BA FINANCE CORPORATION, petitioner,
Not long thereafter, however, the car bogged
vs.
HON. COURT OF APPEALS, Hon. Presiding Judge of Regional Trial
Court of Manila, Branch 43, MANUEL CUADY and LILIA
CUADY, respondents.
Valera, Urmeneta & Associates for petitioner.
Pompeyo L. Bautista for private respondents.
PARAS, J.:
This is a petition for review on certiorari which seeks to reverse and
set aside (1) the decision of the Court of Appeals dated July 21, 1987
in CA-G.R. No. CV-06522 entitled "B.A. Finance Corporation,
Plaintiff-Appellant, vs. Manuel Cuady and Lilia Cuady,
Defendants-Appellees," affirming the decision of the Regional Trial
Court of Manila, Branch 43, which dismissed the complaint in Civil
Case No. 82-10478, and (2) the resolution dated February 9, 1988
denying petitioner's motion for reconsideration.
As gathered from the records, the facts are as follows:
On July 15, 1977, private respondents Manuel Cuady and Lilia Cuady
obtained from Supercars, Inc. a credit of P39,574.80, which amount
covered the cost of one unit of Ford Escort 1300, four-door sedan.
Said obligation was evidenced by a promissory note executed by
private respondents in favor of Supercars, Inc., obligating
themselves to pay the latter or order the sum of P39,574.80,
inclusive of interest at 14% per annum, payable on monthly
installments of P1,098.00 starting August 16, 1977, and on the 16th
day of the next 35 months from September 16, 1977 until full
payment thereof. There was also stipulated a penalty of P10.00 for
every month of late installment payment. To secure the faithful and
prompt compliance of the obligation under the said promissory note,
the Cuady spouses constituted a chattel mortage on the
aforementioned motor vehicle. On July 25, 1977, Supercars, Inc.
assigned the promissory note, together with the chattel mortgage,
to B.A. Finance Corporation. The Cuadys paid a total of P36,730.15
to the B.A. Finance Corporation, thus leaving an unpaid balance of
P2,344.65 as of July 18, 1980. In addition thereto, the Cuadys owe
B.A. Finance Corporation P460.00 representing penalties or
surcharges for tardy monthly installments (Rollo, pp. 27-29).
Parenthetically, the B.A. Finance Corporation, as the assignee of the
mortgage lien obtained the renewal of the insurance coverage over
the aforementioned motor vehicle for the year 1980 with Zenith
Insurance Corporation, when the Cuadys failed to renew said
insurance coverage themselves. Under the terms and conditions of
the said insurance coverage, any loss under the policy shall be
payable to the B.A. Finance Corporation (Memorandum for Private
Respondents, pp. 3-4).
On April 18, 1980, the aforementioned motor vehicle figured in an
accident and was badly damaged. The unfortunate happening was
reported to the B.A. Finance Corporation and to the insurer, Zenith
Insurance Corporation. The Cuadys asked the B.A. Finance
Corporation to consider the same as a total loss, and to claim from
the insurer the face value of the car insurance policy and apply the
same to the payment of their remaining account and give them the
surplus thereof, if any. But instead of heeding the request of the
Cuadys, B.A. Finance Corporation prevailed upon the former to just
have the car repaired.
down. The Cuadys wrote B.A. Finance Corporation requesting the
latter to pursue their prior instruction of enforcing the total loss
provision in the insurance coverage. When B.A. Finance Corporation
did not respond favorably to their request, the Cuadys stopped
paying their monthly installments on the promissory note (Ibid., pp.
45).
On June 29, 1982, in view of the failure of the Cuadys to pay the
remaining installments on the note, B.A. Finance Corporation sued
them in the Regional Trial Court of Manila, Branch 43, for the
recovery of the said remaining installments (Memorandum for the
Petitioner, p. 1).
After the termination of the pre-trial conference, the case was set
for trial on the merits on April 25, 1984. B.A. Finance Corporation's
evidence was presented on even date and the presentation of
Cuady's evidence was set on August 15, 1984. On August 7,1984,
Atty. Noel Ebarle, counsel for the petitioner, filed a motion for
postponement, the reason being that the "handling" counsel, Atty.
Ferdinand Macibay was temporarily assigned in Cebu City and
would not be back until after August 15, 1984. Said motion was,
however, denied by the trial court on August 10, 1984. On August
15, 1984, the date of hearing, the trial court allowed private
respondents to adduce evidence ex-parte in the form of an affidavit
to be sworn to before any authorized officer. B.A. Finance
Corporation filed a motion for reconsideration of the order of the
trial court denying its motion for postponement. Said motion was
granted in an order dated September 26, 1984, thus:
The Court grants plaintiff's motion for reconsideration dated August
22, 1984, in the sense that plaintiff is allowed to adduce evidence in
the form of counter-affidavits of its witnesses, to be sworn to before
any person authorized to administer oaths, within ten days from
notice hereof. (Ibid., pp. 1-2).
B.A. Finance Corporation, however, never complied with the
above-mentioned order, paving the way for the trial court to render
its decision on January 18, 1985, the dispositive portion of which
reads as follows:
IN VIEW WHEREOF, the Court DISMISSES the complaint without
costs.
SO ORDERED. (Rollo, p. 143)
On appeal, the respondent appellate court * affirmed the decision
of the trial court. The decretal portion of the said decision reads as
follows:
WHEREFORE, after consultation among the undersigned members
of this Division, in compliance with the provision of Section 13,
Article VIII of the Constitution; and finding no reversible error in the
judgment appealed from, the same is hereby AFFIRMED, without
any pronouncement as to costs. (Ibid., p. 33)
B.A. Finance Corporation moved for the reconsideration of the
above decision, but the motion was denied by the respondent
appellate court in a resolution dated February 9, 1988 (Ibid., p. 38).
Hence, this present recourse.
On July 11, 1990, this Court gave due course to the petition and
required the parties to submit their respective memoranda. The
parties having complied with the submission of their memoranda,
the case was submitted for decision.
The real issue to be resolved in the case at bar is whether or not B.A.
Finance Corporation has waived its right to collect the unpaid
balance of the Cuady spouses on the promissory note for failure of
the former to enforce the total loss provision in the insurance
coverage of the motor vehicle subject of the chattel mortgage.
It is the contention of B.A. Finance Corporation that even if it failed
to enforce the total loss provision in the insurance policy of the
motor vehicle subject of the chattel mortgage, said failure does not
operate to extinguish the unpaid balance on the promissory note,
considering that the circumstances obtaining in the case at bar do
not fall under Article 1231 of the Civil Code relative to the modes of
extinguishment of obligations (Memorandum for the Petitioner, p.
11).
On the other hand, the Cuadys insist that owing to its failure to
enforce the total loss provision in the insurance policy, B.A. Finance
Corporation lost not only its opportunity to collect the insurance
proceeds on the mortgaged motor vehicle in its capacity as the
assignee of the said insurance proceeds pursuant to the
memorandum in the insurance policy which states that the "LOSS: IF
ANY, under this policy shall be payable to BA FINANCE CORP., as
their respective rights and interest may appear" (Rollo, p. 91) but
also the remaining balance on the promissory note (Memorandum
for the Respondents, pp. 16-17).
The petition is devoid of merit.
B.A. Finance Corporation was deemed subrogated to the rights and
obligations of Supercars, Inc. when the latter assigned the
promissory note, together with the chattel mortgage constituted on
the motor vehicle in question in favor of the former. Consequently,
B.A. Finance Corporation is bound by the terms and conditions of
the chattel mortgage executed between the Cuadys and Supercars,
Inc. Under the deed of chattel mortgage, B.A. Finance Corporation
was constituted attorney-in-fact with full power and authority to file,
follow-up, prosecute, compromise or settle insurance claims; to sign
execute and deliver the corresponding papers, receipts and
documents to the Insurance Company as may be necessary to prove
the claim, and to collect from the latter the proceeds of insurance to
the extent of its interests, in the event that the mortgaged car
suffers any loss or damage (Rollo, p. 89). In granting B.A. Finance
Corporation the aforementioned powers and prerogatives, the
Cuady spouses created in the former's favor an agency. Thus, under
Article 1884 of the Civil Code of the Philippines, B.A. Finance
Corporation is bound by its acceptance to carry out the agency, and
is liable for damages which, through its non-performance, the
Cuadys, the principal in the case at bar, may suffer.
Unquestionably, the Cuadys suffered pecuniary loss in the form of
salvage value of the motor vehicle in question, not to mention the
amount equivalent to the unpaid balance on the promissory note,
when B.A. Finance Corporation steadfastly refused and refrained
from proceeding against the insurer for the payment of a clearly
valid insurance claim, and continued to ignore the yearning of the
Cuadys to enforce the total loss provision in the insurance policy,
despite the undeniable fact that Rea Auto Center, the auto repair
shop chosen by the insurer itself to repair the aforementioned
motor vehicle, misrepaired and rendered it completely useless and
unserviceable (Ibid., p. 31).
Accordingly, there is no reason to depart from the ruling set down
by the respondent appellate court. In this connection, the Court of
Appeals said:
... Under the established facts and circumstances, it is unjust, unfair
and inequitable to require the chattel mortgagors, appellees herein,
to still pay the unpaid balance of their mortgage debt on the said car,
the non-payment of which account was due to the stubborn refusal
and failure of appellant mortgagee to avail of the insurance money
which became due and demandable after the insured motor vehicle
was badly damaged in a vehicular accident covered by the insurance
risk. ... (Ibid.)
On the allegation that the respondent court's findings that B.A.
Finance Corporation failed to claim for the damage to the car was
not supported by evidence, the records show that instead of acting
on the instruction of the Cuadys to enforce the total loss provision
in the insurance policy, the petitioner insisted on just having the
motor vehicle repaired, to which private respondents reluctantly
acceded. As heretofore mentioned, the repair shop chosen was not
able to restore the aforementioned motor vehicle to its condition
prior to the accident. Thus, the said vehicle bogged down shortly
thereafter. The subsequent request of the Cuadys for the B.A.
Finance Corporation to file a claim for total loss with the insurer fell
on deaf ears, prompting the Cuadys to stop paying the remaining
balance on the promissory note (Memorandum for the Respondents,
pp. 4-5).
Moreover, B.A. Finance Corporation would have this Court review
and reverse the factual findings of the respondent appellate court.
This, of course, the Court cannot and will not generally do. It is
axiomatic that the judgment of the Court of Appeals is conclusive as
to the facts and may not ordinarily be reviewed by the Supreme
Court. The doctrine is, to be sure, subject to certain specific
exceptions none of which, however, obtains in the instant case
(Luzon Brokerage Corporation v. Court of Appeals, 176 SCRA 483
[1989]).
Finally, B.A. Finance Corporation contends that respondent trial
court committed grave abuses of discretion in two instances: First,
when it denied the petitioner's motion for reconsideration praying
that the counsel be allowed to cross-examine the affiant, and;
second, when it seriously considered the evidence
adduced ex-parte by the Cuadys, and heavily relied thereon, when
in truth and in fact, the same was not formally admitted as part of
the evidence for the private respondents (Memorandum for the
Petitioner, p. 10). This Court does not have to unduly dwell on this
issue which was only raised by B.A. Finance Corporation for the first
time on appeal. A review of the records of the case shows that B.A.
Finance Corporation failed to directly raise or ventilate in the trial
court nor in the respondent appellate court the validity of the
evidence adduced ex-parte by private respondents. It was only
when the petitioner filed the instant petition with this Court that it
later raised the aforementioned issue. As ruled by this Court in a
long line of cases, issues not raised and/or ventilated in the trial
court, let alone in the Court of Appeals, cannot be raised for the first
time on appeal as it would be offensive to the basic rules of fair play,
justice and due process (Galicia v. Polo, 179 SCRA 375 [1989]; Ramos
v. Intermediate Appellate Court, 175 SCRA 70 [1989]; Dulos Realty &
Development Corporation v. Court of Appeals, 157 SCRA 425 [1988];
Dihiansan, et al. v. Court of Appeals, et al., 153 SCRA 712 [1987]; De
la Santa v. Court of Appeals, et al., 140 SCRA 44 [1985]).
PREMISES CONSIDERED, the instant petition is DENIED, and the
decision appealed from is AFFIRMED.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur.
Sarmiento, J., is on leave.
CORAZON L. ESCUETA, assisted by her husband EDGAR ESCUETA,
IGNACIO E. RUBIO, THE HEIRS OF LUZ R. BALOLOY, namely,
ALEJANDRINO R. BALOLOY and BAYANI R. BALOLOY, Petitioners,
vs.
RUFINA LIM, Respondent.
DECISION
AZCUNA, J.:
This is an appeal by certiorari1 to annul and set aside the Decision
and Resolution of the Court of Appeals (CA) dated October 26, 1998
and January 11, 1999, respectively, in CA-G.R. CV No. 48282,
entitled "Rufina Lim v. Corazon L. Escueta, etc., et. al."
The facts2 appear as follows:
Respondent Rufina Lim filed an action to remove cloud on, or quiet
title to, real property, with preliminary injunction and issuance of [a
hold-departure order] from the Philippines against Ignacio E. Rubio.
Respondent amended her complaint to include specific performance
and damages.
In her amended complaint, respondent averred inter alia that she
bought the hereditary shares (consisting of 10 lots) of Ignacio Rubio
[and] the heirs of Luz Baloloy, namely: Alejandrino, Bayani, and
other co-heirs; that said vendors executed a contract of sale dated
April 10, 1990 in her favor; that Ignacio Rubio and the heirs of Luz
Baloloy received [a down payment] or earnest money in the amount
of P102,169.86 and P450,000, respectively; that it was agreed in the
contract of sale that the vendors would secure certificates of title
covering their respective hereditary shares; that the balance of the
purchase price would be paid to each heir upon presentation of
their individual certificate[s] of [title]; that Ignacio Rubio refused to
receive the other half of the down payment which is P[100,000];
that Ignacio Rubio refused and still refuses to deliver to [respondent]
the certificates of title covering his share on the two lots; that with
respect to the heirs of Luz Baloloy, they also refused and still refuse
to perform the delivery of the two certificates of title covering their
share in the disputed lots; that respondent was and is ready and
willing to pay Ignacio Rubio and the heirs of Luz Baloloy upon
presentation of their individual certificates of title, free from
whatever lien and encumbrance;
As to petitioner Corazon Escueta, in spite of her knowledge that the
disputed lots have already been sold by Ignacio Rubio to respondent,
it is alleged that a simulated deed of sale involving said lots was
effected by Ignacio Rubio in her favor; and that the simulated deed
of sale by Rubio to Escueta has raised doubts and clouds over
respondent’s title.
In their separate amended answers, petitioners denied the material
allegations of the complaint and alleged inter alia the following:
For the heirs of Luz Baloloy (Baloloys for brevity):
Respondent has no cause of action, because the subject contract of
sale has no more force and effect as far as the Baloloys are
concerned, since they have withdrawn their offer to sell for the
reason that respondent failed to pay the balance of the purchase
price as orally promised on or before May 1, 1990.
For petitioners Ignacio Rubio (Rubio for brevity) and Corazon
Escueta (Escueta for brevity):
Respondent has no cause of action, because Rubio has not entered
into a contract of sale with her; that he has appointed his daughter
Patricia Llamas to be his attorney-in-fact and not in favor of Virginia
Rubio Laygo Lim (Lim for brevity) who was the one who represented
him in the sale of the disputed lots in favor of respondent; that
the P100,000 respondent claimed he received as down payment for
the lots is a simple transaction by way of a loan with Lim.
The Baloloys failed to appear at the pre-trial. Upon motion of
respondent, the trial court declared the Baloloys in default. They
then filed a motion to lift the order declaring them in default, which
was denied by the trial court in an order dated November 27, 1991.
Consequently, respondent was allowed to adduce evidence ex parte.
Thereafter, the trial court rendered a partial decision dated July 23,
1993 against the Baloloys, the dispositive portion of which reads as
follows:
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor
of [respondent] and against [petitioners, heirs] of Luz R. Balolo[y],
namely: Alejandrino Baloloy and Bayani Baloloy. The [petitioners]
Alejandrino Baloloy and Bayani Baloloy are ordered to immediately
execute an [Absolute] Deed of Sale over their hereditary share in
the properties covered by TCT No. 74392 and TCT No. 74394, after
payment to them by [respondent] the amount of P[1,050,000] or
consignation of said amount in Court. [For] failure of [petitioners]
Alejandrino Baloloy and Bayani Baloloy to execute the Absolute
Deed of Sale over their hereditary share in the property covered by
TCT No. T-74392 and TCT No. T-74394 in favor of [respondent], the
Clerk of Court is ordered to execute the necessary Absolute Deed of
Sale in behalf of the Baloloys in favor of [respondent,] with a
consideration of P[1,500,000]. Further[,] [petitioners] Alejandrino
Baloloy and Bayani Baloloy are ordered to jointly and severally pay
[respondent] moral damages in the amount of P[50,000]
and P[20,000] for attorney’s fees. The adverse claim annotated at
the back of TCT No. T-74392 and TCT No. T-74394[,] insofar as the
shares of Alejandrino Baloloy and Bayani Baloloy are concerned[,] [is]
ordered cancelled.
With costs against [petitioners] Alejandrino Baloloy and Bayani
Baloloy.
SO ORDERED.3
The Baloloys filed a petition for relief from judgment and order
dated July 4, 1994 and supplemental petition dated July 7, 1994.
This was denied by the trial court in an order dated September 16,
1994. Hence, appeal to the Court of Appeals was taken challenging THE HONORABLE COURT OF APPEALS ERRED IN
the order denying the petition for relief. DENYING THE PETITION FOR RELIEF FROM
JUDGMENT FILED BY THE BALOLOYS.
Trial on the merits ensued between respondent and Rubio and
Escueta. After trial, the trial court rendered its assailed Decision, as II
follows:
THE HONORABLE COURT OF APPEALS ERRED IN
IN VIEW OF THE FOREGOING, the complaint [and] amended REINSTATING THE COMPLAINT AND IN
complaint are dismissed against [petitioners] Corazon L. Escueta, AWARDING MORAL DAMAGES AND ATTORNEY’S
Ignacio E. Rubio[,] and the Register of Deeds. The counterclaim of FEES IN FAVOR OF RESPONDENT RUFINA L. LIM
[petitioners] [is] also dismissed. However, [petitioner] Ignacio E. CONSIDERING THAT:
Rubio is ordered to return to the [respondent], Rufina Lim[,] the
amount of P102,169.80[,] with interest at the rate of six percent (6%) A. IGNACIO E. RUBIO IS NOT BOUND BY THE
per annum from April 10, [1990] until the same is fully paid. Without CONTRACT OF SALE BETWEEN VIRGINIA
pronouncement as to costs. LAYGO-LIM AND RUFINA LIM.

SO ORDERED.4 B. THE CONTRACT ENTERED INTO BETWEEN

RUFINA LIM AND VIRGINIA LAYGO-LIM IS A
On appeal, the CA affirmed the trial court’s order and partial CONTRACT TO SELL AND NOT A CONTRACT OF
decision, but reversed the later decision. The dispositive portion of SALE.
its assailed Decision reads:
C. RUFINA LIM FAILED TO FAITHFULLY COMPLY
WHEREFORE, upon all the foregoing premises considered, this Court WITH HER OBLIGATIONS UNDER THE CONTRACT
rules: TO SELL THEREBY WARRANTING THE
CANCELLATION THEREOF.
1. the appeal of the Baloloys from the Order denying the Petition for
Relief from Judgment and Orders dated July 4, 1994 and D. CORAZON L. ESCUETA ACTED IN UTMOST
Supplemental Petition dated July 7, 1994 is DISMISSED. The Order GOOD FAITH IN ENTERING INTO THE CONTRACT
appealed from is AFFIRMED. OF SALE WITH IGNACIO E. RUBIO.

2. the Decision dismissing [respondent’s] complaint is REVERSED and III

SET ASIDE and a new one is entered. Accordingly,
THE CONTRACT OF SALE EXECUTED BETWEEN
a. the validity of the subject contract of sale in favor of [respondent] IGNACIO E. RUBIO AND CORAZON L. ESCUETA IS
is upheld. VALID.

b. Rubio is directed to execute a Deed of Absolute Sale conditioned IV

upon the payment of the balance of the purchase price by
[respondent] within 30 days from the receipt of the entry of THE HONORABLE COURT OF APPEALS ERRED IN
judgment of this Decision. DISMISSING PETITIONERS’ COUNTERCLAIMS.

c. the contracts of sale between Rubio and Escueta involving Rubio’s Briefly, the issue is whether the contract of sale between petitioners
share in the disputed properties is declared NULL and VOID. and respondent is valid.

d. Rubio and Escueta are ordered to pay jointly and severally the Petitioners argue, as follows:
[respondent] the amount of P[20,000] as moral damages
and P[20,000] as attorney’s fees. First, the CA did not consider the circumstances surrounding
petitioners’ failure to appear at the pre-trial and to file the petition
3. the appeal of Rubio and Escueta on the denial of their for relief on time.
counterclaim is DISMISSED.
As to the failure to appear at the pre-trial, there was fraud, accident
SO ORDERED.5 and/or excusable neglect, because petitioner Bayani was in the
United States. There was no service of the notice of pre-trial or
Petitioners’ Motion for Reconsideration of the CA Decision was order. Neither did the former counsel of record inform him.
denied. Hence, this petition. Consequently, the order declaring him in default is void, and all
subsequent proceedings, orders, or decision are void.
The issues are:
Furthermore, petitioner Alejandrino was not clothed with a power
I of attorney to appear on behalf of Bayani at the pre-trial
conference.
Second, the sale by Virginia to respondent is not binding. Petitioner
Rubio did not authorize Virginia to transact business in his behalf
pertaining to the property. The Special Power of Attorney was
constituted in favor of Llamas, and the latter was not empowered to
designate a substitute attorney-in-fact. Llamas even disowned her
signature appearing on the "Joint Special Power of Attorney," which
constituted Virginia as her true and lawful attorney-in-fact in selling
Rubio’s properties.
Dealing with an assumed agent, respondent should ascertain not
only the fact of agency, but also the nature and extent of the
former’s authority. Besides, Virginia exceeded the authority for
failing to comply with her obligations under the "Joint Special Power
of Attorney."
The amount encashed by Rubio represented not the down payment,
but the payment of respondent’s debt. His acceptance and
encashment of the check was not a ratification of the contract of
sale.
Third, the contract between respondent and Virginia is a contract to
sell, not a contract of sale. The real character of the contract is not
the title given, but the intention of the parties. They intended to
reserve ownership of the property to petitioners pending full
payment of the purchase price. Together with taxes and other fees
due on the properties, these are conditions precedent for the
perfection of the sale. Even assuming that the contract is ambiguous,
the same must be resolved against respondent, the party who
caused the same.
Fourth, Respondent failed to faithfully fulfill her part of the
obligation. Thus, Rubio had the right to sell his properties to Escueta
who exercised due diligence in ascertaining ownership of the
properties sold to her. Besides, a purchaser need not inquire beyond
what appears in a Torrens title.
The petition lacks merit. The contract of sale between petitioners
and respondent is valid.lawphil.net
Bayani Baloloy was represented by his attorney-in-fact, Alejandrino
Baloloy. In the Baloloys’ answer to the original complaint and
amended complaint, the allegations relating to the personal
circumstances of the Baloloys are clearly admitted.
"An admission, verbal or written, made by a party in the course of
the proceedings in the same case, does not require proof."6 The
"factual admission in the pleadings on record [dispenses] with the
need x x x to present evidence to prove the admitted fact."7 It
cannot, therefore, "be controverted by the party making such
admission, and [is] conclusive"8 as to them. All proofs submitted by
them "contrary thereto or inconsistent therewith should be ignored
whether objection is interposed by a party or not."9 Besides, there is
no showing that a palpable mistake has been committed in their
admission or that no admission has been made by them.
Pre-trial is mandatory.10 The notices of pre-trial had been sent to
both the Baloloys and their former counsel of record. Being served
with notice, he is "charged with the duty of notifying the party
represented by him."11 He must "see to it that his client receives
such notice and attends the pre-trial."12 What the Baloloys and their
former counsel have alleged instead in their Motion to Lift Order of
As In Default dated December 11, 1991 is the belated receipt of
Bayani Baloloy’s special power of attorney in favor of their former
counsel, not that they have not received the notice or been
informed of the scheduled pre-trial. Not having raised the ground of
lack of a special power of attorney in their motion, they are now
deemed to have waived it. Certainly, they cannot raise it at this late
stage of the proceedings. For lack of representation, Bayani Baloloy
was properly declared in default.
Section 3 of Rule 38 of the Rules of Court states:
SEC. 3. Time for filing petition; contents and verification. – A
petition provided for in either of the preceding sections of this Rule
must be verified, filed within sixty (60) days after the petitioner
learns of the judgment, final order, or other proceeding to be set
aside, and not more than six (6) months after such judgment or final
order was entered, or such proceeding was taken; and must be
accompanied with affidavits showing the fraud, accident, mistake,
or excusable negligence relied upon, and the facts constituting the
petitioner’s good and substantial cause of action or defense, as the
case may be.
There is no reason for the Baloloys to ignore the effects of the
above-cited rule. "The 60-day period is reckoned from the time the
party acquired knowledge of the order, judgment or proceedings
and not from the date he actually read the same."13 As aptly put by
the appellate court:
The evidence on record as far as this issue is concerned shows that
Atty. Arsenio Villalon, Jr., the former counsel of record of the
Baloloys received a copy of the partial decision dated June 23, 1993
on April 5, 1994. At that time, said former counsel is still their
counsel of record. The reckoning of the 60 day period therefore is
the date when the said counsel of record received a copy of the
partial decision which was on April 5, 1994. The petition for relief
was filed by the new counsel on July 4, 1994 which means that 90
days have already lapsed or 30 days beyond the 60 day period.
Moreover, the records further show that the Baloloys received the
partial decision on September 13, 1993 as evidenced by Registry
return cards which bear the numbers 02597 and 02598 signed by
Mr. Alejandrino Baloloy.
The Baloloys[,] apparently in an attempt to cure the lapse of the
aforesaid reglementary period to file a petition for relief from
judgment[,] included in its petition the two Orders dated May 6,
1994 and June 29, 1994. The first Order denied Baloloys’ motion to
fix the period within which plaintiffs-appellants pay the balance of
the purchase price. The second Order refers to the grant of partial
execution, i.e. on the aspect of damages. These Orders are only
consequences of the partial decision subject of the petition for relief,
and thus, cannot be considered in the determination of the
reglementary period within which to file the said petition for relief.
Furthermore, no fraud, accident, mistake, or excusable negligence
exists in order that the petition for relief may be granted.14 There is
no proof of extrinsic fraud that "prevents a party from having a trial
x x x or from presenting all of his case to the court"15 or an "accident
x x x which ordinary prudence could not have guarded against, and
by reason of which the party applying has probably been impaired in
his rights."16 There is also no proof of either a "mistake x x x of
law"17 or an excusable negligence "caused by failure to receive
notice of x x x the trial x x x that it would not be necessary for him to
take an active part in the case x x x by relying on another person to
attend to the case for him, when such other person x x x was
chargeable with that duty x x x, or by other circumstances not
involving fault of the moving party."18
Article 1892 of the Civil Code provides:
Art. 1892. The agent may appoint a substitute if the principal has
not prohibited him from doing so; but he shall be responsible for the
acts of the substitute:
(1) When he was not given the power to appoint one x x x.
Applying the above-quoted provision to the special power of
attorney executed by Ignacio Rubio in favor of his daughter Patricia
Llamas, it is clear that she is not prohibited from appointing a
substitute. By authorizing Virginia Lim to sell the subject properties,
Patricia merely acted within the limits of the authority given by her
father, but she will have to be "responsible for the acts of the
sub-agent,"19 among which is precisely the sale of the subject
properties in favor of respondent.
Even assuming that Virginia Lim has no authority to sell the subject
properties, the contract she executed in favor of respondent is not
void, but simply unenforceable, under the second paragraph of
Article 1317 of the Civil Code which reads:
Art. 1317. x x x
A contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his
powers, shall be unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
Ignacio Rubio merely denies the contract of sale. He claims, without
substantiation, that what he received was a loan, not the down
payment for the sale of the subject properties. His acceptance and
encashment of the check, however, constitute ratification of the
contract of sale and "produce the effects of an express power of
agency."20 "[H]is action necessarily implies that he waived his right
of action to avoid the contract, and, consequently, it also implies the
tacit, if not express, confirmation of the said sale effected" by
Virginia Lim in favor of respondent.
Similarly, the Baloloys have ratified the contract of sale when they
accepted and enjoyed its benefits. "The doctrine of estoppel
applicable to petitioners here is not only that which prohibits a
party from assuming inconsistent positions, based on the principle
of election, but that which precludes him from repudiating an
obligation voluntarily assumed after having accepted benefits
therefrom. To countenance such repudiation would be contrary to
equity, and would put a premium on fraud or misrepresentation."21
Indeed, Virginia Lim and respondent have entered into a contract of
sale. Not only has the title to the subject properties passed to the
latter upon delivery of the thing sold, but there is also no stipulation
in the contract that states the ownership is to be reserved in or
"retained by the vendor until full payment of the price."22
Applying Article 1544 of the Civil Code, a second buyer of the
property who may have had actual or constructive knowledge of
such defect in the seller’s title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good
faith. Such second buyer cannot defeat the first buyer’s title. In case
a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.23 Even the
argument that a purchaser need not inquire beyond what appears in
a Torrens title does not hold water. A perusal of the certificates of
title alone will reveal that the subject properties are registered in
common, not in the individual names of the heirs.
Nothing in the contract "prevents the obligation of the vendor to
convey title from becoming effective"24 or gives "the vendor the
right to unilaterally resolve the contract the moment the buyer fails
to pay within a fixed period."25Petitioners themselves have failed to
deliver their individual certificates of title, for which reason it is
obvious that respondent cannot be expected to pay the stipulated
taxes, fees, and expenses.
"[A]ll the elements of a valid contract of sale under Article 1458 of
the Civil Code are present, such as: (1) consent or meeting of the
minds; (2) determinate subject matter; and (3) price certain in
money or its equivalent."26 Ignacio Rubio, the Baloloys, and their
co-heirs sold their hereditary shares for a price certain to which
respondent agreed to buy and pay for the subject properties. "The
offer and the acceptance are concurrent, since the minds of the
contracting parties meet in the terms of the agreement."27
In fact, earnest money has been given by respondent. "[I]t shall be
considered as part of the price and as proof of the perfection of the
contract.28 It constitutes an advance payment to "be deducted from
the total price."29
Article 1477 of the same Code also states that "[t]he ownership of
the thing sold shall be transferred to the vendee upon actual or
constructive delivery thereof."30 In the present case, there is actual
delivery as manifested by acts simultaneous with and subsequent to
the contract of sale when respondent not only took possession of
the subject properties but also allowed their use as parking terminal
for jeepneys and buses. Moreover, the execution itself of the
contract of sale is constructive delivery.
Consequently, Ignacio Rubio could no longer sell the subject
properties to Corazon Escueta, after having sold them to respondent.
"[I]n a contract of sale, the vendor loses ownership over the
property and cannot recover it until and unless the contract is
resolved or rescinded x x x."31 The records do not show that Ignacio
Rubio asked for a rescission of the contract. What he adduced was a
belated revocation of the special power of attorney he executed in
favor of Patricia Llamas. "In the sale of immovable property, even
though it may have been stipulated that upon failure to pay the
price at the time agreed upon the rescission of the contract shall of
right take place, the vendee may pay, even after the expiration of
the period, as long as no demand for rescission of the contract has
been made upon him either judicially or by a notarial act."32
WHEREFORE, the petition is DENIED. The Decision and Resolution of
the Court of Appeals in CA-G.R. CV No. 48282, dated
October 26, 1998 and January 11, 1999, respectively, are
hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
VIRGIE SERONA, petitioner, vs. HON. COURT OF APPEALS and THE
PEOPLE OF THE PHILIPPINES, respondents.
 DECISION
YNARES-SANTIAGO, J.:
During the period from July 1992 to September 1992, Leonida
Quilatan delivered pieces of jewelry to petitioner Virgie Serona to
be sold on commission basis. By oral agreement of the parties,
petitioner shall remit payment or return the pieces of jewelry if not
sold to Quilatan, both within 30 days from receipt of the items.
Upon petitioners failure to pay on September 24, 1992,
Quilatan required her to execute an acknowledgment receipt
(Exhibit B) indicating their agreement and the total amount due, to
wit:
Ako, si Virginia Serona, nakatira sa Mother Earth Subd., Las Pinas, ay
kumuha ng mga alahas kay Gng. Leonida Quilatan na may
kabuohang halaga na P567,750.00 para ipagbili para ako
magkakomisyon at ibibigay ang benta kung mabibili o ibabalik sa
kanya ang mga nasabing alahas kung hindi mabibili sa loob ng 30
araw.
Las Pinas, September 24, 1992.[1]
The receipt was signed by petitioner and a witness, Rufina G.
Navarette.
Unknown to Quilatan, petitioner had earlier entrusted the
jewelry to one Marichu Labrador for the latter to sell on commission
basis. Petitioner was not able to collect payment from Labrador,
which caused her to likewise fail to pay her obligation to Quilatan.
Subsequently, Quilatan, through counsel, sent a formal letter
of demand[2] to petitioner for failure to settle her
obligation. Quilatan executed a complaint affidavit[3] against
petitioner before the Office of the Assistant Provincial Prosecutor.
Thereafter, an information for estafa under Article 315, paragraph
1(b)[4] of the Revised Penal Code was filed against petitioner, which
was raffled to Branch 255 of the Regional Trial Court of Las Pinas.
The information alleged:
That on or about and sometime during the period from July 1992 up
to September 1992, in the Municipality of Las Pinas, Metro Manila,
Philippines, and within the jurisdiction of this Honorable Court, the
said accused received in trust from the complainant Leonida E.
Quilatan various pieces of jewelry in the total value of P567,750.00
to be sold on commission basis under the express duty and
obligation of remitting the proceeds thereof to the said complainant
if sold or returning the same to the latter if unsold but the said
accused once in possession of said various pieces of jewelry, with
unfaithfulness and abuse of confidence and with intent to defraud,
did then and there willfully, unlawfully and feloniously
misappropriate and convert the same for her own personal use and
benefit and despite oral and written demands, she failed and
refused to account for said jewelry or the proceeds of sale thereof,
to the damage and prejudice of complainant Leonida E. Quilatan in
the aforestated total amount of P567,750.00.
CONTRARY TO LAW.[5]
Petitioner pleaded not guilty to the charge upon
arraignment.[6] Trial on the merits thereafter ensued.
Quilatan testified that petitioner was able to remit
P100,000.00 and returned P43,000.00 worth of jewelriy; [7] that at
the start, petitioner was prompt in settling her obligation; however,
subsequently the payments were remitted late;[8] that petitioner
still owed her in the amount of P424,750.00.[9]
On the other hand, petitioner admitted that she received
several pieces of jewelry from Quilatan and that she indeed failed to
pay for the same. She claimed that she entrusted the pieces of
jewelry to Marichu Labrador who failed to pay for the same, thereby
causing her to default in paying Quilatan.[10] She presented
handwritten receipts (Exhibits 1 & 2)[11] evidencing payments made
to Quilatan prior to the filing of the criminal case.
Marichu Labrador confirmed that she received pieces of
jewelry from petitioner worth P441,035.00. She identified an
acknowledgment receipt (Exhibit 3)[12] signed by her dated July 5,
1992 and testified that she sold the jewelry to a person who
absconded without paying her. Labrador also explained that in the
past, she too had directly transacted with Quilatan for the sale of
jewelry on commission basis; however, due to her outstanding
account with the latter, she got jewelry from petitioner instead.[13]
On November 17, 1994, the trial court rendered a decision
finding petitioner guilty of estafa, the dispositive portion of which
reads:
WHEREFORE, in the light of the foregoing, the court finds the
accused Virgie Serona guilty beyond reasonable doubt, and as the
amount misappropriated is P424,750.00 the penalty provided under
the first paragraph of Article 315 of the Revised Penal Code has to
be imposed which shall be in the maximum period plus one (1) year
for every additional P10,000.00.
Applying the Indeterminate Sentence Law, the said accused is
hereby sentenced to suffer the penalty of imprisonment ranging
from FOUR (4) YEARS and ONE (1) DAY of prision correccional as
minimum to TEN (10) YEARS and ONE (1) DAY of prision mayor as
maximum; to pay the sum of P424,750.00 as cost for the unreturned
jewelries; to suffer the accessory penalties provided by law; and to
pay the costs.
SO ORDERED.[14]
Petitioner appealed to the Court of Appeals, which affirmed
the judgment of conviction but modified the penalty as follows:
WHEREFORE, the appealed decision finding the accused-appellant
guilty beyond reasonable doubt of the crime of estafa is hereby
AFFIRMED with the following MODIFICATION:
Considering that the amount involved is P424,750.00, the penalty
should be imposed in its maximum period adding one (1) year for
each additional P10,000.00 albeit the total penalty should not
exceed Twenty (20) Years (Art. 315). Hence, accused-appellant is
hereby SENTENCED to suffer the penalty of imprisonment ranging
from Four (4) Years and One (1) Day of Prision Correccional as
minimum to Twenty (20) Years of Reclusion Temporal.
SO ORDERED.[15]
Upon denial of her motion for reconsideration,[16] petitioner
filed the instant petition under Rule 45, alleging that:
I
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
CONCLUDING THAT THERE WAS AN ABUSE OF CONFIDENCE ON THE
PART OF PETITIONER IN ENTRUSTING THE SUBJECT
JEWELRIES (sic) TO HER SUB-AGENT FOR SALE ON COMMISSION TO
PROSPECTIVE BUYERS.
II
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
CONCLUDING THAT THERE WAS MISAPPROPRIATION OR
CONVERSION ON THE PART OF PETITIONER WHEN SHE FAILED TO
RETURN THE SUBJECT JEWELRIES (sic) TO PRIVATE
COMPLAINANT.[17]
Petitioner argues that the prosecution failed to establish the
elements of estafa as penalized under Article 315, par. 1(b) of the
Revised Penal Code. In particular, she submits that she neither
abused the confidence reposed upon her by Quilatan nor converted
or misappropriated the subject jewelry; that her giving the pieces of
jewelry to a sub-agent for sale on commission basis did not violate
her undertaking with Quilatan. Moreover, petitioner delivered the
jewelry to Labrador under the same terms upon which it was
originally entrusted to her. It was established that petitioner had
not derived any personal benefit from the loss of the jewelry.
Consequently, it cannot be said that she misappropriated or
converted the same.
We find merit in the petition.
The elements of estafa through misappropriation or
conversion as defined in Article 315, par. 1(b) of the Revised Penal
Code are: (1) that the money, good or other personal property is
received by the offender in trust, or on commission, or for
administration, or under any other obligation involving the duty to
make delivery of, or to return, the same; (2) that there be
misappropriation or conversion of such money or property by the
offender or denial on his part of such receipt; (3) that such
misappropriation or conversion or denial is to the prejudice of
another; and (4) that there is a demand made by the offended party
on the offender.[18] While the first, third and fourth elements are
concededly present, we find the second element of
misappropriation or conversion to be lacking in the case at bar.
Petitioner did not ipso facto commit the crime
of estafa through conversion or misappropriation by delivering the
jewelry to a sub-agent for sale on commission basis. We are unable
to agree with the lower courts conclusion that this fact alone is
sufficient ground for holding that petitioner disposed of the jewelry
as if it were hers, thereby committing conversion and a clear breach
of trust.[19]
It must be pointed out that the law on agency in our
jurisdiction allows the appointment by an agent of a substitute or
sub-agent in the absence of an express agreement to the contrary
between the agent and the principal.[20] In the case at bar, the
appointment of Labrador as petitioners sub-agent was not expressly
prohibited by Quilatan, as the acknowledgment receipt, Exhibit B,
does not contain any such limitation. Neither does it appear that
petitioner was verbally forbidden by Quilatan from passing on the
jewelry to another person before the acknowledgment receipt was
executed or at any other time. Thus, it cannot be said that
petitioners act of entrusting the jewelry to Labrador is characterized
by abuse of confidence because such an act was not proscribed and
is, in fact, legally sanctioned.
The essence of estafa under Article 315, par. 1(b) is the
appropriation or conversion of money or property received to the
prejudice of the owner. The words convert and misappropriated
connote an act of using or disposing of anothers property as if it
were ones own, or of devoting it to a purpose or use different from
that agreed upon. To misappropriate for ones own use includes not
only conversion to ones personal advantage, but also every attempt
to dispose of the property of another without right.[21]
In the case at bar, it was established that the inability of
petitioner as agent to comply with her duty to return either the
pieces of jewelry or the proceeds of its sale to her principal Quilatan
was due, in turn, to the failure of Labrador to abide by her
agreement with petitioner. Notably, Labrador testified that she
obligated herself to sell the jewelry in behalf of petitioner also on
commission basis or to return the same if not sold. In other words,
the pieces of jewelry were given by petitioner to Labrador to
achieve the very same end for which they were delivered to her in
the first place. Consequently, there is no conversion since the pieces
of jewelry were not devoted to a purpose or use different from that
agreed upon.
Similarly, it cannot be said that petitioner misappropriated the
jewelry or delivered them to Labrador without right. Aside from the
fact that no condition or limitation was imposed on the mode or
manner by which petitioner was to effect the sale, it is also
consistent with usual practice for the seller to necessarily part with
the valuables in order to find a buyer and allow inspection of the
items for sale.
In People v. Nepomuceno,[22] the accused-appellant was
acquitted of estafa on facts similar to the instant case.
Accused-appellant therein undertook to sell two diamond rings in
behalf of the complainant on commission basis, with the obligation
to return the same in a few days if not sold. However, by reason of
the fact that the rings were delivered also for sale on commission to
sub-agents who failed to account for the rings or the proceeds of its
sale, accused-appellant likewise failed to make good his obligation
to the complainant thereby giving rise to the charge of estafa. In
absolving the accused-appellant of the crime charged, we held:
Where, as in the present case, the agents to whom personal
property was entrusted for sale, conclusively proves the inability to
return the same is solely due to malfeasance of a subagent to whom
the first agent had actually entrusted the property in good faith, and
for the same purpose for which it was received; there being no
prohibition to do so and the chattel being delivered to the subagent
before the owner demands its return or before such return
becomes due, we hold that the first agent can not be held guilty of
estafa by either misappropriation or conversion. The abuse of
confidence that is characteristic of this offense is missing under the
circumstances.[23]
Accordingly, petitioner herein must be acquitted. The lower
courts reliance on People v. Flores[24] and U.S. v. Panes[25] to justify
petitioners conviction is misplaced, considering that the factual
background of the cited cases differ from those which obtain in the
case at bar. In Flores, the accused received a ring to sell under the
condition that she would return it the following day if not sold and
without authority to retain the ring or to give it to a sub-agent. The
accused in Panes, meanwhile, was obliged to return the jewelry he
received upon demand, but passed on the same to a
sub-agent even after demand for its return had already been made.
In the foregoing cases, it was held that there was conversion or
misappropriation.
 Furthermore, in Lim v. Court of Appeals,[26] the Court, CHICO-NAZARIO, J.:
citing Nepomuceno and the case of People v. Trinidad,[27] held that:

In cases of estafa the profit or gain must be obtained by the accused Assailed in this Petition for Review on Certiorari, under Rule 45 of
personally, through his own acts, and his mere negligence in
permitting another to take advantage or benefit from the entrusted the Revised Rules of Court, is the Decision[1] dated 22 June 2006 and
chattel cannot constitute estafa under Article 315, paragraph 1-b, of Resolution[2] dated 7 September 2006of the Court of Appeals in
the Revised Penal Code; unless of course the evidence should
disclose that the agent acted in conspiracy or connivance with the CA-G.R. CV No. 74987. The appellate court affirmed with
one who carried out the actual misappropriation, then the accused modification the Decision[3] dated 22 April 2002 of the Regional Trial
would be answerable for the acts of his co-conspirators. If there is
no such evidence, direct or circumstantial, and if the proof is clear Court (RTC), Branch 46, of Manila, in Civil Case No. 98-89047,
that the accused herself was the innocent victim of her sub-agents
granting the Complaint for Sum of Money of herein respondent
faithlessness, her acquittal is in order.[28] (Italics copied)
Sprint Transport Services, Inc. (Sprint) after the alleged failure of
Labrador admitted that she received the jewelry from herein petitioner Soriamont Steamship Agencies, Inc. (Soriamont) to
petitioner and sold the same to a third person. She further
acknowledged that she owed petitioner P441,035.00, thereby return the chassis units it leased from Sprint and pay the
negating any criminal intent on the part of petitioner. There is no accumulated rentals for the same.
showing that petitioner derived personal benefit from or conspired
with Labrador to deprive Quilatan of the jewelry or its value.
Consequently, there is no estafa within contemplation of the law. The following are the factual and procedural antecedents:
Notwithstanding the above, however, petitioner is not entirely
free from any liability towards Quilatan. The rule is that an accused
acquitted of estafa may nevertheless be held civilly liable where the Soriamont is a domestic corporation providing services as
facts established by the evidence so warrant. Then too, an agent a receiving agent for line load contractor vessels. Patrick Ronas
who is not prohibited from appointing a sub-agent but does so
without express authority is responsible for the acts of the (Ronas) is its general manager.
sub-agent.[29] Considering that the civil action for the recovery of
civil liability arising from the offense is deemed instituted with the
criminal action,[30] petitioner is liable to pay complainant Quilatan On the other hand, Sprint is a domestic
the value of the unpaid pieces of jewelry. corporation engaged in transport services. Its co-respondent
WHEREFORE, the petition is GRANTED. The decision of the Ricardo Cruz Papa (Papa) is engaged in the trucking business under
Court of Appeals in CA-G.R. CR No. 17222 dated April 30,1997 and
its resolution dated August 28, 1997 are REVERSEDand SET ASIDE. the business name Papa Transport Services (PTS).
Petitioner Virgie Serona is ACQUITTED of the crime charged, but is
held civilly liable in the amount of P424,750.00 as actual damages,
plus legal interest, without subsidiary imprisonment in case of Sprint filed with the RTC on 2 June 1998 a Complaint[4] for
insolvency. Sum of Money against Soriamont and Ronas, docketed as Civil Case
SO ORDERED. No. 98-89047. Sprint alleged in its Complaint that: (a) on 17

December 1993, it entered into a lease agreement, denominated as

SORIAMONT STEAMSHIP AGENCIES, INC., and G.R. No. 174610
PATRICK RONAS, Equipment Lease Agreement (ELA) with Soriamont, wherein the
Petitioners, Present: former agreed to lease a number of chassis units to the latter for

the transport
YNARES-SANTIAGO, J., of container vans; (b) with authorization letters
- versus - Chairperson,
dated 19 *June 1996 issued by Ronas on behalf of Soriamont, PTS
CARPIO MORALES,
CHICO-NAZARIO,
and another trucker, Rebson Trucking, were able to withdraw on 22
SP R I NT T R A N SP O R T SE R V I C E S , I N C . , VELASCO, JR., and
NACHURA,and
JJ.25 June 1996, from the container yard of Sprint, two chassis
R I C AR D O C R U Z P AP A , d o i n g b u s i n e s s
u n d e r t h e s t y l e P A P A T R A N SP O R T units (subject equipment),[5] evidenced by Equipment Interchange
SE R V I C E S ,
Promulgated:
Receipts No. 14215 and No. 14222; (c) Soriamont and Ronas failed
Respondents.
to pay rental fees for the subject equipment since 15 January 1997;
July 14, 2009
(d) Sprint was subsequently informed by Ronas, through a letter
x---------------------------------------------------x
dated 17 June 1997, of the purported loss of the subject equipment

sometime in June 1997; and (e) despite demands, Soriamont and

DECISION
Ronas failed to pay the rental fees for the subject equipment, and to
replace or return the same to Sprint.
Sprint, thus, prayed for the RTC to render judgment:
1. Ordering [Soriamont and Ronas] to pay
[Sprint], jointly and severally, actual
damages, in the amount of Five Hundred
Thirty-Seven Thousand Eight Hundred
Pesos (P537,800.00) representing unpaid
rentals and the replacement cost for the
lost chassis units.
2. Ordering [Soriamont and Ronas], jointly
and severally, to pay [Sprint] the amount of
Fifty-Three Thousand Five Hundred Four
Pesos and Forty-Two centavos (P53,504.42)
as interest and penalties accrued as of
March 31, 1998 and until full satisfaction
thereof.
3. Ordering [Soriamont and Ronas], jointly
and severally, to pay [Sprint] the amount
equivalent to twenty-five percent (25%) of
the total amount claimed for and as
attorneys fees plus Two Thousand Pesos
(P2,000.00) per court appearance.
4. Ordering [Soriamont and Ronas] to pay the
cost of the suit.[6]
Soriamont and Ronas filed with the RTC their Answer with
Compulsory Counterclaim.[7] Soriamont admitted therein to having a
lease agreement with Sprint, but only for the period 21 October
1993 to 21 January 1994. It denied entering into an ELA with
respondent Sprint on 17 December 1993 as alleged in the
Complaint. Soriamont further argued that it was
party-in-interest in Civil Case No. 98-89047, since it was PTS and
Rebson Trucking that withdrew the subject equipment from the
container yard of Sprint. Ronas was likewise not a party-in-interest
in the case since his actions, assailed in the Complaint, were
executed as part of his regular functions as an officer of Soriamont.
Consistent with their stance, Soriamont and Ronas filed a
Third-Party Complaint[8] against Papa, who was doing business
under the name PTS. Soriamont and Ronas averred in their
Third-Party Complaint that it was PTS and Rebson Trucking that
withdrew the subject equipments from the container yard of Sprint,
and failed to return the same. Since Papa failed to file an answer to
the Third-Party Complaint, he was declared by the RTC to be in
default.[9]
After trial, the RTC rendered its Decision in Civil Case No.
98-89047 on 22 April 2002, finding Soriamont liable for the claim of
Sprint, while absolving Ronas and Papa from any liability. According
to the RTC, Soriamont authorized PTS to withdraw the subject
equipment. The dispositive portion of the RTC Decision reads:
WHEREFORE, judgment is hereby
rendered in favor of [herein respondent] Sprint
Transport Services, Inc. and against [herein
petitioner] Soriamont Steamship Agencies, Inc.,
ordering the latter to pay the former the
following:
Three hundred twenty thousand pesos
(P320,000) representing the value of
the two chassis units with interest at
the legal rate from the filing of the
complaint;
Two hundred seventy thousand one
hundred twenty four & 42/100 pesos
(P270,124.42) representing unpaid
rentals with interest at the legal rate
from the filing of the complaint;
P20,000.00 as attorneys fees.
The rate of interest shall be increased
to 12% per annum once this decision becomes
final and executory.
Defendant Patrick Ronas and [herein
respondent] Ricardo Cruz Papa are absolved
from liability.[10]
Soriamont filed an appeal of the foregoing RTC Decision to
not a the Court of Appeals, docketed as CA-G.R. CV No. 74987.
The Court of Appeals, in its Decision dated 22 June 2006, found the
following facts to be borne out by the records: (1) Sprint and
Soriamont entered into an ELA whereby the former leased chassis
units to the latter for the specified daily rates. The ELA covered the
period 21 October 1993 to 21 January 1994, but it contained an
automatic renewal clause; (2) on 22 and 25 June 1996, Soriamont,
through PTS and Rebson Trucking, withdrew Sprint Chassis 2-07
with Plate No. NUP-261 Serial No. ICAZ-165118, and Sprint Chassis
2-55 with Plate No. NUP-533 Serial MOTZ-160080, from the
container yard of Sprint; (3) Soriamont authorized the withdrawal
by PTS and Rebson Trucking of the subject equipment from the

container yard of Sprint; and (4) the subject pieces of equipment
were never returned to Sprint. In a letter to Sprint dated 19 June
1997, Soriamont relayed that it was still trying to locate the subject
equipment, and requested the former to refrain from releasing
more equipment to respondent PTS and Rebson Trucking.
Hence, the Court of Appeals decreed:
WHEREFORE, the appealed Decision dated April
22, 2002 of the trial court is affirmed, subject to
the modification that the specific rate of legal
interest per annum on both the P320,000.00
representing the value of the two chassis units,
and on the P270,124.42 representing the unpaid
rentals, is six percent (6%), to be increased to
twelve percent (12%) from the finality of this
Decision until its full satisfaction.[11]
In a Resolution dated 7 September 2006, the Court of
Appeals denied the Motion for Reconsideration of Soriamont for
failing to present any cogent and substantial matter that would
warrant a reversal or modification of its earlier Decision.
Aggrieved, Soriamont[12] filed the present Petition for
Review with the following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS
COMMITTED SERIOUS ERROR IN LIMITING AS
SOLE ISSUE FOR RESOLUTION OF WHETHER OR
NOT AN AGENCY RELATIONSHIP EXISTED
BETWEEN PRIVATE RESPONDENT SPRINT
TRANSPORT AND HEREIN PETITIONERS
SORIAMONT STEAMSHIP AGENCIES AND
PRIVATE RESPONDENT PAPA TRUCKING BUT
TOTALLY DISREGARDING AND FAILING TO RULE
ON THE LIABILITY OF PRIVATE RESPONDENT
PAPA TRUCKING TO HEREIN PETITIONERS. THE
LIABILITY OF PRIVATE RESPONDENT PAPA
TRUCKING TO HEREIN PETITIONERS SUBJECT OF
THE THIRD-PARTY COMPLAINT WAS TOTALLY
IGNORED;
II.
THE HONORABLE COURT OF APPEALS
COMMITTED SERIOUS ERROR IN HOLDING
HEREIN PETITIONERS STEAMSHIP AGENCIES
SOLELY LIABLE. EVIDENCE ON RECORD SHOW
THAT IT WAS PRIVATE RESPONDENT PAPA
TRUCKING WHICH WITHDREW THE SUBJECT
CHASSIS. PRIVATE RESPONDENT PAPA
TRUCKING WAS THE LAST IN POSSESSION OF
THE SAID SUBJECT CHASSIS AND IT SHOULD BE
HELD SOLELY LIABLE FOR THE LOSS THEREOF;
III.
THE HONORABLE COURT OF APPEALS
COMMITTED SERIOUS ERROR WHEN IT IGNORED
A MATERIAL INCONSISTENCY IN THE TESTIMONY
OF PRIVATE RESPONDENT SPRINT TRANSPORTS
WITNESS, MR. ENRICO G. VALENCIA. THE
TESTIMONY OF MR. VALENCIA WAS
ERRONEOUSLY MADE THE BASIS FOR HOLDING
HEREIN PETITIONERS LIABLE FOR THE LOSS OF
THE SUBJECT CHASSIS.
We find the Petition to be without merit.
The Court of Appeals and the RTC sustained the
contention of Sprint that PTS was authorized by Soriamont to secure
possession of the subject equipment from Sprint, pursuant to the
existing ELA between Soriamont and Sprint. The authorization
issued by Soriamont to PTS established an agency relationship, with
Soriamont as the principal and PTS as an agent. Resultantly, the
actions taken by PTS as regards the subject equipment were binding
on Soriamont, making the latter liable to Sprint for the unpaid
rentals for the use, and damages for the subsequent loss, of the
subject equipment.
Soriamont anchors its defense on its denial that it issued
an authorization to PTS to withdraw the subject equipment from
the container yard of Sprint. Although Soriamont admits that the
authorization letter dated 19 June 1996 was under its letterhead,
said letter was actually meant for and sent to Harman Foods as
shipper. It was then Harman Foods that tasked PTS to withdraw the
subject equipment from Sprint. Soriamont insists that the Court of
Appeals merely presumed that an agency relationship existed
between Soriamont and PTS, since there was nothing in the records
to evidence the same. Meanwhile, there is undisputed evidence
that it was PTS that withdrew and was last in possession of the
subject equipment. Soriamont further calls attention to the
testimony of Enrico Valencia (Valencia), a witness for Sprint, actually
supporting the position of Soriamont that PTS did not present any
authorization from Soriamont when it withdrew the subject
equipment from the container yard of Sprint. Assuming, for the sake
of argument that an agency relationship did exist between

Soriamont and PTS, the latter should not have been exonerated
from any liability. The acts of PTS that resulted in the loss of the
subject equipment were beyond the scope of its authority as
supposed agent of Soriamont. Soriamont never ratified, expressly or
impliedly, such acts of PTS.
Soriamont is essentially challenging the sufficiency of the
evidence on which the Court of Appeals based its conclusion that
PTS withdrew the subject equipment from the container yard of
Sprint as an agent of Soriamont. In effect, Soriamont is raising
questions of fact, the resolution of which requires us to re-examine
and re-evaluate the evidence presented by the parties below.
Basic is the rule in this jurisdiction that only questions of
law may be raised in a petition for review under Rule 45 of the
Revised Rules of Court. The jurisdiction of the Supreme Court in
cases brought to it from the Court of Appeals is limited to reviewing
In civil cases, the party having the
burden of proof must establish his case by a
preponderance of evidence. Stated differently,
the general rule in civil cases is that a party
having the burden of proof of an essential fact
must produce a preponderance of evidence
thereon (I Moore on Facts, 4, cited in Vicente J.
Francisco, The Revised Rules of Court in the
Philippines, Vol. VII, Part II, p. 542, 1973 Edition).
By preponderance of evidence is meant simply
evidence which is of greater weight, or more
convincing than that which is offered in
opposition to it (32 C.J.S., 1051), The term
'preponderance of evidence' means the weight,
credit and value of the aggregate evidence on
either side and is usually considered to be
synonymous with the terms `greater weight of
evidence' or 'greater weight, of the credible
evidence.' Preponderance of the evidence is a
phrase which, in the last analysis, means
probability of the truth. Preponderance of the
evidence means evidence which is more
convincing to the court as worthy of belief than
that which is offered in opposition thereto. x x
x." (20 Am. Jur., 1100-1101)

errors of law, the findings of fact of the appellate court being

After a review of the evidence on record, we rule that the
conclusive. We have emphatically declared that it is not the function
preponderance of evidence indeed supports the existence of an
of this Court to analyze or weigh such evidence all over again, its
agency relationship between Soriamont and PTS.
jurisdiction being limited to reviewing errors of law that may have

been committed by the lower court.[13]

It is true that a person dealing with an agent is not

authorized, under any circumstances, to trust blindly the agents

These questions of fact were threshed out and decided by
statements as to the extent of his powers. Such person must not act
the trial court, which had the firsthand opportunity to hear the
negligently but must use reasonable diligence and prudence to
parties conflicting claims and to carefully weigh their respective sets
ascertain whether the agent acts within the scope of his
of evidence. The findings of the trial court were subsequently
authority. The settled rule is that persons dealing with an assumed
affirmed by the Court of Appeals. Where the factual findings of both
agent are bound at their peril; and if they would hold the principal
the trial court and the Court of Appeals coincide, the same are
liable, they must ascertain not only the fact of agency, but also the
binding on this Court. We stress that, subject to some exceptional
nature and extent of authority, and in case either is controverted,
instances, only questions of law not questions of fact may be raised
the burden of proof is upon them to prove it. Sprint has successfully
before this Court in a petition for review under Rule 45 of the
discharged this burden.
Revised Rules of Court.[14]

The ELA executed on 17 December 1993 between Sprint,

Given that Soriamont is precisely asserting in the instant
as lessor, and Soriamont, as lessee, of chassis units, explicitly
Petition that the findings of fact of the Court of Appeals are
authorized the latter to appoint a representative who shall
premised on the absence of evidence and are contradicted by the
withdraw and return the leased chassis units to Sprint, to wit:
evidence on record,[15] we accommodate Soriamont by going over

the same evidence considered by the Court of Appeals and the RTC.
EQUIPMENT LEASE AGREEMENT
between
SPRINT TRANSPORT SERVICES, INC.
In Republic v. Court of Appeals,[16] we explained that:
(LESSOR)
And
 SORIAMONT STEAMSHIP AGENCIES,
in June 1996 with authorization letters, issued by Soriamont, for the
INC.
(LESSEE) withdrawal of the subject equipment.[19] On the witness
TERMS and CONDITIONS
stand, Valencia testified, as the operations manager of Sprint, as
xxxx follows:

4. Equipment Interchange Receipt (EIR) as

mentioned herein is a document Atty. Porciuncula:
accomplished every time a chassis is
withdrawn and returned to a Q. Mr. Witness, as operation manager, are you
designated depot. The EIR relates the aware of any transactions between
condition of the chassis at the point of Sprint Transport Services, Inc. and the
on-hire/off-hire duly acknowledged by defendant Soriamont Steamship
the LESSOR, Property Custodian and Agencies, Inc.?
the LESSEES authorized
A. Yes, Sir.
representative.

Q. What transactions are these, Mr. Witness?

xxxx

A. They got from us chassis, Sir.

5. Chassis Withdrawal/Return Slip as mentioned
herein is that document where
Court:
the LESSEE authorizes his
representative to withdraw/return
Q. Who among the two, who withdrew?
the chassis on his behalf. Only
persons with a duly accomplished and
A. The representative of Soriamont Steamship
signed authorization slip shall be
Agencies, Inc., Your Honor.
entertained by the LESSOR for
purposes of withdrawal/return of the Atty. Porciuncula:
chassis. The signatory in the
Withdrawal/Return Slip has to be the Q. And when were these chassis withdrawn, Mr.
signatory of the corresponding Lease Witness?
Agreement or the LESSEEs duly
authorized A. June 1996, Sir.
representative(s).[17] (Emphases ours.)
Q. Will you kindly tell this Honorable Court what
do you mean by withdrawing the
Soriamont, though, avers that the aforequoted ELA was chassis units from your container
yard?
only for 21 October 1993 to 21 January 1994, and no longer in effect
Witness:
at the time the subject pieces of equipment were reportedly

withdrawn and lost by PTS. This contention of Soriamont is without Before they can withdraw the chassis they have
to present withdrawal authority, Sir.
merit, given that the same ELA expressly provides for the automatic

renewal thereof in paragraph 24, which reads: Atty. Porciuncula:

There shall be an automatic renewal of
the contract subject to the same terms and And what is this withdrawal authority?
conditions as stipulated in the original contract
unless terminated by either party in accordance A. This is to prove that they are authorizing their
with paragraph no. 23 hereof. However, in this representative to get from us a chassis
case, termination will take effect unit.
immediately.[18]
Q. And who is this authorization send to you, Mr.
Witness?

There being no showing that the ELA was terminated by A. Sometime a representative bring to our office
either party, then it was being automatically renewed in accordance the letter or the authorization or
sometime thru fax, Sir.
with the afore-quoted paragraph 24.
Q. In this particular incident, Mr. Witness, how
was it sent?
It was, therefore, totally regular and in conformity with
A. By fax, Sir.
the ELA that PTS and Rebson Trucking should appear before Sprint
Q. Is this standard operating procedure of Sprint
Transport Services, Inc.?
A. Yes, Sir, if the trucking could not bring to our
office the original copy of the
authorization they have to send us
thru fax, but the original copy of the
authorization will be followed.
Atty. Porciuncula:
Q. Mr. Witness, I am showing to you two
documents of Soriamont Steamship
Agencies, Inc. letter head with the
headings Authorization, are these the
same withdrawal authority that you
mentioned awhile ago?
A. Yes, Sir.
Atty. Porciuncula:
Your Honor, at this point may we request that
these documents identified by the
witness be marked as Exhibits JJ and
KK, Your Honor.
Court:
Mark them.
xxxx
Q. Way back Mr. Witness, who withdrew the
chassis units 2-07 and 2-55?
A. The representative of Soriamont Steamship
Agencies, Inc., the Papa Trucking, Sir.
Q. And are these trucking companies authorized
to withdraw these chassis units?
A. Yes, Sir, it was stated in the withdrawal
authority.
Atty. Porciuncula:
Q. Showing you again Mr. Witness, this
authorization previously marked as
Exhibits JJ and KK, could you please go
over the same and tell this Honorable
Court where states there that the
trucking companies which you
mentioned awhile ago authorized to
withdraw?
A. Yes, Sir, it is stated in this withdrawal
authority.
Atty. Porciuncula:
At this juncture, Your Honor, may we request
that the Papa trucking and Rebson
trucking identified by the witness be
bracketed and mark as our Exhibits
JJ-1 and KK-1, Your Honor.
Court:
Mark them. Are these documents have dates?
Atty. Porciuncula:
Yes, Your Honor, both documents are
dated June 19, 1996.
Q. Mr. Witness, after this what happened next?
A. After they presented to us the withdrawal
authority, we called up Soriamont
Steamship Agencies, Inc. to verify
whether the one sent to us through
truck and the one sent to us through
fax are one and the same.
Q. Then what happened next, Mr. Witness?
A. Then after the verification whether it is true,
then we asked them to choose the
chassis units then my checker would
see to it whether the chassis units are
in good condition, then after that we
prepared the outgoing Equipment
Interchange Receipt, Sir.
Q. Mr. Witness, could you tell this Honorable
Court what an outgoing Equipment
Interchange Receipt means?
A. This is a document proving that the
representative of Soriamont
Steamship Agencies, Inc. really
withdraw (sic) the chassis units, Sir.
xxxx
Atty. Porciuncula:
Q. Going back Mr. Witness, you mentioned
awhile ago that your company issued
outgoing Equipment Interchange
Receipt?
A. Yes, Sir.
Q. Are there incoming Equipment Interchange
Receipt Mr. Witness?
A. We have not made Incoming Equipment
Interchange Receipt with respect to
Soriamont Steamship Agencies, Inc.,
Sir.
Q. And why not, Mr. Witness?
A. Because they have not returned to us the two
chassis units.[20]
In his candid and straightforward testimony, Valencia was
able to clearly describe the standard operating procedure followed

