits of the factory to his own benefit; and the surreptitious disposition of the Yates band resaw machine in favor
of his cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in July and August of 1956, are plain acts of deliberate

sabotage by the agent that fully justified the revocation of the power of attorney (Exhibit "C") by Claparols and his demand for an
accounting from his agent Coleongco.
Appellant attempts to justify his letter to the Philippine National Bank (Exhibits 35 and 36), claiming that Claparols' mal-administration of
the business endangered the security for the advances that he had made under the financing contract (Exhibit "B"). But if that were the
case, it is to be expected that Coleongco would have first protested to Claparols himself, which he never did. Appellant likewise denies
the authorship of the letter to Kho (Exhibit 32) as well as the attempt to induce Agsam to damage the machinery of the factory. Between
the testimony of Agsam and Claparols and that of Coleongco, the court below whose to believe the former, and we see no reason to
alter the lower court's conclusion on the value of the evidence before it, considering that Kho's letter to Claparols (Exhibit 33) plainly
corroborates and dovetails with the plan outlined in Coleongco's own letter (Exhibit 32), signed by him, and that the credibility of
Coleongco is affected adversely by his own admission of his having been previously convicted of estafa (t.s.n., pp. 139, 276), a crime
that implies moral turpitude. Even disregarding Coleongco's letter to his son-in-law (Exhibit 82) that so fully reveals Coleongco's lack of
business scruples, the clear preponderance of evidence is against appellant.
The same remarks apply to the finding of the trial court that it was appellant Coleongco, and not Claparols, who disposed of the band
resawing equipment, since said machine was received in July, 1956 and sold in August of that year to the Hong Shing Lumber Co.,
managed by appellant's cousin Vicente Kho. The untruth of Coleongco's charge that Claparols, upon his return from Baguio in
September, 1956, admitted having sold the machine behind his associate's back is further evidenced by (a) Coleongco's letter, Exhibit
"V", dated October 29, 1956, inquiring the whereabouts of the resaw equipment from Claparols (an inquiry incompatible with Claparols'
previous admission); (b) by the undenied fact that the appellee was in Baguio and Coleongco was acting for him during the months of
July and August when the machine was received and sold; and (c) the fact that as between the two it is Coleongco who had a clear
interest in selling the sawing machine to his cousin Kho To's lumber yard. If Claparols wished to sell the machine without Coleongco's
knowledge, he would not have picked the latter's cousin for a buyer.
The action of plaintiff-appellant for damages and lost profits due to the discontinuance of the financing agreement, Exhibit "B", may not
prosper, because the record shows that the appellant likewise breached his part of the contract. It will be recalled that paragraph 2 of
the contract, Exhibit "B", it was stipulated:
That the Party of the Second Part (Coleongco) has agreed to finance and put up all the necessary money which may be
needed to pay for the importation of the raw materials needed by such nail factory and allocated by the ICC from time to time,
either in cash of with whatever suitable means which the Party of the Second Part may be able to make by suitable
arrangements with any well-known banking institution recognized by the Central Bank of the Philippines.
Instead of putting up all the necessary money needed to finance the imports of raw material, Coleongco merely advanced 25% in cash
on account of the price and had the balance covered by surety agreements executed by Claparols and others as solidary, (joint and
several) guarantors (see Exhibits G, H, I). The upshot of this arrangement was that Claparols was made to shoulder 3/4 of the payment
for the imports, contrary to the financing agreement. Paragraph 11 of the latter expressly denied Coleongco any power or authority to
bind Claparols without previous consultation and authority. When the balances for the cost of the importations became due, Coleongco,
in some instances, paid it with the dealers' advances to the nail factory against future sales without the knowledge of Claparols
(Exhibits "K" to K-11, K-13). Under paragraphs 8 and 11 of the financing agreement, Coleongco was to give preference to the operating
expenses before sharing profits, so that until the operating costs were provided for, Coleongco had no right to apply the factory's
income to pay his own obligations.
Again, the examination of the books by accountant Atienza of C. Miller and Co., showed that from 1954 onwards Coleongco (who had
the control of the factory's cash and bank deposits, under Paragraph 11 of Exhibit "B") never liquidated and paid in full to Claparols his
half of the profits, so that by the end of 1956 there was due to Claparols P38,068.41 on this account (Exhibit 91). For 1957 to 1958
Claparols financed the imports of nail wire without the help of appellant, and in view of the latter's infringement of his obligations, his
acts of disloyalty previously discussed, and his diversions of factory funds (he even bought two motor vehicles with them), we find no
justification for his insistence in sharing in the factory's profit for those years, nor for the restoration of the revoked power of attorney.
The accountant's reports and testimony (specially Exhibits 80 to 87) prove that as of June 30, 1957, Coleongco owed to Claparols the
sum of P83,466.34 that after some adjustment was reduced to P81,387.37, practically accepted even by appellant's auditor. The
alleged discrepancies between the general ledger and the result thus arrived at was satisfactorily explained by accountant Atienza in
his testimony (t.s.n., 1173-1178).
No error was, therefore, committed by the trial court in declaring the financing contract (Exh. B) properly resolved by Claparols or in
rendering judgment against appellant in favor of appellee for the said amount of P81,387.37. The basic rule of contracts requires parties
to act loyally toward each other in the pursuit of the common end, and appellant clearly violated the rule of good faith prescribed by Art.
1315 of the new Civil Code.

The lower court also allowed Claparols P50,000 for damages, material, moral, and exemplary, caused by the appellant Coleongco's
acts in maliciously undermining appellee's credit that led the Philippine National Bank to secure a writ of execution against Claparols.
Undeniably, the attempts of Coleongco to discredit and "squeeze" Claparols out of his own factory and business could not but cause
the latter mental anguish and serious anxiety, as found by the court below, for which he is entitled to compensation; and the
malevolence that lay behind appellee's actions justified also the imposition of exemplary or deterrent damages (Civ. Code, Art. 2232).
While the award could have been made larger without violating the canons of justice, the discretion in fixing such damages primarily lay
in the trial court, and we feel that the same should be respected.
IN VIEW OF THE FOREGOING, the decision appealed from is affirmed. Costs against appellant Vicente Coleongco.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. L-11415

May 25, 1959

MANUEL BUASON and LOLITA M. REYES, plaintiffs-appellants,


vs.
MARIANO PANUYAS, defendant-appellee.
PADILLA, J.:
This is an appeal from a judgment of the Court of First Instance of Nueva Ecija dismissing an action brought by the spouses Manuel
Buason and Lolita M. Reyes for annulment of a deed of sale in favor of the defendant, cancellation of transfer certificate of title No.
8419 issued in the name of the defendant and his wife, declaration that the sale in their favor is valid, recovery of possession of the
parcel of land described in the complaint from the defendant, damages, attorney's fees and costs. (Civil No. 2144.)
In their lifetime the spouses Buenaventura Dayao and Eugenia Vega acquired by homestead patent a parcel of land situated at barrio
Gabaldon, municipality of Muoz, province of Nueva Ecija, containing an area of 14.8413 hectares covered by original certificate of title
No. 1187 (Exhibit C). On 29 October 1930 they executed a power of attorney authorizing Eustaquio Bayuga to engage the services of
an attorney to prosecute their case against Leonardo Gambito for annulment of a contract of sale of the parcel of land (civil No. 5787 of
the same court) and after the termination of the case in their favor to sell it, and from the proceeds of the sale to deduct whatever
expenses he had incurred in the litigation (Exhibit B). On 14 March 1934 Buenaventura Dayao died leaving his wife Eugenia Vega and
children Pablo, Teodoro, Fortunata and Juliana, all surnamed Dayao. On 21 march 1939 his four children executed a deed of sale
conveying 12.8413 hectares of the parcel of land to the appellants, the spouses Manuel Buason and Lolita M. Reyes (Exhibit A). Their
mother Eugenia Vega affixed her thumbmark to the deed of sale as witness (Exhibit A). The appellants took possession of the parcel of
land through their tenants in 1939. On 18 July 1944 Eustaquio Bayuga sold 8 hectares of the same parcel of land to the spouses
Mariano Panuyas (appellee herein) and Sotera B. Cruz (Exhibit D). Eustaquio Bayuga died on 25 March 1946 and Eugenia Vega in
1954.
The appellants and the appellee claim ownership to the same parcel of land. In their complaint the appellants prayed that the appellee
be ordered to deliver possession of the part of the parcel of land held by him; that the deed of sale of that part of the parcel of land held
by the appellee executed by Eustaquio Bayuga in his favor and of his wife (Exhibit D) be declared null and void and that transfer
certificate of title No. 8419 issued in their name be cancelled; that the deed of sale of the parcel of land executed by the children and
heirs of Buenaventura Dayao in their favor (Exhibit A) be declared valid; that the appellee be ordered to pay them damages and
attorney's fees in the sum of P9,600; and that he ordered to pay the costs of the suit. The appellees affirmative defenses are that he
and his wife were buyers in good faith and for valuable consideration; that appellant's causes of action are barred by the statute of
limitations; that the complaint states no cause of action; that the claim on which their action is based is unenforceable under the statute
of frauds; and that the appellants are guilty of laches. By way of counterclaim, he prayed that for bringing a clearly unfounded suit
against him which depreciated the value of the land and injured his good reputation, the appellants be ordered to pay him the sums of
P5,000 as actual damages and P10,000 as moral damages.
After trial on 20 August 1956 the Court rendered judgment holding that the appellants' action is barred by the statute of limitations and
dismissing their complaint. Their motion for reconsideration filed on 23 August 1956. Hence this appeal upon questions of law.
It appears that the appellants did not register the sale of 12.8413 hectares of the parcel of land in question executed in their favor by
the Dayao children on 21 March 1939 after the death of their father Buenaventura Dayao. On the other hand, the power of attorney
executed by Buenaventura Dayao on 29 October 1930 authorizing Eustaquio Bayuga to sell the parcel of land (Exhibit B) was
annotated or inscribed on the back of the original certificate of title No. 1187 (Exhibit C) as Entry No. 16836/H-1187, and the sale
executed by Eustaquio Bayuga in favor of the appellee Mariano Panuyas and his wife Sotera B. Cruz under the aforesaid power of
attorney was annotated or inscribed on the back of the same original certificate of title (Exhibit C) as Entry No 778/H-1187. It does not

appear that the appellee and his wife had actual knowledge of the previous sale. In the absence of such knowledge, they had a right to
rely on the face of the certificate of title of the registered owners and of the authority conferred by them upon the agent also recorded
on the back of the certificate of title. As this is a case of double sale of land registered under the Land Registration Act, he who recorded
the sale in the Registry of Deeds has a better right than he who did not.1
As to the appellants' contention that, as the death of the principal on 14 March 1934 ended the authority of the agent,2 the sale of 8
hectares of the parcel of land by the agent to the appellee Mariano Panuyas and his wife Sotera B. Cruz was null and void, suffice it to
state that is has not been shown that the agent knew of his principal's demise, and for that reason article 1738, old Civil code or 1931,
new Civil Code, which provides: 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 is the law applicable to the point raised by the appellants. The judgment appealed from is affirmed, with costs against the
appellants
Republic of the Philippines
SUPREME COURT
Manila
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 co-defendant, 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 pro-indiviso share of
Concepcion Rallos in the property in question, Lot 5983 of the Cadastral Survey of Cebu is
concerned;
(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 subjectmatter of the third-party complaint, at bar. (pp. 98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the foregoing judgment insofar as it set
aside the sale of the one-half (1/2) share of Concepcion Rallos. The appellate tribunal, as adverted to earlier, resolved the appeal on
November 20, 1964 in favor of the appellant corporation sustaining the sale in question. 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 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.
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 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
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:
In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a co-owner of lands with
Agustin Nano. The latter had a power of attorney supposedly executed by Vallejo 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:
... 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 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.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 105909 June 28, 1994


