VELOSO VS CA
FACTS:
Petitioner Francisco Veloso was the owner of a parcel
of land situated in the district of Tondo, Manila. The
title was registered in the name of Francisco A.
Veloso. The said title was subsequently canceled and
a new one was issued in the name of Aglaloma B.
Escario.
On August 24, 1988, petitioner Veloso filed an action
for annulment of documents, reconveyance of
property with damages and preliminary injunction
and/or restraining order. Petitioner alleged therein that
he was the absolute owner of the subject property and
he never authorized anybody, not even his wife, to sell
it. He alleged that he was in possession of the title but
when his wife, Irma, left for abroad, he found out that
his copy was missing. He then verified with the
Registry of Deeds of Manila and there he discovered
that his title was already canceled in favor of defendant
Aglaloma Escario. The transfer of property was
supported by a General Power of Attorney executed by
Irma Veloso, wife of the petitioner and appearing as
his attorney-in-fact, and defendant Aglaloma Escario.
Petitioner Veloso, however, denied having executed
the power of attorney and alleged that his signature
was falsified. He also denied having seen or even
known Rosemarie Reyes and Imelda Santos, the
supposed witnesses in the execution of the power of
attorney. He vehemently denied having met or
transacted with the defendant. Thus, he contended that
the sale of the property, and the subsequent transfer
thereof, were null and void. Petitioner Veloso,
therefore, prayed that a temporary restraining order be
issued to prevent the transfer of the subject property;
that the General Power of Attorney, the Deed of
Absolute Sale and the Transfer Certificate of Title No.
180685 be annulled; and the subject property be
reconveyed to him.
Defendant Aglaloma Escario in her answer alleged
that she was a buyer in good faith and denied any
knowledge of the alleged irregularity. She allegedly
relied on the general power of attorney of Irma Veloso
which was sufficient in form and substance and was
duly notarized. She contended that plaintiff (herein
petitioner), had no cause of action against her. In
seeking for the declaration of nullity of the documents,
the real party in interest was Irma Veloso, the wife of
the plaintiff. She should have been impleaded in the
case. In fact, Plaintiffs cause of action should have
been against his wife, Irma. Consequently, defendant
Escario prayed for the dismissal of the complaint and
the payment to her of damages.[8]
The RTC ruled in favor of Escarion and such ruling
was affirmed in toto by the CA. Hence, this petition
for review.
ISSUES:
Whether or not the power of attorney was valid and
regular on its face.
Whether or not there is forgery.
Whether or not there is equitable estoppel.
Whether or not the respondent is an innocent purchaser
for value
Ruling:
YES! An examination of the records showed that the
assailed power of attorney was valid and regular on its
face. It was notarized and as such, it carries the
evidentiary weight conferred upon it with respect to its
due execution. While it is true that it was denominated
as a general power of attorney, a perusal thereof
revealed that it stated an authority to sell, to wit:
To buy or sell, hire or lease, mortgage or otherwise
hypothecate lands, tenements and hereditaments or
other forms of real property, more specifically TCT
No. 49138, upon such terms and conditions and under
such covenants as my said attorney shall deem fit and
proper.
Thus, there was no need to execute a separate and
special power of attorney since the general power of
attorney had expressly authorized the agent or attorney
in fact the power to sell the subject property. The
special power of attorney can be included in the
general power when it is specified therein the act or
transaction for which the special power is required.
The general power of attorney was accepted by the
Register of Deeds when the title to the subject property
was canceled and transferred in the name of private
respondent. In LRC Consulta No. 123, Register of
Deeds of Albay, Nov. 10, 1956, it stated that:
Whether the instrument be denominated as general
power of attorney or special power of attorney, what
matters is the extent of the power or powers
contemplated upon the agent or attorney in fact. If the
power is couched in general terms, then such power
cannot go beyond acts of administration. However,
where the power to sell is specific, it not being merely
implied, much less couched in general terms, there can
not be any doubt that the attorney in fact may execute
a valid sale. xxx
NO! We found, however, that the basis presented by
the petitioner was inadequate to sustain his allegation
of forgery. Mere variance of the signatures cannot be
considered as conclusive proof that the same were
forged. Forgery cannot be presumed.[17] Petitioner,
however, failed to prove his allegation and simply
relied on the apparent difference of the signatures. His
denial had not established that the signature on the
power of attorney was not his.
YES! We agree with the conclusion of the lower court
that private respondent was an innocent purchaser for
value. Respondent Aglaloma relied on the power of
attorney presented by petitioners wife, Irma. Being the
wife of the owner and having with her the title of the
property, there was no reason for the private
respondent not to believe in her authority. Moreover,
the power of attorney was notarized and as such,
carried with it the presumption of its due
execution. Thus, having had no inkling on any
irregularity and having no participation thereof,
private respondent was a buyer in good faith. It has
been consistently held that a purchaser in good faith is
one who buys property of another, without notice that
some other person has a right to, or interest in such
property and pays a full and fair price for the same, at
the time of such purchase, or before he has notice of
the claim or interest of some other person in the
property.[18]
Documents acknowledged before a notary public have
the evidentiary weight with respect to their due
execution. The questioned power of attorney and deed
of sale, were notarized and therefore, presumed to be
valid and duly executed. Even granting for the sake of
argument, that the petitioners signature was falsified
and consequently, the power of attorney and the deed
of sale were null and void, such fact would not revoke
the title subsequently issued in favor of private
respondent Aglaloma.In the case of Tenio-
Obsequio vs. Court of Appeals,[20] it was held, viz.:
The right of an innocent purchaser for value must be
respected and protected, even if the seller obtained his
title through fraud.