in the withdrawal by Soriamont or its authorized representative of
the leased chassis units from the container yard of Sprint. In the
transaction involved herein, authorization letters dated 19 June
1996 in favor of PTS and Rebson Trucking were faxed by Sprint to
Soriamont, and were further verified by Sprint through a telephone
call to Soriamont. Valencias testimony established that Sprint
exercised due diligence in its dealings with PTS, as the agent of
Soriamont.
Soriamont cannot rely on the outgoing Equipment
Interchange Receipts as proof that the withdrawal of the subject
equipment was not authorized by it, but by the shipper/consignee,
Harman Foods, which actually designated PTS and Rebson Trucking
as truckers. However, a scrutiny of the Equipment Interchange
Receipts will show that these documents merely identified Harman
Foods as the shipper/consignee, and the location of said shipping
line. It bears to stress that it was Soriamont that had an existing ELA
with Sprint, not Harman Foods, for the lease of the subject
equipment. Moreover, as stated in the ELA, the outgoing Equipment
Interchange Receipts shall be signed, upon the withdrawal of the
leased chassis units, by the lessee, Soriamont, or its authorized
representative. In this case, we can only hold that the driver of PTS
signed the receipts for the subject equipment as the authorized
representative of Soriamont, and no other.
Finally, the letter[21] dated 17 June 1997, sent to Sprint by
Ronas, on behalf of Soriamont, which stated:
As we are currently having a problem
with regards to the whereabouts of the subject
trailers, may we request your kind assistance in
refraining from issuing any equipment to the
above trucking companies.
reveals that PTS did have previous authority from Soriamont to
withdraw the leased chassis units from Sprint, hence, necessitating
an express request from Soriamont for Sprint to discontinue
recognizing said authority.
Alternatively, if PTS is found to be its agent, Soriamont
argues that PTS is liable for the loss of the subject equipment, since
PTS acted beyond its authority as agent.Soriamont cites Article 1897
of the Civil Code, which provides:
Art. 1897. The agent who acts as such
is not personally liable to the party with whom
he contracts, unless he expressly binds himself
or exceeds the limits of his authority without
giving such party sufficient notice of his powers.
The burden falls upon Soriamont to prove its affirmative
allegation that PTS acted in any manner in excess of its authority as
agent, thus, resulting in the loss of the subject equipment. To recall,
the subject equipment was withdrawn and used by PTS with the
authority of Soriamont. And for PTS to be personally liable, as agent,
it is vital that Soriamont be able to prove that PTS damaged or lost
the said equipment because it acted contrary to or in excess of the
authority granted to it by Soriamont. As the Court of Appeals and
the RTC found, however, Soriamont did not adduce any evidence at
all to prove said allegation. Given the lack of evidence that PTS was
in any way responsible for the loss of the subject equipment, then, it
cannot be held liable to Sprint, or even to Soriamont as its agent. In
the absence of evidence showing that PTS acted contrary to or in
excess of the authority granted to it by its principal, Soriamont, this
Court cannot merely presume PTS liable to Soriamont as its agent.
The only thing proven was that Soriamont, through PTS, withdrew
the two chassis units from Sprint, and that these have never been
returned to Sprint.
Considering our preceding discussion, there is no reason
for us to depart from the general rule that the findings of fact of the
Court of Appeals and the RTC are already conclusive and binding
upon us.
Finally, the adjustment by the Court of Appeals with
respect to the applicable rate of legal interest on the P320,000.00,
representing the value of the subject equipment, and on
the P270,124.42, representing the unpaid rentals awarded in favor
of Sprint, is proper and with legal basis. Under Article 2209 of the
Civil Code, when an obligation not constituting a loan or
forbearance of money is breached, then an interest on the amount
of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. Clearly, the monetary judgment in
favor of Sprint does not involve a loan or forbearance of money;
hence, the proper imposable rate of interest is six (6%) percent.
Further, as declared in Eastern Shipping Lines, Inc. v. Court of
Appeals,[22] the interim period from the finality of the judgment
awarding a monetary claim until payment thereof is deemed to be
equivalent to a forbearance of credit. Eastern Shipping Lines, Inc. v.
Court of Appeals[23] explained, to wit:
I. When an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the
contravenor can be held liable for damages. The
provisions under Title XVIII on Damages of the
Civil Code govern in determining the measure of
recoverable damages.
II. With regard particularly to an award
of interest in the concept of actual and
compensatory damages, the rate of interest, as
well as the accrual thereof, is imposed, as
follows:
1. When the obligation is breached,
and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the
interest due should be that which may have
been stipulated in writing. Furthermore, the
interest due shall itself earn legal interest from
the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall
be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of
the Civil Code.
2. When an obligation, not
constituting a loan or forbearance of money, is
breached, an interest on the amount of
damages awarded may be imposed at the
discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged
on unliquidated claims or damages except when
or until the demand can be established with
reasonable certainty. Accordingly, where the
demand is established with reasonable certainty,
the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the
demand is made, the interest shall begin to run
only from the date the judgment of the court is
made (at which time the quantification of
damages may be deemed to have been
reasonably ascertained). The actual base for the
computation of legal interest shall, in any case,
be on the amount finally adjudged.
3. When the judgment of the court
awarding a sum of money becomes final and
executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such
finality until its satisfaction, this interim period
being deemed to be by then an equivalent to a
forbearance of credit.
Consistent with the foregoing jurisprudence, and later on
affirmed in more recent cases,[24] when the judgment awarding a
sum of money becomes final and executory, the rate of legal
interest shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an
equivalent of a forbearance of credit. Thus, from the time the
judgment becomes final until its full satisfaction, the applicable rate
of legal interest shall be twelve percent (12%).
WHEREFORE, premises considered, the instant Petition for
Review on Certiorari is hereby DENIED. The Decision dated 22 June
2006 and Resolution dated 7 September 2006 of the Court of
Appeals in CA-G.R. CV No. 74987 are hereby AFFIRMED. Costs
against petitioner Soriamont Steamship Agencies, Inc.
SAFIC ALCAN & CIE, petitioner, vs. IMPERIAL VEGETABLE OIL CO.,
INC., respondent.
DECISION
YNARES-SANTIAGO, J.:
Petitioner Safic Alcan & Cie (hereinafter, Safic) is a French
corporation engaged in the international purchase, sale and trading
of coconut oil. It filed with the Regional Trial Court of Manila,
Branch XXV, a complaint dated February 26, 1987 against private
respondent Imperial Vegetable Oil Co., Inc. (hereinafter, IVO),
docketed as Civil Case No. 87-39597. Petitioner Safic alleged that on
July 1, 1986 and September 25, 1986, it placed purchase orders with
IVO for 2,000 long tons of crude coconut oil, valued at US$222.50
per ton, covered by Purchase Contract Nos. A601446 and A601655,
respectively, to be delivered within the month of January
1987. Private respondent, however, failed to deliver the said
coconut oil and, instead, offered a wash out settlement, whereby
the coconut oil subject of the purchase contracts were to be sold
back to IVO at the prevailing price in the international market at the
time of wash out. Thus, IVO bound itself to pay to Safic the
difference between the said prevailing price and the contract price
of the 2,000 long tons of crude coconut oil, which amounted to
US$293,500.00. IVO failed to pay this amount despite repeated oral
and written demands.
Under its second cause of action, Safic alleged that on eight
occasions between April 24, 1986 and October 31, 1986, it placed
purchase orders with IVO for a total of 4,750 tons of crude coconut
oil, covered by Purchase Contract Nos. A601297A/B, A601384,
A601385, A601391, A601415, A601681, A601683 and
A601770A/B/C/. When IVO failed to honor its obligation under the
wash out settlement narrated above, Safic demanded that IVO
make marginal deposits within forty-eight hours on the eight
purchase contracts in amounts equivalent to the difference
between the contract price and the market price of the coconut oil,
to compensate it for the damages it suffered when it was forced to
acquire coconut oil at a higher price. IVO failed to make the
prescribed marginal deposits on the eight contracts, in the
aggregate amount of US$391,593.62, despite written demand
therefor.
The demand for marginal deposits was based on the customs
of the trade, as governed by the provisions of the standard N.I.O.P.
Contract and the FOSFA Contract, to wit:
N.I.O.P. Contract, Rule 54 If the financial condition of either party to
a contract subject to these rules becomes so impaired as to create a
reasonable doubt as to the ability of such party to perform its
obligations under the contract, the other party may from time to
time demand marginal deposits to be made within forty-eight (48)
hours after receipt of such demand, such deposits not to exceed the
difference between the contract price and the market price of the
goods covered by the contract on the day upon which such demand
is made, such deposit to bear interest at the prime rate plus one
percent (1%) per annum. Failure to make such deposit within the
time specified shall constitute a breach of contract by the party
upon whom demand for deposit is made, and all losses and
expenses resulting from such breach shall be for the account of the
party upon whom such demand is made. (Underscoring ours.)[1]
FOSFA Contract, Rule 54 BANKRUPTCY/INSOLVENCY: If before the
fulfillment of this contract either party shall suspend payment,
commit an act of bankruptcy, notify any of his creditors that he is
unable to meet his debts or that he has suspended payment or that
he is about to suspend payment of his debts, convene, call or hold a
meeting either of his creditors or to pass a resolution to go into
liquidation (except for a voluntary winding up of a solvent company
for the purpose of reconstruction or amalgamation) or shall apply
for an official moratorium, have a petition presented for winding up
or shall have a Receiver appointed, the contract shall forthwith be
closed, either at the market price then current for similar goods or,
at the option of the other party at a price to be ascertained by
repurchase or resale and the difference between the contract price
and such closing-out price shall be the amount which the other
party shall be entitled to claim shall be liable to account for under
this contract (sic). Should either party be dissatisfied with the price,
the matter shall be referred to arbitration. Where no such resale or
repurchase takes place, the closing-out price shall be fixed by a Price
Settlement Committee appointed by the Federation. (Underscoring
ours.)[2]
Hence, Safic prayed that IVO be ordered to pay the sums of
US$293,500.00 and US$391,593.62, plus attorneys fees and
litigation expenses. The complaint also included an application for a
writ of preliminary attachment against the properties of IVO.
Upon Safics posting of the requisite bond, the trial court
issued a writ of preliminary attachment. Subsequently, the trial
court ordered that the assets of IVO be placed under receivership, in
order to ensure the preservation of the same.
In its answer, IVO raised the following special affirmative
defenses: Safic had no legal capacity to sue because it was doing
business in the Philippines without the requisite license or authority;
the subject contracts were speculative contracts entered into by
IVOs then President, Dominador Monteverde, in contravention of
the prohibition by the Board of Directors against engaging in
speculative paper trading, and despite IVOs lack of the necessary
license from Central Bank to engage in such kind of trading activity;
and that under Article 2018 of the Civil Code, if a contract which
purports to be for the delivery of goods, securities or shares of stock
is entered into with the intention that the difference between the
price stipulated and the exchange or market price at the time of the
pretended delivery shall be paid by the loser to the winner, the
transaction is null and void.
IVO set up counterclaims anchored on harassment,
paralyzation of business, financial losses, rumor-mongering and
oppressive action. Later, IVO filed a supplemental counterclaim
alleging that it was unable to operate its business normally because
of the arrest of most of its physical assets; that its suppliers were
driven away; and that its major creditors have inundated it with
claims for immediate payment of its debts, and China Banking
Corporation had foreclosed its chattel and real estate mortgages.
During the trial, the lower court found that in 1985, prior to
the date of the contracts sued upon, the parties had entered into
and consummated a number of contracts for the sale of crude
coconut oil. In those transactions, Safic placed several orders and
IVO faithfully filled up those orders by shipping out the required
crude coconut oil to Safic, totalling 3,500 metric tons. Anent the
1986 contracts being sued upon, the trial court refused to declare
the same as gambling transactions, as defined in Article 2018 of the
Civil Code, although they involved some degree of speculation. After
all, the court noted, every business enterprise carries with it a
certain measure of speculation or risk. However, the contracts
performed in 1985, on one hand, and the 1986 contracts subject of
this case, on the other hand, differed in that under the 1985
contracts, deliveries were to be made within two months. This, as
alleged by Safic, was the time needed for milling and building up oil
inventory. Meanwhile, the 1986 contracts stipulated that the
coconut oil were to be delivered within period ranging from eight
months to eleven to twelve months after the placing of orders. The
coconuts that were supposed to be milled were in all likelihood not
yet growing when Dominador Monteverde sold the crude coconut
oil. As such, the 1986 contracts constituted trading in futures or in
mere expectations.
The lower court further held that the subject contracts
were ultra vires and were entered into by Dominador Monteverde
without authority from the Board of Directors. It distinguished
between the 1985 contracts, where Safic likewise dealt with
Dominador Monteverde, who was presumably authorized to bind
IVO, and the 1986 contracts, which were highly speculative in
character. Moreover, the 1985 contracts were covered by letters of
credit, while the 1986 contracts were payable by telegraphic
transfers, which were nothing more than mere promises to pay
once the shipments became ready. For these reasons, the lower
court held that Safic cannot invoke the 1985 contracts as an implied
corporate sanction for the high-risk 1986 contracts, which were
evidently entered into by Monteverde for his personal benefit.
The trial court ruled that Safic failed to substantiate its claim
for actual damages. Likewise, it rejected IVOs counterclaim and
supplemental counterclaim.
Thus, on August 28, 1992, the trial court rendered judgment
as follows:
WHEREFORE, judgment is hereby rendered dismissing the complaint
of plaintiff Safic Alcan & Cie, without prejudice to any action it might
subsequently institute against Dominador Monteverde, the former
President of Imperial Vegetable Oil Co., Inc., arising from the subject
matter of this case. The counterclaim and supplemental
counterclaim of the latter defendant are likewise hereby dismissed
for lack of merit. No pronouncement as to costs.
The writ of preliminary attachment issued in this case as well as the
order placing Imperial Vegetable Oil Co., Inc. under receivership are
hereby dissolved and set aside.[3]
Both IVO and Safic appealed to the Court of Appeals, jointly
docketed as CA-G.R. CV No. 40820.
IVO raised only one assignment of error, viz:
THE TRIAL COURT ERRED IN HOLDING THAT THE ISSUANCE OF THE
WRIT OF PRELIMINARY ATTACHMENT WAS NOT THE MAIN CAUSE
OF THE DAMAGES SUFFERED BY DEFENDANT AND IN NOT
AWARDING DEFENDANT-APPELLANT SUCH DAMAGES.
For its part, Safic argued that:
THE TRIAL COURT ERRED IN HOLDING THAT IVOS PRESIDENT,
DOMINADOR MONTEVERDE, ENTERED INTO CONTRACTS WHICH
WERE ULTRA VIRES AND WHICH DID NOT BIND OR MAKE IVO
LIABLE.
THE TRIAL COURT ERRED IN HOLDING THAT SAFIC WAS UNABLE TO
PROVE THE DAMAGES SUFFERED BY IT AND IN NOT AWARDING
SUCH DAMAGES.
THE TRIAL COURT ERRED IN NOT HOLDING THAT IVO IS LIABLE
UNDER THE WASH OUT CONTRACTS.
On September 12, 1996, the Court of Appeals rendered the
assailed Decision dismissing the appeals and affirming the judgment
appealed from in toto.[4]
Hence, Safic filed the instant petition for review with this
Court, substantially reiterating the errors it raised before the Court
of Appeals and maintaining that the Court of Appeals grievously
erred when:
a. it declared that the 1986 forward contracts (i.e., Contracts Nos.
A601446 and A60155 (sic) involving 2,000 long tons of crude
coconut oil, and Contracts Nos. A601297A/B, A601385, A601391,
A601415, A601681. A601683 and A601770A/B/C involving 4,500
tons of crude coconut oil) were unauthorized acts of Dominador
Monteverde which do not bind IVO in whose name they were
entered into. In this connection, the Court of Appeals erred when (i)
it ignored its own finding that (a) Dominador Monteverde, as IVOs
President, had an implied authority to make any contract necessary
or appropriate to the contract of the ordinary business of the
company; and (b) Dominador Monteverde had validly entered into
similar forward contracts for and on behalf of IVO in 1985; (ii) it
distinguished between the 1986 forward contracts despite the fact
that the Manila RTC has struck down IVOs objection to the 1986
forward contracts (i.e. that they were highly speculative paper
trading which the IVO Board of Directors had prohibited Dominador
Monteverde from engaging in because it is a form of gambling
where the parties do not intend actual delivery of the coconut oil
sold) and instead found that the 1986 forward contracts were not
gambling; (iii) it relied on the testimony of Mr. Rodrigo Monteverde
in concluding that the IVO Board of Directors did not authorize its
President, Dominador Monteverde, to enter into the 1986 forward
contracts; and (iv) it did not find IVO, in any case, estopped from
denying responsibility for, and liability under, the 1986 forward
contracts because IVO had recognized itself bound to similar
forward contracts which Dominador Monteverde entered into (for
and on behalf of IVO) with Safic in 1985 notwithstanding that
Dominador Monteverde was (like in the 1986 forward contracts) not
expressly authorized by the IVO Board of Directors to enter into
such forward contracts;
b. it declared that Safic was not able to prove damages suffered by
it, despite the fact that Safic had presented not only testimonial, but
also documentary, evidence which proved the higher amount it had
to pay for crude coconut oil (vis--vis the contract price it was to pay
to IVO) when IVO refused to deliver the crude coconut oil bought by
Safic under the 1986 forward contracts; and
c. it failed to resolve the issue of whether or not IVO is liable to Safic
under the wash out contracts involving Contracts Nos. A601446 and
A60155 (sic), despite the fact that Safic had properly raised the issue
on its appeal, and the evidence and the law support Safics position
that IVO is so liable to Safic.
In fine, Safic insists that the appellate court grievously erred
when it did not declare that IVOs President, Dominador Monteverde,
validly entered into the 1986 contracts for and on behalf of IVO.
We disagree.
Article III, Section 3 [g] of the By-Laws[5] of IVO provides,
among others, that
Section 3. Powers and Duties of the President. The President shall be
elected by the Board of Directors from their own number.
He shall have the following duties:
xxxxxxxxx
[g] Have direct and active management of the business and
operation of the corporation, conducting the same according to the
orders, resolutions and instruction of the Board of Directors and
according to his own discretion whenever and wherever the same is
not expressly limited by such orders, resolutions and instructions.
It can be clearly seen from the foregoing provision of IVOs
By-laws that Monteverde had no blanket authority to bind IVO to
any contract. He must act according to the instructions of the Board
of Directors. Even in instances when he was authorized to act
according to his discretion, that discretion must not conflict with
prior Board orders, resolutions and instructions. The evidence
shows that the IVO Board knew nothing of the 1986 contracts[6] and
that it did not authorize Monteverde to enter into speculative
contracts.[7] In fact, Monteverde had earlier proposed that the
company engage in such transactions but the IVO Board rejected his
proposal.[8] Since the 1986 contracts marked a sharp departure from
past IVO transactions, Safic should have obtained from Monteverde
the prior authorization of the IVO Board. Safic can not rely on the
doctrine of implied agency because before the controversial 1986
contracts, IVO did not enter into identical contracts with Safic. The
basis for agency is representation and a person dealing with an
agent is put upon inquiry and must discover upon his peril the
authority of the agent.[9] In the case of Bacaltos Coal Mines v. Court
of Appeals,[10] we elucidated the rule on dealing with an agent thus:
Every person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent. If he does not
make such inquiry, he is chargeable with knowledge of the agents
authority, and his ignorance of that authority will not be any
excuse. Persons dealing with an assumed agent, whether the
assumed agency be a general or special one, are bound at their peril,
if they would hold the principal, to ascertain not only the fact of the
agency but also the nature and extent of the authority, and in case
either is controverted, the burden of proof is upon them to establish
it.[11]
The most prudent thing petitioner should have done was to
ascertain the extent of the authority of Dominador
Monteverde. Being remiss in this regard, petitioner can not seek
relief on the basis of a supposed agency.
Under Article 1898[12] of the Civil Code, the acts of an agent
beyond the scope of his authority do not bind the principal unless
the latter ratifies the same expressly or impliedly. It also bears
emphasizing that when the third person knows that the agent was
acting beyond his power or authority, the principal can not be held
liable for the acts of the agent. If the said third person is aware of
such limits of authority, he is to blame, and is not entitled to recover
damages from the agent, unless the latter undertook to secure the
principals ratification.[13]
There was no such ratification in this case. When Monteverde
entered into the speculative contracts with Safic, he did not secure
the Boards approval.[14] He also did not submit the contracts to the
Board after their consummation so there was, in fact, no occasion at
all for ratification. The contracts were not reported in IVOs export
sales book and turn-out book.[15] Neither were they reflected in
other books and records of the corporation.[16] It must be pointed
out that the Board of Directors, not Monteverde, exercises
corporate power.[17] Clearly, Monteverdes speculative contracts
with Safic never bound IVO and Safic can not therefore enforce
those contracts against IVO.
To bolster its cause, Safic raises the novel point that the IVO
Board of Directors did not set limitations on the extent of
Monteverdes authority to sell coconut oil. It must be borne in mind
in this regard that a question that was never raised in the courts
below can not be allowed to be raised for the first time on appeal
without offending basic rules of fair play, justice and due
process.[18] Such an issue was not brought to the fore either in the
trial court or the appellate court, and would have been disregarded
by the latter tribunal for the reasons previously stated. With more
reason, the same does not deserve consideration by this Court.
Be that as it may, Safics belated contention that the IVO Board
of Directors did not set limitations on Monteverdes authority to sell
coconut oil is belied by what appears on the record. Rodrigo
Monteverde, who succeeded Dominador Monteverde as IVO
President, testified that the IVO Board had set down the policy of
engaging in purely physical trading thus:
Q. Now you said that IVO is engaged in trading. With whom
does it usually trade its oil?
A. I am not too familiar with trading because as of March 1987, I
was not yet an officer of the corporation, although I was
at the time already a stockholder, I think IVO is engaged in
trading oil.
Q. As far as you know, what kind of trading was IVO engaged
with?
A. It was purely on physical trading.
Q. How did you know this?
A. As a stockholder, rather as member of [the] Board of
Directors, I frequently visited the plant and from my
observation, as I have to supervise and monitor purchases
of copras and also the sale of the same, I observed that
the policy of the corporation is for the company to
engaged (sic) or to purely engaged (sic)in physical trading.
Q. What do you mean by physical trading?
A. Physical Trading means we buy and sell copras that are only
available to us. We only have to sell the available stocks in
our inventory.
Q. And what is the other form of trading?
Atty. Fernando
No basis, your Honor.
Atty. Abad
Well, the witness said they are engaged in physical trading and
what I am saying [is] if there are any other kind or form of
trading.
Court
Witness may answer if he knows.
Witness
A. Trading future[s] contracts wherein the trader commits a
price and to deliver coconut oil in the future in which he is
yet to acquire the stocks in the future.
Atty. Abad
Q. Who established the so-called physical trading in IVO?
A. The Board of Directors, sir.
Atty. Abad.
Q. How did you know that?
A. There was a meeting held in the office at the factory and it
was brought out and suggested by our former president,
Dominador Monteverde, that the company should
engaged (sic) in future[s] contract[s] but it was rejected by
the Board of Directors. It was only Ador Monteverde who
then wanted to engaged (sic) in this future[s] contract[s].
Q. Do you know where this meeting took place?
A. As far as I know it was sometime in 1985.
Q. Do you know why the Board of Directors rejected the
proposal of Dominador Monteverde that the company
should engaged (sic) in future[s] contracts?
Atty. Fernando
Objection, your Honor, no basis.
Court
Why dont you lay the basis?
Atty. Abad
Q. Were you a member of the board at the time?
A. In 1975, I am already a stockholder and a member.
Q. Then would [you] now answer my question?
Atty. Fernando
No basis, your Honor. What we are talking is about 1985.
Atty. Abad
Q. When you mentioned about the meeting in 1985 wherein the
Board of Directors rejected the future[s] contract[s], were
you already a member of the Board of Directors at that
time?
A. Yes, sir.
Q. Do you know the reason why the said proposal of Mr.
Dominador Monteverde to engage in future[s] contract[s]
was rejected by the Board of Directors?
A. Because this future[s] contract is too risky and it partakes of
gambling.
Q. Do you keep records of the Board meetings of the company?
A. Yes, sir.
Q. Do you have a copy of the minutes of your meeting in 1985?
A. Incidentally our Secretary of the Board of Directors, Mr.
Elfren Sarte, died in 1987 or 1988, and despite [the]
request of our office for us to be furnished a copy he was
not able to furnish us a copy.[19]
xxxxxxxxx
Atty. Abad
Q. You said the Board of Directors were against the company
engaging in future[s] contracts. As far as you know, has
this policy of the Board of Directors been observed or
followed?
Witness
A. Yes, sir.
Q. How far has this Dominador Monteverde been using the
name of I.V.O. in selling future contracts without the
proper authority and consent of the companys Board of
Directors?
A. Dominador Monteverde never records those transactions he
entered into in connection with these future[s] contracts
in the companys books of accounts.
Atty. Abad
Q. What do you mean by that the future[s] contracts were not
entered into the books of accounts of the company?
Witness
A. Those were not recorded at all in the books of accounts of
the company, sir.[20]
xxxxxxxxx
Q. What did you do when you discovered these transactions?
A. There was again a meeting by the Board of Directors of the
corporation and that we agreed to remove the president
and then I was made to replace him as president.
Q. What else?
A. And a resolution was passed disowning the illegal activities of
the former president.[21]
Petitioner next argues that there was actually no difference
between the 1985 physical contracts and the 1986 futures
contracts.
The contention is unpersuasive for, as aptly pointed out by the
trial court and sustained by the appellate court
Rejecting IVOs position, SAFIC claims that there is no distinction
between the 1985 and 1986 contracts, both of which groups of
contracts were signed or authorized by IVOs President, Dominador
Monteverde. The 1986 contracts, SAFIC would bewail, were
similarly with their 1985 predecessors, forward sales contracts in
which IVO had undertaken to deliver the crude coconut oil months
after such contracts were entered into. The lead time between the
closing of the deal and the delivery of the oil supposedly allowed the
seller to accumulate enough copra to mill and to build up its
inventory and so meet its delivery commitment to its foreign
buyers. SAFIC concludes that the 1986 contracts were equally
binding, as the 1985 contracts were, on IVO.
Subjecting the evidence on both sides to close scrutiny, the Court
has found some remarkable distinctions between the 1985 and
1986 contracts. x x x
1. The 1985 contracts were performed within an average of two
months from the date of the sale. On the other hand, the 1986
contracts were to be performed within an average of eight and a
half months from the dates of the sale. All the supposed
performances fell in 1987. Indeed, the contract covered by Exhibit J
was to be performed 11 to 12 months from the execution of the
contract. These pattern (sic) belies plaintiffs contention that the
lead time merely allowed for milling and building up of oil
inventory. It is evident that the 1986 contracts constituted trading in
futures or in mere expectations. In all likelihood, the coconuts that
were supposed to be milled for oil were not yet on their trees when
Dominador Monteverde sold the crude oil to SAFIC.
2. The mode of payment agreed on by the parties in their 1985
contracts was uniformly thru the opening of a letter of credit LC by
SAFIC in favor of IVO. Since the buyers letter of credit guarantees
payment to the seller as soon as the latter is able to present the
shipping documents covering the cargo, its opening usually mark[s]
the fact that the transaction would be consummated. On the other
hand, seven out of the ten 1986 contracts were to be paid by
telegraphic transfer upon presentation of the shipping
documents. Unlike the letter of credit, a mere promise to pay by
telegraphic transfer gives no assurance of [the] buyers compliance
with its contracts. This fact lends an uncertain element in the 1986
contracts.
3. Apart from the above, it is not disputed that with respect to the
1985 contracts, IVO faithfully complied with Central Bank Circular
No. 151 dated April 1, 1963, requiring a coconut oil exporter to
submit a Report of Foreign Sales within twenty-four (24) hours after
the closing of the relative sales contract with a foreign buyer of
coconut oil. But with respect to the disputed 1986 contracts, the
parties stipulated during the hearing that none of these contracts
were ever reported to the Central Bank, in violation of its above
requirement. (See Stipulation of Facts dated June 13, 1990). The
1986 sales were, therefore suspect.
4. It is not disputed that, unlike the 1985 contacts, the 1986
contracts were never recorded either in the 1986 accounting books
of IVO or in its annual financial statement for 1986, a document that
was prepared prior to the controversy. (Exhibits 6 to 6-0 and 7 to
7-I). Emelita Ortega, formerly an assistant of Dominador
Monteverde, testified that they were strange goings-on about the
1986 contract. They were neither recorded in the books nor
reported to the Central Bank. What is more, in those unreported
cases where profits were made, such profits were ordered remitted
to unknown accounts in California, U.S.A., by Dominador
Monteverde.
xxxxxxxxx
Evidently, Dominador Monteverde made business for himself, using
the name of IVO but concealing from it his speculative transactions.
Petitioner further contends that both the trial and appellate
courts erred in concluding that Safic was not able to prove its claim
for damages. Petitioner first points out that its wash out
agreements with Monteverde where IVO allegedly agreed to pay
US$293,500.00 for some of the failed contracts was proof enough
and, second, that it presented purchases of coconut oil it made from
others during the period of IVOs default.
We remain unconvinced. The so-called wash out agreements
are clearly ultra vires and not binding on IVO. Furthermore, such
agreements did not prove Safics actual losses in the transactions in
question.The fact is that Safic did not pay for the coconut oil that it
supposedly ordered from IVO through Monteverede. Safic only
claims that, since it was ready to pay when IVO was not ready to
deliver, Safic suffered damages to the extent that they had to buy
the same commodity from others at higher prices.
The foregoing claim of petitioner is not, however,
substantiated by the evidence and only raises several questions, to
wit: 1.] Did Safic commit to deliver the quantity of oil covered by the
1986 contracts to its own buyers? Who were these buyers? What
were the terms of those contracts with respect to quantity, price
and date of delivery? 2.] Did Safic pay damages to its buyers? Where
were the receipts? Did Safic have to procure the equivalent oil from
other sources? If so, who were these sources? Where were their
contracts and what were the terms of these contracts as to quantity,
price and date of delivery?
The records disclose that during the course of the proceedings
in the trial court, IVO filed an amended motion[22] for production
and inspection of the following documents: a.] contracts of resale of
coconut oil that Safic bought from IVO; b.] the records of the
pooling and sales contracts covering the oil from such pooling, if the
coconut oil has been pooled and sold as general oil; c.] the contracts
of the purchase of oil that, according to Safic, it had to resort to in
order to fill up alleged undelivered commitments of IVO; d.] all
other contracts, confirmations, invoices, wash out agreements and
other documents of sale related to (a), (b) and (c). This amended
motion was opposed by Safic.[23] The trial court, however, in its
September 16, 1988 Order,[24] ruled that:
From the analysis of the parties respective positions, conclusion can
easily be drawn therefrom that there is materiality in the
defendants move: firstly, plaintiff seeks to recover damages from
the defendant and these are intimately related to plaintiffs alleged
losses which it attributes to the default of the defendant in its
contractual commitments; secondly, the documents are specified in
the amended motion. As such, plaintiff would entertain no
confusion as to what, which documents to locate and produce
considering plaintiff to be (without doubt) a reputable going
concern in the management of the affairs which is serviced by
competent, industrious, hardworking and diligent personnel; thirdly,
the desired production and inspection of the documents was
precipitated by the testimony of plaintiffs witness (Donald OMeara)
who admitted, in open court, that they are available. If the said
witness represented that the documents, as generally described, are
available, reason there would be none for the same witness to say
later that they could not be produced, even after they have been
clearly described.
Besides, if the Court may additionally dwell on the issue of damages,
the production and inspection of the desired documents would be
of tremendous help in the ultimate resolution thereof. Plaintiff
claims for the award of liquidated or actual damages to the tune of
US$391,593.62 which, certainly, is a huge amount in terms of pesos,
and which defendant disputes. As the defendant cannot be
precluded in taking exceptions to the correctness and validity of
such claim which plaintiffs witness (Donald OMeara) testified to,
and as, by this nature of the plaintiffs claim for damages, proof
thereof is a must which can be better served, if not amply
ascertained by examining the records of the related sales admitted
to be in plaintiffs possession, the amended motion for production
and inspection of the defendant is in order.
The interest of justice will be served best, if there would be a full
disclosure by the parties on both sides of all documents related to
the transactions in litigation.
Notwithstanding the foregoing ruling of the trial court, Safic
did not produce the required documents, prompting the court a
quo to assume that if produced, the documents would have been
adverse to Safics cause. In its efforts to bolster its claim for damages
it purportedly sustained, Safic suggests a substitute mode of
computing its damages by getting the average price it paid for
certain quantities of coconut oil that it allegedly bought in 1987 and
deducting this from the average price of the 1986 contracts. But this
mode of computation if flawed because: 1.] it is conjectural since it
rests on average prices not on actual prices multiplied by the actual
volume of coconut oil per contract; and 2.] it is based on the
unproven assumption that the 1987 contracts of purchase provided
the coconut oil needed to make up for the failed 1986
contracts. There is also no evidence that Safic had contracted to
supply third parties with coconut oil from the 1986 contracts and
that Safic had to buy such oil from others to meet the requirement.
Along the same vein, it is worthy to note that the quantities of
oil covered by its 1987 contracts with third parties do not match the
quantities of oil provided under the 1986 contracts. Had Safic
produced the documents that the trial court required, a
substantially correct determination of its actual damages would
have been possible. This, unfortunately, was not the case. Suffice it
to state in this regard that [T]he power of the courts to grant
damages and attorneys fees demands factual, legal and equitable
justification; its basis cannot be left to speculation and
conjecture.[25]
WHEREFORE, in view of all the foregoing, the petition is
DENIED for lack of merit.
SO ORDERED.
NICHOLAS Y. CERVANTES, petitioner, vs. COURT OF APPEALS AND
THE PHILIPPINE AIR LINES, INC., respondent.
DECISION
PURISIMA, J.:
 This Petition for Review on certiorari assails the 25 July 1995
decision of the Court of Appeals[1] in CA GR CV No. 41407, entitled
Nicholas Y. Cervantes vs. Philippine Air Lines Inc., affirming in
totothe judgment of the trial court dismissing petitioners complaint
for damages.
On March 27, 1989, the private respondent, Philippines Air Lines,
Inc. (PAL), issued to the herein petitioner, Nicholas
Cervantes (Cervantes), a round trip plane ticket for
Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket
expressly provided an expiry of date of one year from issuance, i.e.,
until March 27, 1990. The issuance of the said plane ticket was in
compliance with a Compromise Agreement entered into between
the contending parties in two previous suits, docketed as Civil Case
Nos. 3392 and 3451 before the Regional Trial Court in Surigao City.[2]
On March 23, 1990, four days before the expiry date of
subject ticket, the petitioner used it. Upon his arrival in Los Angeles
on the same day, he immediately booked his Los Angeles-Manila
return ticket with the PAL office, and it was confirmed for the April 2,
1990 flight.
Upon learning that the same PAL plane would make a
stop-over in San Francisco, and considering that he would be there
on April 2, 1990, petitioner made arrangements with PAL for him to
board the flight in San Francisco instead of boarding in Los Angeles.
On April 2, 1990, when the petitioner checked in at the PAL
counter in San Francisco, he was not allowed to board. The PAL
personnel concerned marked the following notation on his
ticket: TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY.
Aggrieved, petitioner Cervantes filed a Complaint for Damages,
for breach of contract of carriage docketed as Civil Case No. 3807
before Branch 32 of the Regional Trial Court of Surigao del Norte in
Surigao City. But the said complaint was dismissed for lack of
merit.[3]
On September 20, 1993, petitioner interposed an appeal to
the Court of Appeals, which came out with a Decision, on July 25,
1995, upholding the dismissal of the case.
On May 22, 1996, petitioner came to this Court via the
Petition for Review under consideration.
The issues raised for resolution are: (1) Whether or not the act
of the PAL agents in confirming subject ticket extended the period
of validity of petitioners ticket; (2) Whether or not the defense of
lack of authority was correctly ruled upon; and (3) Whether or not
the denial of the award for damages was proper.
To rule on the first issue, there is a need to quote the findings
below. As a rule, conclusions and findings of fact arrived at by the
trial court are entitled to great weight on appeal and should not be
disturbed unless for strong and cogent reasons.[4]
The facts of the case as found by the lower court[5] are, as follows:
The plane ticket itself (Exhibit A for plaintiff; Exhibit 1 for defendant)
provides that it is not valid after March 27, 1990. (Exhibit 1-F). It is
also stipulated in paragraph 8 of the Conditions of Contract (Exhibit
1, page 2) as follows:
"8. This ticket is good for carriage for one year from date of
issue, except as otherwise provided in this ticket, in carriers tariffs,
conditions of carriage, or related regulations. The fare for carriage
hereunder is subject to change prior to commencement of
carriage. Carrier may refuse transportation if the applicable fare has
not been paid.[6]
The question on the validity of subject ticket can be resolved
in light of the ruling in the case of Lufthansa vs. Court of
Appeals[7]. In the said case, the Tolentinos were issued first class
tickets on April 3, 1982, which will be valid until April 10,1983. On
June 10, 1982, they changed their accommodations to economy
class but the replacement tickets still contained the same
restriction. On May 7, 1983, Tolentino requested that subject tickets
be extended, which request was refused by the petitioner on the
ground that the said tickets had already expired. The non-extension
of their tickets prompted the Tolentinos to bring a complaint for
breach of contract of carriage against the petitioner. In ruling
against the award of damages, the Court held that the ticket
constitute the contract between the parties. It is axiomatic that
when the terms are clear and leave no doubt as to the intention of
the contracting parties, contracts are to be interpreted according to
their literal meaning.
In his effort to evade this inevitable conclusion, petitioner
theorized that the confirmation by the PALs agents in Los Angeles
and San Francisco changed the compromise agreement between the
parties.
As aptly ruled by the appellate court:
xxx on March 23, 1990, he was aware of the risk that his ticket could
expire, as it did, before he returned to the Philippines. (pp. 320-321,
Original Records)[8]
The question is: Did these two (2) employees, in effect ,
extend the validity or lifetime of the ticket in question? The answer
is in the negative. Both had no authority to do so. Appellant knew
this from the very start when he called up the Legal Department of
appellee in the Philippines before he left for the United States of
America. He had first hand knowledge that the ticket in question
would expire on March 27,1990 and that to secure an extension, he
would have to file a written request for extension at the PALs office
in the Philippines (TSN, Testimony of Nicholas Cervantes, August 2,
1991, pp 20-23).Despite this knowledge, appellant persisted to use
the ticket in question.[9]
From the aforestated facts, it can be gleaned that the
petitioner was fully aware that there was a need to send a letter to
the legal counsel of PAL for the extension of the period of validity of
his ticket.
Since the PAL agents are not privy to the said Agreement and
petitioner knew that a written request to the legal counsel of PAL
was necessary, he cannot use what the PAL agents did to his
advantage.The said agents, according to the Court of
Appeals,[10] acted without authority when they confirmed the flights
of the petitioner.
Under Article 1898[11] of the New Civil Code, the acts of an
agent beyond the scope of his authority do not bind the principal,
unless the latter ratifies the same expressly or
impliedly. Furthermore, when the third person (herein
petitioner) knows that the agent was acting beyond his power or
authority, the principal cannot be held liable for the acts of the
agent. If the said third person is aware of such limits of authority, he
is to blame, and is not entitled to recover damages from the agent,
unless the latter undertook to secure the principals ratification.[12]
 Anent the second issue, petitioners stance that the defense of
lack of authority on the part of the PAL employees was deemed
waived under Rule 9, Section 2 of the Revised Rules of Court, is
unsustainable. Thereunder, failure of a party to put up defenses in
their answer or in a motion to dismiss is a waiver thereof.
Petitioner stresses that the alleged lack of authority of the PAL
employees was neither raised in the answer nor in the motion to
dismiss. But records show that the question of whether there was
authority on the part of the PAL employees was acted upon by the
trial court when Nicholas Cervantes was presented as a witness and
the depositions of the PAL employees, Georgina M. Reyes and Ruth
Villanueva, were presented.
The admission by Cervantes that he was told by PALs legal
counsel that he had to submit a letter requesting for an extension of
the validity of subject tickets was tantamount to knowledge on his
part that the PAL employees had no authority to extend the validity
of subject tickets and only PALs legal counsel was authorized to do
so.
However, notwithstanding PALs failure to raise the defense of
lack of authority of the said PAL agents in its answer or in a motion
to dismiss, the omission was cured since the said issue was litigated
upon, as shown by the testimony of the petitioner in the course of
trial. Rule 10, Section 5 of the 1997 Rules of Civil Procedure
provides:
Sec. 5. Amendment to conform or authorize presentation of
evidence. - When issues not raised by the pleadings are tried with
express or implied consent of the parties, as if they had been raised
in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise
these issues may be made upon motion of any party at any time,
even after judgment; but failure to amend does not affect the result
of the trial of these issues. xxx
Thus, when evidence is presented by one party, with the
express or implied consent of the adverse party, as to issues not
alleged in the pleadings, judgment may be rendered validly as
regards the said issue, which shall be treated as if they have been
raised in the pleadings. There is implied consent to the evidence
thus presented when the adverse party fails to object thereto.[13]
Re: the third issue, an award of damages is improper because
petitioner failed to show that PAL acted in bad faith in refusing to
allow him to board its plane in San Francisco.
In awarding moral damages for breach of contract of carriage, the
breach must be wanton and deliberately injurious or the one
responsible acted fraudulently or with malice or bad
faith.[14] Petitioner knew there was a strong possibility that he could
not use the subject ticket, so much so that he bought a back-up
ticket to ensure his departure. Should there be a finding of bad faith,
we are of the opinion that it should be on the petitioner. What the
employees of PAL did was one of simple negligence. No injury
resulted on the part of petitioner because he had a back-up ticket
should PAL refuse to accommodate him with the use of subject
ticket.
Neither can the claim for exemplary damages be upheld. Such
kind of damages is imposed by way of example or correction for the
public good, and the existence of bad faith is established. The
wrongful act must be accompanied by bad faith, and an award of
damages would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless or malevolent manner.[15] Here, there is no
showing that PAL acted in such a manner. An award for attorneys
fees is also improper.
WHEREFORE, the Petition is DENIED and the decision of the
Court of Appeals dated July 25, 1995 AFFIRMED in
toto. No pronouncement as to costs.
SO ORDERED.
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS,
represented by CANDIDA G. DANS, and the DBP MORTGAGE
REDEMPTION INSURANCE POOL, respondents.
Office of the Legal Counsel for petitioner.
Reyes, Santayana, Molo & Alegre for DBP Mortgage Redemption
Insurance Pool.
QUIASON, J.:
This is a petition for review on certiorari under Rule 45 of the
Revised Rules of Court to reverse and set aside the decision of the
Court of Appeals in CA-G.R CV No. 26434 and its resolution denying
reconsideration thereof.
We affirm the decision of the Court of Appeals with modification.
I
In May 1987, Juan B. Dans, together with his wife Candida, his son
and daughter-in-law, applied for a loan of P500,000.00 with the
Development Bank of the Philippines (DBP), Basilan Branch. As the
principal mortgagor, Dans, then 76 years of age, was advised by DBP
to obtain a mortgage redemption insurance (MRI) with the DBP
Mortgage Redemption Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by
DBP on August 4, 1987 and released on August 11, 1987. From the
proceeds of the loan, DBP deducted the amount of P1,476.00 as
payment for the MRI premium. On August 15, 1987, Dans
accomplished and submitted the "MRI Application for Insurance"
and the "Health Statement for DBP MRI Pool."
On August 20, 1987, the MRI premium of Dans, less the DBP service
fee of 10 percent, was credited by DBP to the savings account of the
DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the
credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon
notice, relayed this information to the DBP MRI Pool. On September
23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible
for MRI coverage, being over the acceptance age limit of 60 years at
the time of application.
On October 21, 1987, DBP apprised Candida Dans of the disapproval
of her late husband's MRI application. The DBP offered to refund
the premium of P1,476.00 which the deceased had paid, but
Candida Dans refused to accept the same, demanding payment of
the face value of the MRI or an amount equivalent to the loan. She,
likewise, refused to accept an ex gratia settlement of P30,000.00,
which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as
administratrix, filed a complaint with the Regional Trial Court,
Branch I, Basilan, against DBP and the insurance pool for "Collection
of Sum of Money with Damages." Respondent Estate alleged that
Dans became insured by the DBP MRI Pool when DBP, with full
knowledge of Dans' age at the time of application, required him to
apply for MRI, and later collected the insurance premium thereon.
Respondent Estate therefore prayed: (1) that the sum of
P139,500.00, which it paid under protest for the loan, be
reimbursed; (2) that the mortgage debt of the deceased be declared
fully paid; and (3) that damages be awarded.
The DBP and the DBP MRI Pool separately filed their answers, with
the former asserting a cross-claim against the latter.
At the pre-trial, DBP and the DBP MRI Pool admitted all the
documents and exhibits submitted by respondent Estate. As a result
of these admissions, the trial court narrowed down the issues and,
without opposition from the parties, found the case ripe for
summary judgment. Consequently, the trial court ordered the
parties to submit their respective position papers and documentary
evidence, which may serve as basis for the judgment.
On March 10, 1990, the trial court rendered a decision in favor of
respondent Estate and against DBP. The DBP MRI Pool, however,
was absolved from liability, after the trial court found no privity of
contract between it and the deceased. The trial court declared DBP
in estoppel for having led Dans into applying for MRI and actually
collecting the premium and the service fee, despite knowledge of
his age ineligibility. The dispositive portion of the decision read as
follows:
WHEREFORE, in view of the foregoing consideration and in the
furtherance of justice and equity, the Court finds judgment for the
plaintiff and against Defendant DBP, ordering the latter:
1. To return and reimburse plaintiff the amount of P139,500.00 plus
legal rate of interest as amortization payment paid under protest;
2. To consider the mortgage loan of P300,000.00 including all
interest accumulated or otherwise to have been settled, satisfied or
set-off by virtue of the insurance coverage of the late Juan B. Dans;
3. To pay plaintiff the amount of P10,000.00 as attorney's fees;
4. To pay plaintiff in the amount of P10,000.00 as costs of litigation
and other expenses, and other relief just and equitable.
The Counterclaims of Defendants DBP and DBP MRI POOL are
hereby dismissed. The Cross-claim of Defendant DBP is likewise
dismissed (Rollo, p. 79)
The DBP appealed to the Court of Appeals. In a decision dated
September 7, 1992, the appellate court affirmed in toto the decision
of the trial court. The DBP's motion for reconsideration was denied
in a resolution dated April 20, 1993.
Hence, this recourse.
II
When Dans applied for MRI, he filled up and personally signed a
"Health Statement for DBP MRI Pool" (Exh. "5-Bank") with the
following declaration:
I hereby declare and agree that all the statements and answers
contained herein are true, complete and correct to the best of my
knowledge and belief and form part of my application for insurance.
It is understood and agreed that no insurance coverage shall be
effected unless and until this application is approved and the full
premium is paid during my continued good health (Records, p. 40).
Under the aforementioned provisions, the MRI coverage shall take
effect: (1) when the application shall be approved by the insurance
pool; and (2) when the full premium is paid during the continued
good health of the applicant. These two conditions, being joined
conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with
the DBP MRI Pool. The pool, however, did not approve the
application of Dans. There is also no showing that it accepted the
sum of P1,476.00, which DBP credited to its account with full
knowledge that it was payment for Dan's premium. There was, as a
result, no perfected contract of insurance; hence, the DBP MRI Pool
cannot be held liable on a contract that does not exist.
The liability of DBP is another matter.
It was DBP, as a matter of policy and practice, that required Dans,
the borrower, to secure MRI coverage. Instead of allowing Dans to
look for his own insurance carrier or some other form of insurance
policy, DBP compelled him to apply with the DBP MRI Pool for MRI
coverage. When Dan's loan was released on August 11, 1987, DBP
already deducted from the proceeds thereof the MRI premium. Four
days latter, DBP made Dans fill up and sign his application for MRI,
as well as his health statement. The DBP later submitted both the
application form and health statement to the DBP MRI Pool at the
DBP Main Building, Makati Metro Manila. As service fee, DBP
deducted 10 percent of the premium collected by it from Dans.
In dealing with Dans, DBP was wearing two legal hats: the first as a
lender, and the second as an insurance agent.
As an insurance agent, DBP made Dans go through the motion of
applying for said insurance, thereby leading him and his family to
believe that they had already fulfilled all the requirements for the
MRI and that the issuance of their policy was forthcoming.
Apparently, DBP had full knowledge that Dan's application was
never going to be approved. The maximum age for MRI acceptance
is 60 years as clearly and specifically provided in Article 1 of the
Group Mortgage Redemption Insurance Policy signed in 1984 by all
the insurance companies concerned (Exh. "1-Pool").
Under Article 1987 of the Civil Code of the Philippines, "the agent
who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of
his authority without giving such party sufficient notice of his
powers."
The DBP is not authorized to accept applications for MRI when its
clients are more than 60 years of age (Exh. "1-Pool"). Knowing all
the while that Dans was ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of its authority when it
accepted Dan's application for MRI by collecting the insurance
premium, and deducting its agent's commission and service fee.
The liability of an agent who exceeds the scope of his authority
depends upon whether the third person is aware of the limits of the
agent's powers. There is no showing that Dans knew of the
limitation on DBP's authority to solicit applications for MRI.
If the third person dealing with an agent is unaware of the limits of
the authority conferred by the principal on the agent and he (third
person) has been deceived by the non-disclosure thereof by the
agent, then the latter is liable for damages to him (V Tolentino,
Commentaries and Jurisprudence on the Civil Code of the
Philippines, p. 422 [1992], citing Sentencia [Cuba] of September 25,
1907). The rule that the agent is liable when he acts without
authority is founded upon the supposition that there has been some
wrong or omission on his part either in misrepresenting, or in
affirming, or concealing the authority under which he assumes to
act (Francisco, V., Agency 307 [1952], citing Hall v. Lauderdale, 46
N.Y. 70, 75). Inasmuch as the non-disclosure of the limits of the
agency carries with it the implication that a deception was
perpetrated on the unsuspecting client, the provisions of Articles 19,
20 and 21 of the Civil Code of the Philippines come into play.
Article 19 provides:
Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
Article 20 provides:
Every person who, contrary to law, willfully or negligently causes
damage to another, shall indemnify the latter for the same.
Article 21 provides:
Any person, who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy
shall compensate the latter for the damage.
The DBP's liability, however, cannot be for the entire value of the
insurance policy. To assume that were it not for DBP's concealment
of the limits of its authority, Dans would have secured an MRI from
another insurance company, and therefore would have been fully
insured by the time he died, is highly speculative. Considering his
advanced age, there is no absolute certainty that Dans could obtain
an insurance coverage from another company. It must also be noted
that Dans died almost immediately, i.e., on the nineteenth day after
applying for the MRI, and on the twenty-third day from the date of
release of his loan.
One is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved (Civil Code of
the Philippines, Art. 2199). Damages, to be recoverable, must not
only be capable of proof, but must be actually proved with a
reasonable degree of certainty (Refractories Corporation v.
Intermediate Appellate Court, 176 SCRA 539 [1989]; Choa Tek Hee v.
Philippine Publishing Co., 34 Phil. 447 [1916]). Speculative damages
are too remote to be included in an accurate estimate of damages
(Sun Life Assurance v. Rueda Hermanos, 37 Phil. 844 [1918]).
While Dans is not entitled to compensatory damages, he is entitled
to moral damages. No proof of pecuniary loss is required in the
assessment of said kind of damages (Civil Code of Philippines, Art.
2216). The same may be recovered in acts referred to in Article 2219
of the Civil Code.
The assessment of moral damages is left to the discretion of the
court according to the circumstances of each case (Civil Code of the
Philippines, Art. 2216). Considering that DBP had offered to pay
P30,000.00 to respondent Estate in ex gratia settlement of its claim
and that DBP's non-disclosure of the limits of its authority amounted
to a deception to its client, an award of moral damages in the
amount of P50,000.00 would be reasonable.
The award of attorney's fees is also just and equitable under the
circumstances (Civil Code of the Philippines, Article 2208 [11]).
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV
No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to
REIMBURSE respondent Estate of Juan B. Dans the amount of
P1,476.00 with legal interest from the date of the filing of the
complaint until fully paid; and (2) to PAY said Estate the amount of
Fifty Thousand Pesos (P50,000.00) as moral damages and the
amount of Ten Thousand Pesos (P10,000.00) as attorney's fees.
With costs against petitioner.
SO ORDERED.
NORA S. EUGENIO and ALFREDO Y. EUGENIO, petitioners,
vs.
HON. COURT OF APPEALS and PEPSI-COLA BOTTLING COMPANY
OF THE PHILIPPINES, INC., respondents.
Public Attorney's Office for petitioners.
Romualdo M. Jubay for private respondent.
REGALADO, J.:
Private respondent Pepsi-Cola Bottling Company of the Philippines,
Inc. is engaged in the business of manufacturing, making bottling
and selling soft drinks and beverages to the general public.
Petitioner Nora S. Eugenio was a dealer of the soft drink products of
private respondent corporation. Although she had only one store
located at 27 Diamond Street, Emerald Village, Marikina, Metro
Manila, Eugenio had a regular charge account in both the Quezon
City plant (under the name "Abigail Minimart" *) as well as in the
Muntinlupa plant (under the name "Nora Store") of respondent
corporation. Her husband and co-petitioner, Alfredo Y. Eugenio,
used to be a route manager of private respondent in its Quezon City
plant.
On March 17, 1982, private respondent filed a complaint for a sum
of money against petitioners Nora S. Eugenio and Alfredo Y. Eugenio,
docketed as Civil Case No. Q-34718 of the then Court of First
Instance of Quezon City, Branch 9 (now Regional Trial Court, Quezon
City, Branch 97). In its complaint, respondent corporation alleged
that on several occasions in 1979 and 1980, petitioners purchased
and received on credit various products from its Quezon City plant.
As of December 31, 1980, petitioners allegedly had an outstanding
balance of P20,437.40 therein. Likewise, on various occasions in
1980, petitioners also purchased and received on credit various
products from respondent's Muntinlupa plant and, as of December
31, 1989, petitioners supposedly had an outstanding balance of
P38,357.20 there. In addition, it was claimed that petitioners had an
unpaid obligation for the loaned "empties" from the same plant in
the amount of P35,856.40 as of July 11, 1980. Altogether,
petitioners had an outstanding account of P94,651.00 which, so the
complaint alleged, they failed to pay despite oral and written
demands.1
In their defense, petitioners presented four trade provisional
receipts (TPRs) allegedly issued to and received by them from
private respondent's Route Manager Jovencio Estrada of its Malate
Warehouse (Division 57), showing payments in the total sum of
P80,500.00 made by Abigail's Store. Petitioners contended that had
the amounts in the TPRs been credited in their favor, they would
not be indebted to Pepsi-Cola. The details of said receipts are as
follows:
TPR No. Date of Issue Amount
500320 600 Fulls returned 5/6/80 P23,520.00
500326 600 Fulls returned 5/10/80 23,520.00
500344 600 Fulls returned 5/14/80 23,520.00
500346 Cash 5/15/80 10,000.00 2
—————
Total P80,560.00
Further, petitioners maintain that the signature purporting to be
that of petitioner Nora S. Eugenio in Sales Invoice No. 85366 dated
May 15, 1980 in the amount of P5,631.00,3 which was included in
the computation of their alleged debt, is a falsification. In sum,
petitioners argue that if the aforementioned amounts were credited
in their favor, it would be respondent corporation which would be
indebted to them in the sum of P3,546.02 representing
overpayment.
After trial on the merits, the court a quo rendered a decision on
February 17, 1986, ordering petitioners, as defendants therein to
jointly and severally pay private respondent the amount of
P74,849.00, plus 12% interest per annum until the principal amount
shall have been fully paid, as well as P20,000.00 as attorney's
fees.4 On appeal in CA-G.R. CV No. 10623, the Court of Appeals
declared said decision a nullity for failure to comply with the
requirement in Section 14, Article VIII of the 1987 Constitution that
decisions of courts should clearly and distinctly state the facts and
the law on which they are based. The Court of Appeals accordingly
remanded the records of the case to the trial court, directing it to
render another decision in accordance with the requirements of the
Constitution.5
In compliance with the directive of the Court of Appeals, the lower
court rendered a second decision on September 29, 1989. In this
new decision, petitioners were this time ordered to pay, jointly and
severally, the reduced amount of P64,188.60, plus legal interest of
6% per annum from the filing of the action until full payment of the
amount adjudged.6 On appeal therefrom, the Court of Appeals
affirmed the judgment of the trial court in a decision promulgated
on September 27, 1991.7 A motion for the reconsideration of said
judgment of respondent court was subsequently denied in a
resolution dated January 23, 1992.8
We agree with petitioners and respondent court that the crux of the
dispute in the case at bar is whether or not the amounts in the
aforementioned trade provisional receipts should be credited in
favor of herein petitioner spouses.
In a so-called encyclopedic sense, however, our course of action in
this case and the denouement of the controversy therein takes into
account the jurisprudential rule that in the present recourse we
would normally have restricted ourselves to questions of law and
eschewed questions of fact were it not for our perception that the
lower courts manifestly overlooked certain relevant factual
considerations resulting in a misapprehension thereof.
Consequentially, that position shall necessarily affect our analysis of
the rules on the burden of proof and the burden of evidence, and
ultimately, whether the proponent of the corresponding claim has
preponderated or rested on an equipoise or fallen short of
preponderance.
First, the backdrop. It appears that on August 1, 1981, private
respondent through the head of its Legal Department, Atty. Antonio
N. Rosario, sent an inter-office correspondence to petitioner Alfredo
Eugenio inviting him for an interview/interrogation on August 3,
1981 regarding alleged "non-payment of debts to the company,
inefficiency, and loss of trust and confidence."9 The interview was
reset to August 4, 1981 to enable said petitioner to bring along with
him their union president, Luis Isip. On said date, a statement of
overdue accounts were prepared showing that petitioners owed
respondent corporation the following amounts:
Muntinlupa Plant
Nora's Store
Trade Account P38,357.20 (as of 12/3/80) 10
Loaned Empties P35,856.40 (as of 7/11/81) 11
Quezon City Plant
Abigail Minimart
Regular Account P20,437.40 (as of 1980) 12
—————
Total P94,651.00
A reconciliation of petitioners' account was then conducted. The
liability of petitioners as to the loaned empties (Muntinlupa plant,
Nora Store) was reduced to P21,686.00 after a reevaluation of the
value of the loaned empties. 13Likewise, the amount of P5,631.00
under Invoice No. 85366, which was a spurious document, was
deducted from their liability in their trade account with the
Muntinlupa plant. 14 Thereafter, Eugenio and Isip signed the
reconciliation sheets reflecting these items:
Muntinlupa Plant
Nora Store
Trade Account P32,726.20 15
Loaned Empties P21,686.00 16
Quezon City Plant
Abigail Minimart
Trade Account P20,437.2017
——————
Total P74,849.40
After the meeting, private respondent alleged that petitioner
Alfredo Y. Eugenio requested that he be allowed to retire and the
existing accounts be deducted from his retirement pay, but that he
later withdrew his retirement plan. Said petitioner disputed that
allegation and, in fact, he subsequently filed a complaint for illegal
dismissal. The finding of labor arbiter, later affirmed by the Supreme
Court, showed that this petitioner was indeed illegally dismissed,
and that he never filed an application for retirement. In fact, this
Court made a finding that the retirement papers allegedly filed in
the name of this petitioner were forged.18 This makes two falsified
documents to be foisted against petitioners.
With their aforesaid accounts still unpaid, petitioner Alfredo Y.
Eugenio submitted to Atty. Rosario the aforementioned four TPRs.
Thereafter, Atty. Rosario ordered Daniel Azurin, assistant personnel
manager, to conduct an investigation to verify this claim of
petitioners. According to Azurin, during the investigation on
December 4, 1981, Estrada allegedly denied that he issued and
signed the aforesaid TPRs.19 He also presented a supposed affidavit
which Estrada allegedly executed during that investigation to affirm
his verbal statements therein. Surprisingly, however, said supposed
affidavit is inexplicably dated February 5, 1982. 20 At this point, it
should be noted that Estrada never testified thereafter in court and
what he is supposed to have done or said was merely related by
Azurin.
Now, on this point, respondent court disagreed with herein
petitioners that the testimony on the alleged denial of Jovencio
Estrada regarding his signatures on the disputed TPRs, as well as his
affidavit dated February 5, 1982 21wherein he affirmed his denial,
are hearsay evidence because Estrada was not presented as a
witness to testify and be cross-examined thereon. Except for the
terse statement of respondent court that since petitioner Alfredo
Eugenio was supposedly present on December 4, 1981, "(t)he
testimony of Jovencio Estrada at the aforementioned investigation
categorically denying that he issued and signed the disputed TPRs is,
therefore, not hearsay," 22 there was no further explanation on this
unusual doctrinal departure.
The rule is clear and explicit. Under the hearsay evidence rule, a
witness can testify only to those facts which he knows of his
personal knowledge; that is, which are derived from his own
perception, except as otherwise provided in the Rules.23 In the
present case, Estrada failed to appear as a witness at the trial. It was
only Azurin who testified that during the investigation he conducted,
Estrada supposedly denied having signed the TPRs. It is elementary
that under the measure on hearsay evidence, Azurin's testimony
cannot constitute legal proof as to the truth of Estrada's denial. For
that matter, it is not admissible in evidence, petitioners' counsel
having seasonably objected at the trial to such testimony of Azurin
as hearsay. And, even if not objected to and thereby admissible,
such hearsay evidence has no probative value whatsoever. 24
It is true that the testimony or deposition of a witness deceased or
unable to testify, given in a former case or proceeding, judicial or
administrative, involving the same parties and subject matter, may
be given in evidence against the adverse party who had the
opportunity to cross-examine him. 25 Private respondent cannot,
however, seek sanctuary in this exception to the hearsay evidence
rule.
Firstly, the supposed investigation conducted by Azurin was neither
a judicial trial nor an administrative hearing under statutory
regulations and safeguards. It was merely an inter-office interview
conducted by a personnel officer through an ad hoc arrangement.
Secondly, a perusal of the alleged stenographic notes,
assuming arguendo that these notes are admissible in evidence,
would show that the "investigation" was more of a free-flowing
question and answer type of discussion wherein Estrada was asked
some questions, after which Eugenio was likewise asked other
questions. Indeed, there was no opportunity for Eugenio to object,
much less to cross-examine Estrada. Even in a formal prior trial itself,
if the opportunity for
cross-examination did not exist therein or if the accused was not
afforded opportunity to fully cross-examine the witness when the
testimony was offered, evidence relating to the testimony given
therein is thereafter inadmissible in another proceeding, absent any
conduct on the part of the accused amounting to a waiver of his
right to cross-examine.26
Thirdly, the stenographer was not even presented to authenticate
the stenographic notes submitted to the trial court. A copy of the
stenographic report of the entire testimony at the former trial must
be supported by the oath of the stenographer that it is a correct
transcript of his notes of the testimony of the witness as a sine qua
non for its competency and admissibility in evidence. 27 The
supposed stenographic notes on which respondent corporation
relies is unauthenticated and necessarily inadmissible for the
purpose intended.
Lastly, although herein private respondent insinuated that Estrada
was not presented as a witness because he had disappeared, no
evidence whatsoever was offered to show or even intimate that this
was due to any machination or instigation of petitioners. There is no
showing that his absence was procured, or that he was eloigned,
through acts imputable to petitioners. In the case at bar, except for
the self-serving statement that Estrada had disappeared, no
plausible explanation was given by respondent corporation. Estrada
was an employee of private respondent, hence it can be assumed
that it could easily trace or ascertain his whereabouts. It had the
resources to do so, in contradistinction to petitioners who even had
to seek the help of the Public Attorney's Office to defend them here.
Private respondent could not have been unaware of the importance
of Estrada's testimony and the consequent legal necessity for
presenting him in the trial court, through coercive process if
necessary.
Obviously, neither is the affidavit of Estrada admissible; it is likewise
barred as evidence by the hearsay evidence rule. 28 This is aside
from the fact that, by their nature, affidavits are generally not
prepared by the affiants themselves but by another who uses his
own language in writing the affiant's statements, which may thus be
either omitted or misunderstood by the one writing them.29 The
dubiety of that affidavit, as earlier explained, is further underscored
by the fact that it was executed more than two months after the
investigation, presumably for curative purposes as it were.
Now, the authenticity of a handwriting may be proven, among other
means, by its comparison made by the witness or the court with
writings admitted or treated as genuine by the party against whom
the evidence is offered or proved to be genuine to the satisfaction
of the judge. 30 The alleged affidavit of Estrada states". . . that the
comparison that was made as to the authenticity of the signature
appearing in the TPRs and that of my signature showed that there
was an apparent dissimilarity between the two signatures, xerox
copy of my 201 File is attached hereto as Annex 'F' of this
affidavit.31 However, a search of the Folder of Exhibits in this case
does not reveal that private respondent ever submitted any
document, not even the aforementioned 201 File, containing a
specimen of the signature of Estrada which the Court can use as a
basis for comparison. Neither was any document containing a
specimen of Estrada's signature presented by private respondent in
the formal offer of its exhibits.32
Respondent court made the further observation that "Estrada was
even asked by Atty. Azurin at said investigation to sign three times
to provide specimens of his genuine signature." 33 There is, however,
no showing that he did, but assuming that Estrada signed the
stenographic notes, the Court would still be unable to make the
necessary comparison because two signatures appear on the right
margin of each and every page of the stenographic notes, without
any indication whatsoever as to which of the signatures is Estrada's.
The whole document was marked for identification but the
signatures were not. In fact, although formally offered, it was
merely introduced by the private respondent "in order to show that
Jovencio Estrada had been investigated and categorically denied
having collected from Abigail Minimart and denying having signed
the receipts claimed by Alfredo Eugenio to be his payment,"34 and
not for the purpose of presenting any alleged signature of Estrada
on the document as a basis for comparison.
This is a situation that irresistibly arouses judicial curiosity, if not
suspicion. Respondent corporation was fully aware that its case
rested, as it were, on the issue of whether the TPRs were authentic
and which issue, in turn, turned on the genuineness of Estrada's
signatures thereon. Yet, aside from cursorily dismissing the
non-presentation of Estrada in court by the glib assertion that he
could not be found, and necessarily aware that his alleged denial of
his signatures on said TPRs and his affidavit rendered the same
vulnerable to the challenge that they are hearsay and inadmissible,
respondent corporation did nothing more. In fact, Estrada's
disappearance has not been explained up to the present.
The next inquiry then would be as to what exactly is the nature of
the TPRs insofar as they are used in the day-to-day business
transactions of the company. These trade provisional receipts are
bound and given in booklets to the company sales representatives,
under proper acknowledgment by them and with a record of the
distribution thereof. After every transaction, when a collection is
made the customer is given by the sales representative a copy of
the trade provisional receipt, that is, the triplicate copy or
customer's copy, properly filled up to reflect the completed
transaction. All unused TPRs, as well as the collections made, are
turned over by the sales representative to the appropriate company
officer.35
According to respondent court, "the questioned TPR's are merely
'provisional' and were, as printed at the bottom of said receipts, to
be officially confirmed by plaintiff within fifteen (15) days by
delivering the original copy thereof stamped paid and signed by its
cashier to the customer. . . . Defendants-appellants (herein
petitioners) failed to present the original copies of the TPRs in
question, showing that they were never confirmed by the plaintiff,
nor did they demand from plaintiff the confirmed original copies
thereof." 36
We do not agree with the strained implication intended to be
adverse to petitioners. The TPRs presented in evidence by
petitioners are disputably presumed as evidentiary of payments
made on account of petitioners. There are presumptions juris
tantum in law that private transactions have been fair and regular
and that the ordinary course of business has been followed.37 The
role of presumptions in the law on evidence is to relieve the party
enjoying the same of the evidential burden to prove the proposition
that he contends for, and to shift the burden of evidence to the
adverse party. Private respondent having failed to rebut the
aforestated presumptions in favor of valid payment by petitioners,
these would necessarily continue to stand in their favor in this case.
Besides, even assuming arguendo that herein private respondent's
cashier never received the amounts reflected in the TPRs, still
private respondent failed to prove that Estrada, who is its duly
authorized agent with respect to petitioners, did not receive those
amounts from the latter. As correctly explained by petitioners, "in
so far as the private respondent's customers are concerned, for as
long as they pay their obligations to the sales representative of the
private respondent using the latter's official receipt, said payment
extinguishes their obligations."38 Otherwise, it would unreasonably
cast the burden of supervision over its employees from respondent
corporation to its customers.
The substantive law is that payment shall be made to the person in
whose favor the obligation has been constituted, or his
successor-in-interest or any person authorized to receive it.39 As far
as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such is within
the terms of the power of attorney, as written, even if the agent has
in fact exceeded the limits of his authority according to an
understanding between the principal and his agent. 40 In fact, Atty.
Rosario, private respondent's own witness, admitted that "it is the
responsibility of the collector to turn over the collection." 41
Still pursuing its ruling in favor of respondent corporation, the Court
of Appeals makes the following observation:
. . . Having allegedly returned 600 Fulls to the plaintiff's
representative on May 6, 10, and 14, 1980, appellant-wife's Abigail
Store must have received more than 1,800 cases of soft drinks from
plaintiff before those dates. Yet the Statement of Overdue Account
pertaining to Abigail Minimart (Exhs. "D", "D-1" to "D-3") which
appellant-husband and his representative Luis Isip signed on August
3, 1981 does now show more than 1,800 cases of soft drinks were
delivered to Abigail Minimart by plaintiff's Quezon City Plant (which
supposedly issued the disputed TPRs) in May, 1980 or the month
before."42
We regret the inaccuracy in said theory of respondent court which
was impelled by its sole and limited reliance on a mere statement
of overdue amounts. Unlike a statement of account which truly
reflects the day-to-day movement of an account, a statement of an
overdue amount is only a summary of the account, simply reflecting
the balance due thereon. A statement of account, being more
specific and detailed in nature, allows one to readily see and verify if
indeed deliveries were made during a specific period of time, unlike
a bare statement of overdue payments. Respondent court cannot
make its aforequoted categorical deduction unless supporting
documents accompanying the statement of overdue amounts were
submitted to enable easy and accurate verification of the facts.
A perusal of the statement of overdue accounts shows that, except
for a reference number given for each entry, no further details were
volunteered nor offered. It is entirely possible that the statement of
overdue account merely reflects the outstanding debt of a particular
client, and not the specific particulars, such as deliveries made,
particularly since the entries therein were surprisingly entered
irrespective of their chronological order. Obviously, therefore, one
can not use the statement of overdue amounts as conclusive proof
of deliveries done within a particular time frame.
Except for its speculation that petitioner Alfredo Y. Eugenio could
have had easy access to blank forms of the TPRs because he was a
former route manager no evidence whatsoever was presented by
private respondent in support of that theory. We are accordingly
intrigued by such an unkind assertion of respondent corporation
since Azurin himself admitted that their accounting department
could not even inform them regarding the persons to whom the
TPRs were issued. 43 In addition, it is significant that respondent
corporation did not take proper action if indeed some receipts were
actually lost, such as the publication of the fact of loss of the
receipts, with the corresponding investigation into the matter.
We, therefore, reject as attenuated the comment of the trial court
that the TPRs, which Eugenio submitted after the reconciliation
meeting, "smacks too much of an afterthought." 44 The
reconciliation meeting was held on August 4, 1981. Three months
later, on November, 1981, petitioner Alfredo Y. Eugenio submitted
the four TPRs. He explained, and this was not disputed, that at the
time the reconciliation meeting was held, his daughter Nanette,
who was helping his wife manage the store, had eloped and she had
possession of the TPRs. 45 It was only in November, 1981 when
petitioners were able to talk to Nanette that they were able to find
and retrieve said TPRs. He added that during the reconciliation
meeting, Atty. Rosario assured him that any receipt he may submit
later will be credited in his favor, hence he signed the reconciliation
documents. Accordingly, when he presented the TPRs to private
respondent, Atty. Rosario directed Mr. Azurin to verify the TPRs.
Thus, the amount stated in the reconciliation sheet was not final, as
it was still subject to such receipts as may thereafter be presented
by petitioners.
On the other hand, petitioners claimed that the signature of
petitioner Nora S. Eugenio in Sales Invoice No. 85366, in the amount
of P5,631.00 is spurious and should accordingly be deducted from
the disputed amount of P74,849.40. A scrutiny of the reconciliation
sheet shows that said amount had already been deducted upon the
instruction of one Mr. Coloma, Plant Controller of Pepsi-Cola ,
Muntinlupa Plant. 46 That amount is not disputed by respondent
corporation and should no longer be deducted from the total
liability of petitioner in the sum of P74,849.40. Since petitioners had
made a payment of P80,560.00, there was consequently an
overpayment of P5,710.60.
All told, we are constrained to hold that respondent corporation has
dismally failed to comply with the pertinent rules for the admission
of the evidence by which it sought to prove its contentions.
Furthermore, there are questions left unanswered and begging for
cogent explanations why said respondent did not or could not
comply with the evidentiary rules. Its default inevitably depletes the
weight of its evidence which cannot just be taken in vacuo, with the
result that for lack of the requisite quantum of evidence, it has not
discharged the burden of preponderant proof necessary to prevail in
this case.
WHEREFORE, the judgment of respondent Court of Appeals in C.A.
G.R. CV No. 26901, affirming that of the trial court in Civil Case No.
Q-34718, is ANNULLED and SET ASIDE. Private respondent
Pepsi-Cola Bottling Company of the Philippines, Inc. is hereby
ORDERED to pay petitioners Nora and Alfredo Eugenio the amount
of P5,710.60 representing overpayment made to the former.
SO ORDERED.
TOYOTA SHAW, INC., petitioner,
vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.
DAVIDE, JR., J.:
At the heart of the present controversy is the document marked
Exhibit "A" 1 for the private respondent, which was signed by a sales
representative of Toyota Shaw, Inc. named Popong Bernardo. The
document reads as follows:
4 June 1989
AGREEMENTS BETWEEN MR. SOSA
& POPONG BERNARDO OF TOYOTA
SHAW, INC.
1. all necessary documents will be submitted to TOYOTA SHAW, INC.
(POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from
the Province (Marinduque) where the unit will be used on the 19th
of June.
2. the downpayment of P100,000.00 will be paid by Mr. Sosa on
June 15, 1989.
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and
released by TOYOTA SHAW, INC. on the 17th of June at 10 a.m.
Very truly yours,
(Sgd.) POPONG BERNARDO.
Was this document, executed and signed by the petitioner's sales
representative, a perfected contract of sale, binding upon the
petitioner, breach of which would entitle the private respondent to
damages and attorney's fees? The trial court and the Court of
Appeals took the affirmative view. The petitioner disagrees. Hence,
this petition for review on certiorari.
The antecedents as disclosed in the decisions of both the trial court
and the Court of Appeals, as well as in the pleadings of petitioner
Toyota Shaw, Inc. (hereinafter Toyota) and respondent Luna L. Sosa
(hereinafter Sosa) are as follows. Sometime in June of 1989, Luna L.
Sosa wanted to purchase a Toyota Lite Ace. It was then a seller's
market and Sosa had difficulty finding a dealer with an available unit
for sale. But upon contacting Toyota Shaw, Inc., he was told that
there was an available unit. So on 14 June 1989, Sosa and his son,
Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro
Manila. There they met Popong Bernardo, a sales representative of
Toyota.
Sosa emphasized to Bernardo that he needed the Lite Ace not later
than 17 June 1989 because he, his family, and a balikbayan guest
would use it on 18 June 1989 to go to Marinduque, his home
province, where he would celebrate his birthday on the 19th of June.
He added that if he does not arrive in his hometown with the new
car, he would become a "laughing stock." Bernardo assured Sosa
that a unit would be ready for pick up at 10:00 a.m. on 17 June 1989.
Bernardo then signed the aforequoted "Agreements Between Mr.
Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed
upon by the parties that the balance of the purchase price would be
paid by credit financing through B.A. Finance, and for this Gilbert, on
behalf of his father, signed the documents of Toyota and B.A.
Finance pertaining to the application for financing.
The next day, 15 June 1989, Sosa and Gilbert went to Toyota to
deliver the downpayment of P100,000.00. They met Bernardo who
then accomplished a printed Vehicle Sales Proposal (VSP) No.
928,2 on which Gilbert signed under the subheading CONFORME.
This document shows that the customer's name is "MR. LUNA
SOSA" with home address at No. 2316 Guijo Street, United
Parañaque II; that the model series of the vehicle is a "Lite Ace
1500" described as "4 Dr minibus"; that payment is by "installment,"
to be financed by "B.A.," 3 with the initial cash outlay of
P100,000.00 broken down as follows:
a) downpayment — P 53,148.00
b) insurance — P 13,970.00
c) BLT registration fee — P 1,067.00
CHMO fee — P 2,715.00
service fee — P 500.00
accessories — P 29,000.00
and that the "BALANCE TO BE FINANCED" is "P274,137.00." The
spaces provided for "Delivery Terms" were not filled-up. It also
contains the following pertinent provisions:
CONDITIONS OF SALES
1. This sale is subject to availability of unit.
2. Stated Price is subject to change without prior notice, Price
prevailing and in effect at time of selling will apply. . . .
Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and
approved the VSP.
On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to
inform him that the vehicle would not be ready for pick up at 10:00
a.m. as previously agreed upon but at 2:00 p.m. that same day. At
2:00 p.m., Sosa and Gilbert met Bernardo at the latter's office.
According to Sosa, Bernardo informed them that the Lite Ace was
being readied for delivery. After waiting for about an hour, Bernardo
told them that the car could not be delivered because "nasulot ang
unit ng ibang malakas."
Toyota contends, however, that the Lite Ace was not delivered to
Sosa because of the disapproval by B.A. Finance of the credit
financing application of Sosa. It further alleged that a particular unit
had already been reserved and earmarked for Sosa but could not be
released due to the uncertainty of payment of the balance of the
purchase price. Toyota then gave Sosa the option to purchase the
unit by paying the full purchase price in cash but Sosa refused.
After it became clear that the Lite Ace would not be delivered to
him, Sosa asked that his downpayment be refunded. Toyota did so
on the very same day by issuing a Far East Bank check for the full
amount of P100,000.00, 4 the receipt of which was shown by a
check voucher of Toyota,5 which Sosa signed with the reservation,
"without prejudice to our future claims for damages."
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated
27 June 1989 and signed by him, he demanded the refund, within
five days from receipt, of the downpayment of P100,000.00 plus
interest from the time he paid it and the payment of damages with
a warning that in case of Toyota's failure to do so he would be
constrained to take legal action. 6 The second, dated 4 November
1989 and signed by M. O. Caballes, Sosa's counsel, demanded one
million pesos representing interest and damages, again, with a
warning that legal action would be taken if payment was not made
within three days.7 Toyota's counsel answered through a letter
dated 27 November 1989 8 refusing to accede to the demands of
Sosa. But even before this answer was made and received by Sosa,
the latter filed on 20 November 1989 with Branch 38 of the Regional
Trial Court (RTC) of Marinduque a complaint against Toyota for
damages under Articles 19 and 21 of the Civil Code in the total
amount of P1,230,000.00.9 He alleges, inter alia, that:
9. As a result of defendant's failure and/or refusal to deliver the
vehicle to plaintiff, plaintiff suffered embarrassment, humiliation,
ridicule, mental anguish and sleepless nights because: (i) he and his
family were constrained to take the public transportation from
Manila to Lucena City on their way to Marinduque; (ii) his
balikbayan-guest canceled his scheduled first visit to Marinduque in
order to avoid the inconvenience of taking public transportation;
and (iii) his relatives, friends, neighbors and other provincemates,
continuously irked him about "his Brand-New Toyota Lite Ace —
that never was." Under the circumstances, defendant should be
made liable to the plaintiff for moral damages in the amount of One
Million Pesos (P1,000,000.00). 10
In its answer to the complaint, Toyota alleged that no sale was
entered into between it and Sosa, that Bernardo had no authority to
sign Exhibit "A" for and in its behalf, and that Bernardo signed
Exhibit "A" in his personal capacity. As special and affirmative
defenses, it alleged that: the VSP did not state date of delivery; Sosa
had not completed the documents required by the financing
company, and as a matter of policy, the vehicle could not and would
not be released prior to full compliance with financing requirements,
submission of all documents, and execution of the sales
agreement/invoice; the P100,000.00 was returned to and received
by Sosa; the venue was improperly laid; and Sosa did not have a
sufficient cause of action against it. It also interposed compulsory
counterclaims.
After trial on the issues agreed upon during the pre-trial
session, 11 the trial court rendered on 18 February 1992 a decision
in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS
BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid
perfected contract of sale between Sosa and Toyota which bound
Toyota to deliver the vehicle to Sosa, and further agreed with Sosa
that Toyota acted in bad faith in selling to another the unit already
reserved for him.
As to Toyota's contention that Bernardo had no authority to bind it
through Exhibit "A," the trial court held that the extent of
Bernardo's authority "was not made known to plaintiff," for as
testified to by Quirante, "they do not volunteer any information as
to the company's sales policy and guidelines because they are
internal matters." 13 Moreover, "[f]rom the beginning of the
transaction up to its consummation when the downpayment was
made by the plaintiff, the defendants had made known to the
plaintiff the impression that Popong Bernardo is an authorized sales
executive as it permitted the latter to do acts within the scope of an
apparent authority holding him out to the public as possessing
power to do these acts." 14 Bernardo then "was an agent of the
defendant Toyota Shaw, Inc. and hence bound the defendants." 15
The court further declared that "Luna Sosa proved his social
standing in the community and suffered besmirched reputation,
wounded feelings and sleepless nights for which he ought to be
compensated." 16 Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings, judgment is hereby
rendered in favor of the plaintiff and against the defendant:
1. ordering the defendant to pay to the plaintiff the sum of
P75,000.00 for moral damages;
2. ordering the defendant to pay the plaintiff the sum of P10,000.00
for exemplary damages;
3. ordering the defendant to pay the sum of P30,000.00 attorney's
fees plus P2,000.00 lawyer's transportation fare per trip in attending
to the hearing of this case;
4. ordering the defendant to pay the plaintiff the sum of P2,000.00
transportation fare per trip of the plaintiff in attending the hearing
of this case; and
5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the
Court of Appeals. The case was docketed as CA-G.R. CV No. 40043.
In its decision promulgated on 29 July 1994,17 the Court of Appeals
affirmed in toto the appealed decision.
Toyota now comes before this Court via this petition and raises the
core issue stated at the beginning of the ponenciaand also the
following related issues: (a) whether or not the standard VSP was
the true and documented understanding of the parties which would
have led to the ultimate contract of sale, (b) whether or not Sosa
has any legal and demandable right to the delivery of the vehicle
despite the non-payment of the consideration and the non-approval
of his credit application by B.A. Finance, (c) whether or not Toyota
acted in good faith when it did not release the vehicle to Sosa, and
(d) whether or not Toyota may be held liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the
conclusion that Exhibit "A" is a perfected contract of sale.
Article 1458 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed perfected:
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract
and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts.
What is clear from Exhibit "A" is not what the trial court and the
Court of Appeals appear to see. It is not a contract of sale. No
obligation on the part of Toyota to transfer ownership of a
determinate thing to Sosa and no correlative obligation on the part
of the latter to pay therefor a price certain appears therein. The
provision on the downpayment of P100,000.00 made no specific
reference to a sale of a vehicle. If it was intended for a contract of
sale, it could only refer to a sale on installment basis, as the VSP
executed the following day confirmed. But nothing was mentioned
about the full purchase price and the manner the installments were
to be paid.
This Court had already ruled that a definite agreement on the
manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale. 18 This is so
because the agreement as to the manner of payment goes into the
price such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price. Definiteness as to the
price is an essential element of a binding agreement to sell personal
property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds
between Toyota and Sosa. For one thing, Sosa did not even sign it.
For another, Sosa was well aware from its title, written in bold
letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF
TOYOTA SHAW, INC.
that he was not dealing with Toyota but with Popong Bernardo and
that the latter did not misrepresent that he had the authority to sell
any Toyota vehicle. He knew that Bernardo was only a sales
representative of Toyota and hence a mere agent of the latter. It
was incumbent upon Sosa to act with ordinary prudence and
reasonable diligence to know the extent of Bernardo's authority as
an
agent20 in respect of contracts to sell Toyota's vehicles. A person
dealing with an agent is put upon inquiry and must discover upon
his peril the authority of the agent.21
At the most, Exhibit "A" may be considered as part of the initial
phase of the generation or negotiation stage of a contract of sale.
There are three stages in the contract of sale, namely:
(a) preparation, conception, or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of
the parties;
(b) perfection or birth of the contract, which is the moment when
the parties come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance
of the terms agreed upon in the contract.22
The second phase of the generation or negotiation stage in this case
was the execution of the VSP. It must be emphasized that
thereunder, the downpayment of the purchase price was
P53,148.00 while the balance to be paid on installment should be
financed by B.A. Finance Corporation. It is, of course, to be assumed
that B.A. Finance Corp. was acceptable to Toyota, otherwise it
should not have mentioned B.A. Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as
amended by P.D. No. 1454 and P.D. No. 1793, as "corporations or
partnerships, except those regulated by the Central Bank of the
Philippines, the Insurance Commission and the Cooperatives
Administration Office, which are primarily organized for the purpose
of extending credit facilities to consumers and to industrial,
commercial, or agricultural enterprises, either by discounting or
factoring commercial papers or accounts receivables, or by buying
and selling contracts, leases, chattel mortgages, or other evidence
of indebtedness, or by leasing of motor vehicles, heavy equipment
and industrial machinery, business and office machines and
equipment, appliances and other movable property." 23
Accordingly, in a sale on installment basis which is financed by a
financing company, three parties are thus involved: the buyer who
executes a note or notes for the unpaid balance of the price of the
thing purchased on installment, the seller who assigns the notes or
discounts them with a financing company, and the financing
company which is subrogated in the place of the seller, as the
creditor of the installment buyer. 24 Since B.A. Finance did not
approve Sosa's application, there was then no meeting of minds on
the sale on installment basis.
We are inclined to believe Toyota's version that B.A. Finance
disapproved Sosa's application for which reason it suggested to Sosa
that he pay the full purchase price. When the latter refused, Toyota
cancelled the VSP and returned to him his P100,000.00. Sosa's
version that the VSP was cancelled because, according to Bernardo,
the vehicle was delivered to another who was "mas malakas" does
not inspire belief and was obviously a delayed afterthought. It is
claimed that Bernardo said, "Pasensiya kayo, nasulot ang unit ng
ibang malakas," while the Sosas had already been waiting for an
hour for the delivery of the vehicle in the afternoon of 17 June 1989.
However, in paragraph 7 of his complaint, Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning, defendant's
sales representative, Mr. Popong Bernardo, called plaintiff's house
and informed the plaintiff's son that the vehicle will not be ready for
pick-up at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day
instead. Plaintiff and his son went to defendant's office on June 17
1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant
for reasons known only to its representatives, refused and/or failed
to release the vehicle to the plaintiff. Plaintiff demanded for an
explanation, but nothing was given; . . . (Emphasis supplied). 25
The VSP was a mere proposal which was aborted in lieu of
subsequent events. It follows that the VSP created no demandable
right in favor of Sosa for the delivery of the vehicle to him, and its
non-delivery did not cause any legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's
fees and costs of suit is without legal basis. Besides, the only ground
upon which Sosa claimed moral damages is that since it was known
to his friends, townmates, and relatives that he was buying a Toyota
Lite Ace which they expected to see on his birthday, he suffered
humiliation, shame, and sleepless nights when the van was not
delivered. The van became the subject matter of talks during his
celebration that he may not have paid for it, and this created an
impression against his business standing and reputation. At the
bottom of this claim is nothing but misplaced pride and ego. He
should not have announced his plan to buy a Toyota Lite Ace
knowing that he might not be able to pay the full purchase price. It
was he who brought embarrassment upon himself by bragging
about a thing which he did not own yet.
Since Sosa is not entitled to moral damages and there being no
award for temperate, liquidated, or compensatory damages, he is
likewise not entitled to exemplary damages. Under Article 2229 of
the Civil Code, exemplary or corrective damages are imposed by
way of example or correction for the public good, in addition to
moral, temperate, liquidated, or compensatory damages.
Also, it is settled that for attorney's fees to be granted, the court
must explicitly state in the body of the decision, and not only in the
dispositive portion thereof, the legal reason for the award of
attorney's fees. 26 No such explicit determination thereon was made
in the body of the decision of the trial court. No reason thus exists
for such an award.
WHEREFORE, the instant petition is GRANTED. The challenged
decision of the Court of Appeals in CA-G.R. CV NO. 40043 as well as
that of Branch 38 of the Regional Trial Court of Marinduque in Civil
Case No. 89-14 are REVERSED and SET ASIDE and the complaint in
Civil Case No. 89-14 is DISMISSED. The counterclaim therein is
likewise DISMISSED.
No pronouncement as to costs.
SO ORDERED.
AIR FRANCE, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE G. GANA (Deceased),
CLARA A. GANA, RAMON GANA, MANUEL GANA, MARIA TERESA
GANA, ROBERTO GANA, JAIME JAVIER GANA, CLOTILDE VDA. DE
AREVALO, and EMILY SAN JUAN, respondents.
Benjamin S. Valte for petitioner.
Napoleon Garcia for private respondents.
MELENCIO-HERRERA, J.:
In this petition for review on certiorari, petitioner AIR FRANCE
assails the Decision of then respondent Court of
Appeals 1 promulgated on 15 December 1980 in CA-G.R. No.
58164-R, entitled "Jose G. Gana, et al. vs. Sociedad Nacionale Air
France", which reversed the Trial Court's judgment dismissing the
Complaint of private respondents for damages arising from breach
of contract of carriage, and awarding instead P90,000.00 as moral
damages.
Sometime in February, 1970, the late Jose G. Gana and his family,
numbering nine (the GANAS), purchased from AIR FRANCE through
Imperial Travels, Incorporated, a duly authorized travel agent, nine
(9) "open-dated" air passage tickets for the
Manila/Osaka/Tokyo/Manila route. The GANAS paid a total of
US$2,528.85 for their economy and first class fares. Said tickets
were bought at the then prevailing exchange rate of P3.90 per
US$1.00. The GANAS also paid travel taxes of P100.00 for each
passenger.
On 24 April 1970, AIR FRANCE exchanged or substituted the
aforementioned tickets with other tickets for the same route. At this
time, the GANAS were booked for the Manila/Osaka segment on AIR
FRANCE Flight 184 for 8 May 1970, and for the Tokyo/Manila return
trip on AIR FRANCE Flight 187 on 22 May 1970. The aforesaid tickets
were valid until 8 May 1971, the date written under the printed
words "Non valuable apres de (meaning, "not valid after the").
The GANAS did not depart on 8 May 1970.
Sometime in January, 1971, Jose Gana sought the assistance of
Teresita Manucdoc, a Secretary of the Sta. Clara Lumber Company
where Jose Gana was the Director and Treasurer, for the extension
of the validity of their tickets, which were due to expire on 8 May
1971. Teresita enlisted the help of Lee Ella Manager of the
Philippine Travel Bureau, who used to handle travel arrangements
for the personnel of the Sta. Clara Lumber Company. Ella sent the
tickets to Cesar Rillo, Office Manager of AIR FRANCE. The tickets
were returned to Ella who was informed that extension was not
possible unless the fare differentials resulting from the increase in
fares triggered by an increase of the exchange rate of the US dollar
to the Philippine peso and the increased travel tax were first paid.
Ella then returned the tickets to Teresita and informed her of the
impossibility of extension.
In the meantime, the GANAS had scheduled their departure on 7
May 1971 or one day before the expiry date. In the morning of the
very day of their scheduled departure on the first leg of their trip,
Teresita requested travel agent Ella to arrange the revalidation of
the tickets. Ella gave the same negative answer and warned her that
although the tickets could be used by the GANAS if they left on 7
May 1971, the tickets would no longer be valid for the rest of their
trip because the tickets would then have expired on 8 May 1971.
Teresita replied that it will be up to the GANAS to make the
arrangements. With that assurance, Ella on his own, attached to the
tickets validating stickers for the Osaka/Tokyo flight, one a JAL.
sticker and the other an SAS (Scandinavian Airways System) sticker.
The SAS sticker indicates thereon that it was "Reevaluated by: the
Philippine Travel Bureau, Branch No. 2" (as shown by a circular
rubber stamp) and signed "Ador", and the date is handwritten in the
center of the circle. Then appear under printed headings the
notations: JL. 108 (Flight), 16 May (Date), 1040 (Time), OK (status).
Apparently, Ella made no more attempt to contact AIR FRANCE as
there was no more time.
Notwithstanding the warnings, the GANAS departed from Manila in
the afternoon of 7 May 1971 on board AIR FRANCE Flight 184 for
Osaka, Japan. There is no question with respect to this leg of the
trip.
However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines
refused to honor the tickets because of their expiration, and the
GANAS had to purchase new tickets. They encountered the same
difficulty with respect to their return trip to Manila as AIR FRANCE
also refused to honor their tickets. They were able to return only
after pre-payment in Manila, through their relatives, of the
readjusted rates. They finally flew back to Manila on separate Air
France Frights on 19 May 1971 for Jose Gana and 26 May 1971 for
the rest of the family.
On 25 August 1971, the GANAS commenced before the then Court
of First Instance of Manila, Branch III, Civil Case No. 84111 for
damages arising from breach of contract of carriage.
AIR FRANCE traversed the material allegations of the Complaint and
alleged that the GANAS brought upon themselves the predicament
they found themselves in and assumed the consequential risks; that
travel agent Ella's affixing of validating stickers on the tickets
without the knowledge and consent of AIR FRANCE, violated airline
tariff rules and regulations and was beyond the scope of his
authority as a travel agent; and that AIR FRANCE was not guilty of
any fraudulent conduct or bad faith.
On 29 May 1975, the Trial Court dismissed the Complaint based on
Partial and Additional Stipulations of Fact as wen as on the
documentary and testimonial evidence.
The GANAS appealed to respondent Appellate Court. During the
pendency of the appeal, Jose Gana, the principal plaintiff, died.
On 15 December 1980, respondent Appellate Court set aside and
reversed the Trial Court's judgment in a Decision, which decreed:
WHEREFORE, the decision appealed from is set aside. Air France is
hereby ordered to pay appellants moral damages in the total sum of
NINETY THOUSAND PESOS (P90,000.00) plus costs.
SO ORDERED. 2
Reconsideration sought by AIR FRANCE was denied, hence,
petitioner's recourse before this instance, to which we gave due
course.
The crucial issue is whether or not, under the environmental milieu
the GANAS have made out a case for breach of contract of carriage
entitling them to an award of damages.
We are constrained to reverse respondent Appellate Court's
affirmative ruling thereon.
Pursuant to tariff rules and regulations of the International Air
Transportation Association (IATA), included in paragraphs 9, 10, and
11 of the Stipulations of Fact between the parties in the Trial Court,
dated 31 March 1973, an airplane ticket is valid for one year. "The
passenger must undertake the final portion of his journey by
departing from the last point at which he has made a voluntary stop
before the expiry of this limit (parag. 3.1.2. ) ... That is the time
allowed a passenger to begin and to complete his trip (parags. 3.2
and 3.3.). ... A ticket can no longer be used for travel if its validity
has expired before the passenger completes his trip (parag. 3.5.1.) ...
To complete the trip, the passenger must purchase a new ticket for
the remaining portion of the journey" (ibid.) 3
From the foregoing rules, it is clear that AIR FRANCE cannot be
faulted for breach of contract when it dishonored the tickets of the
GANAS after 8 May 1971 since those tickets expired on said date;
nor when it required the GANAS to buy new tickets or have their
tickets re-issued for the Tokyo/Manila segment of their trip. Neither
can it be said that, when upon sale of the new tickets, it imposed
additional charges representing fare differentials, it was motivated
by self-interest or unjust enrichment considering that an increase of
fares took effect, as authorized by the Civil Aeronautics Board (CAB)
in April, 1971. This procedure is well in accord with the IATA tariff
rules which provide:
6. TARIFF RULES
7. APPLICABLE FARE ON THE DATE OF DEPARTURE
3.1 General Rule.
All journeys must be charged for at the fare (or charge) in effect on
the date on which transportation commences from the point of
origin. Any ticket sold prior to a change of fare or charge (increase
or decrease) occurring between the date of commencement of the
journey, is subject to the above general rule and must be adjusted
accordingly. A new ticket must be issued and the difference is to be
collected or refunded as the case may be. No adjustment is
necessary if the increase or decrease in fare (or charge) occurs when
the journey is already commenced. 4
The GANAS cannot defend by contending lack of knowledge of those
rules since the evidence bears out that Teresita, who handled travel
arrangements for the GANAS, was duly informed by travel agent Ella
of the advice of Reno, the Office Manager of Air France, that the
tickets in question could not be extended beyond the period of their
validity without paying the fare differentials and additional travel
taxes brought about by the increased fare rate and travel taxes.
ATTY. VALTE
Q What did you tell Mrs. Manucdoc, in turn after being told this by
Mr. Rillo?
A I told her, because that is the reason why they accepted again the
tickets when we returned the tickets spin, that they could not be
extended. They could be extended by paying the additional fare,
additional tax and additional exchange during that time.
Q You said so to Mrs. Manucdoc?
A Yes, sir." ... 5
The ruling relied on by respondent Appellate Court, therefore,
in KLM. vs. Court of Appeals, 65 SCRA 237 (1975), holding that it
would be unfair to charge respondents therein with automatic
knowledge or notice of conditions in contracts of adhesion, is
inapplicable. To all legal intents and purposes, Teresita was the
agent of the GANAS and notice to her of the rejection of the request
for extension of the validity of the tickets was notice to the GANAS,
her principals.
The SAS validating sticker for the Osaka/Tokyo flight affixed by Era
showing reservations for JAL. Flight 108 for 16 May 1971, without
clearing the same with AIR FRANCE allegedly because of the
imminent departure of the GANAS on the same day so that he could
not get in touch with Air France 6 was certainly in contravention of
IATA rules although as he had explained, he did so upon Teresita's
assurance that for the onward flight from Osaka and return, the
GANAS would make other arrangements.
Q Referring you to page 33 of the transcript of the last session, I had
this question which reads as follows: 'But did she say anything to
you when you said that the tickets were about to expire?' Your
answer was: 'I am the one who asked her. At that time I told her if
the tickets being used ... I was telling her what about their bookings
on the return. What about their travel on the return? She told me it
is up for the Ganas to make the arrangement.' May I know from you
what did you mean by this testimony of yours?
A That was on the day when they were asking me on May 7, 1971
when they were checking the tickets. I told Mrs. Manucdoc that I
was going to get the tickets. I asked her what about the tickets
onward from the return from Tokyo, and her answer was it is up for
the Ganas to make the arrangement, because I told her that they
could leave on the seventh, but they could take care of that when
they arrived in Osaka.
Q What do you mean?
A The Ganas will make the arrangement from Osaka, Tokyo and
Manila.
Q What arrangement?
A The arrangement for the airline because the tickets would expire
on May 7, and they insisted on leaving. I asked Mrs. Manucdoc what
about the return onward portion because they would be travelling
to Osaka, and her answer was, it is up to for the Ganas to make the
arrangement.
Q Exactly what were the words of Mrs. Manucdoc when you told
her that? If you can remember, what were her exact words?
A Her words only, it is up for the Ganas to make the arrangement.
Q This was in Tagalog or in English?
A I think it was in English. ... 7
The circumstances that AIR FRANCE personnel at the ticket counter
in the airport allowed the GANAS to leave is not tantamount to an
implied ratification of travel agent Ella's irregular actuations. It
should be recalled that the GANAS left in Manila the day before the
expiry date of their tickets and that "other arrangements" were to
be made with respect to the remaining segments. Besides, the
validating stickers that Ella affixed on his own merely reflect the
status of reservations on the specified flight and could not legally
serve to extend the validity of a ticket or revive an expired one.
The conclusion is inevitable that the GANAS brought upon
themselves the predicament they were in for having insisted on
using tickets that were due to expire in an effort, perhaps, to beat
the deadline and in the thought that by commencing the trip the
day before the expiry date, they could complete the trip even
thereafter. It should be recalled that AIR FRANCE was even unaware
of the validating SAS and JAL. stickers that Ella had affixed spuriously.
Consequently, Japan Air Lines and AIR FRANCE merely acted within
their contractual rights when they dishonored the tickets on the
remaining segments of the trip and when AIR FRANCE demanded
payment of the adjusted fare rates and travel taxes for the
Tokyo/Manila flight.
WHEREFORE, the judgment under review is hereby reversed and set
CA-G.R. CV No. 33568. The appellate court had affirmed the
aside, and the Amended Complaint filed by private respondents
hereby dismissed. Decision[3] dated October 10, 1989 of the Regional Trial Court (RTC)