MUNICIPALITY OF PILILLA, RIZAL, petitioner,
vs.
HON. COURT OF APPEALS, HON. ARTURO A. MARAVE, as Presiding Judge, Regional Trial Court, Branch 78, Morong, Rizal,
and PHILIPPINE PETROLEUM CORPORATION, respondents.
REGALADO, J.:
Petitioner questions and seeks the nullification of the resolution of respondent Court of Appeals in CA-G.R. SP. No. 27504 dated March
31, 1992, dismissing the petition for having been filed by a private counsel, as well as its succeeding resolution dated June 9, 1992,
denying petitioner's motion for reconsideration. 1
The records show that on March 17, 1989, the Regional Trial Court of Tanay, Rizal, Branch 80, rendered judgment in Civil Case No.
057-T in favor of plaintiff, now herein petitioner Municipality of Pililla, Rizal, against defendant, now herein private respondent Philippine
Petroleum Corporation (PPC, for short), ordering therein defendant to pay said plaintiff (1) the amount of P5,301,385.00 representing
the tax on business due from the defendant under Section 9(A) of Municipal Tax Ordinance No. 1 of said municipality for the period
from 1979 to 1983, inclusive, plus such amount of tax as may accrue until final determination of the case; (2) storage permit fee in the
amount of P3,321,730.00 due from the defendant under Section 10, paragraph Z(13)
(b-1-c) of the same municipal tax ordinance for the period from 1975 to 1986, inclusive, plus the amount of said fee that may accrue
until final determination of the case; (3) mayor's permit fee due from the defendant under Section 10, paragraph (P) (2) of said
municipal tax ordinance from 1975 to 1984, inclusive, in the amount of P12,120.00, plus such amount of the same fee as may accrue

until final determination of the case; (4) sanitary inspection fee in the amount of P1,010.00 for the period from 1975 to 1984, plus the
amount of this fee that may accrue until final determination of the case; and (5) the costs of suit. 2
On June 3, 1991, in G.R. No. 90776 this Court affirmed the aforesaid judgment, with the modification that business taxes accruing prior
to 1976 are not to be paid by PPC because the same have prescribed, and that storage fees are not also to be paid by PPC since the
storage tanks are owned by PPC and not by the municipality and, therefore, cannot be the bases of a charge for service by the
municipality. 3 This judgment became final and executory on July 13, 1991 and the records were remanded to the trial court for
execution.
On October 14, 1991, in connection with the execution of said judgment, Atty. Felix E. Mendiola filed a motion in behalf of plaintiff
municipality with the Regional Trial Court, Branch 78, Morong, Rizal* for the examination of defendant corporation's gross sales for the
years 1976 to 1978 and 1984 to 1991 for the purpose of computing the tax on business imposed under the Local Tax Code, as
amended. On October 21, 1991, defendant corporation filed a manifestation to the effect that on October 18, 1991, Pililla Mayor
Nicomedes Patenia received from it the sum of P11,457,907.00 as full satisfaction of the above-mentioned judgment of the Supreme
Court, as evidence by the release and quitclaim documents executed by said mayor. Accordingly, on October 31, 1991 the court below
issued an order denying plaintiff municipality's motion for examination and execution of judgment on the ground that the judgment in
question had already been satisfied. 4
Thereafter, on November 21, 1991 Atty. Mendiola filed a motion for reconsideration of the court's aforesaid order of October 31, 1991,
claiming that the total liability of defendant corporation to plaintiff municipality amounted to P24,176,599.00, while the amount involved
in the release and quitclaim executed by Mayor Patenia was only P12,718,692; and that the said mayor could not waive the balance
which represents the taxes due under the judgment to the municipality and over which judgment the law firm of Atty. Mendiola had
registered two liens for alleged consultancy services of 25% and attorneys' fees of 25% which, when quantified and added, amount to
more than P12 million.
On January 28,1992, the trial court denied the aforesaid motion for reconsideration. 5
On February 18, 1992, Atty. Mendiola, again ostensibly in behalf of herein petitioner municipality, filed a petition forcertiorari with us,
which petition we referred to the Court of Appeals for proper disposition and was docketed therein as CA-G.R. SP No. 27504. 6 On
March 2, 1992, respondent PPC filed a motion questioning Atty. Mendiola's authority to represent petitioner
municipality. 7 Consequently, on March 31, 1992 respondent Court of Appeals dismissed the petition for having been filed by a private
counsel in violation of law and jurisprudence, but without prejudice to the filing of a similar petition by the Municipality of Pililla through
the proper provincial or municipal legal officer. 8 Petitioner filed a motion for reconsideration which was denied by the Court of Appeals
in its resolution of June 9, 1992. 9
Petitioner is once again before us with the following assignment of errors:
1. It is an error for the Court of Appeals to consider private respondent's new issue raised for the first time on appeal,
as it could no longer be considered on appeal, because it was never been (sic) raised in the court below.
2. It is an error for the Court of Appeals in dismissing (sic) the instant petition with alternative remedy of filing similar
petition as it is a departure from established jurisprudence.
3. It is an error for the Court of Appeals to rule that the filing of the instant petition by the private counsel is in violation
of law and jurisprudence. 10
We find the present petition devoid of merit.
The Court of Appeals is correct in holding that Atty. Mendiola has no authority to file a petition in behalf of and in the name of the
Municipality of Pililla. The matter of representation of a municipality by a private attorney has been settled in Ramos vs. Court of
Appeals, et al., 11 and reiterated in Province of Cebu vs. Intermediate Appellate Court, et al.,12 where we ruled that private attorneys
cannot represent a province or municipality in lawsuits.
Section 1683 of the Revised Administrative Code provides:
Section 1683. Duty of fiscal to represent provinces and provincial subdivisions in litigation. The provincial fiscal
shall represent the province and any municipality or municipal district thereof in any court, except in cases whereof
original jurisdiction is vested in the Supreme Court or in cases where the municipality or municipal district in question
is a party adverse to the provincial government or to some other municipality or municipal district in the same
province. When the interests of a provincial government and of any political division thereof are opposed, the
provincial fiscal shall act on behalf of the province.

When the provincial fiscal is disqualified to serve any municipality or other political subdivision of a province, a special
attorney may be employed by its council. 13
Under the above provision, complemented by Section 3, Republic Act No. 2264, the Local Autonomy Law, 14 only the provincial fiscal
and the municipal attorney can represent a province or municipality in their lawsuits. The provision is mandatory. The municipality's
authority to employ a private lawyer is expressly limited only to situations where the provincial fiscal is disqualified to represent it. 15
For the aforementioned exception to apply, the fact that the provincial fiscal was disqualified to handle the municipality's case must
appear on
record. 16 In the instant case, there is nothing in the records to show that the provincial fiscal is disqualified to act as counsel for the
Municipality of Pililla on appeal, hence the appearance of herein private counsel is without authority of law.
The submission of Atty. Mendiola that the exception is broad enough to include situations wherein the provincial fiscal refuses to handle
the case cannot be sustained. The fiscal's refusal to represent the municipality is not a legal justification for employing the services of
private counsel. Unlike a practicing lawyer who has the right to decline employment, a fiscal cannot refuse to perform his functions on
grounds not provided for by law without violating his oath of office. Instead of engaging the services of a special attorney, the municipal
council should request the Secretary of Justice to appoint an acting provincial fiscal in place of the provincial fiscal who has declined to
handle and prosecute its case in court, pursuant to Section 1679 of the Revised Administrative Code. 17
It is also significant that the lack of authority of herein counsel,
Atty. Mendiola, was even raised by the municipality itself in its comment and opposition to said counsel's motion for execution of his
lien, which was filed with the court a quo by the office of the Provincial Prosecutor of Rizal in behalf of said municipality. 18
The contention of Atty. Mendiola that private respondent cannot raise for the first time on appeal his lack of authority to represent the
municipality is untenable. The legality of his representation can be questioned at any stage of the proceedings. In the cases
hereinbefore cited, 19 the issue of lack of authority of private counsel to represent a municipality was only raised for the first time in the
proceedings for the collection of attorney's fees for services rendered in the particular case, after the decision in that case had become
final and executory and/or had been duly executed.
Furthermore, even assuming that the representation of the municipality by Atty. Mendiola was duly authorized, said authority is deemed
to have been revoked by the municipality when the latter, through the municipal mayor and without said counsel's participation, entered
into a compromise agreement with herein private respondent with regard to the execution of the judgment in its favor and thereafter
filed personally with the court below two pleadings
entitled and constitutive of a "Satisfaction of Judgment" and a "Release and Quitclaim". 20
A client, by appearing personally and presenting a motion by himself, is considered to have impliedly dismissed his lawyer. Herein
counsel cannot pretend to be authorized to continue representing the municipality since the latter is entitled to dispense with his
services at any time. Both at common law and under Section 26, Rule 138 of the Rules of Court, a client may dismiss his lawyer at any
time or at any stage of the proceedings, and there is nothing
to prevent a litigant from appearing before the court to conduct his own litigation. 21
The client has also an undoubted right to compromise a suit without the intervention of his lawyer. 22 Even the lawyers' right to fees from
their clients may not be invoked by the lawyers themselves as a ground for disapproving or holding in abeyance the approval of a
compromise agreement. The lawyers concerned can enforce their rights in the proper court in an appropriate proceeding in accordance
with the Rules of Court, but said rights may not be used to prevent the approval of the compromise agreement. 23
The apprehension of herein counsel that it is impossible that the municipality will file a similar petition, considering that the mayor who
controls its legislative body will not take the initiative, is not only conjectural but without factual basis. Contrary to his pretensions, there
is presently a manifestation and motion pending with the trial court filed by the aforesaid municipal mayor for the withdrawal of the
"Satisfaction of Judgment" and the "Release and Quitclaim"24 previously filed in the case therein as earlier mentioned.
WHEREFORE, the petition at bar is DENIED for lack of merit and the judgment of respondent Court of Appeals is hereby AFFIRMED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 175862

October 13, 2010

REAL BANK, INC., Petitioner,


vs.
SAMSUNG MABUHAY CORPORATION, Respondent.
DECISION
PEREZ, J.:
This is a Petition for Review under Rule 45 of the Rules of Court filed by petitioner Real Bank, Inc., assailing the Decision1 of the Court
of Appeals in CA-G.R. SP No. 73188 dated 18 August 2006, which granted the Petition filed by herein respondent Samsung Mabuhay
Corporation (respondent Samsung) and set aside the Orders dated 5 June 2002 and 2 August 2002 of the Regional Trial Court (RTC),
Branch 20 of Manila, which dismissed Civil Case No. 97-86265 for failure of respondent Samsung to appear at the scheduled mediation
conference. Likewise assailed is the Resolution2 of the appellate court dated 13 December 2006 denying petitioner Real Bank, Inc.s
Motion for Reconsideration.
The generative facts are:

On 27 November 1997, respondent Samsung filed a Complaint3 for damages against petitioner Real Bank, Inc. docketed as Civil Case
No. 97-86265. The case was originally raffled to the RTC, Branch 9 of Manila. In its complaint, respondent Samsung alleged:
Plaintiff SAMSUNG MABUHAY ELECTRONIC CORPORATION is a joint venture corporation between SAMSUNG ELECTRONICS CO.
LTD., a foreign corporation duly organized and existing under Korean laws, and plaintiff MABUHAY ELECTRONICS CORPORATION, a
corporation organized and existing under Philippine laws x x x.
As a result of the Joint Venture Agreement, Samsung Mabuhay Electronics Corporation became the exclusive distributor for Samsung
products in the Philippines.4
xxxx
2.1. Sometime in December of 1996, Conpinco Trading, a regular dealer of [respondent] Samsung Mabuhay Corporation in
Davao City, issued five (5) postdated [United Coconut Planters Bank] UCPB checks payable to the order of Samsung
Mabuhay Corporation, to wit:
Check No.