YES! Finally, the trial court did not err in applying
equitable estoppel in this case. The principle of
equitable estoppel states that where one or two
innocent persons must suffer a loss, he who by his
conduct made the loss possible must bear it. From the
evidence adduced, it should be the petitioner who
should bear the loss. As the court a quo found:
Besides, the records of this case disclosed that the
plaintiff is not entirely free from blame. He admitted
that he is the sole person who has access to TCT No.
49138 and other documents appertaining thereto
(TSN, May 23, 1989, pp. 7-12). However, the fact
remains that the Certificate of Title, as well as other
documents necessary for the transfer of title were in
the possession of plaintiffs wife, Irma L. Veloso,
consequently leaving no doubt or any suspicion on the
part of the defendant as to her authority.
Orbeta vs Sendiong
On 24 March 1925, Simeona Montenegro sold to the
spouses Maximo Orbeta and Basilisa Teves (spouses
Orbeta) a portion, comprising of 4,622 square meters,
of a parcel of land designated as Lot 606 of the
Cadastral Survey of the Municipality of Dumaguete
(subject land), by virtue of a document denominated
Escritura de Compra Venta. The subject land was
exclusive of a 884-square meter site occupied by the
house of Simeona Montenegros grandmother which
was not included in the sale.
On 25 January 1934, Maximo Orbeta, in turn, sold to
the spouses Juan Sendiong and Exequila Castellanes
the subject land, with all the improvements existing
thereon.
In the meantime or on 29 December 1956, the spouses
Juan Sendiong and Exequila Castellanes donated the
subject land in favor of Luis Sendiong who therafter
sold the easternmost one-half (1/2) undivided portion
thereof to the spouses Pretzylou Sendiong[4] on 9 June
1973. Apparently, Luis Sendiong kept the other
undivided half for himself.
Thereafter, Simeona Montenegro, having apparently
lost possession over the 884-square meter portion that
was excluded in the 1925 sale, filed a complaint on 25
May 1972 against Luis Sendiong for recovery of
possession of the said portion, and damages, which
was docketed as Civil Case No. 5442 of the Court of
First Instance of Negros Oriental. The heirs of Basilisa
Teves-Orbeta, for their part, filed a complaint-in-
intervention dated 26 December 1973, praying for the
recovery of possession of their portion in the subject
land comprising of 2,311 square meters. However,
during the pendency of this case, the case records were
destroyed in a fire which razed the sala of the RTC
hearing the complaint. Said records were not
reconstituted, and it seems the complaint was never
pursued.
On 18 May 1992, the heirs of Simeona Montenegro,
as well as the heirs of the spouses Orbetaherein
petitioners (petitioners)filed before the RTC of Negros
Oriental a complaint against Mr. & Mrs. Benedicto
Pajulas, otherwise known as the spouses Pretzylou
Sendiong, for recovery of possession, quieting of title
and damages, with a prayer for the issuance of a writ
of preliminary injunction, docketed as Civil Case No.
10173, entitled Ma. Luisa C. Locsin, et al. vs. Mr. and
Mrs. Benedicto Pajulas @ Mr. and Mrs. Pretzylou
Sendiong. Petitioners asserted that Maximo Orbeta,
whom they claim as having sold the subject property
to the spouses Juan Sendiong and Exequila Castellanes
without the consent of his wife, could have conveyed
only his conjugal share in the propertywhich
comprised of 2,311 square meters or one-half of 4,622
square meters of the subject land that Simeona
Montenegro had actually sold to spouses Orbeta. The
heirs of Simeona Montenegro also reiterated their
claim over the 884-square meter portion that had been
excluded in the 1925 sale.
In their Complaint, petitioners prayed that they be
declared absolute co-owners of the subject property
except for the 2,311.00 SQUARE METERS conveyed
by Maximo Orbeta to Spouses Juan Sendiong and
Exequila Castellanes.
In their Answer, dated 11 September 1992, defendant
spouses claimed that in the 1925 sale, Simeona
Montenegro had actually sold Lot 606 in its entirety,
including the aforementioned 884-square meters.
Defendant spouses likewise claimed that since 25
January 1934, they, together with the estate of Luis
Sendiong, had been in peaceful and open possession,
in the concept of an owner and adverse to the whole
world, of the entire Lot 606. Pertinently to the present
petition, they further alleged that Lourdes Sendiong
and herein respondent, Paul Sendiong, being the heirs
of Luis Sendiong, should be impleaded as party
defendants. Lourdes and Paul Sendiong were children
of Luis Sendiong.
On 17 November 1993, defendant spouses filed a
motion to dismiss on the ground of lack of cause of
action, in view of the fact that the heirs of Luis
Sendiong have not been impleaded as indispensable
parties. In their vigorous opposition to said motion,
petitioners alleged that the heirs of Luis Sendiong are
not indispensable parties as they are not in possession
of the subject land which was the very issue in said
case.
In its Order of 17 December 1993, the trial court
denied the motion to dismiss
On 16 April 1998, the trial court rendered the decision
that was eventually annulled by the Court of Appeals.