of Manila, Branch 3, finding petitioner as defendant and the

No costs.
co-defendants below jointly and severally liable to the plaintiffs,
SO ORDERED. now herein respondents.

Teehankee (Chairman), Plana, Relova and Gutierrez, Jr., JJ., concur.

The antecedent facts are as follows:

Respondent Teresita O. Pedroso is a policyholder of a 20-year

Footnotes
endowment life insurance issued by petitioner Filipinas Life
1 Seventh Division composed of J. Guillermo P. Villasor, ponente Assurance Company (Filipinas Life). Pedroso claims Renato Valle was
concurred in by JJ. Venicio Escolin and Onofre A. Villaluz.
her insurance agent since 1972 and Valle collected her monthly
2 p. 62, Rollo. premiums. In the first week of January 1977, Valle told her that the

Filipinas Life Escolta Office was holding a promotional investment

3 3.1.2 The time allowed a passenger to complete his journey
calculated from the date of comencement of the journey, but program for policyholders. It was offering 8% prepaid interest a
exclusive of that date. The passenger must undertake the final
month for certain amounts deposited on a monthly basis. Enticed,
portion of his journey by departing from the last point at which he
has made a voluntary stop before the expiry of this limit, regardless she initially invested and issued a post-dated check dated January 7,
of whether this last segment is covered by a single or several flight
1977 for P10,000.[4] In return, Valle issued Pedroso his personal
coupons.
check for P800 for the 8%[5] prepaid interest and a Filipinas Life
xxx xxx xxx Agents Receipt No. 807838.[6]

3.2 Time allowed a passenger to begin his trip.

Subsequently, she called the Escolta office and talked to

Francisco Alcantara, the administrative assistant, who referred her

to the branch manager, Angel Apetrior. Pedroso inquired about the

FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE G.R. No. 159489
ASSURANCE, INC.), promotional investment and Apetrior confirmed that there was such
Petitioner, Present: a promotion. She was even told she could push through with the

check
QUISUMBING, she issued. From the records, the check, with the
J., Chairperson,
CARPIO,
endorsement of Alcantara at the back, was deposited in the account
- versus - CARPIO MORALES,
TINGA, andof Filipinas Life with the Commercial Bank and Trust Company
VELASCO, JR., JJ.
(CBTC), Escolta Branch.
CLEMENTE N. PEDROSO,
TERESITA O. PEDROSO and JENNIFER N. PALACIO thru her
Attorney-in-Fact PONCIANO C. MARQUEZ, Relying on the representations made by the petitioners duly
Respondents. Promulgated:
authorized representatives Apetrior and Alcantara, as well as having
February 4, 2008
known agent Valle for quite some time, Pedroso waited for the
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
-x maturity of her initial investment. A month after, her investment

of P10,000 was returned to her after she made a written request for
DECISION
its refund. The formal written request, dated February 3, 1977, was

written on an inter-office memorandum form of Filipinas Life

QUISUMBING, J.:
prepared by Alcantara.[7] To collect the amount, Pedroso personally

went to the Escolta branch where Alcantara gave her the P10,000 in
This petition for review on certiorari seeks the reversal of
cash. After a second investment, she made 7 to 8 more investments in
the Decision[1] and Resolution,[2] dated November 29,
varying amounts, totaling P37,000 but at a lower rate of 5%[8] prepaid
2002 and August 5, 2003, respectively, of the Court of Appeals in
interest a month. Upon maturity of Pedrosos subsequent investments,
Valle would take back from Pedroso the corresponding yellow-colored
agents receipt he issued to the latter.
Pedroso told respondent Jennifer N. Palacio, also a
Filipinas Life insurance policyholder, about the investment
plan. Palacio made a total investment of P49,550[9] but at only 5%
prepaid interest. However, when Pedroso tried to withdraw her
investment, Valle did not want to return some P17,000 worth of
it. Palacio also tried to withdraw hers, but Filipinas Life, despite
demands, refused to return her money. With the assistance of their
lawyer, they went to Filipinas Life Escolta Office to collect their
respective investments, and to inquire why they had not seen Valle
for quite some time. But their attempts were futile. Hence,
respondents filed an action for the recovery of a sum of money.
After trial, the RTC, Branch 3, Manila, held Filipinas Life
and its co-defendants Valle, Apetrior and Alcantara jointly and
solidarily liable to the respondents.
On appeal, the Court of Appeals affirmed the trial courts
ruling and subsequently denied the motion for reconsideration.
Petitioner now comes before us raising a single issue:
WHETHER OR NOT THE COURT OF APPEALS
COMMITTED A REVERSIBLE ERROR AND
GRAVELY ABUSED ITS DISCRETION IN AFFIRMING
THE DECISION OF THE LOWER COURT HOLDING
FLAC [FILIPINAS LIFE] TO BE JOINTLY AND
SEVERALLY LIABLE WITH ITS CO-DEFENDANTS
ON THE CLAIM OF RESPONDENTS INSTEAD OF
HOLDING ITS AGENT, RENATO VALLE, SOLELY
LIABLE TO THE RESPONDENTS.[10]
Simply put, did the Court of Appeals err in holding
petitioner and its co-defendants jointly and severally liable to the
herein respondents?
Filipinas Life does not dispute that Valle was its agent, but
claims that it was only a life insurance company and was not
engaged in the business of collecting investment money. It contends
that the investment scheme offered to respondents by Valle,
Apetrior and Alcantara was outside the scope of their authority as
agents of Filipinas Life such that, it cannot be held liable to the
respondents.[11]
On the other hand, respondents contend that Filipinas Life
authorized Valle to solicit investments from them. In fact, Filipinas
Lifes official documents and facilities were used in consummating
the transactions. These transactions, according to respondents,
were confirmed by its officers Apetrior and Alcantara. Respondents
assert they exercised all the diligence required of them in
ascertaining the authority of petitioners agents; and it is Filipinas
Life that failed in its duty to ensure that its agents act within the
scope of their authority.
Considering the issue raised in the light of the submissions
of the parties, we find that the petition lacks merit. The Court of
Appeals committed no reversible error nor abused gravely its
discretion in rendering the assailed decision and resolution.
It appears indisputable that respondents Pedroso and
Palacio had invested P47,000 and P49,550, respectively. These were
received by Valle and remitted to Filipinas Life, using Filipinas Lifes
official receipts, whose authenticity were not disputed. Valles
authority to solicit and receive investments was also established by
the parties. When respondents sought confirmation, Alcantara,
holding a supervisory position, and Apetrior, the branch manager,
confirmed that Valle had authority. While it is true that a person
dealing with an agent is put upon inquiry and must discover at his
own peril the agents authority, in this case, respondents did exercise
due diligence in removing all doubts and in confirming the validity of
the representations made by Valle.
Filipinas Life, as the principal, is liable for obligations
contracted by its agent Valle. By the contract of agency, a person
binds himself to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter.[12] The general rule is that the principal is
responsible for the acts of its agent done within the scope of its
authority, and should bear the damage caused to third
persons.[13] When the agent exceeds his authority, the agent
becomes personally liable for the damage.[14] But even when the
agent exceeds his authority, the principal is still solidarily liable
together with the agent if the principal allowed the agent to act as
though the agent had full powers.[15] In other words, the acts of an
agent beyond the scope of his authority do not bind the principal,
unless the principal ratifies them, expressly or
impliedly.[16] Ratification in agency is the adoption or confirmation