Date

Amount

1869863

December 31, 1996

P 363,

1869864

December 31, 1996

400,

1869865

January 30, 1997

800,

1869866

February 28, 1997

800,

1869867

March 30, 1997

599,

These five (5) checks were picked-up by Reynaldo Senson, former Collection Supervisor of Samsung Mabuhay Corporation
for Visayas and Mindanao, at Conpinco Tradings place of business at J.P. Laurel Avenue, Bajada Drive, Davao City last
December 14, 1996. x x x.
2.1.1. All of the five (5) checks were denominated to the "PAYEES ACCOUNT" only, the payee being Mabuhay
Electronics Corporation although the proceeds of the checks were actually intended for Samsung Mabuhay
Corporation. After the Joint Venture Agreement, Samsung dealers were duly requested by Samsung Mabuhay
Corporation to make all checks payable to the order of Samsung Mabuhay Corporation instead of Mabuhay
Electronics Corporation. Nevertheless, some dealers, like Conpinco Trading, still made out checks payable to
Mabuhay Electronics Corporation.
2.1.2. Plaintiff Samsung Mabuhay Corporation continued to received checks from its local dealers payable to the
order of Mabuhay Electronics Corporation. Plaintiff [Samsung Mabuhay Corporation] deposited the said checks to its
bank account with Far East Bank and Trust Company (FEBTC), Adriatico Branch under Account No. 0113-26238-8.
FEBTC accepted for deposit into Samsung Mabuhay Corporations account therein all checks payable to Mabuhay
Electronics Corporation.
2.2. Two (2) of the five (5) checks picked-up by Reynaldo Senson were remitted to Samsung Mabuhay Corporation. These
checks [1869866 and 1869867] in the total amount of P1,399,093.20 were cleared by the drawee bank, UCPB, and the
amount credited to the account of Samsung Mabuhay Corporation with FEBTC.
2.3. However, the three (3) remaining UCPB checks, i.e., check nos. 1869863, 1869864, and 1869865 amounting to
P1,563,750.00, were not remitted by Reynaldo Senson to Samsung Mabuhay Corporation. Instead, Reynaldo Senson, using
an alias name, Edgardo Bacea, opened an account with defendant Real Bank, Malolos, Bulacan branch under the account
name of one Mabuhay Electronics Company, a business entity in no way related to plaintiff Mabuhay Electronics Corporation.
Mabuhay Electronics Company is a single proprietorship owned and managed by Reynaldo Senson, alias Edgardo Bacea.
2.4. Reynaldo Senson, alias Edgardo Bacea, opened an account with defendant [Real Bank] by presenting an identification
card bearing Mabuhay Electronics Company, the alias name Edgardo Bacea identifying him as the General Manager of
Mabuhay Electronics Company, and the photograph of Reynaldo Senson, x x x. Reynaldo Senson and Edgardo Bacea are
one and the same person as shown in the identification card issued by Samsung Mabuhay Corporation to Reynaldo Senson x
x x.
2.5. Reynaldo Senson, alias Edgardo Bacea, through the negligence of defendant [Real Bank], indorsed the checks and then
deposited all the three (3) checks in the account of Mabuhay Electronics Company under Savings Account No. 1102-01944-2.
The dorsal portion of the said checks (check nos. 1869863, 1869864, and 1869865) x x x and made integral parts hereof.

2.6. Defendant [Real Bank] then sent the three (3) checks for clearing and for payment through Far East Bank and Trust
Company, Malolos, Bulacan Branch after stamping at the back of the checks the usual endorsements: "ALL PRIOR
ENDORSEMENT and/or LACK OF ENDORSEMENT GUARANTEED." Conpinco Tradings account with the drawee bank,
UCPB, was eventually debited for the value of the three (3) checks and Mabuhay Electronics Companys account with
defendant [Real Bank] was credited for the same amount although it was not the payee nor the person authorized by the
payee.
2.7. Subsequently, Reynaldo Senson, alias Edgardo Bacea again through the negligence of defendant bank, was able to
withdraw the amount of P1,563,750.00. The value of the three (3) checks were negligently credited by defendant [Real Bank]
to the account of Mabuhay Electronics Company, a single proprietorship, although the check was payable only to Mabuhay
Electronics Corporation, a juridical entity, and to no one else.
xxxx
2.9. Despite plaintiffs [Samsung Mabuhay Corporations] demands, defendant [Real Bank] ignored and refused to reimburse
them with the value of the three (3) checks. Thus, plaintiffs were constrained to hire the legal services of the law firm of V.E.
Del Rosario and Partners.5
Petitioner Real Bank, Inc. filed its Answer6 on 23 February 1998, to which a Reply7 was filed by respondent Samsung on 5 March 1998.
On 12 March 1998, respondent Samsung filed an Ex-Parte Motion To Set Case for Pre-Trial, asking that the case be set for pre-trial.8 In
a notice dated 24 March 1998, Judge Amelia Tria-Infante (Judge Infante) of RTC, Br. 9 of Manila, set the case for pre-trial on 25 June
1998.9
Meantime, petitioner Real Bank, Inc. filed on 26 May 1998 a Motion to Admit Third Party Complaint against Reynaldo A. Senson alias
Edgardo Bacea, to which was attached the Third Party Complaint.
On 22 June 1998, respondent Samsung filed its Pre-trial Brief. The pre-trial was originally set on 25 June 1998 but was reset to 17 July
1998 upon motion of petitioner Real Bank, Inc. on the ground that its Motion to Admit Third Party Complaint was still pending resolution.
Thus, the pre-trial was re-scheduled and reset to 10 September 1998.10
Petitioner Real Bank, Inc. once again moved for the resetting of the pre-trial conference scheduled on 10 September 199811 on the
same ground that its Motion to Admit Third Party Complaint has yet to be resolved.
On 22 February 1999, the trial court issued an Order granting petitioner Real Bank, Inc.s Motion to Admit Third Party Complaint and
also ordered that summons be issued to third-party defendant Reynaldo A. Senson alias Edgardo Bacea.
On 25 May 1999, respondent Samsung filed a Motion to Dismiss the Third Party Complaint for failure of petitioner Real Bank, Inc. to
prosecute its case and Motion to Set the Case for Pre-Trial.12 On the other hand, petitioner Real Bank, Inc. filed a Motion to Serve
Summons by Publication on the third-party defendant Reynaldo A. Senson alias Edgardo Bacea.
Citing the undue delay of Presiding Judge Infante in resolving the several motions pending before her, respondent Samsung filed a
Motion for her inhibition of Judge Infante on 20 September 1999.
On 15 March 2000, the Presiding Judge of Branch 9 issued an Order13 reading:
Before this Court are three (3) motions.
The Motion to Serve Summons by Publication is hereby GRANTED.
The Motion to Dismiss Third-Party Complaint is hereby DENIED and considering that this Honorable Court can administer justice on
this case with impartiality and without bias, the Motion for Inhibition is likewise DENIED.
Let therefore, service of summons by publication be made on third-party defendant, Reynaldo Senson alias Edgardo Bacea doing
business under the name and style "Mabuhay Electronics Company" in a newspaper of general circulation for three (3) consecutive
weeks.
On 19 October 2000, the counsel of respondent Samsung, V.E. Del Rosario and Partners, filed a Notice of Withdrawal of Appearance
with the conformity of respondent Samsung.14
For its part, petitioner Real Bank, Inc. filed a Motion To Declare Third-Party defendant Reynaldo Senson in Default.

On 7 March 2001, the trial court issued an Order dated 17 March 2001 requiring both petitioner Real Bank, Inc. and respondent
Samsung to appear in a mediation proceeding set on 3 April 2001.15 This Order of the trial court was sent to respondent Samsungs
former counsel, V.E. Del Rosario and Partners which had at that time already filed a notice of withdrawal of appearance.16
The mediation proceedings took place as scheduled on 3 April 2001 and Mediator Tammy Ann C. Reyes, who handled the mediation
proceedings submitted her report to the Court stating therein that no action was taken on the case referred for mediation because
respondent Samsung failed to appear.17
On 4 June 2001, the new counsel of respondent Samsung (Ortega, Del Castillo, Bacorro, Odulio, Calma and Carbonell) entered its
appearance. This was filed and received by the court on 6 June 2001.18
Subsequently, RTC Branch 9 of Manila, where the case was pending was designated as a Family Court. Hence, the case was re-raffled
to RTC Judge Marivic Balisi-Umali (Judge Umali) of RTC Branch 20 of Manila.
On 5 June 2002, an Order was issued by Judge Umali of Branch 20 dismissing the complaint of respondent Samsung for failure to
appear at the mediation conference previously scheduled by the trial judge of Branch 9 in her Order dated 17 March 2001.19
The Order of Judge Umali states:
This is a re-raffled case from Branch 9 of this Court, pursuant to Supreme Courts Resolution A.M. 99-11-07 dated February 1, 2000
and August 22, 2000 designating the Branch as a Family Court.
Perusal of the record reveals that in its order dated March 7, 2001, the Court referred the case for mediation, per Sec. 29, Rule 18,
1997 Rules on Civil Procedure and the Guidelines of the Supreme Court dated November 16, 1999. On April 3, 2001, Mediator Tammy
Ann C. Reyes, who handled the mediation proceedings, submitted her Report to the Court stating therein that no action was taken for
the case referred for mediation because the plaintiff failed to appear.
Mediation is part of pre-trial, Sec. 5, Rule 18, Rules of Court, explicitly provides that failure of the plaintiff to appear at the pre-trial shall
be ground for the dismissal of the action for non-suit.
Premises considered the above-entitled case is hereby DISMISSED for non-suit.20
Respondent Samsungs new counsel challenged the Order dated 5 June 2002 in a Motion for Reconsideration alleging that the
dismissal is improper and inappropriate as it was not notified of the scheduled mediation conference. Besides, the notice of the
scheduled mediation was sent to the previous counsel of respondent Samsung who had already withdrawn and not to the new
lawyers.21
Judge Umali denied the Motion for Reconsideration of respondent Samsung in her Order dated 2 August 2002.221avvphi1
Respondent Samsung then filed before the Court of Appeals a petition for certiorari under Rule 65 of the Rules of Court docketed as
CA-G.R. SP No. 73188. The Court of Appeals rendered a decision in favor of respondent Samsung dated 18 August 2006, the fallo of
which reads:
WHEREFORE, in view of the foregoing, the Petition is hereby GRANTED. The Orders dated 5 June 2002 and 2 August 2002 are
hereby REVERSED and SET ASIDE.23
The Court of Appeals explained its decision in this wise:
[R]espondent judge did not even peruse or verify the records of the case. Has she done so, she would have discovered that the former
counsel of petitioner to whom she sent the Notice of the order had already withdrawn and that a new counsel for petitioner had already
entered their appearance. Likewise, she should have discovered that at that time the Order dated March 7, 2001 was issued by RTC
Br. 9, petitioner was no longer holding office at its given address. This fact is clearly indicated in the Order of March 7, 2001 itself.
Clearly, therefore, respondent judge committed grave abuse of discretion amounting to excess or lack of jurisdiction in issuing the Order
dated June 5, 2002. 24
Petitioner Real Bank, Inc.s Motion for Reconsideration was denied by the Court of Appeals in a Resolution dated 13 December 2006.25
Hence, this petition.
Petitioner Real Bank, Inc. submits the following issues for our resolution.