The trial court found that what Simeona Montenegro
had actually sold in 1935 was the subject land, which
did not include the 884-square meter portion claimed
by her heirs.
Pretzylou and Genosa Sendiong[5] sought to appeal
the decision by filing a Notice of Appeal, but the same
was denied by the RTC on the ground that the
certificate of non forum-shopping was signed by
counsel and not by the Sendiongs themselves. The
disallowance of the Notice of Appeal was challenged
before the Court of Appeals in a Petition for Certiorari,
docketed as C.A.-G.R. SP No. 48943, but the petition
was denied by the Court of Appeals Fourth Division in
a Decision dated 30 June 2000.[6] A motion for the
reconsideration of the Decision was denied in a
Resolution dated 8 January 2001.[7] The appeal not
having been given due course, the decision in Civil
Case No. 10173 lapsed into finality.
On 28 August 2000, respondent, represented by his
attorney-in-fact and daughter Mae A. Sendiong, filed
a Petition for Annulment of Decision with a Prayer for
a Temporary Restraining Order and Writ of
Preliminary Injunction with the Court of Appeals, in
respect to the decision in Civil Case No. 10173.
Respondent, as petitioner therein, alleged having
learned of the decision sought to be annulled only in
1999, as he was not made a party thereto. Asserting his
right to the property as an heir of Luis Sendiong,
respondent noted that the petitioners did not implead
him as a defendant in Civil Case No. 10173, and that
the trial court had refused to implead him as an
indispensable party despite repeated motions to that
effect by the defendants in the civil case. Private
respondent argued that the decision in Civil Case No.
10173 encroached on the hereditary rights of himself
and Lourdes Sendiong without having even given the
elementary courtesy of due process.[8] On the premise
that he and Lourdes Sendiong were indispensable
parties in Civil Case No. 10173 but not made parties
thereto, respondent invoked Rule 3, Section 7 of the
Rules of Civil Procedure and jurisprudence in positing
that the RTC decision was null and void
Before the Court of Appeals, petitioners argued that
the petition for annulment of judgment was fatally
infirm as the certification on non-forum shopping was
signed by the attorney-in-fact by virtue of a General
Power of Attorney.
the Court of Appeals granted the petition for
annulment of judgment and nullified the decision in
Civil Case No. 10173. It ruled that respondent and
Lourdes Sendiong were indeed indispensable parties
in Civil Case No. 10173, considering that the
complaint had prayed that petitioners be declared as
absolute co-owners of the subject property. Moreover,
petitioners had challenged the validity of the donation
of the subject property to Luis Sendiong, predecessor-
in-interest of respondent, and accordingly, any
judgment regarding petitioners claims would affect
respondents interests in the subject land. Citing
jurisprudence, the appellate court ruled that the
absence of an indispensable party in a case renders
ineffectual all the proceedings subsequent to the filing
of the complaint, including the judgment,[10] and that
all subsequent actuations of the court are null and void
for want of authority to act, not only as to the absent
parties, but even as to those present.[11]
The Court of Appeals also ruled that the petition for
annulment of judgment was barred neither by estoppel,
laches, res judicata nor forum-shopping, contrary to
the stance of petitioners.
Issue: 1. Whether or not the respondents are
indispensable parties?
2. Whether or not there is a violation of the
Anti Forum Shopping Rule premised on the signature
of the certification of non-forum shopping having been
affixed by attorney-in-fact Mae Sendiong only, and at
that only on the basis of a mere General Power of
Attorney?
Ruling:
Yes. It takes no great degree of legal sophistication to
realize that respondents Paul Sendiong and Lourdes
Sendiong were indispensable parties to Civil Case No.
10173. Paul and Lourdes Sendiong derived their rights
to the subject property from their father Luis
Sendiong, who acquired the property by way of
donation from the spouses Juan Sendiong and
Exequila Castellanes, who in turn purchased the
property from Maximo Orbeta in 1934. The central
thrust of the complaint in Civil Case No. 10173 was
that Orbeta could have sold only his one-half conjugal
share, which of course is undivided, in the subject land
as his wife did not consent to the sale. Accordingly,
the prayer in the complaint was that petitioners be
declared as the absolute co-owners of the subject land,
minus 2,311 square meters which they claimed was the
maximum which Maximo Orbeta could have
conveyed to Juan Sendiong and Exequila Castellanes.
If such thrust and prayer were to be upheld, as it was
by the RTC, then all the subsequent transmissions of
the subject land from 1934 would be affected, and the
rights of ownership acquired by the various
successors-in-interest accordingly diminished. This
includes the rights of Paul Sendiong and Lourdes
Sendiong, who derived their hereditary shares in the
property from Luis Sendiong.
Indeed, the Court could not see how or why respondent
and Lourdes Sendiong could not have been impleaded
in Civil Case No. 10173 before the RTC. In the answer
filed by the defendants in Civil Case No. 10173, the
matter of the indispensable inclusion of Paul and
Lourdes Sendiong was already raised. Petitioners
could have easily amended their complaint to that
effect, but they did not. The RTC could have required
the inclusion of Paul and Lourdes Sendiong as party-
defendants, as prayed for by the defendants in Civil
Case No. 10173, but it refused to do so. The shared
intransigence of petitioners and the RTC in refusing to
implead Paul and Lourdes Sendiong has resulted in the
ignominy of a void decision.