by one person of an act performed on his behalf by another without
authority.[17]
Filipinas Life cannot profess ignorance of Valles acts. Even
if Valles representations were beyond his authority as a
debit/insurance agent, Filipinas Life thru Alcantara and Apetrior
expressly and knowingly ratified Valles acts. It cannot even be
denied that Filipinas Life benefited from the investments deposited
by Valle in the account of Filipinas Life. In our considered view,
Filipinas Life had clothed Valle with apparent authority; hence, it is
now estopped to deny said authority. Innocent third persons should
not be prejudiced if the principal failed to adopt the needed
measures to prevent misrepresentation, much more so if the
principal ratified his agents acts beyond the latters authority. The
act of the agent is considered that of the principal itself. Qui per
alium facit per seipsum facere videtur. He who does a thing by an
agent is considered as doing it himself.[18]
WHEREFORE, the petition is DENIED for lack of merit. The
Decision and Resolution, dated November 29, 2002 and August 5,
2003, respectively, of the Court of Appeals in CA-G.R. CV No. 33568
are AFFIRMED.
Costs against the petitioner.
SO ORDERED.
CHINA AIRLINES, petitioner, vs. DANIEL CHIOK, respondent.
DECISION
PANGANIBAN, J.:
A common carrier has a peculiar relationship with and an
exacting responsibility to its passengers. For reasons of public
interest and policy, the ticket-issuing airline acts as principal in a
contract of carriage and is thus liable for the acts and the omissions
of any errant carrier to which it may have endorsed any sector of
the entire, continuous trip.
The Case
Before the Court is a Petition for Review on Certiorari[1] under
Rule 45 of the Rules of Court, seeking to reverse the August 7, 2001
Decision[2] and the February 7, 2002 Resolution[3] of the Court of
Appeals (CA) in CA-GR CV No. 45832. The challenged Decision
disposed as follows:
WHEREFORE, premises considered, the assailed Decision dated July
5, 1991 of Branch 31, Regional Trial Court, National Capital Judicial
Region, Manila, in Civil Case No. 82-13690, is hereby MODIFIED by
deleting that portion regarding defendants-appellants liabilities for
the payment of the actual damages amounting to HK$14,128.80 and
US$2,000.00 while all other respects are AFFIRMED. Costs against
defendants-appellants.[4]
The assailed Resolution denied Petitioners Motion for Partial
Reconsideration.
The Facts
The facts are narrated by the CA[5] as follows:
On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok)
purchased from China Airlines, Ltd. (CAL for brevity) airline
passenger ticket number 297:4402:004:278:5 for air transportation
covering Manila-Taipei-Hongkong-Manila. Said ticket was exclusively
endorseable to Philippine Airlines, Ltd. (PAL for brevity).
Subsequently, on November 21, 1981, Chiok took his trip from
Manila to Taipei using [the] CAL ticket. Before he left for said trip,
the trips covered by the ticket were pre-scheduled and confirmed
by the former. When he arrived in Taipei, he went to the CAL office
and confirmed his Hongkong to Manila trip on board PAL Flight No.
PR 311. The CAL office attached a yellow sticker appropriately
indicating that his flight status was OK.
When Chiok reached Hongkong, he went to the PAL office and
sought to reconfirm his flight back to Manila. The PAL office
confirmed his return trip on board Flight No. PR 311 and attached its
own sticker.On November 24, 1981, Chiok proceeded to Hongkong
International Airport for his return trip to Manila. However, upon
reaching the PAL counter, Chiok saw a poster stating that PAL Flight
No. PR 311 was cancelled because of a typhoon in Manila. He was
then informed that all the confirmed ticket holders of PAL Flight No.
PR 311 were automatically booked for its next flight, which was to
leave the next day.He then informed PAL personnel that, being the
founding director of the Philippine Polysterene Paper Corporation,
he ha[d] to reach Manila on November 25, 1981 because of a
business option which he ha[d] to execute on said date.
On November 25, 1981, Chiok went to the airport. Cathay Pacific
stewardess Lok Chan (hereafter referred to as Lok) ha[d] taken and
received Chioks plane ticket and his luggage. Lok called the
attention of Carmen Chan (hereafter referred to as Carmen), PALs
terminal supervisor, and informed the latter that Chioks name was
not in the computer list of passengers. Subsequently, Carmen
informed Chiok that his name did not appear in PALs computer list
of passengers and therefore could not be permitted to board PAL
Flight No. PR 307.
Meanwhile, Chiok requested Carmen to put into writing the alleged
reason why he was not allowed to take his flight. The latter then
wrote the following, to wit: PAL STAFF CARMEN CHAN CHKD WITH
R/C KENNY AT 1005H NO SUCH NAME IN COMPUTER FOR 311/24
NOV AND 307/25 NOV. The latter sought to recover his luggage but
found only 2 which were placed at the end of the passengers line.
Realizing that his new Samsonite luggage was missing, which
contained cosmetics worth HK$14,128.80, he complained to
Carmen.
Thereafter, Chiok proceeded to PALs Hongkong office and
confronted PALs reservation officer, Carie Chao (hereafter referred
to as Chao), who previously confirmed his flight back to Manila.
Chao told Chiok that his name was on the list and pointed to the
latter his computer number listed on the PAL confirmation sticker
attached to his plane ticket, which number was R/MN62.
Chiok then decided to use another CAL ticket with No.
297:4402:004:370:5 and asked Chao if this ticket could be used to
book him for the said flight. The latter, once again, booked and
confirmed the formers trip, this time on board PAL Flight No. PR 311
scheduled to depart that evening. Later, Chiok went to the PAL
check-in counter and it was Carmen who attended to him. As this
juncture, Chiok had already placed his travel documents, including
his clutch bag, on top of the PAL check-in counter.
Thereafter, Carmen directed PAL personnel to transfer counters. In
the ensuing commotion, Chiok lost his clutch bag containing the
following, to wit: (a) $2,000.00; (b) HK$2,000.00; (c) Taipei
$8,000.00; (d) P2,000.00; (e) a three-piece set of gold (18 carats)
cross pens valued at P3,500; (f) a Cartier watch worth
about P7,500.00; (g) a tie clip with a garnet birthstone and diamond
worth P1,800.00; and (h) a [pair of] Christian Dior reading
glasses. Subsequently, he was placed on stand-by and at around
7:30 p.m., PAL personnel informed him that he could now check-in.
Consequently, Chiok as plaintiff, filed a Complaint on November 9,
1982 for damages, against PAL and CAL, as defendants, docketed as
Civil Case No. 82-13690, with Branch 31, Regional Trial Court,
National Capital Judicial Region, Manila.
He alleged therein that despite several confirmations of his flight,
defendant PAL refused to accommodate him in Flight No. 307, for
which reason he lost the business option aforementioned. He also
alleged that PALs personnel, specifically Carmen, ridiculed and
humiliated him in the presence of so many people. Further, he
alleged that defendants are solidarily liable for the damages he
suffered, since one is the agent of the other.[6]
The Regional Trial Court (RTC) of Manila held CAL and PAL
jointly and severally liable to respondent. It did not, however, rule
on their respective cross-claims. It disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against the defendants to jointly and severally pay:
1. Actual damages in the amount of HK$14,128.80
or its equivalent in Philippine Currency
at the time of the loss of the luggage
consisting of cosmetic products;
2. US$2,000.00 or its equivalent at the time of the
loss of the clutch bag containing the
money;
3. P200,000.00 by way of moral damages;
4. P50,000.00 by way of exemplary damages or
corrective damages;
5. Attorney[]s fees equivalent to 10% of the
amounts due and demandable and
awarded in favor of the plaintiff; and
6. The costs of this proceedings.[7]
The two carriers appealed the RTC Decision to the CA.
Ruling of the Court of Appeals
Affirming the RTC, the Court of Appeals debunked petitioners
claim that it had merely acted as an issuing agent for the ticket
covering the Hong Kong-Manila leg of respondents journey. In
support of its Decision, the CA quoted a purported ruling of this
Court in KLM Royal Dutch Airlines v. Court of Appeals[8] as follows:
Article 30 of the Warsaw providing that in case of transportation to
be performed by various successive carriers, the passenger can take
action only against the carrier who performed the transportation
during which the accident or the delay occurred presupposes the
occurrence of either an accident or delay in the course of the air trip,
and does not apply if the damage is caused by the willful
misconduct on the part of the carriers employee or agent acting
within the scope of his employment.
It would be unfair and inequitable to charge a passenger with
automatic knowledge or notice of a condition which purportedly
would excuse the carrier from liability, where the notice is written at
the back of the ticket in letters so small that one has to use a
magnifying glass to read the words. To preclude any doubt that the
contract was fairly and freely agreed upon when the passenger
accepted the passage ticket, the carrier who issued the ticket must
inform the passenger of the conditions prescribed in the ticket or, in
the very least, ascertain that the passenger read them before he
accepted the passage ticket. Absent any showing that the carriers
officials or employees discharged this responsibility to the
passenger, the latter cannot be bound by the conditions by which
the carrier assumed the role of a mere ticket-issuing agent for other
airlines and limited its liability only to untoward occurrences in its
own lines.
Where the passage tickets provide that the carriage to be
performed thereunder by several successive carriers is to be
regarded as a single operation, the carrier which issued the tickets
for the entire trip in effect guaranteed to the passenger that the
latter shall have sure space in the various carriers which would ferry
him through the various segments of the trip, and the ticket-issuing
carrier assumes full responsibility for the entire trip and shall be
held accountable for the breach of that guaranty whether the
breach occurred in its own lines or in those of the other carriers.[9]
On PALs appeal, the appellate court held that the carrier had
reneged on its obligation to transport respondent when, in spite of
the confirmations he had secured for Flight PR 311, his name did not
appear in the computerized list of passengers. Ruling that the
airlines negligence was the proximate cause of his excoriating
experience, the appellate court sustained the award of moral and
exemplary damages.
The CA, however, deleted the RTCs award of actual damages
amounting to HK$14,128.80 and US$2,000.00, because the lost
piece of luggage and clutch bag had not actually been checked in or
delivered to PAL for transportation to Manila.
On August 28, 2001, petitioner filed a Motion for Partial
Reconsideration, contending that the appellate court had
erroneously relied on a mere syllabus of KLM v. CA, not on the
actual ruling therein. Moreover, it argued that respondent was fully
aware that the booking for the PAL sector had been made only upon
his request; and that only PAL, not CAL, was liable for the actual
carriage of that segment. Petitioner likewise prayed for a ruling on
its cross-claim against PAL, inasmuch as the latters employees had
acted negligently, as found by the trial court.
Denying the Motion, the appellate court ruled that petitioner
had failed to raise any new matter or issue that would warrant a
modification or a reversal of the Decision. As to the alleged
misquotation, the CA held that while the portion it had cited
appeared to be different from the wording of the actual ruling, the
variance was more apparent than real since the difference [was]
only in form and not in substance.[10]
CAL and PAL filed separate Petitions to assail the CA Decision.
In its October 3, 2001 Resolution, this Court denied PALs appeal,
docketed as GR No. 149544, for failure to serve the CA a copy of the
Petition as required by Section 3, Rule 45, in relation to Section 5(d)
of Rule 56 and paragraph 2 of Revised Circular No. 1-88 of this
Court. PALs Motion for Reconsideration was denied with finality on
January 21, 2002.
Only the appeal of CAL[11] remains in this Court.
Issues
In its Memorandum, petitioner raises the following issues for
the Courts consideration:
1. The Court of Appeals committed judicial misconduct
in finding liability against the petitioner on the basis of a
misquotation from KLM Royal Dutch Airlines vs. Court
of Appeals, et al., 65 SCRA 237 and in magnifying its
misconduct by denying the petitioners Motion for
Reconsideration on a mere syllabus, unofficial at that.
2. The Court of Appeals committed an error of law when
it did not apply applicable precedents on the case
before it.
3. The Court of Appeals committed a non sequitur when
it did not rule on the cross-claim of the petitioner.[12]
The Courts Ruling
The Petition is not meritorious.
First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial misconduct for quoting
from and basing its ruling against the two airlines on an unofficial
syllabus of this Courts ruling in KLM v. CA. Moreover, such
misconduct was allegedly aggravated when the CA, in an attempt to
justify its action, held that the difference between the actual ruling
and the syllabus was more apparent than real.[13]
We agree with petitioner that the CA committed a lapse when
it relied merely on the unofficial syllabus of our ruling in KLM v. CA.
Indeed, lawyers and litigants are mandated to quote decisions of
this Court accurately.[14] By the same token, judges should do no
less by strictly abiding by this rule when they quote cases that
support their judgments and decisions. Canon 3 of the Code of
Judicial Conduct enjoins them to perform official duties diligently by
being faithful to the law and maintaining their professional
competence.
However, since this case is not administrative in nature, we
cannot rule on the CA justices administrative liability, if any, for this
lapse. First, due process requires that in administrative proceedings,
the respondents must first be given an opportunity to be heard
before sanctions can be imposed. Second, the present action is an
appeal from the CAs Decision, not an administrative case against the
magistrates concerned. These two suits are independent of and
separate from each other and cannot be mixed in the same
proceedings.
By merely including the lapse as an assigned error here
without any adequate and proper administrative case therefor,
petitioner cannot expect the imposition of an administrative
sanction.
In the case at bar, we can only determine whether the error in
quotation would be sufficient to reverse or modify the CA Decision.
Applicability of KLM v. CA
In KLM v. CA, the petitioner therein issued tickets to the
Mendoza spouses for their world tour. The tour included a
Barcelona-Lourdes route, which was serviced by the Irish airline Aer
Lingus. At the KLM office in Frankfurt, Germany, they obtained a
confirmation from Aer Lingus of their seat reservations on its Flight
861. On the day of their departure, however, the airline rudely
off-loaded them.
When sued for breach of contract, KLM sought to be excused
for the wrongful conduct of Aer Lingus by arguing that its liability for
damages was limited only to occurrences on its own sectors. To
support its argument, it cited Article 30 of the Warsaw Convention,
stating that when transportation was to be performed by various
successive carriers, the passenger could take action only against the
carrier that had performed the transportation when the accident or
delay occurred.
In holding KLM liable for damages, we ruled as follows:
1. The applicability insisted upon by the KLM of article 30 of the
Warsaw Convention cannot be sustained. That article presupposes
the occurrence of either an accident or a delay, neither of which
took place at the Barcelona airport; what is here manifest, instead,
is that the Aer Lingus, through its manager there, refused to
transport the respondents to their planned and contracted
destination.
2. The argument that the KLM should not be held accountable for
the tortious conduct of Aer Lingus because of the provision printed
on the respondents' tickets expressly limiting the KLM's liability for
damages only to occurrences on its own lines is unacceptable. As
noted by the Court of Appeals that condition was printed in letters
so small that one would have to use a magnifying glass to read the
words. Under the circumstances, it would be unfair and inequitable
to charge the respondents with automatic knowledge or notice of
the said condition so as to preclude any doubt that it was fairly and
freely agreed upon by the respondents when they accepted the
passage tickets issued to them by the KLM. As the airline which
issued those tickets with the knowledge that the respondents would
be flown on the various legs of their journey by different air carriers,
the KLM was chargeable with the duty and responsibility of
specifically informing the respondents of conditions prescribed in
their tickets or, in the very least, to ascertain that the respondents
read them before they accepted their passage tickets. A thorough
search of the record, however, inexplicably fails to show that any
effort was exerted by the KLM officials or employees to discharge in
a proper manner this responsibility to the respondents.
Consequently, we hold that the respondents cannot be bound by
the provision in question by which KLM unilaterally assumed the
role of a mere ticket-issuing agent for other airlines and limited its
liability only to untoward occurrences on its own lines.
3. Moreover, as maintained by the respondents and the Court of
Appeals, the passage tickets of the respondents provide that the
carriage to be performed thereunder by several successive carriers
is to be regarded as a single operation, which is diametrically
incompatible with the theory of the KLM that the respondents
entered into a series of independent contracts with the carriers
which took them on the various segments of their trip. This position
of KLM we reject. The respondents dealt exclusively with the KLM
which issued them tickets for their entire trip and which in effect
guaranteed to them that they would have sure space in Aer Lingus
flight 861. The respondents, under that assurance of the
internationally prestigious KLM, naturally had the right to expect
that their tickets would be honored by Aer Lingus to which, in the
legal sense, the KLM had indorsed and in effect guaranteed the
performance of its principal engagement to carry out the
respondents' scheduled itinerary previously and mutually agreed
upon between the parties.
4. The breach of that guarantee was aggravated by the discourteous
and highly arbitrary conduct of an official of the Aer Lingus which the
KLM had engaged to transport the respondents on the
Barcelona-Lourdes segment of their itinerary. It is but just and in full
accord with the policy expressly embodied in our civil law which
enjoins courts to be more vigilant for the protection of a contracting
party who occupies an inferior position with respect to the other
contracting party, that the KLM should be held responsible for the
abuse, injury and embarrassment suffered by the respondents at the
hands of a supercilious boor of the Aer Lingus.[15]
In the instant case, the CA ruled that under the contract of
transportation, petitioner -- as the ticket-issuing carrier (like KLM) --
was liable regardless of the fact that PAL was to perform or had
performed the actual carriage. It elucidated on this point as follows:
By the very nature of their contract, defendant-appellant CAL is
clearly liable under the contract of carriage with [respondent] and
remains to be so, regardless of those instances when actual carriage
was to be performed by another carrier. The issuance of a
confirmed CAL ticket in favor of [respondent] covering his entire trip
abroad concretely attests to this. This also serves as proof that
defendant-appellant CAL, in effect guaranteed that the carrier, such
as defendant-appellant PAL would honor his ticket, assure him of a
space therein and transport him on a particular segment of his
trip.[16]
Notwithstanding the errant quotation, we have found after
careful deliberation that the assailed Decision is supported in
substance by KLM v. CA. The misquotation by the CA cannot serve
as basis for the reversal of its ruling.
Nonetheless, to avert similar incidents in the future, this Court
hereby exhorts members of the bar and the bench to refer to and
quote from the official repository of our decisions, the Philippine
Reports, whenever practicable.[17] In the absence of this primary
source, which is still being updated, they may resort to unofficial
sources like the SCRA.[18] We remind them that the
Courts ponencia, when used to support a judgment or ruling, should
be quoted accurately.[19]
Second Issue:
Liability of the Ticket-Issuing Airline
We now come to the main issue of whether CAL is liable for
damages. Petitioner posits that the CA Decision must be annulled,
not only because it was rooted on an erroneous quotation, but also
because it disregarded jurisprudence, notably China Airlines v.
Intermediate Appellate Court[20] and China Airlines v. Court of
Appeals.[21]
Jurisprudence Supports
CA Decision
It is significant to note that the contract of air transportation
was between petitioner and respondent, with the former endorsing
to PAL the Hong Kong-to-Manila segment of the journey.Such
contract of carriage has always been treated in this jurisdiction as a
single operation. This jurisprudential rule is supported by the
Warsaw Convention,[22] to which the Philippines is a party, and by
the existing practices of the International Air Transport Association
(IATA).
Article 1, Section 3 of the Warsaw Convention states:
Transportation to be performed by several successive air carriers
shall be deemed, for the purposes of this Convention, to be one
undivided transportation, if it has been regarded by the parties as a
single operation, whether it has been agreed upon under the form
of a single contract or of a series of contracts, and it shall not lose its
international character merely because one contract or a series of
contracts is to be performed entirely within a territory subject to the
sovereignty, suzerainty, mandate, or authority of the same High
Contracting Party.[23]
Article 15 of IATA-Recommended Practice similarly provides:
Carriage to be performed by several successive carriers under one
ticket, or under a ticket and any conjunction ticket issued therewith,
is regarded as a single operation.
In American Airlines v. Court of Appeals,[24] we have noted
that under a general pool partnership agreement, the ticket-issuing
airline is the principal in a contract of carriage, while the
endorsee-airline is the agent.
x x x Members of the IATA are under a general pool partnership
agreement wherein they act as agent of each other in the issuance
of tickets to contracted passengers to boost ticket sales worldwide
and at the same time provide passengers easy access to airlines
which are otherwise inaccessible in some parts of the
world. Booking and reservation among airline members are allowed
even by telephone and it has become an accepted practice among
them. A member airline which enters into a contract of carriage
consisting of a series of trips to be performed by different carriers is
authorized to receive the fare for the whole trip and through the
required process of interline settlement of accounts by way of the
IATA clearing house an airline is duly compensated for the segment
of the trip serviced. Thus, when the petitioner accepted the unused
portion of the conjunction tickets, entered it in the IATA clearing
house and undertook to transport the private respondent over the
route covered by the unused portion of the conjunction tickets, i.e.,
Geneva to New York, the petitioner tacitly recognized its
commitment under the IATA pool arrangement to act as agent of
the principal contracting airline, Singapore Airlines, as to the
segment of the trip the petitioner agreed to undertake. As such, the
petitioner thereby assumed the obligation to take the place of the
carrier originally designated in the original conjunction ticket. The
petitioners argument that it is not a designated carrier in the
original conjunction tickets and that it issued its own ticket is not
decisive of its liability. The new ticket was simply a replacement for
the unused portion of the conjunction ticket, both tickets being for
the same amount of US$ 2,760 and having the same points of
departure and destination. By constituting itself as an agent of the
principal carrier the petitioners undertaking should be taken as part
of a single operation under the contract of carriage executed by the
private respondent and Singapore Airlines in Manila.[25]
Likewise, as the principal in the contract of carriage, the
petitioner in British Airways v. Court of Appeals[26] was held liable,
even when the breach of contract had occurred, not on its own
flight, but on that of another airline. The Decision followed our
ruling in Lufthansa German Airlines v. Court of Appeals,[27] in which
we had held that the obligation of the ticket-issuing airline remained
and did not cease, regardless of the fact that another airline had
undertaken to carry the passengers to one of their destinations.
In the instant case, following the jurisprudence cited above,
PAL acted as the carrying agent of CAL. In the same way that we
ruled against British Airways and Lufthansa in the aforementioned
cases, we also rule that CAL cannot evade liability to respondent,
even though it may have been only a ticket issuer for the Hong
Kong-Manila sector.
Moral and Exemplary Damages
Both the trial and the appellate courts found that respondent
had satisfactorily proven the existence of the factual basis for the
damages adjudged against petitioner and PAL. As a rule, the findings
of fact of the CA affirming those of the RTC will not be disturbed by
this Court.[28] Indeed, the Supreme Court is not a trier of facts. As a
rule also, only questions of law -- as in the present recourse -- may
be raised in petitions for review under Rule 45.
Moral damages cannot be awarded in breaches of carriage
contracts, except in the two instances contemplated in Articles 1764
and 2220 of the Civil Code, which we quote:
Article 1764. Damages in cases comprised in this Section shall be
awarded in accordance with Title XVIII of this Book, concerning
Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.
xxx xxxxxx
Article 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule applies
to breaches of contract where the defendant acted fraudulently or in
bad faith. (Italics supplied)
There is no occasion for us to invoke Article 1764 here. We
must therefore determine if CAL or its agent (PAL) is guilty of bad
faith that would entitle respondent to moral damages.
In Lopez v. Pan American World Airways,[29] we defined bad
faith as a breach of a known duty through some motive of interest
or ill will.
In the case at bar, the known duty of PAL was to transport
herein respondent from Hong Kong to Manila. That duty arose when
its agent confirmed his reservation for Flight PR 311,[30]and it
became demandable when he presented himself for the trip on
November 24, 1981.
It is true that due to a typhoon, PAL was unable to transport
respondent on Flight PR 311 on November 24, 1981. This fact,
however, did not terminate the carriers responsibility to its
passengers. PAL voluntarily obligated itself to automatically transfer
all confirmed passengers of PR 311 to the next available flight, PR
307, on the following day.[31] That responsibility was subsisting
when respondent, holding a confirmed ticket for the former flight,
presented himself for the latter.
The records amply establish that he secured repeated
confirmations of his PR 311 flight on November 24, 1981. Hence, he
had every reason to expect that he would be put on the
replacement flight as a confirmed passenger. Instead, he was
harangued and prevented from boarding the original and the
replacement flights. Thus, PAL breached its duty to transport
him. After he had been directed to pay the terminal fee, his pieces
of luggage were removed from the weighing-in counter despite his
protestations.[32]
It is relevant to point out that the employees of PAL were
utterly insensitive to his need to be in Manila on November 25, 1981,
and to the likelihood that his business affairs in the city would be
jeopardized because of a mistake on their part. It was that mistake
that had caused the omission of his name from the passenger list
despite his confirmed flight ticket. By merely looking at his ticket
and validation sticker, it is evident that the glitch was the airlines
fault. However, no serious attempt was made by PAL to secure the
all-important transportation of respondent to Manila on the
following day. To make matters worse, PAL allowed a group of
non-revenue passengers, who had no confirmed tickets or
reservations, to board Flight PR 307.[33]
Time and time again, this Court has stressed that the business
of common carriers is imbued with public interest and duty;
therefore, the law governing them imposes an exacting
standard.[34] In Singson v. Court of Appeals,[35] we said:
x x x [T]he carrier's utter lack of care and sensitivity to the needs of
its passengers, clearly constitutive of gross negligence, recklessness
and wanton disregard of the rights of the latter, [are] acts evidently
indistinguishable or no different from fraud, malice and bad faith. As
the rule now stands, where in breaching the contract of carriage the
defendant airline is shown to have acted fraudulently, with malice
or in bad faith, the award of moral and exemplary damages, in
addition to actual damages, is proper.[36] (Italics supplied)
In Saludo v. Court of Appeals,[37] the Court reminded airline
companies that due to the nature of their business, they must not
merely give cursory instructions to their personnel to be more
accommodating towards customers, passengers and the general
public; they must require them to be so.
The acts of PALs employees, particularly Chan, clearly fell
short of the extraordinary standard of care that the law requires of
common carriers.[38] As narrated in Chans oral deposition,[39] the
manner in which the airline discharged its responsibility to
respondent and its other passengers manifested a lack of the
requisite diligence and due regard for their welfare. The pertinent
portions of the Oral Deposition are reproduced as follows:
Q Now you said that flight PR 311 on 24th November
was cancelled due to [a] typhoon and naturally the
passengers on said flight had to be accommodated
on the first flight the following day or the first
flight subsequently. [W]ill you tell the Honorable
Deposition Officer the procedure followed by
Philippine Airlines in the handling of passengers of
cancelled flight[s] like that of PR 311 which was
cancelled due to [a] typhoon?
A The procedure will be: all the confirmed passengers
from [PR] 311 24th November [are] automatically
transfer[red] to [PR] 307, 25th November[,] as a
protection for all disconfirmed passengers.
Q Aside from this procedure[,] what do you do with the
passengers on the cancelled flight who are
expected to check-in on the flights if this flight is
cancelled or not operating due to typhoon or
other reasons[?] In other words, are they not
notified of the cancellation?
A I think all these passengers were not notified because
of a typhoon and Philippine Airlines Reservation
were [sic] not able to call every passenger by
phone.
Atty. Fruto:
Q Did you say were not notified?
A I believe they were not, but believe me, I was on
day-off.
Atty. Calica:
Q Per procedure, what should have been done by
Reservations Office when a flight is cancelled for
one reason or another?
A If there is enough time, of course, Reservations Office
x x x call[s] up all the passengers and tell[s] them
the reason. But if there [is] no time[,] then the
Reservations Office will not be able to do that.[40]
xxx xxxxxx
Q I see. Miss Chan, I [will] show you a ticket which has
been marked as Exh. A and A-1. Will you please go
over this ticket and tell the court whether this is
the ticket that was used precisely by Mr. Chiok
when he checked-in at [F]light 307, 25 November
81?
A [Are you] now asking me whether he used this ticket
with this sticker?
Q No, no, no. That was the ticket he used.
A Yes, [are you] asking me whether I saw this ticket?
Atty. Fruto: Yes.
A I believe I saw it.
Q You saw it, O.K. Now of course you will agree with me
Miss Chan that this yellow stub here which has
been marked as Exh. A-1-A, show[s] that the
status on flight 311, 24th November, is O.K.,
correct?
A Yes.
Q You agree with me. And you will also agree with me
that in this ticket of flight 311, on this, another
sticker Exh. A-1-B for 24 November is O.K.?
A May I x x x look at them. Yes, it says O.K. x x x, but
[there is] no validation.
Q O.K. Miss Chan what do you understand by these
entries here R bar M N 6 V?[41]
A This is what we call a computer reference.
Q I see. This is a computer reference showing that the
name of Mr. Chiok has been entered in Philippine
Airlines computer, and this is his computer
number.
A Yes.
Q Now you stated in your answer to the procedure
taken, that all confirmed passengers on flight 311,
24 November[,] were automatically transferred to
307 as a protection for the passengers, correct?
A Correct.
Q So that since following the O.K. status of Mr. Chioks
reservation [on] flight 311, [he] was also
automatically transferred to flight 307 the
following day?
A Should be.
Q Should be. O.K. Now do you remember how many
passengers x x x were transferred from flight 311,
24 November to flight 307, 25 November 81?
A I can only give you a very brief idea because that was
supposed to be air bus so it should be able to
accommodate 246 people; but how many [exactly],
I dont know.[42]
xxx xxxxxx
Q So, between six and eight oclock in the evening of 25
November 81, Mr. Chiok already told you that he
just [came] from the Swire Building where
 Philippine Airlines had [its] offices and that he told
you that his space for 311 25 November 81 was
confirmed?
A Yes.
Q That is what he told you. He insisted on that flight?
A Yes.
Q And did you not try to call up Swire Building--
Philippine Airlines and verify indeed if Mr. Chiok
was there?
A Swire House building is not directly under Philippine
Airlines. it is just an agency for selling Philippine
Airlines ticket. And besides around six o clock
theyre close[d] in Central.
Q So this Swire Building is an agency authorized by
Philippine Airlines to issue tickets for and on
behalf of Philippine Airlines and also...
A Yes.
Q And also to confirm spaces for and on behalf of
Philippine Airlines.
A Yes.[43]
Under the foregoing circumstances, we cannot apply our 1989
ruling in China Airlines v. Intermediate Appellate Court,[44] which
petitioner urges us to adopt. In that case, the breach of contract and
the negligence of the carrier in effecting the immediate flight
connection for therein private respondent was incurred in good
faith.[45] Having found no gross negligence or recklessness, we
thereby deleted the award of moral and exemplary damages against
it.[46]
This Courts 1992 ruling in China Airlines v. Court of
Appeals[47] is likewise inapplicable. In that case, we found no bad
faith or malice in the airlines breach of its contractual
obligation.[48]We held that, as shown by the flow of telexes from
one of the airlines offices to the others, petitioner therein had
exercised diligent efforts in assisting the private respondent change
his flight schedule. In the instant case, petitioner failed to exhibit
the same care and sensitivity to respondents needs.
In Singson v. Court of Appeals,[49] we said:
x x x Although the rule is that moral damages predicated upon a
breach of contract of carriage may only be recoverable in instances
where the mishap results in the death of a passenger, or where the
carrier is guilty of fraud or bad faith, there are situations where the
negligence of the carrier is so gross and reckless as to virtually
amount to bad faith, in which case, the passenger likewise becomes
entitled to recover moral damages.
In the present case, we stress that respondent had repeatedly
secured confirmations of his PR 311 flight on November 24, 1981 --
initially from CAL and subsequently from the PAL office in Hong
Kong. The status of this flight was marked OK on a validating sticker
placed on his ticket. That sticker also contained the entry
RMN6V. Ms Chan explicitly acknowledged that such entry was a
computer reference that meant that respondents name had been
entered in PALs computer.
Since the status of respondent on Flight PR 311 was OK, as a
matter of right testified to by PALs witness, he should have been
automatically transferred to and allowed to board Flight 307 the
following day. Clearly resulting from negligence on the part of PAL
was its claim that his name was not included in its list of passengers
for the November 24, 1981 PR 311 flight and, consequently, in the
list of the replacement flight PR 307. Since he had secured
confirmation of his flight -- not only once, but twice -- by personally
going to the carriers offices where he was consistently assured of a
seat thereon -- PALs negligence was so gross and reckless that it
amounted to bad faith.
In view of the foregoing, we rule that moral and
exemplary[50] damages were properly awarded by the lower
courts.[51]
Third Issue:
Propriety of the Cross-Claim
We now look into the propriety of the ruling on CALs
cross-claim against PAL. Petitioner submits that the CA should have
ruled on the cross-claim, considering that the RTC had found that it
was PALs employees who had acted negligently.
Section 8 of Rule 6 of the Rules of Court reads:
Sec. 8. Cross-claim. - A cross claim is any claim by one party against a
co-party arising out of the transaction or occurrence that is the
subject matter either of the original action or of a counterclaim
therein.Such cross-claim may include a claim that the party against
whom it is asserted is or may be liable to the cross-claimant for all
or part of a claim asserted in the action against the cross-claimant.
For purposes of a ruling on the cross-claim, PAL is an
indispensable party. In BA Finance Corporation v. CA,[52] the Court
stated:
x x x. An indispensable party is one whose interest will be affected
by the courts action in the litigation, and without whom no final
determination of the case can be had. The partys interest in the
subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties that his legal presence as a party
to the proceeding is an absolute necessity. In his absence there
cannot be a resolution of the dispute of the parties before the
court which is effective, complete, or equitable.
xxx xxxxxx
Without the presence of indispensable parties to a suit or
proceeding, judgment of a court cannot attain real finality.
PALs interest may be affected by any ruling of this Court on
CALs cross-claim. Hence, it is imperative and in accordance with due
process and fair play that PAL should have been impleaded as a
party in the present proceedings, before this Court can make a final
ruling on this matter.
Although PAL was petitioners co-party in the case before the
RTC and the CA, petitioner failed to include the airline in the present
recourse. Hence, the Court has no jurisdiction over it.Consequently,
to make any ruling on the cross-claim in the present Petition would
not be legally feasible because PAL, not being a party in the present
case, cannot be bound thereby.[53]
WHEREFORE, the Petition is DENIED. Costs against petitioner.
 SO ORDERED.
PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
BERNARDO BAGAMASPAD and BIENVENIDO M.
FERRER, defendants-appellants.
Jose G. Flores, for appellants.
Nemesio P. Labunao for appellee.
MONTEMAYOR, J.:
On May 25, 1948, the plaintiff Philippine National Bank, a banking
corporation organized and operating under the laws of the
Philippines, with main office in the City of Manila and agencies in
different provinces like the province of Cotabato, initiated this suit
in the Court of First Instance of Cotabato for the purpose of
collecting from the defendants Bernardo Bagamaspad and
Bienvenido M. Ferrer who, in the years 1946 and 1947, were its
Agent and Assistant Agent, respectively, in its Cotabato Agency, the
sum of P704,903.18, said to have been disbursed and released by
them as special crop loans, without authority and in a careless
manner to manifestly insolvent, unqualified or fictitious borrowers,
all contrary to the rules and regulations of the plaintiff Bank. In the
course of the trial, upon petition of plaintiff's counsel, the amount
of the claim was reduced to P699,803.57, due to payments made by
some of the borrowers. On March 31, 1949, the trial court rendered
judgment in favor of the plaintiff, ordering both defendants to pay
jointly and severally to it the sum of P699,803.57, representing the
uncollected balance of the special crop loans improperly released by
said defendants, with legal interest thereon from the date of the
filing of the complaint, plus costs. The two defendants appealed
from that decision. The appeal was first taken to the Court of
Appeals but in view of the amount involved it was certified to this
Tribunal by the said Court of Appeals.
The uncontroverted facts in the present case may be briefly stated
as follows. Because of the Pacific War and by reason of the
destruction and loss of animals of labor, farm implements, and
damage to or abandonment of farm lands, after liberation there was
acute shortage of foodstuff. President Roxas in order to foment and
encourage food production, instructed the plaintiff Philippine
National Bank to extend special facilities to farmers in the form of
crop loans in order to enable them to rehabilitate their farms. In
pursuance of said instructions and to cooperate with the
Administration, the plaintiff Bank passed the corresponding
resolution (Exhibit B) authorizing the granting of ten-month special
crop loans to bona fide food producers, land-owners or their
tenants, under certain conditions. Delfin Buencamino, one of the
Vice-President of the Bank and head of the Branches and Agencies
Department of said institution, was entrusted with the supervision
of the granting of these loans. Juan Tueres, one of the Assistant
Managers of said Department drafted the corresponding rules and
regulations regarding the granting of said specials crops loans. After
approval by Buencamino, these rules and regulations were
embodied in a circular letter (Exhibit C), a copy of which was
personally delivered to defendant Ferrer. These rules and
regulations were later amplified by another circular letter (Exhibit D).
Besides circularizing its branches and agencies with these rules and
regulations, on June 14, 1946, the Bank held in Manila a conference
in of all its manager and Agents. Defendant Ferrer, Assistant Agent
of the Cotabato Agency attended the conference in representation
of said Agency. He arrived late but Tueres explained to him what
had been discussed during the conference, emphasizing to him the
necessity of exercising diligence and care in the granting of the crop
loans to see to it that they are granted only tobona fide planters,
land-owners or tenants, as well as repeating to him the advice of
Vicente Carmona, President of the bank, that the Managers and
Agents of the Bank should not allow themselves to be fooled.
The Cotabato Agency under the management of the two defendants
began granting these special crop loans in July, 1946, and by March
of the following year, 1947, said Agency had granted to over 5,000
borrowers, loans in the total amount of a little over eight and half
million pesos.
The theory on which the Bank's claim and complaint are based is
that the two defendants Bagamaspad and Ferrer acting as Agent
and Assistant Agent of the Cotabato Agency, in granting new crop
loans after November 13, 1946, violated the instructions of the Bank,
and that furthermore, in granting said crop loans, they acted
negligently and did not exercise the care and precaution required of
them in order to prevent the release of crop loans to persons who
were neither qualified borrowers nor entitled to the assistance
being rendered by the Government and the Bank, all contrary to the
rules and regulations issued by the Bank.
Because of the form heavy disbursements made by the Cotabato
Agency in the form of crop loans and because of exhaustion of its
funds, said agency sent a telegram, Exhibit 11, dated November 11,
1946, requesting authority from the central office to secure cash
from the Zamboanga Agency. Replying to this telegram, Delfin
Buencamino sent a letter, Exhibit E, dated November 13, 1946,
addressed to the Cotabato Agency stating among other things that
the purposes of these funds (to be obtained from the Zamboanga
Agency was to meet the release of the second installment crop
loans being granted which according to the telegram aggregated
P60,000 daily. The letter reminded the Agency's that the Central
office had not yet received the Agency's monthly reports on special
crop loans granted, as required by the regulations, and it
emphasized the necessity of performing inspection of the field to
verify whether the amount released as first installment was actually
used for the purpose for which it was granted, before releasing the
second installment. In relation with the said letter, Exhibit F, dated
November 18, 1946, to the central office making reference to said
Exhibit E, reiterating the Agency's heavy disbursements on second
installments for crop loans and stating that Ferrer had been
instructed to proceed to Zamboanga to secure the needed cash, and
that Ferrer was able to secure P300,000 from the Zamboanga
Agency. Then making reference to and quoting a portion of the
letter of Buencamino, Exhibit E, Bagamaspad in his letter said:
In connection with the following portion:
"In this connection, we would like to state that the purpose of these
funds is to meet the release of the second installment of crop loans
being granted by that agency, which, according to your said
telegram, will run toP600,000 daily."
of your above mentioned letter, may we know if could still entertain
new applicants on Special Crop Loans? We are constrained to
request for this matter because there are now on file no less than
1,000 new applicants which we could not entertain because of your
above quoted statement. Yesterday they held a demonstration and
copy of the picture is hereto attached. In addition, there are about
5,000 settlers in Koronadal Valley who, according to your
indorsement of Oct. 31, 1946 to the Technical Assistant to the
President of the Philippines, could be given crop loans. If we could
not therefore disburse from the funds taken from Zamboanga
Agency against first installment of applicants on crop loans, we shall
appreciate if you could give us definite course of action towards the
clarifications of our stand to the public.
We are again sending Asst. Agent B.M. Ferrer to Zamboanga to
despatch this letter without delay and wait there for whatever
instruction that you may give with reference to our desire to secure
more cash from our Zamboanga Agency, say P1,000,000 and
whether we shall continue granting special crop loans or not.
With reference to the cash that we desire to secure more, we could
tell you with assurance that the same shall arrive their safely under
guard on a chartered plane which will cost not more than P300 only.
From this letter of Bagamaspad of which his co-defendant and
Ferrer must have been aware, because he himself prepared it upon
order of Bagamaspad(pp. 340-344, t.s.n.), particularly the portion
above-quoted, it will be seen that without waiting for authority to
secure funds from the Zamboanga Agency, Ferrer obtained
P300,000 from said Agency, and that Bagamaspad again had sent
Ferrer to Zamboanga to await instruction from the central office
regarding their desire and intention to secure in additional
P1,000,000 for the Cotabato Agency. As matter of fact, however,
once in Zamboanga, and without waiting for instructions, Ferrer
again secured P500,000 from the Zamboanga Agency. It was while
Ferrer already carrying the P500,000 was about to board the plane
that was to taken him to Cotabato, that he received the answer
from the central office, Exhibit G, authorizing him to obtain only
P3,0000,000 from the Zamboanga Agency, with the statement that
as soon as the said amount was exhausted, the Cotabato Agency
may again request for replenishment. This letter of the Central
Office again emphasized the necessity of strict compliance with the
rules and regulations regarding the required field inspection before
releasing the second installment. The said letter, Exhibit G, ended
with the following:
Concerning the new special crop loan applications numbering about
1,000, we would like to be informed whether the farms of the said
applicants have already been actually planted, considering that at
this periodplanting season in low-land palay region is now over. As
the purpose for which special crop loans are being granted by the
Bank is to provide the farmers with funds to meet the expenses of
their farms and if said farms have already been planted, we believe
that the farmers may not need said credit facilities unless it has
been found out by actual investigation and verification that said
loans are needed by them.
Please, therefore, let us hear from you regarding this matter.
(Emphasis ours)
In answer to this letter, Exhibit G, defendants sent a telegram,
Exhibit H, dated November 25, 1946 to the central office in Manila,
stating that for Cotabato, the planting season for second crops of
December. In answer to Exhibit H, the central office sent a telegram,
Exhibit I, dated November 28, 1946, expressly instructing the
Cotabato Agency to discontinue granting new crop loans. The
defendants claim that this telegram, Exhibit I, was received by them
by mail on December 7, 1946.
In their brief the appellant contend that the trial court erred in
finding and holding that extending new special crop loans after
November 26, 1946, amounting to P726,680, as they as Agent and
Assistant Agent, respectively, of the of the Cotabato Agency, did so
at their own risk and in violation of the instructions received from
the Manila office; also that the court erred in holding that they
(appellants) acted with extreme laxity, negligence and carelessness
in granting said new special crops loans. On the first assigned error
appellants maintain that outside of the telegram, Exhibit I, which
they claim to have received only on December 7, 1946, there was no
instruction by the central office stopping the granting of new special
crop loans.
It may be that there was no such express instruction couched in so
many words directly ordering the defendants to stop granting new
special crop loans, but that said idea of the central office could be
gathered from its letter, Exhibit E, and that it was understood and
clearly, by the defendants, is evident. If defendants did not so
understand it, namely, that they were no longer authorized to grant
new special crop loans, how else may we interpret the contents of
the letter of Bagamaspad, Exhibit F, particularly that portion
wherein after quoting a portion of the central office letter Exhibit E,
he asks if they (defendants) could still entertain new applications for
special crop loans? At least, they then doubted their to grant new
special crop loans and until that doubt was cleared up and
determined by new instructions from their superiors, it was their
bounden duty to stop granting new loans. Appellant Ferrer himself,
in response to question asked by the trial court during the hearing,
said that in case of doubt as to whether or not to disburse funds of
the bank, he should consult and await instructions. Appellants asked
for instructions as to whether or not they should grant new special
crop loans. This request for instructions is contained clearly in
Bagamaspad's letter, Exhibit F, where in one paragraph he ask: "May
we know if we could still entertain new applications on special crop
loans?" And, in another paragraph he says? "We are again sending
Asst. Agent B.M. Ferrer to Zamboanga . . . and wait there for further
instructions that you may give . . . and whether we shall continue
granting special crops loans or not." The trouble is that without
waiting for said requested instructions, appellants proceeded to
grant new special crop loans from November 26, 1946, to January 4,
1947.
Appellants not only granted new special crop loans after they were
given to understand by the central office that they should no longer
grant said loans and before appellants received instructions as to
what they should do in that regard, but they also violated the
express instructions of the Bank to the effect that funds received
from the Zamboanga Agency should be utilized only to pay second
installments on special crop loans. Of course, defendants contend
that the total of P800,000 secured from the Zamboanga Agency
were all used in paying second installments, but the contrary is
amply established by Exhibit T, a statement prepared by Felicisimo
Lopez, Chief Examiner of the Bank showing that out of the P500,000
secured from the Zamboanga Agency on or about November 18,
1946, the amount of P232,931.58 was paid on account of new
special crop loans or first installments. The plaintiff-appellee Bank in
its brief explains in details this use of part of the Zamboanga funds
in paying first installments on new crop loans.
As to the alleged error committed by the trial court in finding and
holding that the appellants were extremely lax, negligent and
careless in granting new special crop loans, we quote with approval
a portion of the well considered decision of the trial Judge, Hon.
Arsenio Solidum, on this point:
From the evidence of record, one cannot help but be amazed at the
extreme laxity, negligence and carelessness on the part of the
defendants in the granting of the special crop loans. It seems that all
precautions to protect the interest of the Philippine National Bank
as the principal of the defendants were thrown overboard. From all
appearances, the door of the Cotabato Agency was left wide open
by the defendants as an invitation for all persons to come in secure
from them special crop loans regardless of whether or not under the
rules prescribed therefor they were rightfully entitled thereto. . . . (p.
165, Record on Appeal)
xxx xxx xxx
What really happened was that in those days of crop loan boom, the
borrowers made a holiday of the funds of the Cotabato Agency of
the Philippine National Bank with indulgence and tolerance of the
defendants as the managing officials of the Agency. And the saddest
part of it all was that the money did not go to the farmers who
needed it most but to unscrupulous persons, who, taking undue
advantage of the laxity and looseness of the defendants in doling
out these loans, secured special crop loan funds without the least
idea of investing them in food production campaign for which they
were primarily intended. Part of the booty went to the pockets of
those who acted as intermediaries in the procurement of the loans
under the very noses of the defendants fully knowing that such
practice was prohibited by the rules and regulations of the
Philippine National Bank governing the operation of the provincial
agencies (Exhibits "W", "T-1", to "T-11", "U-1" to "U-2") . . . (pp.
176-177, Record on Appeal)
The lower court as may be seen, severely critcized and condemned
the acts of laxity, negligence and carelessness of the appellants. But
the severity of this criticism and condemnation would appear to be
amply warranted by the evidence. Out of the numerous acts of
laxity, negligence and carelessness established by the record, a few
cases may be cited. Exhibit C and D which contain instructions and
rules and regulations governing the granting of special crop loans,
provide that before a crop is granted the Agent or Sub-Agent of the
Bank must be satisfied that the applicant is either landowner well
known to be possessing the particular property on which the crop is
to be produced, the particular property on which the crop ids to be
produced, or if the applicant be tenant he must be recommended
by the landowner concerned or in the absence of said landowner
must be properly identified that he is the bona fide tenant actually
tilling the land from which the crop to mortgage would be
harvested.
The evidence shows that in violation of these instructions and
regulations, the defendants released large loans aggregating
P348,768.22 to about 103 borrowers who were neither landowners
or tenants but only public land sales applicants that is to say,
persons who have merely filed applications to buy public lands. It is
a well known fact that when a person desires to apply for the
purchase of public lands usually containing trees, under brush,
cogon or other wild vegetation, and never previously cultivated, he
merely goes over the land, takes it out and then files his application,
tries to determine the location of the land, its identity, proceeds to
classify it to see if it is open to sale and if so, perhaps makes rough
survey of it to establish its exact location and fix boundaries with
respect to the entire area of the public domain. The application
naturally carries no implication of occupancy, possession, much less
cultivation and dominion. And yet, in spite of all this, the applicants
who were neither landowners or tenants.
The record further shows that Mr. Villamarzo, District Land Officer
for Cotabato with whom these sale applications had been filed,
came to know that he had been issuing to the applicants, which
were nothing but acknowledgements of the filing of the applications,
had been used by said applicants to secure special crop loans, and
so he went to see the appellants as early as the middle of August of
1946 and advised them that those certificates were issued merely to
show that applications had been filed with him but that it did not
mean that said applications had already been investigated, much
less that the lands covered by them had been surveyed. Then about
the end of the same month Villamarzo accompanied by Almonte, a
Division Land Inspector of the Bureau of Lands, again went to the
defendants and repeated the advice and warning. Despite all these,