I. WHETHER THE COURT OF APPEALS ERRED IN SETTING ASIDE THE ORDER OF THE TRIAL COURT DISMISSING
THE CASE BEFORE IT DUE TO THE FAILURE OF RESPONDENT AND ITS COUNSEL TO ATTEND THE MEDIATION
CONFERENCE.
II. WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT WAS NOT NOTIFIED OF THE
MEDIATION CONFERENCE.
III. WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT THE WITHDRAWAL OF RESPONDENTS COUNSEL
WAS SUFFICIENT NOTWITHSTANDING THE FACT THAT THE SAID WITHDRAWAL WAS NOT APPROVED BY THE TRIAL
COURT, AND DESPITE THE FACT THAT AT THE TIME, RESPONDENT HAS NOT YET ENGAGED THE SERVICES OF A
NEW COUNSEL.
IV. WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT GUILTY OF NEGLIGENCE IN FAILING
TO INQUIRE ABOUT THE STATUS OF ITS CASE AND TO ENGAGE THE SERVICES OF A NEW COUNSEL FOR A PERIOD
OF ALMOST EIGHT (8) MONTHS.26
In this petition, it is petitioner Real Bank, Inc.s position that RTC Branch 20 of Manila acted properly in dismissing Civil Case No. 9786265 for failure on the part of respondent Samsung to appear on the scheduled mediation conference.
In Senarlo v. Judge Paderanga,27 this Court accentuated that mediation is part of pre-trial and failure of the plaintiff to appear thereat
merits sanction on the part of the absent party. This court held:
A.M. No. 01-10-5-SC-PHILJA dated 16 October 2001, otherwise known as the Second Revised Guidelines for the Implementation of
Mediation Proceedings and Section 5, Rule 18 of the Rules of Court grant judges the discretion to dismiss an action for failure of the
plaintiff to appear at mediation proceedings.
A.M. No. 01-10-5-SC-PHILJA considers mediation a part of pre-trial and provides sanctions for the absent party:
12. Sanctions.
Since mediation is part of Pre-Trial, the trial court shall impose the appropriate sanction including but not limited to censure, reprimand,
contempt and such sanctions as are provided under the Rules of Court for failure to appear for pre-trial, in case any or both of the
parties absent himself/themselves, or for abusive conduct during mediation proceedings.
Under Rule 18, Section 5 of the Rules of Court, failure of the plaintiff to appear at pre-trial shall be cause for dismissal of the action:
Sec. 5. Effect of failure to appear. The failure of the plaintiff to appear when so required pursuant to the next preceding section shall
be cause for dismissal of the action. The dismissal shall be with prejudice, unless otherwise ordered by the court. A similar failure on the
part of the defendant shall be cause to allow the plaintiff to present his evidence ex parte and the court to render judgment on the basis
thereof.28
However, the ruling in Senarlo will not resolve the present case where the basic issue is whether or not respondents Samsung nonappearance at the mediation proceedings is justifiable from the records.
We sustain the ruling of the Court of Appeals.
Rule 138, section 26 of the Rules of Court outlines the procedure in case of withdrawal of counsel. It states:
RULE 138
Attorneys and Admission to Bar
Sec. 26. Change of attorneys. An attorney may retire at any time from any action or special proceeding, by the written consent of his
client filed in court. He may also retire at any time from an action or special proceeding, without the consent of his client, should the
court, on notice to the client and attorney, and on hearing, determine that he ought to be allowed to retire. In case of substitution, the
name of the attorney newly employed shall be entered on the docket of the court in place of the former one, and written notice of the
change shall be given to the adverse party.
Under the first sentence of Section 26, the withdrawal of counsel with the conformity of the client is completed once the same is filed in
court. No further action thereon by the court is needed other than the mechanical act of the Clerk of Court of entering the name of the
new counsel in the docket and of giving written notice thereof to the adverse party.29

In this case, it is uncontroverted that the withdrawal of respondent Samsungs original counsel, V.E. Del Rosario and Partners on 19
October 2000, was with the clients consent. Thus, no approval thereof by the trial court was required because a courts approval is
indispensable only if the withdrawal is without the clients consent.30
It being daylight clear that the withdrawal of respondent Samsungs original counsel was sufficient as the same carried the stamp of
approval of the client, the notice of mediation sent to respondent Samsungs original counsel was ineffectual as the same was sent at
the time when such counsel had already validly withdrawn its representation. Corollarily, the absence of respondent Samsung during
the scheduled mediation conference was excusable and justified. Therefore, the trial court erroneously dismissed Civil Case No. 9786265.
We cannot sustain petitioner Real Bank, Inc.s argument that respondent Samsung was negligent in the conduct of its case.
The calendar of hearings document the fact that respondent Samsung has been willing and able to prosecute its case. Except for the
lone instance, reasonable as already shown, of absence during the scheduled mediation conference on 3 April 2001, respondent
Samsung had, till then, promptly and religiously attended the hearings set by the RTC. In fact, respondent Samsung exhibited diligence
and dispatch in prosecuting its case against petitioner Real Bank, Inc. by immediately moving to set the case for pre-trial after it had
filed its reply and momently filing a motion for reconsideration of the RTC Order dismissing Civil Case No. 97-86265.
The following observation of the Court of Appeals is worth noting:
As borne by the records, it is [petitioner] [Real Bank, Inc.] which asked for a resetting of the pre-trial twice. On the other hand, the
[respondent Samsung] was the one egging and repeatedly requesting Presiding Judge Infante of Br. 9 to set the case for pre-trial. It
has reached the point that [respondent Samsung] got exasperated for the unreasonable delay of the judge of RTC, Br. 9 in resolving
the incidents pending before her that it was constrained to file a motion for inhibition.31
Herein respondent Samsung instituted Civil Case No. 97-86265 before the RTC, to recover the amount it claims to have lost due to the
negligence of petitioner Real Bank, Inc., clearly a property right. The substantive right of respondent Samsung to recover a due and
demandable obligation cannot be diminished by an unwarranted strictness in the application of a rule of procedure.32
In Calalang v. Court of Appeals,33 this Court underscored that unless a partys conduct is so negligent, irresponsible, contumacious or
dilatory as to provide substantial grounds for dismissal for non-appearance, the court should consider lesser sanctions which would still
amount into achieving the desired end.1avvphi1
In Bank of the Philippine Islands v. Court of Appeals,34 we ruled that in the absence of a pattern or scheme to delay the disposition of
the case or a wanton failure to observe the mandatory requirement of the rules, courts should decide to dispense rather than wield their
authority to dismiss.
While not at the fore of this case, it may be stated that the state of the court docket cannot justify injudicious case dismissals.
Inconsiderate dismissals, even without prejudice, do not constitute a panacea or a solution to the congestion of court dockets; while
they lend a deceptive aura of efficiency to records of individual judges, they merely postpone the ultimate reckoning between the
parties. In the absence of clear lack of merit or intention to delay, justice is better served by a brief continuance, trial on the merits, and
final disposition of cases before the court.35
Accordingly, the ends of justice and fairness would be best served if the parties in Civil Case No. 97-86265 are given the full opportunity
to thresh out the real issues in a full blown trial. Besides, petitioner Real Bank, Inc. would not be prejudiced should the RTC proceed
with Civil Case No. 97-86265 as it is not stripped of any affirmative defenses nor deprived of due process of law.36
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the Decision of the Court of Appeals in CAG.R. SP No. 73188 dated 18 August 2006 and the Resolution of the same court dated 13 December 2006 are AFFIRMED. This case is
ordered REMANDED to the RTC Manila, Branch 20 for continuation of proceedings until its conclusion with utmost dispatch.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
A.C. No. 6155

March 14, 2006

MA. GINA L. FRANCISCO, JOSEPHINE S. TAN and CARLOS M. JOAQUIN, Complainants,


vs.
ATTY. JAIME JUANITO P. PORTUGAL, Respondent.
DECISION
TINGA, J.:
Complainants filed before this Court an affidavit-complaint1 on 15 August 2003 against Atty. Jaime Juanito P. Portugal (respondent) for
violation of the Lawyers Oath, gross misconduct, and gross negligence. Complainants are related to petitioners in G.R. No. 152621-23
entitled SPO1 Ernest C. Francisco, SPO1 Donato F. Tan and PO3 Rolando M. Joaquin v. People of the Philippines, in whose behalf
respondent filed the Petition for Review on Certiorari (Ad Cautelam) in the case.
The complaint against respondent originated from his alleged mishandling of the above-mentioned petition which eventually led to its
denial with finality by this Court to the prejudice of petitioners therein.
The facts are as follows:
On 21 March 1994, SPO1 Ernesto C. Francisco, SPO1 Donato F. Tan and PO3 Rolando M. Joaquin (eventually petitioners in G.R. No.
152621-23, collectively referred to herein as the accused) were involved in a shooting incident which resulted in the death of two
individuals and the serious injury of another. As a result, Informations were filed against them before the Sandiganbayan for murder and
frustrated murder. The accused pleaded not guilty and trial ensued. After due trial, the Sandiganbayan2 found the accused guilty of two
counts of homicide and one count of attempted homicide.

At that juncture, complainants engaged the services of herein respondent for the accused. Respondent then filed a Motion for
Reconsideration with the Sandiganbayan but it was denied in a Resolution dated 21 August 2001. Unfazed by the denial, respondent
filed an Urgent Motion for Leave to File Second Motion for Reconsideration, with the attached Second Motion for
Reconsideration.3 Pending resolution by the Sandiganbayan, respondent also filed with this Court a Petition for Review on Certiorari
(Ad Cautelam) on 3 May 2002.
Thereafter, complainants never heard from respondent again despite the frequent telephone calls they made to his office. When
respondent did not return their phone inquiries, complainants went to respondents last known address only to find out that he had
moved out without any forwarding address.
More than a year after the petition was filed, complainants were constrained to personally verify the status of the ad cautelam petition
as they had neither news from respondent about the case nor knowledge of his whereabouts. They were shocked to discover that the
Court had already issued a Resolution4 dated 3 July 2002, denying the petition for late filing and non-payment of docket fees.
Complainants also learned that the said Resolution had attained finality and warrants of arrest5 had already been issued against the
accused because respondent, whose whereabouts remained unknown, did nothing to prevent the reglementary period for seeking
reconsideration from lapsing.
In his Comment,6 respondent states that it is of vital significance that the Court notes that he was not the original counsel of the
accused. He only met the accused during the promulgation of the Sandiganbayan decision convicting the accused of two counts of
homicide and one count of attempted homicide. He was merely requested by the original counsel to be on hand, assist the accused,
and be present at the promulgation of the Sandiganbayan decision.
Respondent claims that there was no formal engagement undertaken by the parties. But only because of his sincere effort and in true
spirit of the Lawyers Oath did he file the Motion for Reconsideration. Though admitting its highly irregular character, respondent also
made informal but urgent and personal representation with the members of the Division of the Sandiganbayan who promulgated the
decision of conviction. He asserts that because of all the efforts he put into the case of the accused, his other professional obligations
were neglected and that all these were done without proper and adequate remuneration.
As to the ad cautelam petition, respondent maintains that it was filed on time. He stresses that the last day of filing of the petition was
on 3 April 2002 and on that very day, he filed with this Court a Motion for Extension of Time to File Petition for Review,7 seeking an
additional thirty (30) days to file the petition. Subsequently, on 3 May 2002, he filed the petition by registered mail and paid the
corresponding docket fees. Hence, so he concludes, it was filed within the reglementary period.
Soon thereafter, respondent recounted all the "herculean" efforts he made in assisting the accused for almost a year after the
promulgation of the Sandiganbayan decision. He considered the fact that it was a case he had just inherited from the original counsel;
the effect of his handling the case on his other equally important professional obligations; the lack of adequate financial consideration
for handling the case; and his plans to travel to the United States to explore further professional opportunities. He then decided to
formally withdraw as counsel for the accused. He wrote a letter to PO3 Rolando Joaquin (PO3 Joaquin), who served as the contact
person between respondent and complainants, explaining his decision to withdraw as their counsel, and attaching the Notice to
Withdraw which respondent instructed the accused to sign and file with the Court. He sent the letter through registered mail but
unfortunately, he could not locate the registry receipt issued for the letter.
Respondent states that he has asked the accused that he be discharged from the case and endorsed the Notice of Withdrawal to PO3
Joaquin for the latter to file with the Court. Unfortunately, PO3 Joaquin did not do so, as he was keenly aware that it would be difficult to
find a new counsel who would be as equally accommodating as respondent. Respondent suggests this might have been the reason for
the several calls complainants made to his office.
On 9 February 2004, the Court resolved to refer the matter to the Integrated Bar of the Philippines (IBP) for investigation, report and
recommendation.1awph!l.net
The case was assigned to Investigating Commissioner Leland R. Villadolid, Jr. (Commissioner Villadolid) who sent notices of hearing to
the parties but of the three complainants, only complainant Carlos Joaquin appeared. Thus, in the mandatory conference held, the
other two complainants were declared as having waived their rights to further participate in the IBP proceedings.8
The parties were directed to file their respective position papers and on 27 May 2005, Commissioner Villadolid submitted his Report
and Recommendation finding respondent guilty of violation of the Code of Professional Responsibility9 and recommended the
imposition of penalty ranging from reprimand to suspension of six (6) months.1awph!l.net10 On 12 November 2005, the Board of
Directors of the IBP resolved to adopt and approve Commissioner Villadolids recommendation to find respondent guilty and specifically
to recommend his suspension for six (6) months as penalty.