The foregoing premises considered, the Court cannot
seriously consider petitioners contention that
respondents hereditary rights, interests and
participation over the subject land would not be
adversely affected by their complaint.
None. There is no violation of the Anti Forum
Shopping Rule.
Petitioners assert that respondent submitted a false
certification on non-forum shopping, primarily on the
ground that the said certification was signed not by
respondent, but by his daughter, Mae Sendiong, by
authority of a General Power of Attorney, which
petitioners claim was not specified for the purpose of
filing the petition. However, a perusal of the General
Power of Attorney shows that Mae Sendiong is
empowered, among others, to execute, sign,
authenticate, and enter into any and all contracts and
agreements for me and in my name with any person or
entity, and to bring suit, defend and enter into
compromises in my name and stead, in connection
with actions brought for or against me, of whatever
nature and kind.[24]
The signing of the verification and certification of non-
forum shopping are covered under the said provisions
of the General Power of Attorney. A special power of
attorney simply refers to a clear mandate specifically
authorizing the performance of a specific power and of
express acts subsumed therein,[25] and there is a
specific authority given to Mae Sendiong to sign her
name in behalf of Paul Sendiong in contracts and
agreements and to institute suits in behalf of her father.
Neither would the fact that the document is captioned
General Power of Attorney militate against its
construction as granting specific powers to the agent
pertaining to the petition for annulment of judgment
she instituted in behalf of her father. As Justice Paras
has noted, a general power of attorney may include a
special power if such special power is mentioned or
referred to in the general power
SHOPPER’S PARADISE REALTY &
DEVELOPMENT CORPORATION,
vs.
EFREN P. ROQUE
FACTS:
Shopper’s Paradise Realty & Development
Corporation, represented by its president, Atienza,
entered into a twenty-five year lease with Dr. Roque,
now deceased, over a parcel of land, covered by (TCT)
in the name of Dr. Roque. Simultaneously, petitioner
and Dr. Roque likewise entered into a memorandum of
agreement for the construction, development and
operation of a commercial building complex on the
property. The contract of lease and the memorandum
of agreement, both notarized, were to be annotated on
TCT within sixty (60) days from 23 December 1993.
The annotations, however, were never made because
of the untimely demise of Dr. Roque. The death of Dr.
Roque constrained petitioner to deal with respondent
Efren P. Roque, one of the surviving children of the
late Dr. Roque, but the negotiations broke down due to
some disagreements. Respondent filed a case for
annulment of the contract of lease and the
memorandum of agreement. Efren P. Roque alleged
that he had long been the absolute owner of the subject
property by virtue of a deed of donation inter vivos
executed in his favor by his parents(DR. Roque) and
that the late Dr. Roque had no authority to enter into
the assailed agreements with petitioner. The donation
was made in a public instrument duly acknowledged
by the donor-spouses before a notary public and duly
accepted on the same day by respondent before the
notary public in the same instrument of donation. The
title to the property, however, remained in the name of
Dr. Roque, and it was only transferred to and in the
name of respondent sixteen years later, Respondent,
while he resided in the USA, delegated to his father the
mere administration of the property. Respondent came
to know of the assailed contracts with petitioner only
after retiring to the Philippines upon the death of his
father.
TRIAL COURT: dismissed the complaint of
respondent. The Trial court ordered respondent to
surrender TCT the Register of Deeds of Quezon City
for the annotation of the questioned Contract of Lease
and Memorandum of Agreement.
CA: reversed the decision of the trial court and held to
be invalid the Contract of Lease and Memorandum of
Agreement. concluded that petitioner was not a lessee
in good faith having had prior knowledge of the
donation in favor of respondent, and that such actual
knowledge had the effect of registration insofar as
petitioner was concerned.
ISSUE:
(1)WON the contract of lease and memorandum of
agreement is valid.
(2)WON respondent is estopped by laches
RULING:
(1)NO, As being itself a mode of acquiring ownership,
donation results in an effective transfer of title over the
property from the donor to the donee.
In donations of immovable property, the law requires
for its validity that it should be contained in a public
document. The Civil Code provides, however, that
"titles of ownership, or other rights over immovable
property, which are not duly inscribed or annotated in
the Registry of Property shall not prejudice third
persons." It is enough, between the parties to a
donation of an immovable property, that the donation
be made in a public document but, in order to bind
third persons, the donation must be registered in the
registry of Property.
A person dealing with registered land may thus safely
rely on the correctness of the certificate of title issued
therefore, and he is not required to go beyond the
certificate to determine the condition of the
property7 but, where such party has knowledge of a
prior existing interest which is unregistered at the time
he acquired a right thereto, his knowledge of that prior
unregistered interest would have the effect of
registration as regards to him.
The appellate court was not without substantial basis
when it found petitioner to have had knowledge of the
donation at the time it entered into the two agreements
with Dr. Roque. During their negotiation, petitioner,
through its representatives, was apprised of the fact
that the subject property actually belonged to
respondent.
It was not shown that Dr.. Roque had been an
authorized agent of respondent.
In a contract of agency, the agent acts in representation
or in behalf of another with the consent of the
latter.9 Article 1878 of the Civil Code expresses that a
special power of attorney is necessary to lease any real
property to another person for more than one year. The
lease of real property for more than one year is
considered not merely an act of administration but an
act of strict dominion or of ownership. A special power
of attorney is thus necessary for its execution through
an agent.