as already stated, appellants granted new special crop loans to 103
of these public land sales applicants, knowing as they must have
known that the borrowers were neither landowners nor tenants.
Furthermore, it should be remembered that these special crop loans
according to regulations were payable in ten (10) months, and were
to be secured by chattel mortgages on the crops to be produced. A
virgin land, especially if covered with trees or underbrush, needs to
be cleared and placed in condition for cultivation before crops may
produced. That work of clearing would take some time. A public
land sale applicant, even assuming that he immediately began to
clear the land applied for even before favorable action on his
application is taken, is hardly in a position to meet the requirements
of the regulations governing the granting of special crop loans,
namely, to mortgage the crop he is going to produce, and pay the
loan within ten months.
Appellants in their over-enthusiasm and seemingly inordinate desire
to grant as many loans as possible and in amounts disproportionate
to the needs of the borrowers, admitted and passed upon more
loan applications than they could properly handle. From July, 1946
to March, 1947 the total amount of about eight and half (81/2)
million pesos was released in the form of special crop loans to about
5,105 borrowers and this, in a relatively sparsely populated province
like Cotabato. As a consequence of this big volume of business the
bookkeeper of the Agency could not keep up with the posting of the
daily transactions in his books and ledgers and he was several
months behind. There were so many applications acted upon and
accepted that they could not all be carefully examined and many of
them do not even bear the initials or signatures of the appellants as
required by regulations. Some of the chattel mortgages given to
secure the payments of the loans, contrary to regulations, do not
show the number of cavans of palay to be produced on the land and
to be mortgaged in favor of the Bank.
Contrary to the Bank's rules and regulations regarding the granting
of special crops loans, the defendants allowed intermediaries to
intervene in the granting of special crop loans. Many lawyers,
business agents and other persons intervened in the granting of the
loans. We may have an idea of the of the part played by these
intermediaries by referring to a portion of the report, Exhibit V,
prepared by Mr. Lagdameo, one of the Assistant Managers of the
Agencies and Branches Department of the plaintiff Bank, sent to
Cotabato to investigate the crop loan anomalies in the Cotabato
Agency, which portion we quote below:
On top of this, were the heavy expenses incurred by the borrowers
to secure crop loans. The rush was so unprecendented that
applicants had to stay had to stay for weeks in hotels in Cotabato to
lobby for the approval of their applications. They even went to the
extent of engaging intermediaries who in the words of some
borrowers were the best ones to fix things with the agency for the
approval and immediate release of the loan. These intermediaries
are government employees and business agents and particularly
practicing attorneys who charged fees up to 5 per cent of the total
loans approved. Instances have been shown that the Agency itself
collected the attorney's fees and delivered them to the parties
concerned. In other cases, the intermediaries themselves were the
ones who received the proceeds of the loans and distributed them
to the borrowers. It has also been found that loan papers including
the preparation of promissory notes, debit tickets, etc., were
prepared by said intermediaries and submitted to the Agency
already executed. . . ..
There is evidence to the effect that sometimes the fees of these
intermediaries were collected by the Agency itself and were later
turned over to appellant Ferrer, perhaps to be later given by him to
said intermediaries.
One of the provisions of the rules and regulations concerning the
granting of loans is to the effect that loans to be released by a
Provincial Agency like that of the appellant's should be approved by
loan Board to be composed of the Agent, like defendant
Bagamaspad; the Assistant Agent, like defendant Ferrer or the
Inspector if there is no Assistant Agent; and the Municipal Treasurer
where the borrower resides. The evidence, however, shows that
many of the special crop loans released by the appellants have not
been approved by this Board and others have not even been
approved by anyone of them.
It will be remembered that in the letter of Vice President
Buencamino, Exhibit G, dated November 19, 1946, speaking of the
new special crop loan applications numbering about 1,000
mentioned by appellant Bagamaspad in his letter, Exhibit F, the
plaintiff Bank wanted to know whether on that date, November
19th, the farmers in Cotabato had already planted their farms in
which case there was no need for obtaining crop loans to meet the
expenses of planting. Answering this query, the Cotabato Agency
under the appellants, sent a telegram (Exhibit H) dated November
25, 1946, to the plaintiff Bank saying that the planting season for
Cotabato for second crops ends in December. This was evidently
intended to justify the granting of special crop loans even at the end
of the year. The evidence however, belies the correctness of this
statement and information. Mr. Aniceto Padilla, Assistant Provincial
Agricultural Supervisor, a graduate of the College of Agriculture of
the University of the Philippines, told the court that his office, which
is the Provincial Agricultural Station in Cotabato, has determined the
proper period for planting crops raised in that province and that for
upland palay, the planting season is during the months of March,
April up to May; that for lowland palay is June and July; and that
second crops may be planted in September even as late as October.
From this, one may conclude that it is not true as the appellants
informed the bank that the planting season for palay (second crop)
in Cotabato ends in December. Whether this incorrect information
was given deliberately or thru negligence and carelessness, we
deem it unnecessary to determine.
To give a further idea of the confusion, lack of care and method with
which the Cotabato Agency was managed by the appellants, the
record shows that in January, 1947, Mr. Simeon Intal, Traveling
Auditor of the Philippine National Bank, was sent to Cotabato with
instructions to make an audit of the accounts of the Cotabato
Agency and to see for himself the reported irregularities being
committed in said Agency with respect to the granting of special
crop loans. According to Mr. Intal he found the Cotabato Agency like
a market place full of people. He saw crop loan papers like
promissory notes, loan applications and chattel mortgages scattered
all over the Agency, some on the desks of employees, on open
shelves or on top of filing cabinets, and others on the floor. He
found that transactions which had taken place five months before
were not yet posted in the books of the Agency. In February, 1947,
Mr. Amado Lagdameo, then one of the Assistant Managers of the
Branches and Agencies Department of the Bank, was also sent to
Cotabato and there he found the same condition found and
reported by Intal. In order to make thorough investigation of the
anomalies reportedly obtaining in the Cotabato Agency, Felicisimo
Lopez, a certified public accountant and Chief Examiner of the
plaintiff Bank, was sent to Cotabato in June, 1947. He checked up
the findings of Intal about the deplorable condition of the books and
records of the Agency and he agreed with said findings. Lopez and
Intal and assisted by Benjamin de Guzman, Branch Auditor of the
Bank at the Davao Branch, Mr. Macuja (who later succeeded
Benjamin de Guzman), Mr. Juan B. Sanchez, now Branch Auditor in
Legaspi, Mr. Antonio Cruz of the Head Office, Mr. Danao from
Oriental Misamis, Mr. Fernandez from Zamboanga and Mr. Romena
of the Davao Branch, went to work on the books and records of the
books and records of the Cotabato Agency and it took them almost
four months to straighten out the special crop loan accounts and
bring the books up-to-date, after which, they found that as of June
10, 1947, the Cotabato Agency had released special crop loans in
the aggregate sum of P8,688,864.
To us who have always had the impression and the idea that the
business of a Bank is conducted in an orderly, methodical and
businesslike manner, that its papers, especially those relating to
loans with their corresponding securities, are properly filed,
well-kept and in a safe place, its books kept up-to-date, and that its
funds are not given out in loans without careful and scrupulous
scrutiny of the responsibility and solvency of the borrowers and the
sufficiency of the security given by them, the conditions obtaining in
the Cotabato Agency due to the apparent indifference, carelessness
or negligence of the appellants, is indeed shocking. And it is because
of these shortcomings of the appellants their disregard of the
elementary rules and practice of banking and their violation of
instructions of their superiors, that these anomalies resulting in
financial losses to the Bank were made possible.
The trial court based the civil liability of the appellants herein on the
provisions of Arts. 1718 and 1719 of the Civil Code, defining and
enumerating the duties and obligations of an agent and his liability
for failure to comply with such duties, and Art. 259 of the Code of
Commerce which provides that an agent must observe the
provisions of law and regulations with respect to business
transactions entrusted to him otherwise he shall be responsible for
the consequences resulting from their breach or omissions; and also
Art. 1902 of the Civil Code which provides for the liability of one for
his tortious act, that is to say, any act or omission which causes
damage to another by his fault or negligence. Appellants while
agreeing with the meaning and scope of the legal provisions cited,
nevertheless insist that those provisions are not applicable to them
inasmuch as they are not guilty of any violation of instructions or
regulations of the plaintiff Bank; and that neither are they guilty of
negligence of carelessness as found by the trial court. A careful
study and consideration of the record, however, convinces us and
we agree with the trial court that the defendants-appellants have
not only violated instructions of the plaintiff Bank, including things
which said Bank wanted done or not done, all of which were fully
understood by them, but they (appellants) also violated standing
regulations regarding the granting of loans; and, what is more, thru
their carelessness, laxity and negligence, they allowed loans to be
granted to persons who were not entitled to receive loans.
It is the contention of the appellants that the act of plaintiff Bank in
filling suits against the borrowers to whom appellants were said to
have granted loans without authority, which suits resulted in the
payment of part of said loans resulting in the reduction of the
original claim of the plaintiff Bank from P704,903.18 to P699,803.57,
should be interpreted and considered as a ratification of the acts of
the appellants. What is more, it is more, it is contended that it
would be iniquitous for the plaintiff to go against the defendants for
whatever amounts may have been loaned by the latter and at the
same time go against the individual borrowers for collection of the
respective sums borrowed by them. That would be enriching the
plaintiff at the expense of the defendants." We cannot subscribe to
this theory. As pointed out by Counsel for appellee, ordinarily, a
principal who collects either judicially or extrajudicially a loan made
by an agent without authority, thereby ratifies the said act of the
agent. In the present case, however, in filing suits against some of
the borrowers to collect at least part of the unauthorized loans,
there was no intention on the part of the plaintiff Bank to ratify the
acts of appellants. Neither did the plaintiff receive any substantial
benefit by its act of filing these suits if we consider the fact that the
collections so far made, form a small or insignificant portion of the
entire principal and interest. And, we fail to see any iniquity in this
act of the plaintiff in suing some of the borrowers to collect what it
could at the same time holding the appellants liable for the balance,
because the plaintiff Bank is not trying to enrich itself at the expense
of the defendants but is merely trying to diminish as much as
possible the loss to itself and automatically decrease the financial
liability of appellants. Considering the large amount for which
appellants are found liable, it is a matter of serious doubt if they are
in a position to pay it. Moreover, whatever amount is collected by
the plaintiff Bank from borrowers, serves to diminish the financial
liability of the appellants, in the same way that the original claim of
P704,903.18, at the very instance of plaintiff was reduced to
P699,803.57. In other words, the act of the plaintiff Bank in the
matter, far from being iniquitous, is really beneficial to the
appellants.
Appellants further contend that the present action is rather
premature for the reason that there is no showing that the
borrowers to whom they allegedly gave loans without authority, are
manifestly insolvent or unqualified, and that the loans granted to
them are uncollectible and have been written off the books of the
Bank as "bad debts". We find this contention untenable. It is not
necessary for the plaintiff Bank to first go against the individual
borrowers, exhaust all remedies against them and then hold the
defendants liable only for the balance which cannot be collected.
The case of Corsicana National Bank vs. Johnson, 64 L. ed. 141, cited
by the trial court and by the plaintiff bank is in point. The issue in
that case whether or not a bank could proceed against one of its
officials for losses which it had sustained in consequence of the
unauthorized loans released by said official, or whether it should
first pursue its remedies against the borrowers or await the
liquidation of their estates. The Supreme Court of the United States
in said case held that the cause of action of the Bank accrued and
the injury to it was complete on the very day that the amounts of
the unauthorized loans were released by the erring official. We
quote a part of that decision:
Assuming the Fleming and Templeton notes were found to
represent an excessive loan, knowingly participated in or assented
to by defendant as a director of the Bank, in our opinion the cause
of action against him accrued on or about June 10, 1907, when the
Bank, through his act, parted with the money loaned, receiving in
return only negotiable paper that it could not lawfully accept
because the transaction was prohibited by section 5200, Rev. Stat.
(Comp. Stat. section 9761, 6 Fed. Stat. Anno. 2d ed., p. 761). The
damage as well as the injury was complete at that time, and the
Bank was not obliged to await the maturity of the notes, because
immediately it became the duty of the officers or directors who
knowingly participated in making the excessive loan to undo the
wrong done by taking the notes off the hands of the Bank and
restoring to it the money that had been loaned. Of course, whatever
of value the Bank recovered from the borrowers on account of the
loan would go in diminution of the damages; but the responsible
officials would have no right to require the Bank to pursue its
remedies against the borrowers or await the liquidation of their
estates. The liability imposed by the statute upon the director is a
direct liability, not contingent or collateral.
In view of all the foregoing, and finding no reversible error in the
decision appealed from, the same is hereby affirmed with costs
against the appellants. So ordered.
RURAL BANK OF MILAOR (CAMARINES SUR), petitioner,
vs.
FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIÑO,
FELICISIMO OCFEMIA, RENATO OCFEMIA JR, and WINSTON
OCFEMIA, respondents.
PANGANIBAN, J.:
When a bank, by its acts and failure to act, has clearly clothed its
manager with apparent authority to sell an acquired asset in the
normal course of business, it is legally obliged to confirm the
transaction by issuing a board resolution to enable the buyers to
register the property in their names. It has a duty to perform
necessary and lawful acts to enable the other parties to enjoy all
benefits of the contract which it had authorized.
The Case
Before this Court is a Petition for Review on Certiorari challenging
the December 18, 1998 Decision of the Court of Appeals 1 (CA) in
CA-GR SP No. 46246, which affirmed the May 20, 1997 Decision 2 of
the Regional Trial Court (RTC) of Naga City (Branch 28). The CA
disposed as follows:
Wherefore, premises considered, the Judgment appealed from is
hereby AFFIRMED. Costs against the respondent-appellant. 3
The dispositive portion of the judgment affirmed by the CA ruled in
this wise:
WHEREFORE, in view of all the foregoing findings, decision is hereby
rendered whereby the [petitioner] Rural Bank of Milaor (Camarines
Sur), Inc. through its Board of Directors is hereby ordered to
immediately issue a Board Resolution confirming the Deed of Sale it
executed in favor of Renato Ocfemia marked Exhibits C, C-1 and C-2);
to pay [respondents] the sum of FIVE HUNDRED (P500.00) PESOS as
actual damages; TEN THOUSAND (P10,000.00) PESOS as attorney's
fees; THIRTY THOUSAND (P30,000.00) PESOS as moral damages;
THIRTY THOUSAND (P30,000.00) PESOS as exemplary damages; and
to pay the costs. 4
Also assailed is the February 26, 1999 CA Resolution 5 which denied
petitioner's Motion for Reconsideration.
The Facts
The trial court's summary of the undisputed facts was reproduced in
the CA Decision as follows:
This is an action for mandamus with damages. On April 10, 1996,
[herein petitioner] was declared in default on motion of the
[respondents] for failure to file an answer within the
reglementary-period after it was duly served with summons. On
April 26, 1996, [herein petitioner] filed a motion to set aside the
order of default with objection thereto filed by [herein
respondents].
On June 17, 1996, an order was issued denying [petitioner's] motion
to set aside the order of default. On July 10, 1996, the defendant
filed a motion for reconsideration of the order of June 17, 1996 with
objection thereto by [respondents]. On July 12, 1996, an order was
issued denying [petitioner's] motion for reconsideration. On July 31,
1996, [respondents] filed a motion to set case for hearing. A copy
thereof was duly furnished the [petitioner] but the latter did not file
any opposition and so [respondents] were allowed to present their
evidence ex-parte. A certiorari case was filed by the [petitioner]
with the Court of Appeals docketed as CA GR No. 41497-SP but the
petition was denied in a decision rendered on March 31, 1997 and
the same is now final.
The evidence presented by the [respondents] through the testimony
of Marife O. Niño, one of the [respondents] in this case, show[s]
that she is the daughter of Francisca Ocfemia, a co-[respondent] in
this case, and the late Renato Ocfemia who died on July 23, 1994.
The parents of her father, Renato Ocfemia, were Juanita Arellano
Ocfemia and Felicisimo Ocfemia. Her other co-[respondents]
Rowena O. Barrogo, Felicisimo Ocfemia, Renato Ocfemia, Jr. and
Winston Ocfemia are her brothers and sisters.1âwphi1.nêt
Marife O. Niño knows the five (5) parcels of land described in
paragraph 6 of the petition which are located in Bombon, Camarines
Sur and that they are the ones possessing them which [were]
originally owned by her grandparents, Juanita Arellano Ocfemia and
Felicisimo Ocfemia. During the lifetime of her grandparents,
[respondents] mortgaged the said five (5) parcels of land and two (2)
others to the [petitioner] Rural Bank of Milaor as shown by the Deed
of Real Estate Mortgage (Exhs. A and A-1) and the Promissory Note
(Exh. B).
The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were
not able to redeem the mortgaged properties consisting of seven (7)
parcels of land and so the mortgage was foreclosed and thereafter
ownership thereof was transferred to the [petitioner] bank. Out of
the seven (7) parcels that were foreclosed, five (5) of them are in
the possession of the [respondents] because these five (5) parcels of
land described in paragraph 6 of the petition were sold by the
[petitioner] bank to the parents of Marife O. Niño as evidenced by a
Deed of Sale executed in January 1988 (Exhs. C, C-1 and C-2).
The aforementioned five (5) parcels of land subject of the deed of
sale (Exh. C), have not been, however transferred in the name of the
parents of Merife O. Niño after they were sold to her parents by the
[petitioner] bank because according to the Assessor's Office the five
(5) parcels of land, subject of the sale, cannot be transferred in the
name of the buyers as there is a need to have the document of sale
registered with the Register of Deeds of Camarines Sur.
In view of the foregoing, Marife O. Niño went to the Register of
Deeds of Camarines Sur with the Deed of Sale (Exh. C) in order to
have the same registered. The Register of Deeds, however,
informed her that the document of sale cannot be registered
without a board resolution of the [petitioner] Bank. Marife Niño
then went to the bank, showed to if the Deed of Sale (Exh. C), the
tax declaration and receipt of tax payments and requested the
[petitioner] for a board resolution so that the property can be
transferred to the name of Renato Ocfemia the husband of
petitioner Francisca Ocfemia and the father of the other
[respondents] having died already.
The [petitioner] bank refused her request for a board resolution and
made many alibi[s]. She was told that the [petitioner] bank ha[d] a
new manager and it had no record of the sale. She was asked and
she complied with the request of the [petitioner] for a copy of the
deed of sale and receipt of payment. The president of the
[petitioner] bank told her to get an authority from her parents and
other [respondents] and receipts evidencing payment of the
consideration appearing in the deed of sale. She complied with said
requirements and after she gave all these documents, Marife O.
Niño was again told to wait for two (2) weeks because the
[petitioner] bank would still study the matter.
After two (2) weeks, Marife O. Niño returned to the [petitioner]
bank and she was told that the resolution of the board would not be
released because the [petitioner] bank ha[d] no records from the
old manager. Because of this, Marife O. Niño brought the matter to
her lawyer and the latter wrote a letter on December 22, 1995 to
the [petitioner] bank inquiring why no action was taken by the
board of the request for the issuance of the resolution considering
that the bank was already fully paid [for] the consideration of the
sale since January 1988 as shown by the deed of sale itself (Exh. D
and D-1 ).
On January 15, 1996 the [petitioner] bank answered [respondents']
lawyer's letter (Exh. D and D-1) informing the latter that the request
for board resolution ha[d] already been referred to the board of
directors of the [petitioner] bank with another request that the
latter should be furnished with a certified machine copy of the
receipt of payment covering the sale between the [respondents]
and the [petitioner] (Exh. E). This request of the [petitioner] bank
was already complied [with] by Marife O. Niño even before she
brought the matter to her lawyer.
On January 23, 1996 [respondents'] lawyer wrote back the branch
manager of the [petitioner] bank informing the latter that they were
already furnished the receipts the bank was asking [for] and that the
[respondents] want[ed] already to know the stand of the bank
whether the board [would] issue the required board resolution as
the deed of sale itself already show[ed] that the [respondents were]
clearly entitled to the land subject of the sale (Exh. F). The manager
of the [petitioner] bank received the letter which was served
personally to him and the latter told Marife O. Niño that since he
was the one himself who received the letter he would not sign
anymore a copy showing him as having already received said letter
(Exh. F).
After several days from receipt of the letter (Exh. F) when Marife O.
Niño went to the [petitioner] again and reiterated her request, the
manager of the [petitioner] bank told her that they could not issue
the required board resolution as the [petitioner] bank ha[d] no
records of the sale. Because of this Merife O. Niño already went to
their lawyer and ha[d] this petition filed.
The [respondents] are interested in having the property described in
paragraph 6 of the petition transferred to their names because their
mother and co-petitioner, Francisca Ocfemia, is very sickly and they
want to mortgage the property for the medical expenses of
Francisca Ocfemia. The illness of Francisca Ocfemia beg[a]n after her
husband died and her suffering from arthritis and pulmonary
disease already became serious before December 1995.
Marife O. Niño declared that her mother is now in serious condition
and they could not have her hospitalized for treatment as they do
not have any money and this is causing the family sleepless nights
and mental anguish, thinking that their mother may die because
they could not submit her for medication as they do not have
money. 6
The trial court granted the Petition. As noted earlier, the CA
affirmed the RTC Decision.
Hence, this recourse. 7 In a Resolution dated June 23, 1999, this
Court issued a Temporary Restraining Order directing the trial court
"to refrain and desist from executing [pending appeal] the decision
dated May 20, 1997 in Civil Case No. RTC-96-3513, effective
immediately until further orders from this Court." 8
Ruling of the Court of Appeals
The CA held that herein respondents were "able to prove their
present cause of action" against petitioner. It ruled that the RTC had
jurisdiction over the case, because (1) the Petition involved a matter
incapable of pecuniary estimation; (2) mandamus fell within the
jurisdiction of RTC; and (3) assuming that the action was for specific
performance as argued by the petitioner, it was still cognizable by
the said court.
Issues
In its Memorandum, 9 the bank posed the following questions:
1. Question of Jurisdiction of the Regional Trial Court. — Has a
Regional Trial Court original jurisdiction over an action involving title
to real property with a total assessed value of less than P20,000.00?
2. Question of Law. — May the board of directors of a rural banking
corporation be compelled to confirm a deed of absolute sale of real
property owned by the corporation which deed of sale was
executed by the bank manager without prior authority of the board
of directors of the rural banking corporation? 10
This Court's Ruling
The present Petition has no merit.
First Issue:
Jurisdiction of the Regional Trial Court
Petitioner submits that the RTC had no jurisdiction over the case.
Disputing the ruling of the appellate court that the present action
was incapable of pecuniary estimation, petitioner argues that the
matter in fact involved title to real property worth less than P20,000.
Thus, under RA 7691, the case should have been filed before a
metropolitan trial court, a municipal trial court or a municipal circuit
trial court.
We disagree. The well-settled rule is that jurisdiction is determined
by the allegations of the complaint. 11 In the present case, the
Petition for Mandamus filed by respondents before the trial court
prayed that petitioner-bank be compelled to issue a board
resolution confirming the Deed of Sale covering five parcels of
unregistered land, which the bank manager had executed in their
favor. The RTC has jurisdiction over such action pursuant to Section
21 of BP 129, which provides:
Sec. 21. Original jurisdiction in other cases. — Regional Trial Courts
shall exercise original jurisdiction;
(1) in the issuance of writ of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction which may be enforced in
any part of their respective regions; and
(2) In actions affecting ambassadors and other public ministers and
consuls.
A perusal of the Petition shows that the respondents did not raise
any question involving the title to the property, but merely asked
that petitioner's board of directors be directed to issue the subject
resolution. Moreover, the bank did not controvert the allegations in
the said Petition. To repeat, the issue therein was not the title to the
property; it was respondents' right to compel the bank to issue a
board resolution confirming the Deed of Sale.
Second Issue:
Authority of the Bank Manager
Respondents initiated the present proceedings, so that they could
transfer to their names the subject five parcels of land; and
subsequently, to mortgage said lots and to use the loan proceeds
for the medical expenses of their ailing mother. For the property to
be transferred in their names, however, the register of deeds
required the submission of a board resolution from the bank
confirming both the Deed of Sale and the authority of the bank
manager, Fe S. Tena, to enter into such transaction. Petitioner
refused. After being given the runaround by the bank, respondents
sued in exasperation.
Allegations in the Petition for Mandamus Deemed Admitted
Respondents based their action before the trial court on the Deed of
Sale, the substance of which was alleged in and a copy thereof was
attached to the Petition for Mandamus. The Deed named Fe S. Tena
as the representative of the bank. Petitioner, however, failed to
specifically deny under oath the allegations in that contract. In fact,
it filed no answer at all, for which reason it was declared in default.
Pertinent provisions of the Rules of Court read:
Sec. 7. Action or defense based on document. — Whenever an
action or defense is based upon a written instrument or document,
the substance of such instrument or document shall be set forth in
the pleading, and the original or a copy thereof shall be attached to
the pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may with like effect be set forth in the
pleading.
Sec. 8. How to contest genuineness of such documents.— When an
action or defense is founded upon a written instrument, copied in or
attached to the corresponding pleading as provided in the preceding
section, the genuineness and due execution of the instrument shall
be deemed admitted unless the adverse party, under oath,
specifically denies them, and sets forth what he claims to be the
facts; but this provision does not apply when the adverse party does
not appear to be a party to the instrument or when compliance with
an order for an inspection of the original instrument is refused. 12
In failing to file its answer specifically denying under oath the Deed
of Sale, the bank admitted the due execution of the said contract.
Such admission means that it acknowledged that Tena was
authorized to sign the Deed of Sale on its behalf. 13 Thus, defenses
that are inconsistent with the due execution and the genuineness of
the written instrument are cut off by an admission implied from a
failure to make a verified specific denial.
Other Acts of the Bank
In any event, the bank acknowledged, by its own acts or failure to
act, the authority of Fe S. Tena to enter into binding contracts. After
the execution of the Deed of Sale, respondents occupied the
properties in dispute and paid the real estate taxes due thereon. If
the bank management believed that it had title to the property, it
should have taken some measures to prevent the infringement or
invasion of its title thereto and possession thereof.
Likewise, Tena had previously transacted business on behalf of the
bank, and the latter had acknowledged her authority. A bank is
liable to innocent third persons where representation is made in the
course of its normal business by an agent like Manager Tena, even
though such agent is abusing her authority. 14 Clearly, persons
dealing with her could not be blamed for believing that she was
authorized to transact business for and on behalf of the bank. Thus,
this Court has ruled in Board of Liquidators v. Kalaw: 15
Settled jurisprudence has it that where similar acts have been
approved by the directors as a matter of general practice, custom,
and policy, the general manager may bind the company without
formal authorization of the board of directors. In varying language,
existence of such authority is established, by proof of the course of
business, the usages and practices of the company and by the
knowledge which the board of directors has, or must be presumed
to have, of acts and doings of its subordinates in and about the
affairs of the corporation. So also,
. . . authority to act for and bind a corporation may be presumed
from acts of recognition in other instances where the power was in
fact exercised.
. . . Thus, when, in the usual course of business of a corporation, an
officer has been allowed in his official capacity to manage its affairs,
his authority to represent the corporation may be implied from the
manner in which he has been permitted by the directors to manage
its business.
Notwithstanding the putative authority of the manager to bind the
bank in the Deed of Sale, petitioner has failed to file an answer to
the Petition below within the reglementary period, let alone present
evidence controverting such authority. Indeed, when one of herein
respondents, Marife S. Nino, went to the bank to ask for the board
resolution, she was merely told to bring the receipts. The bank
failed to categorically declare that Tena had no authority. This Court
stresses the following:
. . . Corporate transactions would speedily come to a standstill were
every person dealing with a corporation held duty-bound to
disbelieve every act of its responsible officers, no matter how
regular they should appear on their face. This Court has observed
in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that —
In passing upon the liability of a corporation in cases of this kind it is
always well to keep in mind the situation as it presents itself to the
third party with whom the contract is made. Naturally he can have
little or no information as to what occurs in corporate meetings; and
he must necessarily rely upon the external manifestation of
corporate consent. The integrity of commercial transactions can
only be maintained by holding the corporation strictly to the liability
fixed upon it by its agents in accordance with law; and we would be
sorry to announce a doctrine which would permit the property of
man in the city of Paris to be whisked out of his hands and carried
into a remote quarter of the earth without recourse against the
corporation whose name and authority had been used in the
manner disclosed in this case. As already observed, it is familiar
doctrine that if a corporation knowingly permits one of its officers,
or any other agent, to do acts within the scope of an apparent
authority, and thus holds him out to the public as possessing power
to do those acts, the corporation will, as against any one who has in
good faith dealt with the corporation through such agent, be
estopped from denying his authority; and where it is said "if the
corporation permits this means the same as "if the thing is
permitted by the directing power of the corporation." 16
In this light, the bank is estopped from questioning the authority of
the bank manager to enter into the contract of sale. If a corporation
knowingly permits one of its officers or any other agent to act within
the scope of an apparent authority, it holds the agent out to the
public as possessing the power to do those acts; thus, the
corporation will, as against anyone who has in good faith dealt with
it through such agent, be estopped from denying the agent's
authority. 17
Unquestionably, petitioner has authorized Tena to enter into the
Deed of Sale. Accordingly, it has a clear legal duty to issue the board
resolution sought by respondent's. Having authorized her to sell the
property, it behooves the bank to confirm the Deed of Sale so that
the buyers may enjoy its full use.
The board resolution is, in fact, mere paper work. Nonetheless, it is
paper work necessary in the orderly operations of the register of
deeds and the full enjoyment of respondents' rights. Petitioner-bank
persistently and unjustifiably refused to perform its legal duty.
Worse, it was less than candid in dealing with respondents
regarding this matter. In this light, the Court finds it proper to assess
the bank treble costs, in addition to the award of damages.
WHEREFORE, the Petition is hereby DENIED and the assailed
Decision and Resolution AFFIRMED. The Temporary Restraining
Order issued by this Court is hereby LIFTED. Treble costs against
petitioner.
SO ORDERED.
Melo, Purisima and Gonzaga-Reyes, JJ., concur.
Vitug, J., please see concurring opinion.
Separate Opinions
VITUG, J., concurring opinion;
I share the views expressed in the ponencia written for the Court by
our esteemed colleague Mr. Justice Artemio V. Panganiban. There is
just a brief clarificatory statement that I thought could be made.
The Civil Code, being a law of general application, can be suppletory
to special laws and certainly not preclusive of those that govern
commercial transactions. Indeed, in its generic sense, civil law can
rightly be said to encompass commercial law. Jus civile, in ancient
Rome, was merely used to distinguish it from jus gentium or the law
common to all the nations within the empire and, at some time later,
only in contrast to international law. In more recent times, civil law
is so referred to as private law in distinction from public law and
criminal law. Today, it may not be totally inaccurate to consider
commercial law, among some other special laws, as being a branch
of civil law.
Sec. 45 of the Corporation Code provides:
Sec. 45. Ultra vires acts of corporations. — No corporation under
this Code shall possess or exercise any corporate powers except
those conferred by this Code or by its articles of incorporation and
except such as are necessary or incidental to the exercise of the
powers so conferred.
The language of the Code appears to confine the term ultra vires to
an act outside or beyond express, implied and incidental corporate
powers. Nevertheless, the concept can also include those acts that
may ostensibly be within such powers but are, by general or special
laws, either proscribed or declared illegal. In general, although
perhaps loosely, ultra vires has also been used to designate those
acts of the board of directors or of corporate officers when acting
beyond their respective spheres of authority. In the context that the
law has used the term in Article 45 of the Corporation Code, an ultra
vires act would be void and not susceptible to ratification. 1 In
determining whether or not a corporation may perform an act, one
considers the logical and necessary relation between the act
assailed and the corporate purpose expressed by the law or in the
charter. For if the act were one which is lawful in itself or not
otherwise prohibited and done for the purpose of serving corporate
ends or reasonably contributes to the promotion of those ends in a
substantial and not merely in a remote and fanciful sense, it may be
fairly considered within corporate powers. 2
Sec. 23 of the Corporation Code states that the corporate powers
are to be exercised, all business conducted, and all property of
corporations controlled and held, by the Board of Directors. When
the act of the board is within corporate powers but it is done
without the concurrence of the shareholders as and when such
approval is required by law 3 or when the act is beyond its
competence to do, 4 the act has been described as void 5 or, as
unenforceable, 6 or as ineffective and not legally binding. 7 These
holdings notwithstanding, the act cannot accurately be likened to
an ultra vires act of the corporation itself defined in Section 45 of
the Code. Where the act is within corporate powers but the board
has acted without being competent to independently do so, the
action is not necessarily and totally devoid of effects, and it may
generally be ratified expressly or impliedly. Thus, an acceptance of
benefits derived by the shareholders from an outside investment
made by the board without the required concurrence of the
stockholders may, nonetheless, be so considered as an effective
investment. 8 It may be said, however, that when the board
resolution is yet executory, the act should aptly be deemed
inoperative and specific performance cannot be validly demanded
but, if for any reason, the contemplated action is carried out, such
principles as ratification or prescription when applicable, normally
unknown in void contracts, can serve to negate a claim for the total
nullity thereof.
Corporate officers, in their case, may act on such matters as may be
authorized either expressly by the By-laws or Board Resolutions or
impliedly such as by general practice or policy or as are implied by
express powers. When officers are allowed to act in certain
particular cases, their acts conformably therewith can bind the
company. Hence, a corporate officer entrusted with general
management and control of the business has the implied authority
to act or contract for the corporation which may be necessary or
appropriate to conduct the ordinary business. 9 If the act of
corporate officers comes within corporate powers but it is done
without any express or implied authority therefor from the by-laws,
board resolutions or corporate practices, such an act does not bind
the corporation. The Board, however, acting within its competence,
may ratify the unauthorized act of the corporate officer. So, too, a
corporation may be held in estoppel from denying as against
innocent third persons the authority of its officers or agents who
have been clothed by it with ostensible or apparent authority. 10
The Corporation Code itself has not been that explicit with respect
to the consequences of ultra vires acts; hence, the varied
ascriptions to its effects heretofore expressed. It may well be to
consider futile any further attempt to have these situations bear any
exact equivalence to the civil law precepts of defective contracts.
Nevertheless, general statements could be made. Here reiterated,
while an act of the corporation which is either illegal or outside of
express, implied or incidental powers as so provided by law or the
charter would be void under Article 5 11 of the Civil Code, and the
act is not susceptible to ratification, an unauthorized act (if within
corporate powers) of the board or a corporate officer, however,
would only be unenforceable conformably with Article 1403 12 of
the Civil Code but, if the party with whom the agent has contracted
is aware of the latter's limits of powers, the unauthorized act is
declared void by Article 1898 13 of the same Code, although still
susceptible thereunder to ratification by the principal. Any person
dealing with corporate boards and officers may be said to be
charged with the knowledge that the latter can only act within their
respective limits of power, and he is put to notice accordingly. Thus,
it would generally behoove such a person to look into the extent of
the authority of corporate agents since the onus would ordinarily be
with him.1âwphi1.nêt
THE MANILA REMNANT CO., INC., Petitioner, v. THE HONORABLE
COURT OF APPEALS and OSCAR VENTANILLA, JR. and CARMEN
GLORIA DIAZ, Respondents.
Bede S. Talingcos, for Petitioners.
Augusto Gatmaytan for Private Respondent.
 SYLLABUS
1. CIVIL LAW; AGENCY; FAILURE OF THE PRINCIPAL TO CORRECT AN
IRREGULARITY DESPITE KOWLEDGE THEREOF, DEEMED A
RATIFICATION OF THE ACT OF THE AGENT. — In the case at bar, the
Valencia realty firm had clearly overstepped the bounds of its
authority as agent — and for that matter, even the law — when it
undertook the double sale of the disputed lots. Such being the case,
the principal, Manila Remnant, would have been in the clear
pursuant to Article 1897 of the Civil Code which states that" (t)he
agent who acts as such is not personally liable to that party with
whom he contracts, unless he expressly binds himself or exceeds
the limits of his authority without giving such party sufficient notice
of his powers." However, the unique relationship existing between
the principal and the agent at the time of the dual sale must be
underscored. Bear in mind that the president then of both firms was
Artemio U. Valencia, the individual directly responsible for the sale
scam. Hence, despite the fact that the double sale was beyond the
power of the agent, Manila Remnant as principal was chargeable
with the knowledge or constructive notice of that fact and not
having done anything to correct such an irregularity was deemed to
have ratified the same. (See Art. 1910, Civil Code.)
2. ID.; ID.; PRINCIPLE OF ESTOPPEL; REASON AND EFFECT THEREOF;
CASE AT BAR. — More in point, we find that by the principle of
estoppel, Manila Remnant is deemed to have allowed its agent to
act as though it had plenary powers. Article 1911 of the Civil Code
provides: "Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the
latter to act as though he had full powers." The above-quoted article
is new. It is intended to protect the rights of innocent persons. In
such a situation, both the principal and the agent may be considered
as joint feasors whose liability is joint and solidary (Verzosa v. Lim,
45 Phil. 416). Authority by estoppel has arisen in the instant case
because by its negligence, the principal, Manila Remnant, has
permitted its agent, A.U. Valencia and Co., to exercise powers not
granted to it. That the principal might not have had actual
knowledge of the agent’s misdeed is of no moment.
DECISION
FERNAN, J.:
Like any other couple, Oscar Ventanilla and his wife Carmen, both
faculty members of the University of the Philippines and renting a
faculty unit, dreamed of someday owning a house and lot. Instead
of attaining this dream, they became innocent victims of deceit and
found themselves in the midst of an ensuing squabble between a
subdivision owner and its real estate agent.
The facts as found by the trial court and adopted by the Appellate
Court are as follows:chanrob1es virtual 1aw library
Petitioner Manila Remnant Co., Inc. is the owner of the parcels of
land situated in Quezon City covered by Transfer Certificates of Title
Nos. 26400, 26401, 30783 and 31986 and constituting the
subdivision known as Capital Homes Subdivision Nos. I and II. On
July 25, 1972, Manila Remnant and A.U. Valencia & Co. Inc. entered
into a written agreement entitled "Confirmation of Land
Development and Sales Contract" to formalize an earlier verbal
agreement whereby for a consideration of 17 and 1/2% fee,
including sales commission and management fee, A.U. Valencia and
Co., Inc. was to develop the aforesaid subdivision with authority to
manage the sales thereof, execute contracts to sell to lot buyers and
issue official receipts. 1
At that time the President of both A.U. Valencia and Co. Inc. and
Manila Remnant Co., Inc. was Artemio U. Valencia.cralawnad
On March 3, 1970, Manila Remnant thru A.U. Valencia and Co.
executed two "contracts to sell" covering Lots 1 and 2 of Block 17 in
favor of Oscar C. Ventanilla and Carmen Gloria Diaz for the
combined contract price of P66,571.00 payable monthly for ten
years. 2 As thus agreed in the contracts to sell, the Ventanillas paid
the down payments on the two lots even before the formal contract
was signed on March 3, 1970.
Ten (10) days after the signing of the contracts with the Ventanillas
or on March 13, 1970, Artemio U. Valencia, as President of Manila
Remnant, and without the knowledge of the Ventanilla couple, sold
Lots 1 and 2 of Block 17 again, this time in favor of Carlos
Crisostomo, one of his sales agents without any consideration. 3
Artemio Valencia then transmitted the fictitious Crisostomo
contracts to Manila Remnant while he kept in his files the contracts
to sell in favor of the Ventanillas. All the amounts paid by the
Ventanillas were deposited in Valencia’s bank account.
Beginning March 13, 1970, upon orders of Artemio Valencia, the
monthly payments of the Ventanillas were remitted to Manila
Remnant as payments of Crisostomo for which the former issued
receipts in favor of Crisostomo. Since Valencia kept the receipts in
his files and never transmitted the same to Crisostomo, the latter
and the Ventanillas remained ignorant of Valencia’s scheme. Thus,
the Ventanillas continued paying their monthly
installments.chanrobles virtual lawlibrary
Subsequently, the harmonious business relationship between
Artemio Valencia and Manila Remnant ended. On May 30, 1973,
Manila Remnant, through its General Manager Karl Landahl, wrote
Artemio Valencia informing him that Manila Remnant was
terminating its existing collection agreement with his firm on
account of the considerable amount of discrepancies and
irregularities discovered in its collections and remittances by virtue
of confirmations received from lot buyers. 4 As a consequence, on
June 6, 1973, Artemio Valencia was removed as President by the
Board of Directors of Manila Remnant. Therefore, from May of 1973,
Valencia stopped transmitting Ventanilla’s monthly installments
which at that time had already amounted to P17,925.40 for Lot 1
and P18,141.95 for Lot 2, (which appeared in Manila Remnant’s
record as credited in the name of Crisostomo). 5
On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before
Branch 19 of the then Court of First Instance of Manila 6 to impugn
the abrogation of their agency agreement. On June 10 and July 10,
1973, said court ordered all lot buyers to deposit their monthly
amortizations with the court. 7 But on July 17, 1973, A.U. Valencia
and Co. wrote the Ventanillas that it was still authorized by the
court to collect the monthly amortizations and requested them to
continue remitting their amortizations with the assurance that said
payments would be deposited later in court. 8 On May 22, 1974, the
trial court issued an order prohibiting A.U. Valencia and Co. from
collecting the monthly installments. 9 On July 22, 1974 and February
6, 1976 the same court ordered the Valencia firm to furnish the
court with a complete list of all lot buyers who had already made
down payments to Manila Remnant before December 1972. 10
Valencia complied with the court’s order on August 6, 1974 by
submitting a list which excluded the name of the Ventanillas. 11
Since A.U. Valencia and Co. failed to forward its collections after
May 1973, Manila Remnant caused on August 20, 1976 the
publication in the Times Journal of a notice cancelling the contracts
to sell of some lot buyers including that of Carlos Crisostomo in
whose name the payments of the Ventanillas had been credited. 12
To prevent the effective cancellation of their contracts, Artemio
Valencia instigated on September 22, 1976 the filing by Carlos
Crisostomo and seventeen (17) other lot vendees of a complaint for
specific performance with damages against Manila Remnant before
the Court of First Instance of Quezon City. The complaint alleged
that Crisostomo had already paid a total of P17,922.40 and
P18,136.85 on Lots 1 and 2, respectively. 13
It was not until March 1978 when the Ventanillas, after learning of
the termination of the agency agreement between Manila Remnant
and A.U. Valencia & Co., decided to stop paying their amortizations
to the latter. The Ventanillas, believing that they had already
remitted P37,007.00 for Lot 1 and P36,911.00 for Lot 2 or a grand
total, inclusive of interest, of P73,122.35 for the two lots, thereby
leaving a balance of P13,531.58 for Lot 1 and P13,540.22 for Lot 2,
went directly to Manila Remnant and offered to pay the entire
outstanding balance of the purchase price. 14 To their shock and
utter consternation, they discovered from Gloria Caballes, an
accountant of Manila Remnant, that their names did not appear in
the records of A.U. Valencia and Co. as lot buyers. Caballes showed
the Ventanillas copies of the contracts to sell in favor of Carlos
Crisostomo, duly signed by Artemio U. Valencia as President of
Manila Remnant. 15 Whereupon, Manila Remnant refused the offer
of the Ventanillas to pay for the remainder of the contract price
because they did not have the personality to do so. Furthermore,
they were shown the published Notice of Cancellation in the
January 29, 1978 issue of the Times Journal rescinding the contracts
of delinquent buyers including Crisostomo.
Thus, on November 21, 1978, the Ventanillas commenced an action
for specific performance, annulment of deeds and damages against
Manila Remnant, A.U. Valencia and Co. and Carlos Crisostomo
before the Court of First Instance of Quezon City, Branch 17-B. 16
Crisostomo was declared in default for failure to file an
answer.chanrobles.com:cralaw:red
On November 17, 1980, the trial court rendered a decision 1)
declaring the contracts to sell issued in favor of the Ventanillas valid
and subsisting and annulling the contracts to sell in Crisostomo’s
favor; 2) ordering Manila Remnant to execute in favor of the
Ventanillas an Absolute Deed of Sale free from all liens and
encumbrances; and 3) condemning defendants A.U. Valencia and Co.
Inc., Manila Remnant and Carlos Crisostomo jointly and severally to
pay the Ventanillas the amount of P100,000.00 as moral damages,
P100,000.00 as exemplary damages, and P100,000.00 as attorney’s
fees. The lower court also added that if, for any legal reason, the
transfer of the lots could no longer be effected, the defendants
should reimburse jointly and severally to the Ventanillas the total
amount of P73,122.35 representing the total amount paid for the
two lots plus legal interest thereon from March 1970 plus damages
as aforestated. With regard to the cross claim of Manila Remnant
against Valencia, the court found that Manila Remnant could have
not been dragged into this suit without the fraudulent
manipulations of Valencia. Hence, it adjudged A.U. Valencia and Co.
to pay the Manila Remnant P5,000.00 as moral damages and
exemplary damages and P5,000.00 as attorney’s fees. 17
Subsequently, Manila Remnant and A.U. Valencia and Co. elevated
the lower court’s decision to the Court of Appeals through separate
appeals. On October 13, 1987, the Appellate Court affirmed in toto
the decision of the lower court. Reconsideration sought by
petitioner Manila Remnant was denied, hence the instant petition.
There is no question that the contracts to sell in favor of the
Ventanilla spouses are valid and subsisting. The only issue remaining
is whether or not petitioner Manila Remnant should be held
solidarily liable together with A.U. Valencia and Co. and Carlos
Crisostomo for the payment of moral, exemplary damages and
attorney’s fees in favor of the Ventanillas. 18
While petitioner Manila Remnant has not refuted the legality of the
award of damages per se, it believes that it cannot be made jointly
and severally liable with its agent A.U. Valencia and Co. since it was
not aware of the illegal acts perpetrated nor did it consent or ratify
said acts of its agent.
The argument is devoid of merit.
In the case at bar, the Valencia realty firm had clearly overstepped
the bounds of its authority as agent — and for that matter, even the
law — when it undertook the double sale of the disputed lots. Such
being the case, the principal, Manila Remnant, would have been in
the clear pursuant to Article 1897 of the Civil Code which states
that" (t)he agent who acts as such is not personally liable to that
party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party
sufficient notice of his powers." chanrobles.com.ph : virtual law
library
However, the unique relationship existing between the principal and
the agent at the time of the dual sale must be underscored. Bear in
mind that the president then of both firms was Artemio U. Valencia,
the individual directly responsible for the sale scam. Hence, despite
the fact that the double sale was beyond the power of the agent,
Manila Remnant as principal was chargeable with the knowledge or
constructive notice of that fact and not having done anything to
correct such an irregularity was deemed to have ratified the same.
19
More in point, we find that by the principle of estoppel, Manila
Remnant is deemed to have allowed its agent to act as though it had
plenary powers. Article 1911 of the Civil Code
provides:jgc:chanrobles.com.ph
"Even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to act
as though he had full powers." (Emphasis supplied)
The above-quoted article is new. It is intended to protect the rights
of innocent persons. In such a situation, both the principal and the
agent may be considered as joint feasors whose liability is joint and
solidary. 20
Authority by estoppel has arisen in the instant case because by its
negligence, the principal, Manila Remnant, has permitted its agent,
A.U. Valencia and Co., to exercise powers not granted to it. That the
principal might not have had actual knowledge of the agent’s the prejudice of bona fide lot buyers, as precisely what the agent
misdeed is of no moment. Consider the following had intended to happen in the present case. This is a serious matter
circumstances:chanrob1es virtual 1aw library that must be looked into by the appropriate government housing
authority.chanrobles.com.ph : virtual law library
Firstly, Manila Remnant literally gave carte blanche to its agent A.U.
Valencia and Co. in the sale and disposition of the subdivision lots. WHEREFORE, in view of the foregoing, the appealed decision of the
As a disclosed principal in the contracts to sell in favor of the Court of Appeals dated October 13, 1987 sustaining the decision of
Ventanilla couple, there was no doubt that they were in fact the Quezon City trial court dated November 17, 1980 is AFFIRMED.
contracting with the principal. Section 7 of the Ventanillas’ contracts This judgment is immediately executory. Costs against petitioner.
to sell states:jgc:chanrobles.com.ph
SO ORDERED.
"7. That all payments whether deposits, down payment and
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE
monthly installment agreed to be made by the vendee shall be
CASTRO, petitioners, vs. COURT OF APPEALS and
payable to A.U. Valencia and Co., Inc. It is hereby expressly
FRANCISCO ARTIGO, respondents.
understood that unauthorized payments made to real estate
brokers or agents shall be the sole and exclusive responsibility and
at the risk of the vendee and any and all such payments shall not be DECISION
recognized by the vendors unless the official receipts therefor shall
CARPIO, J.:
have been duly signed by the vendors’ duly authorized agent, A.U.
Valencia and Co., Inc." (Emphasis supplied)