The only issue to be resolved in the case at bar is, considering all the facts presented, whether respondent committed gross negligence
or misconduct in handling G.R. No. 152621-23, which eventually led to the ad cautelam petitions dismissal with finality.
After careful consideration of the records of the case, the Court finds the suspension recommended by the IBP proper.
In a criminal case like that handled by respondent in behalf of the accused, respondent has a higher duty to be circumspect in
defending the accused for it is not only the property of the accused which stands to be lost but more importantly, their right to their life
and liberty. As held in Regala v. Sandiganbayan:11
Thus, in the creation of lawyer-client relationship, there are rules, ethical conduct and duties that breathe life into it, among those, the
fiduciary duty to his client which is of very delicate, exacting and confidential character, requiring a very high degree of fidelity and good
faith, that is required by reason of necessity and public interest x x x .
It is also the strict sense of fidelity of a lawyer to his client that distinguishes him from any other profession in society. x x x 12
At the onset, the Court takes notice that the ad cautelam petition was actually filed out of time. Though respondent filed with the
Sandiganbayan an Urgent Motion for Leave to File Second Motion for Reconsideration with the attached Second Motion for
Reconsideration, he should have known that a second motion for reconsideration is a prohibited pleading13 and it rests on the sound
discretion of the Sandiganbayan to admit it or not. Thus, in effect, the motion did not toll the reglementary period to appeal. Having
failed to do so, the accused had already lost their right to appeal long before respondent filed his motion for extension. Therefore,
respondent cannot now say he filed the ad cautelam petition on time. Also important to note is the allegation of complainants that the
Sandiganbayan denied the second motion for reconsideration in its Resolution dated 7 February 2002. This respondent does not
dispute.
As to respondents conduct in dealing with the accused and complainants, he definitely fell short of the high standard of assiduousness
that a counsel must perform to safeguard the rights of his clients. As aptly observed by Commissioner Villadolid, respondent had not
been quite candid in his dealings with the accused or complainants. The Court notes that though respondent represented to the
accused that he had changed his office address, still, from the examination of the pleadings14 he filed, it can be gleaned that all of the
pleadings have the same mailing address as that known to complainants. Presumably, at some point, respondents office would have
received the Courts Resolution dismissing the petition. Of course, the prudent step to take in that situation was to at least inform the
client of the adverse resolution since they had constantly called respondents office to check the status of the case. Even when he knew
that complainants had been calling his office, he opted not to return their calls.
Respondent professed an inkling that the several phone calls of complainants may have been about the letter he sent PO3 Joaquin
regarding his desire to be discharged as counsel of the case. However, though aware of such likelihood, respondent still did not return
their calls. Had he done so, he and complainants could have threshed out all unresolved matters between them.
Had respondent truly intended to withdraw his appearance for the accused, he as a lawyer who is presumably steeped in court
procedures and practices, should have filed the notice of withdrawal himself instead of the accused. At the very least, he should have
informed this Court through the appropriate manifestation that he had already given instructions to his clients on the proper way to go
about the filing of the Notice of Withdrawal, as suggested by Commissioner Villadolid. In not so doing, he was negligent in handling the
case of the accused.
Certainly, respondent ought to know that he was the one who should have filed the Notice to Withdraw and not the accused. His tale
that he sent a registered letter to the accused and gave them instructions on how to go about respondents withdrawal from the case
defies credulity. It should have been respondent who undertook the appropriate measures for the proper withdrawal of his
representation. He should not have relied on his client to do it for him if such was truly the case. Without the presentation of the alleged
registry receipt (or the return card, which confirms the receipt of the mail by the recipient) of the letter he allegedly sent to PO3 Joaquin,
the Court cannot lend credence to respondents naked claim, especially so that complainants have been resolute in their stand that they
did not hear from respondent after the latter had filed the ad cautelam petition. He could relieve himself of his responsibility as counsel
only first by securing the written conformity of the accused and filing it with the court pursuant to Rule 138, Section 26 of the Rules of
Court.15
The rule in this jurisdiction is that a client has the absolute right to terminate the attorney-client relation at anytime with or without cause.
The right of an attorney to withdraw or terminate the relation other than for sufficient cause is, however, considerably restricted. Among
the fundamental rules of ethics is the principle that an attorney who undertakes to conduct an action impliedly stipulates to carry it to its
conclusion. He is not at liberty to abandon it without reasonable cause. A lawyers right to withdraw from a case before its final
adjudication arises only from the clients written consent or from a good cause.16

We agree with Commissioner Villadolid that the dismissal of the ad cautelam petition was primarily due to the gross negligence of
respondent. The Court has stressed in Aromin v. Boncavil17 that:
Once he agrees to take up the cause of the client, the lawyer owes fidelity to such cause and must always be mindful of the trust and
confidence reposed in him. He must serve the client with competence and diligence, and champion the latters cause with wholehearted
fidelity, care, and devotion. Elsewise stated, he owes entire devotion to the interest of the client, warm zeal in the maintenance and
defense of his clients rights, and the exertion of the his utmost learning and ability to the end that nothing be taken or withheld from his
client, save by the rules of law, legally applied. This simply means that his client is entitled to the benefit of any and every remedy and
defense that is authorized by the law of the land and he may expect his lawyer to assert every such remedy or defense. If much is
demanded from an attorney, it is because the entrusted privilege to practice law carries with it the correlative duties not only to the client
but also to the court, to the bar, and to the public. A lawyer who performs his duty with diligence and candor not only protects the
interest of his client; he also serves the ends of justice, does honor to the bar, and helps maintain the respect of the community to the
legal profession.18
Respondent has time and again stated that he did all the endeavors he enumerated without adequate or proper remuneration.
However, complainants have sufficiently disputed such claim when they attached in their position paper filed before the IBP a machine
validated deposit slip in the amount of P15,500.00 for the Metro Bank savings account of one Jaime Portugal with account number
7186509273.19 Respondent has neither admitted nor denied having claimed the deposited amount.
The Court also rejects respondents claim that there was no formal engagement between the parties and that he made all his efforts for
the case without adequate and proper consideration. In the words of then Justice Panganiban (presently Chief Justice) in Burbe v. Atty.
Magulta:20
After agreeing to take up the cause of a client, a lawyer owes fidelity to both cause and client, even if the client never paid any fee for
the attorney-client relationship. Lawyering is not a business; it is a profession in which duty of public service, not money, is the primary
consideration.21
Also to the point is another case where this Court ruled, thus:
A written contract is not an essential element in the employment of an attorney; the contract may be express or implied. To establish the
relation, it is sufficient that the advice and assistance of an attorney is sought and received in any matter pertinent to his profession. x x
x 22
Hence, even if respondent felt under-compensated in the case he undertook to defend, his obligation embodied in the Lawyers Oath
and the Code of Professional Responsibility still remains unwavering. The zeal and the degree of fervor in handling the case should
neither diminish nor cease just because of his perceived insufficiency of remuneration.
Lastly, the Court does not appreciate the offensive appellation respondent called the shooting incident that the accused was engaged
in. He described the incident, thus: "the accused police officers who had been convicted of [h]omicide for the salvage of Froilan G.
Cabiling and Jose M. Chua and [a]ttempted [h]omicide of Mario C. Macato."23 Rule 14.0124 of the Code of Professional Responsibility
clearly directs lawyers not to discriminate clients as to their belief of the guilt of the latter. It is ironic that it is the defense counsel that
actually branded his own clients as being the culprits that "salvaged" the victims. Though he might think of his clients as that, still it is
unprofessional to be labeling an event as such when even the Sandiganbayan had not done so.
The IBP Board of Governors recommended the suspension of respondent for six (6) months, the most severe penalty recommended by
Commissioner Villadolid, but did not explain why such penalty was justified. In a fairly recent case where the lawyer failed to file an
appeal brief which resulted to the dismissal of the appeal of his client in the Court of Appeals, the Court imposed upon the erring lawyer
the penalty of three (3) months suspension.25The Court finds it fit to impose the same in the case at bar.
WHEREFORE, premises considered, respondent is hereby SUSPENDED from the practice of law for three (3) months. Let a copy of
the Resolution be furnished the Bar Confidant for appropriate annotation in the record of respondent.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 188051

November 22, 2010

ASIA UNITED BANK, Petitioner,


vs.
GOODLAND COMPANY, INC., Respondent.
DECISION
NACHURA, J.:
Petitioner assails the February 16, 2009 Decision1 and the May 18, 2009 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
103304, annulling the August 23, 20073 and February 15, 20084 Orders of the Regional Trial Court (RTC) of Makati City, Branch 150,
which in turn denied due course to respondent Goodland Company, Inc.s (GOODLAND) notice of appeal for invalid substitution of
counsel.
The antecedents:
An Ex-Parte Application/Petition for the Issuance of Writ of Possession5 was filed by Asia United Bank (AUB) over a 5,801-squaremeter lot located in Makati City and covered by Transfer Certificate of Title (TCT) No. 223120 of the Registry of Deeds of Makati in
AUBs name. The property was previously registered in the name of GOODLAND under TCT No. 192674 (114645).