(2) NO, Respondent learned of the contracts only after
the death of his father, and in the same year, he assailed
the validity of the agreements. Hardly, could
respondent then be said to have neglected to assert his
case for unreasonable length of time.
Neither is respondent estopped from repudiating the
contracts.
Spouses Salvador vs Spouses Rabaja
FACTS: Sometime in July 1998, Spouses Rabaja
learned that Spouses Salvador were looking for a
buyer of the subject property. Petitioner Herminia
Salvador (Herminia) personally introduced Gonzales
to them as the administrator of the said property.
Spouses Salvador even handed to Gonzales the
owner's duplicate certificate of title over the subject
property. On July, 3, 1998, Spouses Rabaja made an
initial payment of P48,000.00 to Gonzales in the
presence of Herminia. Gonzales then presented the
Special Power of Attorney[3] (SPA), executed by
Rolando Salvador (Rolando). On the same day, the
parties executed the Contract to Sell[4] which
stipulated that for a consideration of P5,000,000.00,
Spouses Salvador sold, transferred and conveyed in
favor of Spouses Rabaja the subject property. Spouses
Rabaja made several payments totalling P950,000.00,
which were received by Gonzales pursuant to the SPA
provided earlier as evidenced by the check vouchers
signed by Gonzales and the improvised receipts signed
by Herminia.
Sometime in June 1999, however, Spouses Salvador
complained to Spouses Rabaja that they did not
receive any payment from Gonzales. This prompted
Spouses Rabaja to suspend further payment of the
purchase price; and as a consequence, they received a
notice to vacate the subject property from Spouses
Salvador for non-payment of rentals.
Thereafter, Spouses Salvador instituted an action for
ejectment against Spouses Rabaja. In turn, Spouses
Rabaja filed an action for rescission of contract against
Spouses Salvador and Gonzales, the subject matter of
the present petition.
The MeTC ruled in favor of Spouses Salvador finding
that valid grounds existed for the eviction of Spouses
Rabaja from the subject property and ordering them to
pay back rentals. Spouses Salvador were able to
garnish the amount of P593,400.00[6] from Spouses
Rabaja's time deposit account pursuant to a writ of
execution issued by the MeTC.[7] Spouses Rabaja
appealed to the Regional Trial Court, which reversed
the MeTC ruling.The RTC-Br. 212 found that no lease
agreement existed between the parties. Thereafter,
Spouses Salvador filed an appeal with the CA. On
March 31, 2006, the CA ruled in favor of Spouses
Salvador and reinstated the MeTC ruling ejecting
Spouses Rabaja.[9] Not having been appealed, the CA
decision in CA-G.R. SP No. 89259 became final and
executory on May 12, 2006.[10]
Meanwhile, the rescission case filed by Spouses
Rabaja against Spouses Salvador and Gonzales was
also raffled to RTC-Br. 212. In their complaint, Rabaja
demanded the rescission of the contract to sell praying
that the amount of P950,000.00 they previously paid
to Spouses Salvador be returned to them. They
likewise prayed that damages be awarded due to the
contractual breach committed by Spouses Salvador.
Spouses Salvador filed their answer with counterclaim
and cross-claim[12] contending that there was no
meeting of the minds between the parties and that the
SPA in favor of Gonzales was falsified. In fact, they
filed a case for falsification against Gonzales, but it
was dismissed because the original of the alleged
falsified SPA could not be produced. They further
averred that they did not receive any payment from
Spouses Rabaja through Gonzales. In her defense,
Gonzales filed her answer[13] stating that the SPA was
not falsified and that the payments of Spouses Rabaja
amounting to P950,000.00 were all handed over to
Spouses Salvador. In the pre- trial conference, spouses
Salvador failed to attend.
RTC ruled in favor of spouses Rabaja. It held that the
signature of Spouses Salvador affixed in the contract
to sell appeared to be authentic. CA affirmed the
decision. Hence, this petition.
ISSUES:
WON Spouses Salvador are correct in raising in issue
the veracity of the receipts given by Gonzales, the SPA
and the validity of the contract to sell.
WON Spouses Salvador’s argument, that the
ejectment case, from which the amount of
P593,400.00 was garnished, already became
final and executory and could not anymore be
disturbed, is correct.
RULING:
NO! The Court agrees with the courts below in finding
that the contract entered into by the parties was
essentially a contract of sale which could be validly
rescinded. Spouses Salvador insist that they did not
receive the payments made by Spouses Rabaja from
Gonzales which totalled P950,000.00 and that
Gonzales was not their duly authorized agent. Persons
dealing with an agent must ascertain not only the fact
of agency, but also the nature and extent of the agent's
authority. A third person with whom the agent wishes
to contract on behalf of the principal may require the
presentation of the power of attorney, or the
instructions as regards the agency. The basis for
agency is representation and a person dealing with an
agent is put upon inquiry and must discover on his own
peril the authority of the agent.
According to Article 1990 of the New Civil Code,
insofar as third persons are concerned, an act is
deemed to have been performed within the scope of
the agent's authority, if such act is within the terms of
the power of attorney, as written. In this case, Spouses
Rabaja did not recklessly enter into a contract to sell
with Gonzales. They required her presentation of the
power of attorney before they transacted with her
principal. And when Gonzales presented the SPA to
Spouses Rabaja, the latter had no reason not to rely on
it.