Indeed, once Manila Remnant had been furnished with the usual The Case
copies of the contracts to sell, its only participation then was to
accept the collections and pay the commissions to the agent. The
Before us is a Petition for Review on Certiorari[1] seeking to
latter had complete control of the business arrangement. 21
annul the Decision of the Court of Appeals[2] dated May 4, 1994 in
CA-G.R. CV No. 37996, which affirmed in toto the decision[3] of the
Secondly, it is evident from the records that Manila Remnant was
Regional Trial Court of Quezon City, Branch 80, in Civil Case No.
less than prudent in the conduct of its business as a subdivision
Q-89-2631. The trial court disposed as follows:
owner. For instance, Manila Remnant failed to take immediate steps
to avert any damage that might be incurred by the lot buyers as a
result of its unilateral abrogation of the agency contract. The WHEREFORE, the Court finds defendants Constante and Corazon
publication of the cancelled contracts to sell in the Times Journal Amor de Castro jointly and solidarily liable to plaintiff the sum of:
came three years after Manila Remnant had revoked its agreement
with A.U. Valencia and Co.chanrobles virtual lawlibrary a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
Moreover, Manila Remnant also failed to check the records of its c) P45,000.00 for and by way of attorneys fees;
agent immediately after the revocation of the agency contract d) To pay the cost of this suit.
despite the fact that such revocation was due to reported anomalies
in Valencia’s collections. Altogether, as pointed out by the counsel Quezon City, Metro Manila, December 20, 1991.
for the Ventanillas, Manila Remnant could and should have devised
a system whereby it could monitor and require a regular accounting
from A.U. Valencia and Co., its agent. Not having done so, Manila
The Antecedent Facts
Remnant has made itself liable to those who have relied on its agent
and the representation that such agent was clothed with sufficient
powers to act on behalf of the principal. On May 29, 1989, private respondent Francisco Artigo (Artigo
for brevity) sued petitioners Constante A. De Castro (Constante for
Even assuming that Manila Remnant was as much a victim as the brevity) and Corazon A. De Castro (Corazon for brevity) to collect
other innocent lot buyers, it cannot be gainsaid that it was precisely the unpaid balance of his brokers commission from the De
its negligence and laxity in the day to day operations of the real Castros.[4] The Court of Appeals summarized the facts in this wise:
estate business which made it possible for the agent to deceive
unsuspecting vendees like the Ventanillas.
x x x. Appellants[5] were co-owners of four (4) lots located at EDSA
corner New York and Denver Streets in Cubao, Quezon City. In a
In essence, therefore, the basis for Manila Remnant’s solidary
letter dated January 24, 1984 (Exhibit A-1, p. 144, Records),
liability is estoppel which, in turn, is rooted in the principal’s
appellee[6] was authorized by appellants to act as real estate broker
neglectfulness in failing to properly supervise and control the affairs
in the sale of these properties for the amount of P23,000,000.00,
of its agent and to adopt the needed measures to prevent further
five percent (5%) of which will be given to the agent as
misrepresentation. As a consequence, Manila Remnant is
commission. It was appellee who first found Times Transit
considered estopped from pleading the truth that it had no direct
Corporation, represented by its president Mr. Rondaris, as
hand in the deception employed by its agent. 22
prospective buyer which desired to buy two (2) lots only, specifically
lots 14 and 15. Eventually, sometime in May of 1985, the sale of lots
A final word. The Court cannot help but be alarmed over the
14 and 15 was consummated. Appellee received from
reported practice of supposedly reputable real estate brokers of
appellants P48,893.76 as commission.
manipulating prices by allowing their own agents to "buy" lots in
their names in the hope of reselling the same at a higher price to
It was then that the rift between the contending parties soon
emerged. Appellee apparently felt short changed because according
to him, his total commission should be P352,500.00 which is five
percent (5%) of the agreed price of P7,050,000.00 paid by Times
Transit Corporation to appellants for the two (2) lots, and that it was
he who introduced the buyer to appellants and unceasingly
facilitated the negotiation which ultimately led to the
consummation of the sale. Hence, he sued below to collect the
balance of P303,606.24 after having received P48,893.76 in
advance.
On the other hand, appellants completely traverse appellees claims
and essentially argue that appellee is selfishly asking for more than
what he truly deserved as commission to the prejudice of other
agents who were more instrumental in the consummation of the
sale. Although appellants readily concede that it was appellee who
first introduced Times Transit Corp. to them, appellee was not
designated by them as their exclusive real estate agent but that in
fact there were more or less eighteen (18) others whose collective
efforts in the long run dwarfed those of appellees, considering that
the first negotiation for the sale where appellee took active
participation failed and it was these other agents who successfully
brokered in the second negotiation. But despite this and out of
appellants pure liberality, beneficence and magnanimity, appellee
nevertheless was given the largest cut in the commission
(P48,893.76), although on the principle of quantum meruit he would
have certainly been entitled to less. So appellee should not have
been heard to complain of getting only a pittance when he actually
got the lions share of the commission and worse, he should not
have been allowed to get the entire commission. Furthermore, the
purchase price for the two lots was only P3.6 million as appearing in
the deed of sale and not P7.05 million as alleged by appellee. Thus,
even assuming that appellee is entitled to the entire commission, he
would only be getting 5% of the P3.6 million, or P180,000.00.
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial
court.
First. The Court of Appeals found that Constante authorized
Artigo to act as agent in the sale of two lots in Cubao, Quezon
City. The handwritten authorization letter signed by Constante
clearly established a contract of agency between Constante and
Artigo. Thus, Artigo sought prospective buyers and found Times
Transit Corporation (Times Transit for brevity).Artigo facilitated the
negotiations which eventually led to the sale of the two
lots. Therefore, the Court of Appeals decided that Artigo is entitled
to the 5% commission on the purchase price as provided in the
contract of agency.
Second. The Court of Appeals ruled that Artigos complaint is
not dismissible for failure to implead as indispensable parties the
other co-owners of the two lots. The Court of Appeals explained
that it is not necessary to implead the other co-owners since the
action is exclusively based on a contract of agency between Artigo
and Constante.
Third. The Court of Appeals likewise declared that the trial
court did not err in admitting parol evidence to prove the true
amount paid by Times Transit to the De Castros for the two lots.The
Court of Appeals ruled that evidence aliunde could be presented to
prove that the actual purchase price was P7.05 million and not P3.6
million as appearing in the deed of sale.Evidence aliunde is
admissible considering that Artigo is not a party, but a mere witness
in the deed of sale between the De Castros and Times Transit. The
Court of Appeals explained that, the rule that oral evidence is
inadmissible to vary the terms of written instruments is generally
applied only in suits between parties to the instrument and
strangers to the contract are not bound by it. Besides, Artigo was
not suing under the deed of sale, but solely under the contract of
agency. Thus, the Court of Appeals upheld the trial courts finding
that the purchase price was P7.05 million and not P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -
I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT
FOR FAILURE TO IMPLEAD INDISPENSABLE
PARTIES-IN-INTEREST;
II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT
ON THE GROUND THAT ARTIGOS CLAIM HAS BEEN
EXTINGUISHED BY FULL PAYMENT, WAIVER, OR
ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED
TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES
AND ATTORNEYS FEES;
VI. NOT AWARDING THE DE CASTROS MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEYS FEES.
The Courts Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for failure to
implead other co-owners as indispensable parties
The De Castros argue that Artigos complaint should have been
dismissed for failure to implead all the co-owners of the two
lots. The De Castros claim that Artigo always knew that the two lots
were co-owned by Constante and Corazon with their other siblings
Jose and Carmela whom Constante merely represented. The De
Castros contend that failure to implead such indispensable parties is
fatal to the complaint since Artigo, as agent of all the four
co-owners, would be paid with funds co-owned by the four
co-owners.
The De Castros contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected
by the courts action in the litigation, and without whom no final
determination of the case can be had. [7] The joinder of
indispensable parties is mandatory and courts cannot proceed
without their presence.[8] Whenever it appears to the court in the
course of a proceeding that an indispensable party has not been
joined, it is the duty of the court to stop the trial and order the
inclusion of such party.[9]
However, the rule on mandatory joinder of indispensable
parties is not applicable to the instant case.
There is no dispute that Constante appointed Artigo in a
handwritten note dated January 24, 1984 to sell the properties of
the De Castros for P23 million at a 5 percent commission. The
authority was on a first come, first serve basis. The authority reads
in full:
24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is authorized as our real
estate broker in connection with the sale of our property located at
Edsa Corner New York & Denver, Cubao, Quezon City.
Asking price P23,000,000.00 with
5% commission as agents fee.
C American Biscuit Co., Inc.[13] that
.C. de Castro
o x x x solidarity does not make a solidary obligor an indispensable
wner & representing
c says that the creditor `may proceed against anyone of the solidary
o-owners
This authority is on a first-come
First serve basis CAC
Constante signed the note as owner and as representative of
the other co-owners. Under this note, a contract of agency was
clearly constituted between Constante and Artigo. Whether
Constante appointed Artigo as agent, in Constantes individual or
representative capacity, or both, the De Castros cannot seek the
dismissal of the case for failure to implead the other co-owners as
indispensable parties. The De Castros admit that the other
co-owners are solidarily liable under the contract of
agency,[10] citing Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed an agent for a
common transaction or undertaking, they shall be solidarily liable to
the agent for all the consequences of the agency.
The solidary liability of the four co-owners, however, militates
against the De Castros theory that the other co-owners should be
impleaded as indispensable parties. A noted commentator
explained Article 1915 thus
The rule in this article applies even when the appointments were
made by the principals in separate acts, provided that they are for
the same transaction. The solidarity arises from the common
interest of the principals, and not from the act of constituting the
agency. By virtue of this solidarity, the agent can recover from any
principal the whole compensation and indemnity owing to him by
the others. The parties, however, may, by express agreement,
negate this solidary responsibility. The solidarity does not disappear
by the mere partition effected by the principals after the
accomplishment of the agency.
If the undertaking is one in which several are interested, but only
some create the agency, only the latter are solidarily liable, without
prejudice to the effects of negotiorum gestio with respect to the
others. And if the power granted includes various transactions some
of which are common and others are not, only those interested in
each transaction shall be liable for it.[11]
When the law expressly provides for solidarity of the
obligation, as in the liability of co-principals in a contract of agency,
each obligor may be compelled to pay the entire obligation. [12]The
agent may recover the whole compensation from any one of the
co-principals, as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor
may sue any of the solidary debtors. This article reads:
Art. 1216. The creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously. The demand made
against one of them shall not be an obstacle to those which may
subsequently be directed against the others, so long as the debt has
not been fully collected.
Thus, the Court has ruled in Operators Incorporated vs.
party in a suit filed by the creditor. Article 1216 of the Civil Code
debtors or some or all of them simultaneously. (Emphasis supplied)
Second Issue: whether Artigos claim has been extinguished by full
payment, waiver or abandonment
The De Castros claim that Artigo was fully paid on June 14,
1985, that is, Artigo was given his proportionate share and no longer
entitled to any balance. According to them, Artigo was just one of
the agents involved in the sale and entitled to a proportionate share
in the commission. They assert that Artigo did absolutely nothing
during the second negotiation but to sign as a witness in the deed of
sale. He did not even prepare the documents for the transaction as
an active real estate broker usually does.
The De Castros arguments are flimsy.
A contract of agency which is not contrary to law, public order,
public policy, morals or good custom is a valid contract, and
constitutes the law between the parties.[14] The contract of agency
entered into by Constante with Artigo is the law between them and
both are bound to comply with its terms and conditions in good
faith.
The mere fact that other agents intervened in the
consummation of the sale and were paid their respective
commissions cannot vary the terms of the contract of agency
granting Artigo a 5 percent commission based on the selling
price. These other agents turned out to be employees of Times
Transit, the buyer Artigo introduced to the De Castros. This
prompted the trial court to observe:
The alleged `second group of agents came into the picture only
during the so-called `second negotiation and it is amusing to note
that these (sic) second group, prominent among whom are Atty. Del
Castillo and Ms. Prudencio, happened to be employees of Times
Transit, the buyer of the properties. And their efforts were limited
to convincing Constante to part away with the properties because
the redemption period of the foreclosed properties is around the
corner, so to speak. (tsn. June 6, 1991).
xxx
To accept Constantes version of the story is to open the floodgates
of fraud and deceit. A seller could always pretend rejection of the
offer and wait for sometime for others to renew it who are much
willing to accept a commission far less than the original broker. The
immorality in the instant case easily presents itself if one has to
consider that the alleged `second group are the employees of the
buyer, Times Transit and they have not bettered the offer secured
by Mr. Artigo for P7 million.
It is to be noted also that while Constante was too particular about
the unrenewed real estate brokers license of Mr. Artigo, he did not
bother at all to inquire as to the licenses of Prudencio and Castillo.
(tsn, April 11, 1991, pp. 39-40).[15] (Emphasis supplied)
In any event, we find that the 5 percent real estate brokers
commission is reasonable and within the standard practice in the
real estate industry for transactions of this nature.
The De Castros also contend that Artigos inaction as well as
failure to protest estops him from recovering more than what was
actually paid him. The De Castros cite Article 1235 of the Civil Code
which reads:
Art. 1235. When the obligee accepts the performance, knowing its
incompleteness and irregularity, and without expressing any protest
or objection, the obligation is deemed fully complied with.
The De Castros reliance on Article 1235 of the Civil Code is
misplaced. Artigos acceptance of partial payment of his commission
neither amounts to a waiver of the balance nor puts him in
estoppel. This is the import of Article 1235 which was explained in
this wise:
The word accept, as used in Article 1235 of the Civil Code, means to
take as satisfactory or sufficient, or agree to an incomplete or
irregular performance. Hence, the mere receipt of a partial
payment is not equivalent to the required acceptance of
performance as would extinguish the whole
obligation.[16] (Emphasis supplied)
There is thus a clear distinction between acceptance and
mere receipt. In this case, it is evident that Artigo merely received
the partial payment without waiving the balance. Thus, there is no
estoppel to speak of.
The De Castros further argue that laches should apply because
Artigo did not file his complaint in court until May 29, 1989, or
almost four years later. Hence, Artigos claim for the balance of his
commission is barred by laches.
Laches means the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due
diligence could or should have been done earlier. It is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has
abandoned it or declined to assert it.[17]
Artigo disputes the claim that he neglected to assert his rights.
He was appointed as agent on January 24, 1984. The two lots were
finally sold in June 1985. As found by the trial court, Artigo
demanded in April and July of 1985 the payment of his commission
by Constante on the basis of the selling price of P7.05 million but
there was no response from Constante.[18] After it became clear that
his demands for payment have fallen on deaf ears, Artigo decided to
sue on May 29, 1989.
Actions upon a written contract, such as a contract of agency,
must be brought within ten years from the time the right of action
accrues.[19] The right of action accrues from the moment the breach
of right or duty occurs. From this moment, the creditor can institute
the action even as the ten-year prescriptive period begins to run.[20]
The De Castros admit that Artigos claim was filed within the
ten-year prescriptive period. The De Castros, however, still maintain
that Artigos cause of action is barred by laches. Laches does not
apply because only four years had lapsed from the time of the sale
in June 1985. Artigo made a demand in July 1985 and filed the
action in court on May 29, 1989, well within the ten-year
prescriptive period. This does not constitute an unreasonable delay
in asserting ones right. The Court has ruled, a delay within the
prescriptive period is sanctioned by law and is not considered to be
a delay that would bar relief.[21] In explaining that laches applies
only in the absence of a statutory prescriptive period, the Court has
stated -
Laches is recourse in equity. Equity, however, is applied only in the
absence, never in contravention, of statutory law. Thus, laches,
cannot, as a rule, be used to abate a collection suit filed within the
prescriptive period mandated by the Civil Code.[22]
Clearly, the De Castros defense of laches finds no support in
law, equity or jurisprudence.
Third issue: whether the determination of the purchase price was
made in violation of the Rules on Evidence
The De Castros want the Court to re-examine the probative
value of the evidence adduced in the trial court to determine
whether the actual selling price of the two lots was P7.05 million
and not P3.6 million. The De Castros contend that it is erroneous to
base the 5 percent commission on a purchase price of P7.05 million
as ordered by the trial court and the appellate court. The De Castros
insist that the purchase price is P3.6 million as expressly stated in
the deed of sale, the due execution and authenticity of which was
admitted during the trial.
The De Castros believe that the trial and appellate courts
committed a mistake in considering incompetent evidence and
disregarding the best evidence and parole evidence rules. They
claim that the Court of Appeals erroneously affirmed sub
silentio the trial courts reliance on the various correspondences
between Constante and Times Transit which were mere
photocopies that do not satisfy the best evidence rule. Further,
these letters covered only the first negotiations between Constante
and Times Transit which failed; hence, these are immaterial in
determining the final purchase price.
The De Castros further argue that if there was an
undervaluation, Artigo who signed as witness benefited therefrom,
and being equally guilty, should be left where he presently
stands.They likewise claim that the Court of Appeals erred in relying
on evidence which were not offered for the purpose considered by
the trial court. Specifically, Exhibits B, C, D and E were not offered to
prove that the purchase price was P7.05 Million. Finally, they argue
that the courts a quo erred in giving credence to the perjured his contractual obligation.[26] On the other hand, attorneys fees are
testimony of Artigo. They want the entire testimony of Artigo awarded in instances where the defendant acted in gross and
rejected as a falsehood because he was lying when he claimed at evident bad faith in refusing to satisfy the plaintiffs plainly valid, just
the outset that he was a licensed real estate broker when he was and demandable claim.[27] There is no reason to disturb the trial
not. courts finding that the defendants lack of good faith and unkind
treatment of the plaintiff in refusing to give his due commission
Whether the actual purchase price was P7.05 Million as found
deserve censure. This warrants the award of P25,000.00 in moral
by the trial court and affirmed by the Court of Appeals, or P3.6
damages and P45,000.00 in attorneys fees. The amounts are, in our
Million as claimed by the De Castros, is a question of fact and not of
view, fair and reasonable. Having found a buyer for the two lots,
law. Inevitably, this calls for an inquiry into the facts and evidence
Artigo had already performed his part of the bargain under the
on record. This we can not do.
contract of agency. The De Castros should have exercised fairness
It is not the function of this Court to re-examine the evidence and good judgment in dealing with Artigo by fulfilling their own part
submitted by the parties, or analyze or weigh the evidence of the bargain - paying Artigo his 5 percent brokers commission
again.[23] This Court is not the proper venue to consider a factual based on the actual purchase price of the two lots.
issue as it is not a trier of facts. In petitions for review on certiorari
WHEREFORE, the petition is denied for lack of merit. The
as a mode of appeal under Rule 45, a petitioner can only raise
Decision of the Court of Appeals dated May 4, 1994 in CA-G.R. CV
questions of law. Our pronouncement in the case of Cormero vs.
No. 37996 is AFFIRMED in toto.
Court of Appeals[24] bears reiteration:
SO ORDERED.
At the outset, it is evident from the errors assigned that the petition
is anchored on a plea to review the factual conclusion reached by
the respondent court. Such task however is foreclosed by the rule
that in petitions for certiorari as a mode of appeal, like this one, only
questions of law distinctly set forth may be raised. These questions
have been defined as those that do not call for any examination of
the probative value of the evidence presented by the
parties. (Uniland Resources vs. Development Bank of the Philippines,
200 SCRA 751 [1991] citing Goduco vs. Court of appeals, et al., 119
Phil. 531; Hernandez vs. Court of Appeals, 149 SCRA 67). And when
this court is asked to go over the proof presented by the parties,
and analyze, assess and weigh them to ascertain if the trial court
and the appellate court were correct in according superior credit to
this or that piece of evidence and eventually, to the totality of the
evidence of one party or the other, the court cannot and will not do
the same. (Elayda vs. Court of Appeals, 199 SCRA 349 [1991]). Thus,
in the absence of any showing that the findings complained of are
totally devoid of support in the record, or that they are so glaringly
erroneous as to constitute serious abuse of discretion, such findings
must stand, for this court is not expected or required to examine or
contrast the oral and documentary evidence submitted by the
parties. (Morales vs. Court of Appeals, 197 SCRA 391 [1991] citing
Santa Ana vs. Hernandez, 18 SCRA 973 [1966]).

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

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

Fourth Issue: whether award of moral damages and attorneys fees

is proper

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

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

Law and jurisprudence support the award of moral damages

and attorneys fees in favor of Artigo. The award of damages and
attorneys fees is left to the sound discretion of the court, and if such
discretion is well exercised, as in this case, it will not be disturbed on
appeal.[25] Moral damages may be awarded when in a breach of
contract the defendant acted in bad faith, or in wanton disregard of