The petition alleged that, on February 20, 2000, GOODLAND executed a Third Party Real Estate Mortgage on the property in favor of
AUB to secure the P202 million credit accommodation extended by the latter to Radiomarine Network (Smartnet) Inc. (Radiomarine).
When Radiomarine defaulted in the payment of its obligation, AUB instituted extrajudicial foreclosure proceedings against the real
estate mortgage. At the public auction sale held on December 4, 2006, AUB was declared the highest bidder. On the same date, a
Certificate of Sale was issued in its name and registered with the Registry of Deeds of Makati City.
With the expiration of the redemption period, AUB proceeded to execute an Affidavit of Consolidation of Ownership, through its First
Vice-President, Florante del Mundo. AUB thereafter secured a Certificate Authorizing Registration from the Bureau of Internal Revenue
to facilitate the transfer of the title.
On December 8, 2006, TCT No. 192674 (114645) was cancelled and, in lieu thereof, TCT No. 223120 was issued in the name of AUB.
GOODLAND, through its counsel, Atty. Antonio Bautista (Atty. Bautista), opposed the petition, denying that it executed the real estate
mortgage. GOODLAND further averred that the signature of the notary public appearing on the deed was a forgery, and that no
technical description of the property supposedly mortgaged was indicated therein. Concluding that AUBs title was derived from the
foreclosure of a fake mortgage, GOODLAND prayed for the petitions denial.6
On March 1, 2007, the RTC issued the writ of possession sought by AUB. It ratiocinated that, as the purchaser of the property at the
foreclosure sale and as the new title holder thereof, AUBs right of possession and enjoyment of the same had become absolute.7
GOODLAND, through its counsel on record, Atty. Bautista, filed a motion for reconsideration8 and a supplemental motion for
reconsideration,9 but both were denied in the Order10 dated April 25, 2007, which was received by Atty. Bautista on June 15, 2007.11
Relentless, GOODLAND sought recourse with the CA by initially filing a Notice of Appeal12 with the RTC, through a certain Atty. Lito
Mondragon (Atty. Mondragon) of the Mondragon & Montoya Law Offices. On August 23, 2007, the RTC issued an Order13 denying due
course to GOODLANDs notice of appeal for being legally inutile due to Atty. Mondragons failure to properly effect the substitution of
former counsel on record, Atty. Bautista. GOODLAND moved for reconsideration, but the same was denied in the Order dated February
15, 2008.14
GOODLAND elevated the incident to the CA by way of a special civil acton for certiorari. In its February 16, 2009 Decision, the CA
granted the petition and directed the RTC to give due course to the notice of appeal, thus:
WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated August 23, 2007 and February 15, 2008 of the Regional
Trial Court, Branch 150, Makati City are ANNULLED and SET ASIDE. The trial court is DIRECTED to give due course to petitioners
Notice of Appeal.
SO ORDERED.15
Aggrieved, AUB moved for reconsideration, but the CA denied the motion in its Resolution dated May 18, 2009. Hence, the present
petition for review on certiorari,16 praying for the reinstatement of the RTC Order.
The petition is meritorious.
Under Rule 138, Section 26 of the Rules of Court, for a substitution of attorney to be effectual, the following essential requisites must
concur: (1) there must be a written application for substitution; (2) it must be filed with the written consent of the client; (3) it must be
with the written consent of the attorney substituted; and (4) in case the consent of the attorney to be substituted cannot be obtained,
there must at least be proof of notice that the motion for substitution was served on him in the manner prescribed by the Rules of
Court. 17
The courts a quo were uniform and correct in finding that Atty. Mondragon failed to observe the prescribed procedure and, thus, no valid
substitution of counsel was actualized. However, they took divergent postures as to the repercussion of such non-compliance, thereby
igniting the herein controversy.
The RTC strictly imposed the rule on substitution of counsel and held that the notice of appeal filed by Atty. Mondragon was a mere
scrap of paper.lawphi1
However, relying on our pronouncement in Land Bank of the Philippines v. Pamintuan Development Co.,18 the CA brushed aside the
procedural lapse and took a liberal stance on considerations of substantial justice, viz.:

It is a far better and more prudent course of action for the court to excuse a technical lapse and afford the parties a review of the case
on appeal to attain the ends of justice rather than dispose of the case on technicality and cause a grave injustice to the parties, giving a
false impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of justice. Thus, substantial
justice would be better served by giving due course to petitioners notice of appeal.19
AUB argues that the liberality applied by the Court in Land Bank is incompatible with the herein controversy, and that Pioneer Insurance
and Surety Corporation v. De Dios Transportation Co., Inc.,20 which espouses the same view adopted by the RTC, is more appropriate.
GOODLAND, on the other hand, insists that the CA committed no reversible error in ordering that the notice of appeal be allowed in
order not to frustrate the ends of substantial justice.
We agree with AUB. A revisit of our pronouncements in Land Bank and Pioneer is in order.
In Land Bank, we held that the Department of Agrarian Reform Adjudication Board gravely abused its discretion when it denied due
course to the Notice of Appeal and Notice of Entry of Appearance filed by petitioners new counsel for failure to effect a valid
substitution of the former counsel on record.
We clarified that the new counsel never intended to replace the counsel of record because, although not so specified in the notice, they
entered their appearance as collaborating counsel. Absent a formal notice of substitution, all lawyers who appear before the court or file
pleadings in behalf of a client are considered counsel of the latter. We pursued a liberal application of the rule in order not to frustrate
the just, speedy, and inexpensive determination of the controversy.
In Pioneer, we adopted a strict posture and declared the notice of withdrawal of appeal filed by appellants new counsel as a mere
scrap of paper for his failure to file beforehand a motion for the substitution of the counsel on record.
Provoking such deportment was the absence of a special power of attorney authorizing the withdrawal of the appeal in addition to the
lack of a proper substitution of counsel. More importantly, we found that the withdrawal of the appeal was calculated to frustrate the
satisfaction of the judgment debt rendered against appellant, thereby necessitating a rigid application of the rules in order to deter
appellant from benefiting from its own deleterious manipulation thereof.
The emerging trend of jurisprudence is more inclined to the liberal and flexible application of the Rules of Court. However, we have not
been remiss in reminding the bench and the bar that zealous compliance with the rules is still the general course of action. Rules of
procedure are in place to ensure the orderly, just, and speedy dispensation of cases;21 to this end, inflexibility or liberality must be
weighed. The relaxation or suspension of procedural rules or the exemption of a case from their operation is warranted only by
compelling reasons or when the purpose of justice requires it.22
As early as 1998, in Hon. Fortich v. Hon. Corona,23 we expounded on these guiding principles:
Procedural rules, we must stress, should be treated with utmost respect and due regard since they are designed to facilitate the
adjudication of cases to remedy the worsening problem of delay in the resolution of rival claims and in the administration of justice. The
requirement is in pursuance to the bill of rights inscribed in the Constitution which guarantees that "all persons shall have a right to the
speedy disposition of their cases before all judicial, quasi-judicial and administrative bodies." The adjudicatory bodies and the parties to
a case are thus enjoined to abide strictly by the rules. While it is true that a litigation is not a game of technicalities, it is equally true that
every case must be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy administration of justice.
There have been some instances wherein this Court allowed a relaxation in the application of the rules, but this flexibility was "never
intended to forge a bastion for erring litigants to violate the rules with impunity." A liberal interpretation and application of the rules of
procedure can be resorted to only in proper cases and under justifiable causes and circumstances.
In Sebastian v. Hon. Morales,24 we straightened out the misconception that the enforcement of procedural rules should never be
permitted if it would prejudice the substantive rights of litigants:
Under Rule 1, Section 6 of the 1997 Rules of Civil Procedure, liberal construction of the rules is the controlling principle to effect
substantial justice. Thus, litigations should, as much as possible, be decided on their merits and not on technicalities. This does not
mean, however, that procedural rules are to be ignored or disdained at will to suit the convenience of a party. Procedural law has its
own rationale in the orderly administration of justice, namely, to ensure the effective enforcement of substantive rights by providing for a
system that obviates arbitrariness, caprice, despotism, or whimsicality in the settlement of disputes. Hence, it is a mistake to suppose
that substantive law and procedural law are contradictory to each other, or as often suggested, that enforcement of procedural rules
should never be permitted if it would result in prejudice to the substantive rights of the litigants.

x x x. Hence, rules of procedure must be faithfully followed except only when for persuasive reasons, they may be relaxed to relieve a
litigant of an injustice not commensurate with his failure to comply with the prescribed procedure. x x x.
Indeed, the primordial policy is a faithful observance of the Rules of Court, and their relaxation or suspension should only be for
persuasive reasons and only in meritorious cases, to relieve a litigant of an injustice not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed.25 Further, a bare invocation of "the interest of substantial justice" will
not suffice to override a stringent implementation of the rules.26
A reading of the CAs Decision readily shows that the leniency it granted GOODLAND was merely anchored on substantial justice. The
CA overlooked GOODLANDs failure to advance meritorious reasons to support its plea for the relaxation of Rule 138, Section 26. The
fact that GOODLAND stands to lose a valuable property is inadequate to dispense with the exacting imposition of a rather basic rule.
More importantly, the CA failed to realize that the ultimate consequences that will come about should GOODLANDs appeal proceed
would in fact contravene substantial justice. The CA and, eventually, this Court will just re-litigate an otherwise non-litigious matter and
thereby compound the delay GOODLAND attempts to perpetrate in order to prevent AUB from rightfully taking possession of the
property.
It is a time-honored legal precept that after the consolidation of titles in the buyer's name, for failure of the mortgagor to redeem,
entitlement to a writ of possession becomes a matter of right.27 As the confirmed owner, the purchasers right to possession becomes
absolute.28 There is even no need for him to post a bond,29 and it is the ministerial duty of the courts to issue the same upon proper
application and proof of title.30 To accentuate the writs ministerial character, the Court has consistently disallowed injunction to prohibit
its issuance despite a pending action for annulment of mortgage or the foreclosure itself.31
The nature of an ex parte petition for issuance of the possessory writ under Act No. 3135 has been described as a non-litigious
proceeding and summary in nature.32 As an ex parte proceeding, it is brought for the benefit of one party only, and without notice to or
consent by any person adversely interested.33
Subsequent proceedings in the appellate courts would merely involve a reiteration of the foregoing settled doctrines. The issue involved
in the assailed RTC issuances is conclusively determined by the above cited legal dictum, and it would be unnecessarily vexatious and
unjust to allow the present controversy to undergo protracted litigation.
AUBs right of possession is founded on its right of ownership over the property which it purchased at the auction sale. Upon expiration
of the redemption period and consolidation of the title to the property, its possessory rights over the same became absolute. We quote
with approval the pronouncement of the RTC, viz.:
As the purchaser of the property in the foreclosure sale to which new title has already been issued, petitioners right over the property
has become absolute, vesting upon it the right of possession and enjoyment of the property which this Court must aid in effecting its
delivery. Under the circumstances, and following established doctrine, the issuance of a writ of possession is a ministerial function
whereby the court exercises neither discretion nor judgment x x x. Said writ of possession must be enforced without delay x x x.34
The law does not require that a petition for a writ of possession be granted only after documentary and testimonial evidence shall have
been offered to and admitted by the court.35 As long as a verified petition states the facts sufficient to entitle petitioner to the relief
requested, the court shall issue the writ prayed for.36
Given the foregoing, we are bound to deny a liberal application of the rules on substitution of counsel and resolve definitively that
GOODLANDs notice of appeal merits a denial, for the failure of Atty. Mondragon to effect a valid substitution of the counsel on record.
Substantial justice would be better served if the notice of appeal is disallowed. In the same way that the appellant in Pioneer was not
permitted to profit from its own manipulation of the rules on substitution of counsel, so too can GOODLAND be not tolerated to foster
vexatious delay by allowing its notice of appeal to carry on.
WHEREFORE, premises considered, the petition is GRANTED. The February 16, 2009 Decision and the May 18, 2009 Resolution of
the Court of Appeals are hereby ANNULLED and SET ASIDE; and the August 23, 2007 and February 15, 2008 Orders of the Regional
Trial Court of Makati City, Branch 150, are REINSTATED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 187188

June 27, 2012

SALVADOR O. MOJAR, EDGAR B. BEGONIA, Heirs of the late JOSE M. CORTEZ, RESTITUTO GADDI, VIRGILIO M. MONANA,
FREDDIE RANCES, and EDSON D. TOMAS, Petitioners,
vs.
AGRO COMMERCIAL SECURITY SERVICE AGENCY, INC., et al.,1 Respondents.
DECISION
SERENO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to annul the entire proceedings before the Court
of Appeals (CA) in CA-G.R. SP No. 102201, in which it issued its Decision dated 21 July 2008 and Resolution dated 16 March 2009.2