The law mandates an agent to act within the scope of
his authority which what appears in the written terms
of the power of attorney granted upon him.[36] The
Court holds that, indeed, Gonzales acted within the
scope of her authority. The SPA precisely stated that
she could administer the property, negotiate the sale
and collect any document and all payments related to
the subject property.[37] As the agent acted within the
scope of his authority, the principal must comply with
all the obligations.[38] As correctly held by the CA,
considering that it was not shown that Gonzales
exceeded her authority or that she expressly bound
herself to be liable, then she could not be considered
personally and solidarily liable with the principal,
Spouses Salvador.[39]
Perhaps the most significant point which defeats the
petition would be the fact that it was Herminia herself
who personally introduced Gonzalez to Spouses
Rabaja as the administrator of the subject property. By
their own ostensible acts, Spouses Salvador made third
persons believe that Gonzales was duly authorized to
administer, negotiate and sell the subject property.
This fact was even affirmed by Spouses Salvador
themselves in their petition where they stated that they
had authorized Gonzales to look for a buyer of their
property.[40] It is already too late in the day for Spouses
Salvador to retract the representation to unjustifiably
escape their principal obligation.
As correctly held by the CA and the RTC, considering
that there was a valid SPA, then Spouses Rabaja
properly made payments to Gonzales, as agent of
Spouses Salvador; and it was as if they paid to Spouses
Salvador. It is of no moment, insofar as Spouses
Rabaja are concerned, whether or not the payments
were actually remitted to Spouses Salvador. Any
internal matter, arrangement, grievance or strife
between the principal and the agent is theirs alone and
should not affect third persons. If Spouses Salvador
did not receive the payments or they wish to
specifically revoke the SPA, then their recourse is to
institute a separate action against Gonzales. Such
action, however, is not any more covered by the
present proceeding.
The amount of P593,400.00 should not be returned by
Spouses Salvador
Nevertheless, the assailed decision of the CA must be
modified with respect to the amount of P593,400.00
garnished by Spouses Salvador and ordered returned
to Spouses Rabaja. The RTC ordered the return of the
amount garnished holding that it constituted a part of
the purchase price. The CA ruled that Spouses
Salvador misled the Court when they improperly cited
CA-G.R. SP No. 89260 to prove their entitlement to
the said amount. Both courts erred in their ruling.
First, the garnishment of the amount of P593,400.00
against Spouses Rabaja was pursuant to the CA
decision in CA-G.R. SP No. 89259, an entirely
different case involving an action for ejectment, and it
does not concern the rescission case which is on appeal
before this Court. Moreover, the decision on the
ejectment case is final and executory and an entry of
judgment has already been made.[41] Nothing is more
settled in law than that when a final judgment is
executory, it thereby becomes immutable and
unalterable. The judgment may no longer be modified
in any respect, even if the modification is meant to
correct what is perceived to be an erroneous
conclusion of fact or law, and regardless of whether
the modification is attempted to be made by the court
which rendered it or by the highest Court of the land.
The doctrine is founded on consideration of public
policy and sound practice that, at the risk of occasional
errors, judgments must become final at some definite
point in time.[42]
The March 31, 2006 CA decision[43] in CA-G.R. SP
No. 89259 has long been final and executory and
cannot any more be disturbed by the Court. Public
policy dictates that once a judgment becomes final,
executory and unappealable, the prevailing party
should not be denied the fruits of his victory by some
subterfuge devised by the losing party. Unjustified
delay in the enforcement of a judgment sets at naught
the role and purpose of the courts to resolve justiciable
controversies with finality.[44]
Macaria Arguelles and the heirs of the Deceased
Petronio Arguelles vs Malarayat Rural Bank Inc.
Facts:
The late Fermina M. Guia was the registered owner of
Lot 3, a parcel of agricultural land in Barrio
Pinagkurusan, Alitagtag, Batangas, with an area of
4,560 square meters, as evidenced by Original
Certificate of Title (OCT) No. P-129304 of the
Register of Deeds of Batangas. On December 1, 1990,
Fermina M. Guia sold the south portion of the land
with an approximate area of 1,350 square meters to the
spouses Petronio and Macaria Arguelles.5 Although
the spouses Arguelles immediately acquired
possession of the land, the Deed of Sale was neither
registered with the Register of Deeds nor annotated on
OCT No. P-12930. At the same time, Fermina M. Guia
ordered her son Eddie Guia and the latter's wife
Teresita Guia to subdivide the land covered by OCT
No. P-12930 into three lots and to apply for the
issuance of separate titles therefor, to wit: Lot 3-A, Lot
3-B, and Lot 3-C. Thereafter, she directed the delivery
of the Transfer Certificate of Title (TCT)
corresponding to Lot 3-C to the vendees of the
unregistered sale or the spouses Arguelles. However,
despite their repeated demands, the spouses Arguelles
claimed that they never received the TCT
corresponding to Lot 3-C from the spouses Guia.
On August 18, 1997, the spouses Guia obtained a loan
in the amount of ₱240,000 from the respondent
Malarayat Rural Banlc and secured the loan with a
Deed of Real Estate Mortgage7 over Lot 3-C. The loan
and Real Estate Mortgage were made pursuant to the
Special Power of Attorney8 purportedly executed by
the registered owner of Lot 3-C, Fermina M. Guia, in
favor of the mortgagors, spouses Guia. Moreover, the
Real Estate
Mortgage and Special Power of Attorney were duly
annotated in the memorandum of encumbrances of
TCT No. T-83944 covering Lot 3-C.
The spouses Arguelles alleged that it was only in 1997
or after seven years from the date of the unregistered
sale that they discovered from the Register of Deeds
of Batangas City the following facts: (1) subdivision
of Lot 3 into Lots 3-A, 3-B, and 3-C; (2) issuance of
separate TCTs for each lot; and (3) the annotation of
the Real Estate Mortgage and Special Power of
Attorney over Lot 3-C covered by TCT No. T-83944.
Two years thereafter, or on June 17, 1999, the spouses
Arguelles registered their adverse claim9 based on the
unregistered sale dated December 1, 1990 over Lot 3-
C.
On July 22, 1999, the spouses Arguelles filed a
complaint10 for Annulment of Mortgage and
Cancellation of Mortgage Lien with Damages against
the respondent Malarayat Rural Banlc with the RTC,
Branch 86, of Taal, Batangas. In asserting the nullity
of the mortgage lien, the spouses Arguelles alleged
ownership over the land that had been mortgaged in
favor of the respondent Malarayat Rural Bank. On
August 16, 1999, the respondent Malarayat Rural
Bank filed an Answer with Counterclaim and Cross-
claim11 against cross-claim-defendant spouses Gui a
wherein it argued that the failure of the spouses
Arguelles to register the Deed of Sale dated December
1, 1990 was fatal to their claim of ownership.
The RTC found that the spouses Guia were no longer
the absolute owners of the land described as Lot 3-C
and covered by TCT No. T-83944 at the time they
mortgaged the same to the respondent Malarayat Rural
Bank in view of the unregistered sale in favor of the
vendee spouses Arguelles. Thus, the RTC annulled the
real estate mortgage, the subsequent foreclosure sale,
and the corresponding issuance of the certificate of
title. Moreover, the RTC declared that the respondent
Malarayat Rural Bank was not a mortgagee in good
faith as it failed to exercise the exacting degree of
diligence required from banking institutions.
On September 16, 2008, the respondent filed a notice
of appeal with the CA.
In granting the appeal, the CA held that because of the
failure of the spouses Arguelles to register their deed
of sale, the unregistered sale could not affect the
respondent Malarayat Rural Bank. Thus, the
respondent Malarayat Rural Bank has a better right to
the land mortgaged as compared to spouses Arguelles
who were the vendees in the unregistered sale. In
addition, the CA found that the respondent Malarayat
Rural Bank was a mortgagee in good faith as it
sufficiently demonstrated due diligence in approving
the loan application of the spouses Guia. Aggrieved,
the petitioners filed the instant petition raismg the
following issues for resolution
Issue: Whether the respondent Malarayat Rural Bank
is a mortgagee in good faith who is entitled to
protection on its mortgage lien?
Ruling:
No. At the outset, we note that the issue of whether a
mortgagee is in good faith generally cannot be
entertained in a petition filed under Rule 45 of the
1997 Rules of Civil Procedure, as amended.15 This is
because the ascertainment of good faith or the lack
thereof, and the determination of negligence are
factual matters which lay outside the scope of a
petition for review on certiorari.16 However, a
recognized exception to this rule is when the RTC and
the CA have divergent findings of fact17 as in the case
at bar. We find that the respondent Malarayat Rural
Bank is not a mortgagee in good faith. Therefore, the
spouses Arguelles as the vendees to the unregistered
sale have a superior right to the mortgaged land.
There is, however, a situation where, despite the fact
that the mortgagor is not the owner of the mortgaged
property, his title being fraudulent, the mortgage
contract and any foreclosure sale arising therefrom are
given effect by reason of public policy. This is the
doctrine of "mortgagee in good faith" based on the rule
that all persons dealing with the property covered by a
Torrens Certificate of Title, as buyers or mortgagees,
are not required to go beyond what appears on the face
of the title. The public interest in upholding the
indefeasibility of a certificate of title, as evidence of
lawful ownership of the land or of any encumbrance
thereon, protects a buyer or mortgagee who, in good
faith, relied upon what appears on the face of the
certificate of title.
However, in Bank of Commerce v. Spouses San Pablo,
Jr.,20 we also ruled that "[i]n cases where the
mortgagee does not directly deal with the registered
owner of real property, the law requires that a higher
degree of prudence be exercised by the mortgagee."
Specifically, we cited Abad v. Sps. Guimbci21 where
we held, "x x x While one who buys from the
registered owner does not need to look behind the
certificate of title, one who buys from one who is not
the registered owner is expected to examine not only
the certificate of title but all factual circumstances
necessary for [one] to determine if there are any flaws
in the title of the transferor, or in [the] capacity to
transfer the land. " Although the instant case does not
involve a sale but only a mortgage, the same rule
applies inasmuch as the law itself includes a
mortgagee in the term "purchaser."