Statement of Facts and of the Case


Petitioners were employed as security guards by respondent and assigned to the various branches of the Bank of Commerce in
Pangasinan, La Union and Ilocos Sur.
In separate Office Orders dated 23 and 24 May 2002, petitioners were relieved from their respective posts and directed to report to their
new assignments in Metro Manila effective 3 June 2002. They, however, failed to report for duty in their new assignments, prompting
respondent to send them a letter dated 18 June 2002. It required a written explanation why no disciplinary action should be taken
against them, but the letter was not heeded.
On 15 February 2005, petitioners filed a Complaint for illegal dismissal against respondent and the Bank of Commerce, Dagupan
Branch, before the National Labor Relations Commission (NLRC). Petitioners claimed, among others, that their reassignment was a
scheme to sever the employer-employee relationship and was done in retaliation for their pressing their claim for salary differential,
which they had earlier filed against respondent and the Bank of Commerce before the NLRC. They also contended that the transfer to
Manila was inconvenient and prejudicial, since they would incur additional expenses for board and lodging.
On 22 May 2006, the Labor Arbiter (LA) rendered a Decision3 finding that petitioners were illegally dismissed. The dispositive portion
reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondents to reinstate all the complainants to their
former assignment in Pangasinan with full backwages and if reinstatement is no longer possible, to pay separation pay of one month for
every year of service each of the seven complainant security guards. (A detailed computation of the judgment award is attached as
Annex "A.")4 (Italicized in the original)
On appeal, the NLRC affirmed the LAs ruling, with the modification that the Complaint against the Bank of Commerce was
dismissed.5 The dispositive portion provides:
WHEREFORE, premises considered, the appeal of Agro Commercial Security Service Agency, Inc. is hereby DISMISSED for lack of
merit. The Appeal of Bank of Commerce is GRANTED for being impressed with merit. Accordingly, judgment is hereby rendered
MODIFYING the Decision of the Labor Arbiter dated May 22, 2006 by DISMISSING the complaint against Bank of CommerceDagupan. All other dispositions of the Labor Arbiter not so modified, STAYS.6
On 23 January 2008, respondent filed a Motion for Extension to file a Petition for Certiorari before the CA. In a Resolution dated 20
February 2008, the latter granted the Motion for Extension, allowing respondent until 10 February 2008 within which to file its Petition.
On 9 February 2008, respondent filed its Petition for Certiorari before the appellate court.
On 30 June 2008, the CA issued a Resolution noting that no comment on the Petition had been filed, and stating that the case was now
deemed submitted for resolution.
On 21 July 2008, the CA rendered its Decision. Finding merit in the Petition, it found the Orders transferring petitioners to Manila to be a
valid exercise of management prerogative. The records were bereft of any showing that the subject transfer involved a diminution of
rank or salaries. Further, there was no showing of bad faith or ill motive on the part of the employer. Thus, petitioners refusal to comply
with the transfer orders constituted willful disobedience of a lawful order of an employer and abandonment, which were just causes for
termination under the Labor Code. However, respondent failed to observe the due process requirements in terminating them. The
dispositive portion of the CA Decision provides:
WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Decision and Resolution of the NLRC dated July
31, 2007 and October 31, 2007[,] respectively, in NLRC NCR CA No. 046036-05 are REVERSED and SET ASIDE. The complaints of
private respondents for illegal dismissal are hereby DISMISSED. However, petitioner is ordered to pay private respondents the sum
of P 10,000.00 each for having violated the latters right to statutory due process.7
On 1 August 2008, petitioner Mojar filed a Manifestation8 before the CA, stating that he and the other petitioners had not been served a
copy of the CA Petition. He also said that they were not aware whether their counsel before the NLRC, Atty. Jose C. Espinas, was
served a copy thereof, since the latter had already been bedridden since December 2007 until his demise on "25 February
2008."9 Neither could their new counsel, Atty. Mario G. Aglipay, enter his appearance before the CA, as petitioners failed to "get [the]
folder from the office of Atty. Espinas, as the folder can no longer be found."10
Thereafter, petitioners filed a Motion to Annul Proceedings11 dated 9 September 2008 before the CA. They moved to annul the
proceedings on the ground of lack of jurisdiction. They argued that the NLRC Decision had already attained finality, since the Petition
before the CA was belatedly filed, and the signatory to the Certification of non-forum shopping lacked the proper authority.

In a Resolution dated 16 March 2009, the CA denied the Motion to Annul Proceedings.
Hence, this Petition.
The Petition raised the following arguments: (1) There was no proof of service attached to the Motion for Extension to file a Petition for
Certiorari before the CA; thus, both the Motion and the Petition were mere scraps of paper. (2) Respondent purposely intended to
exclude petitioners from the proceedings before the CA by omitting their actual addresses in the CA Petition, a mandatory requirement
under Section 3, Rule 46; in relation to Section 1, Rule 65 of the Rules of Court. Further, respondent failed to prove the valid service of
its CA Petition upon petitioners former counsel of record. (3) The CA was grossly ignorant of the law in ignoring jurisprudence, which
states that when the floating status of an employee lasts for more than six months, the latter may be considered to have been
constructively dismissed.
On 3 September 2009, respondent filed its Comment on the Petition, pursuant to this Courts 29 June 2009 Resolution. In its Comment,
it argued that the CA Decision had already become final and executory, inasmuch as the Motion to Annul Proceedings, a procedural
approach not provided for in the Rules, was filed some 44 days after the service of the CA Decision on the counsel for petitioners.
Further, Atty. Aglipay had then no legal standing to appear as counsel, considering that there was still no substitution of counsel at the
time he filed the Motion to Annul Proceedings. In any case, petitioners are bound by the actions of their counsel, Atty. Espinas.
On 1 March 2010, this Court issued a Resolution requiring petitioners to file their reply, which petitioners complied with on 26 April
2010. In their Reply, petitioners state among others that the records of the CA case showed that there was a deliberate violation of their
right to due process. The CA Petition did not contain the required affidavit of service, which alone should have caused the motu proprio
dismissal thereof. Further, the instant Petition before this Court is an appropriate mode to contest the CA Decision and Resolution,
which petitioners contend are void judgments. They also argue that there is no rule on the clients substitution in case of the death of
counsel. Instead, the reglementary period to file pleadings in that case must be suspended and made more lenient, considering that the
duty of substitution is transferred to a non-lawyer.
On 30 March 2011, respondent filed a Motion for Early Resolution of the case. Petitioners likewise filed a Motion for Leave (For the
Admission of the Instant Comment on Private Respondents Motion for Early Resolution), stating that they were joining respondent in
moving for the early resolution of the case.
This Court will resolve the issues raised in seriatim.
Actual Addresses of Parties
Petitioners contend that the CA should not have taken cognizance of the Petition before it, as their actual addresses were not indicated
therein as required under Section 3, Rule 4612 of the Rules of Court, and pursuant to Cendaa v. Avila.13 In the 2008 case Cendaa, this
Court ruled that the requirement that a petition for certiorari must contain the actual addresses of all the petitioners and the respondents
is mandatory. The failure to comply with that requirement is a sufficient ground for the dismissal of a petition.
This rule, however, is not absolute. In the 2011 case Santos v. Litton Mills Incorporated,14 this Court ruled that where the petitioner
clearly mentioned that the parties may be served with the courts notices or processes through their respective counsels, whose
addresses have been clearly specified as in this case, this act would constitute substantial compliance with the requirements of Section
3, Rule 46. The Court further observed that the notice required by law is notice to counsel if the party has already appeared by counsel,
pursuant to Section 2, Rule 13 of the Rules of Court.
In its Petition before the CA, respondent clearly indicated the following:
THE PARTIES
2.0. The petitioner AGRO COMMERCIAL SECURITY SERVICE AGENCY, INC. (hereafter petitioner AGRO), is a corporation existing
under Philippine laws, and may be served with process thru counsel, at his address hereunder indicated; private respondents (1)
SALVADOR O. MOJAR; (2) EDGAR B. BEGONIA; (3) JOSE M. CORTEZ; (4) FREDDIE RANCES; (5) VIRGILIO MONANA; (6)
RESTITUTU [sic] GADDI; and, (7) EDSON D. TOMAS, are all of age, and during the material period, were in the employ of petitioner
AGRO as security guards; said respondents may be served with process thru their common counsel, ATTY. JOSE C. ESPINAS at No.
51 Scout Tuazon, Quezon City; on the other hand, respondent National Labor Relations Commission, 1st Division, Quezon City, is the
agency having jurisdiction over labor disputes in the Philippines and may be served with process at offices in Quezon City;15
The foregoing may thus be considered as substantial compliance with Section 3, Rule 46. In any case, and as will be discussed further
below, the CA had sufficient reason to take cognizance of the Petition.

Affidavit of Service
Section 3, Rule 46 provides that the petition for certiorari should be filed together with the proof of service thereof on the respondent.
Under Section 13, Rule 13 of the Rules of Court, if service is made by registered mail, as in this case, proof shall be made by an
affidavit of the person mailing and the registry receipt issued by the mailing office. Section 3, Rule 46 further provides that the failure to
comply with any of the requirements shall be sufficient ground for the dismissal of the petition.
Petitioners allege that no affidavit of service was attached to the CA Petition. Neither is there any in the copy of the CA Petition attached
to the instant Petition. In its Comment, respondent claims that petitioners through their counsel, Atty. Aglipay can be charged with
knowledge of the pendency of the CA Petition. It says that on April 2008, Atty. Aglipay filed before the NLRC an Entry of Appearance
and Motion for Execution Pending Appeal.16However, petitioners merely indicated therein that they were "respectfully mov[ing] for the
execution pending appeal of the Labor Arbiters decision dated 22 May 2006 affirmed by the NLRC."17 There was no indication that they
had been served a copy of the CA Petition. No other proof was presented by respondent to show petitioners actual receipt of the CA
Petition. In any case, this knowledge, even if presumed, would not and could not take the place of actual service and proof of
service by respondent.
In Ferrer v. Villanueva,18 petitioner therein failed to append the proof of service to his Petition for Certiorari. Holding that this failure was
a fatal defect, the Court stated:
There is no question that petitioner herein was remiss in complying with the foregoing Rule. In Cruz v. Court of Appeals, we ruled that
with respect to motions, proof of service is a mandatory requirement. We find no cogent reason why this dictum should not apply and
with more reason to a petition for certiorari, in view of Section 3, Rule 46 which requires that the petition shall be filed "together with
proof of service thereof." We agree with the Court of Appeals that the lack of proof of service is a fatal defect. The utter disregard of the
Rule cannot be justified by harking to substantial justice and the policy of liberal construction of the Rules. Technical rules of procedure
are not meant to frustrate the ends of justice. Rather, they serve to effect the proper and orderly disposition of cases and thus
effectively prevent the clogging of court dockets. (Emphasis in the original)
Indeed, while an affidavit of service is required merely as proof that service has been made on the other party, it is nonetheless
essential to due process and the orderly administration of justice.19
Be that as it may, it does not escape the attention of this Court that in the CA Resolution dated 16 March 2009, the appellate court
stated that their records revealed that Atty. Espinas, petitioners counsel of record at the time, was duly served a copy of the following:
CA Resolution dated 20 February 2008 granting respondents Motion for Extension of Time to file the CA Petition; CA Resolution dated
24 April 2008 requiring petitioners to file their Comment on the CA Petition; and CA Resolution dated 30 June 2008, submitting the case
for resolution, as no comment was filed.
Such service to Atty. Espinas, as petitioners counsel of record, was valid despite the fact he was already deceased at the time. If a
party to a case has appeared by counsel, service of pleadings and judgments shall be made upon his counsel or one of them, unless
service upon the party is specifically ordered by the court. It is not the duty of the courts to inquire, during the progress of a case,
whether the law firm or partnership representing one of the litigants continues to exist lawfully, whether the partners are still alive, or
whether its associates are still connected with the firm.20
It is the duty of party-litigants to be in contact with their counsel from time to time in order to be informed of the progress of their case. It
is likewise the duty of parties to inform the court of the fact of their counsels death.21 Their failure to do so means that they have been
negligent in the protection of their cause.22 They cannot pass the blame to the court, which is not tasked to monitor the changes in the
circumstances of the parties and their counsel.
Substitution of Counsel
Petitioners claim that Atty. Espinas passed away on 8 February 2008. They further claim that he was already bedridden as early as
December 2007, and thus they "failed to get any information whether [he] was served with a copy of the [CA Petition]."23
Petitioners were negligent in the conduct of their litigation. Having known that Atty. Espinas was already bedridden as early as
December 2007, they should have already obtained new counsel who could adequately represent their interests. The excuse that Atty.
Aglipay could not enter his appearance before the CA "because [petitioners] failed to get [their] folder from the office of Atty.
Espinas"24 is flimsy at best.
The requirements for a valid substitution of counsel have been jurisprudentially settled in this wise:

Under Section 26, Rule 138 of the Rules of Court and established jurisprudence, a valid substitution of counsel has the following
requirements: (1) the filing of a written application for substitution; (2) the client's written consent; (3) the consent of the substituted
lawyer if such consent can be obtained; and, in case such written consent cannot be procured, (4) a proof of service of notice of such
motion on the attorney to be substituted in the manner required by the Rules. Where death of the previous attorney is the cause of
substitution of the counsel, a verified proof of the death of such attorney (usually a death certificate) must accompany the notice of
appearance of the new counsel.25
The fact that petitioners were unable to obtain their folder from Atty. Espinas is immaterial. Proof of service upon the lawyer to be
substituted will suffice where the lawyers consent cannot be obtained. With respect to the records of the case, these may easily be
reconstituted by obtaining copies thereof from the various courts involved.
Petitioners allegedly went to the CA sometime prior to 31 July 2008, or the date of filing of their Manifestation before the CA, to inquire
about the status of their case. Allegedly, they "always visited the Court of Appeals for [the] development of their case."26 It is doubtful
that a person who regularly follows up the status of his case before a court would not be told, first, that a petition has been filed against
him; and, second, that the courts resolutions have been sent to his counsel. It is questionable why, knowing these matters, petitioners
did not seek the replacement of their counsel, if the latter was unable to pursue their case. Further, despite their manifestation that,
sometime prior to 31 July 2008, they were already aware that the case had been submitted for resolution, they still waited until 9
September 2008 or until they allegedly had knowledge of the CA Decision before they filed the Motion to Annul Proceedings.
In Ampo v. Court of Appeals,27 this Court explained the vigilance that must be exercised by a party:
We are not persuaded by petitioners argument that he was not aware that his counsel had died or that an adverse judgment had
already been rendered until he received the notice of promulgation from the RTC of Butuan City on April 20, 2005. Time and again we
have stated that equity aids the vigilant, not those who slumber on their rights. Petitioner should have taken it upon himself to
periodically keep in touch with his counsel, check with the court, and inquire about the status of the case. Had petitioner been more
prudent, he would have found out sooner about the death of his counsel and would have taken the necessary steps to prevent his
present predicament.
xxx

xxx

xxx

Litigants who are represented by counsel should not expect that all they need to do is sit back, relax and await the outcome of their
cases. Relief will not be granted to a party who seeks avoidance from the effects of the judgment when the loss of the remedy at law
was due to his own negligence. The circumstances of this case plainly show that petitioner only has himself to blame. Neither can he
invoke due process. The essence of due process is simply an opportunity to be heard. Due process is satisfied when the parties are
afforded a fair and reasonable opportunity to explain their respective sides of the controversy. Where a party, such as petitioner, was
afforded this opportunity to participate but failed to do so, he cannot complain of deprivation of due process. If said opportunity is not
availed of, it is deemed waived or forfeited without violating the constitutional guarantee.
In this case, petitioners must bear the fruits of their negligence in the handling of their case. They may not decry the denial of due
process, when they were indeed afforded the right to be heard in the first place.
Substantive Issue: Illegal Dismissal
Petitioners argue that they were illegally dismissed, based on the 1989 case Agro Commercial Security Services Agency, Inc. v.
NLRC.,28 which holds that when the floating status of employees lasts for more than six (6) months, they may be considered to have
been illegally dismissed from the service.
Unfortunately, the above-mentioned case is not applicable here. In Agro, the service contracts of the security agency therein with
various corporations and government agencies to which the security guards were previously assigned were terminated, generally
due to the sequestration of the said offices. Accordingly, many of the security guards were placed on floating status. "Floating status"
means an indefinite period of time when one does not receive any salary or financial benefit provided by law.29 In this case, petitioners
were actually reassigned to new posts, albeit in a different location from where they resided. Thus, there can be no floating status or
indefinite period to speak of. Instead, petitioners were the ones who refused to report for work in their new assignment.
In cases involving security guards, a relief and transfer order in itself does not sever the employment relationship between the security
guards and their agency. Employees have the right to security of tenure, but this does not give them such a vested right to their
positions as would deprive the company of its prerogative to change their assignment or transfer them where their services, as security
guards, will be most beneficial to the client.30

An employer has the right to transfer or assign its employees from one office or area of operation to another in pursuit of its legitimate
business interest, provided there is no demotion in rank or diminution of salary, benefits, and other privileges; and the transfer is not
motivated by discrimination or bad faith, or effected as a form of punishment or demotion without sufficient cause.31
While petitioners may claim that their transfer to Manila will cause added expenses and inconvenience, we agree with the CA that,
absent any showing of bad faith or ill motive on the part of the employer, the transfer remains valid.
WHEREFORE, the Petition is DENIED. The Court of Appeals Decision dated 21 July 2008 and Resolution dated 16 March 2009 in CAG.R. SP No. 102201 are hereby AFFIRMED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
Adm. Case No. 6266

November 16, 2006

ESTELA ANASTACIO-BRIONES, Complainant,


vs.
ATTY. ALFREDO A. ZAPANTA, Respondent.
DECISION
QUISUMBING, J.:
This is a disbarment complaint filed by Estela Anastacio-Briones against respondent Atty. Alfredo A. Zapanta for abandonment and
neglect of duties.
In her Complaint1 dated December 1, 2003, Estela Anastacio-Briones stated that she engaged the services of respondent to file three
civil cases involving a parcel of land located in Antipolo City. The cases were then consolidated2 before the Regional Trial Court of
Antipolo City, Branch 73.
Complainant averred that on October 25, 2002, she showed respondent a copy of "Discharge and Appearance of Counsels with Exparte Motion to Cancel the October 25, 2002 Hearing" she intended to file that day. She claimed that even prior to the hearing, she
informed respondent of her joint venture agreement with a real estate developer who offered the services of its own counsel.
Complainant added that respondent requested her not to file it and he would submit a withdrawal of appearance instead. Complainant
also informed respondent that she could not attend the hearing on January 6, 2003 because of other commitments. Respondent
allegedly assured her that he would be present in the hearing.
On January 6, 2003, both respondent and complainant failed to appear in the hearing. As a result, the trial court declared them to have
waived their right to present further witnesses and directed them to file their formal offer of evidence within ten days from notice. The
trial court noted that respondent received its Order on January 24, 2003, but respondent did not act on it within the ten-day period.
Instead of filing a formal offer of evidence, respondent filed a withdrawal of appearance on March 5, 2003. On March 10, 2003, the trial
court dismissed the case with prejudice.3
On May 5, 2003, complainant learned that the cases were dismissed and that respondent did not attend the January 6, 2003 hearing
and did not file a formal offer of evidence.
Complainant prayed that respondent be disbarred for abandoning her case and withdrawing his appearance as counsel without her
knowledge.
In his Comment4 dated June 10, 2004, respondent countered that he was discharged as complainants counsel after the October 25,
2002 hearing. Respondent added that he prepared a withdrawal of appearance on October 30, 2002 but complainant ignored his
several requests to sign it in his office. Nevertheless, he claimed he filed a withdrawal of appearance on March 5, 2003 without
complainants conformity.
Respondent denied promising complainant that he would attend the January 6, 2003 hearing. According to him, complainant informed
his secretary that her new lawyer would attend. Respondent claimed further that complainants new lawyer should be faulted for
belatedly filing an entry of appearance and a motion for reconsideration. Respondent claimed that he was merely being used as a
scapegoat for complainants own negligence in pursuing the cases.
In a Resolution5 dated September 20, 2004, the Court referred the matter to the Integrated Bar of the Philippines (IBP) for investigation,
report and recommendation.
In his Report and Recommendation dated May 26, 2005, Commissioner Dennis A.B. Funa of the IBP Commission on Bar Discipline
found respondent liable for negligence in the performance of his duties as counsel, and for violating the Code of Professional
Responsibility. Commissioner Funa recommended respondents suspension for three months from the practice of law.

In Resolution No. XVII-2005-104 dated October 22, 2005, the IBP Board of Governors adopted and approved the report and
recommendation of Commissioner Funa. On November 15, 2005, the IBP Board of Governors forwarded the Report to this Court
pursuant to Rule 139-B of the Rules of Court.
On January 4, 2006, respondent filed with this Court a motion for reconsideration. In its comment, the IBP, through Commissioner Funa,
recommended the denial of the motion.
We sustain the findings of the IBP that respondent was remiss in performing his duties as counsel of complainant. The Court finds
respondent liable for negligence and for violation of Canon 186 specifically Rules 18.037 and 18.048 of the Code of Professional
Responsibility.
Section 26, Rule 138 of the Rules of Court9 provides the proper procedure for a lawyers withdrawal as counsel in a case. Unless the
procedure prescribed in the abovementioned section is complied with, the attorney of record is regarded as the counsel who should be
served with copies of the judgments, orders and pleadings and who should be held responsible for the case.10 For its part, the court
could recognize no other representation on behalf of the client except such counsel of record until a formal substitution of attorney is
effected.11
In Orcino v. Gaspar,12 we held that until a lawyers withdrawal shall have been approved, he remains counsel of record and is expected
by his client as well as by the court to do what the interests of his client require. He must still appear on the date of hearing for the
attorney-client relation does not terminate formally until there is a withdrawal of his appearance on record.
In this case, respondent admitted that he did not attend the January 6, 2003 hearing despite being notified by the court.1wphi1 His
claim that he was already discharged as counsel as early as October 25, 2002 is negated by the record that he withdrew his
appearance only on March 5, 2003. Until his dismissal or withdrawal was made of record, any judicial notice sent to him was binding
upon his client even though as between them the professional relationship may have been terminated.13 Thus, unless properly relieved,
respondent is responsible for the conduct of the cases and his failure to attend the hearing and comply with the trial courts directive to
file a formal offer of evidence constitute inexcusable negligence.
Moreover, respondents negligence is not excused by his claim that he had prepared his withdrawal of appearance as early as October
30, 2002 but complainant refused to sign it. In Macarilay v. Seria,14 with similar facts, we rejected the counsels excuse for failing to file
the complaints, although the complaints were finished, due to his clients refusal to sign them.
Certainly not to be overlooked is the duty of an attorney to inform his client of the developments of the case. 15 We note that it was only
on May 5, 2003 that complainant learned that she defaulted in the case. As a lawyer mindful of the interest of his client, respondent
should have informed the complainant of the courts order addressed to him, especially if he considered himself discharged in order for
complainant and her new counsel to be guided accordingly.
The appropriate penalty on an errant lawyer depends on the exercise of sound judicial discretion based on the surrounding facts. The
penalties for a lawyers failure to file a brief or other pleading range from reprimand, warning with fine, suspension and, in grave cases,
disbarment.16 In this case, this Court sustains the recommendation of the IBP for respondents suspension of three months.
WHEREFORE, respondent Atty. Alfredo A. Zapanta is hereby found GUILTY of negligence and is meted the penalty
of SUSPENSION from the practice of law for THREE MONTHS effective upon finality of this Decision.
Let copies of this Decision be furnished the Office of the Bar Confidant to be appended to respondents personal record as an attorney,
the Integrated Bar of the Philippines, the Department of Justice, and all courts in this country for their information and guidance.
SO ORDERED.