Respondent, however, is not an ordinary mortgagee; it
is a mortgagee-bank. As such, unlike private
individuals, it is expected to exercise greater care and
prudence in its dealings, including those involving
registered lands. A banking institution is expected to
exercise due diligence before entering into a mortgage
contract. The ascertainment of the status or condition
of a property offered to it as security for a loan must
be a standard and indispensable part of its operations.
In this case, we find that the respondent Malarayat
Rural Bank fell short of the required degree of
diligence, prudence, and care in approving the loan
application of the spouses Guia.
Respondent should have diligently conducted an
investigation of the land offered as collateral.1âwphi1
Although the Report of Inspection and Credit
Investigation found at the dorsal portion of the
Application for Agricultural Loan29 proved that
the respondent Malarayat Rural Bank inspected
the land, the respondent turned a blind eye to the
finding therein that the "lot is planted [with] sugarcane
with annual yield (crops) in the amount of
₱15,000."30
We disagree with respondent's stance that the mere
planting and harvesting of sugarcane cannot
reasonably trigger suspicion that there is adverse
possession over the land offered as mortgage. Indeed,
such fact should have immediately prompted the
respondent to conduct further inquiries, especially
since the spouses Guia were not the registered owners
of the land being mortgaged. They merely derived the
authority to mortgage the lot from the Special Power
of Attorney allegedly executed by the late Fermina M.
Guia. Hence, it was incumbent upon the respondent
Malarayat Rural Bank to be more cautious in dealing
with the spouses Guia, and inquire further regarding
the identity and possible adverse claim of those in
actual possession of the property.
Pertinently, in Land Bank of the Philippines v.
Poblete,31 we ruled that "[w]here the mortgagee acted
with haste in granting the mortgage loan and did not
ascertain the ownership of the land being mortgaged,
as well as the authority of the supposed agent
executing the mortgage, it cannot be considered an
innocent mortgagee."
Since the subject land was not mortgaged by the owner
thereof and since the respondent Malarayat Rural
Bank is not a mortgagee in good faith, said bank is not
entitled to protection under the law. The unregistered
sale in favor of the spouses Arguelles must prevail
over the mortgage lien of respondent Malarayat Rural
Bank.
ALVIN PATRIMONIO
vs.
NAPOLEON GUTIERREZ and OCTAVIO
MARASIGAN III
FACTS:
The petitioner and the respondent into a business
venture under the name of Slam Dunk Corporation a
production outfit that produced mini-concerts and
shows related to basketball. Petitioner was already
then a decorated professional basketball player while
Gutierrez was a well-known sports columnist.
In the course of their business, the petitioner pre-
signed several checks to answer for the expenses of
Slam Dunk. Although signed, these checks had no
payee’s name, date or amount. The blank checks were
entrusted to Gutierrez with the specific instruction not
to fill them out without previous notification to and
approval by the petitioner. According to petitioner, the
arrangement was made so that he could verify the
validity of the payment and make the proper
arrangements to fund the account.
In the middle of 1993, without the petitioner’s
knowledge and consent, Gutierrez went to
Marasigan to secure a loan in the amount of
₱200,000.00 on the excuse that the petitioner needed
the money for the construction of his house. In
addition to the payment of the principal, Gutierrez
assured Marasigan that he would be paid an interest of
5% per month
After much contemplation and taking into account his
relationship with the petitioner and Gutierrez,
Marasigan acceded to Gutierrez’ request. Gutierrez
simultaneously delivered to Marasigan one of the
blank checks the petitioner pre-signed with Pilipinas
Bank, Greenhills Branch. The upper right portion of
the check corresponding to the date was also filled out
with the words "May 23, 1994" but the petitioner
contended that the same was not written by Gutierrez.
Marasigan deposited the check but it was dishonored
for the reason "ACCOUNT CLOSED."
Marasigan sought recovery from Gutierrez, to no
avail. He thereafter sent several demand letters to the
petitioner asking for the payment of ₱200,000.00, but
his demands likewise went unheeded. Consequently,
he filed a criminal case for violation of B.P. 22 against
the petitioner.
Petitioner filed before the Regional Trial Court a
Complaint for Declaration of Nullity of Loan and
Recovery of Damages against Gutierrez and co-
respondent Marasigan. He completely denied
authorizing the loan or the check’s negotiation, and
asserted that he was not privy to the parties’ loan
agreement.
The Ruling of the RTC
in favor of Marasigan. The RTC ruled that Gutierrez
deliberately violated petitioner’s specific
instructions and took advantage of the trust
reposed in him by the latter.
Nonetheless, the RTC declared Marasigan as a holder
in due course and accordingly dismissed the
petitioner’s complaint for declaration of nullity of
the loan
The petitioner contended that when Marasigan
received the check, he knew that the same was without
a date, and hence, incomplete. He also alleged that the
loan was actually between Marasigan and Gutierrez
with his check being used only as a security.
The Ruling of the CA
affirmed the RTC ruling, although premised on
different factual findings. After careful analysis, the
CA agreed with the petitioner that Marasigan is not a
holder in due course as he did not receive the check in
good faith.
ISSUES:
1. Whether the contract of loan in the amount, may be
nullified for being void;
2. Whether Marasigan is a holder in due course.
RULING:
(1)YES, The Contract of Loan Entered Into by
Gutierrez in Behalf of the Petitioner Should be
Nullified for Being Void; Petitioner is Not Bound by
the Contract of Loan.
A review of the records reveals that Gutierrez did not
have any authority to borrow money in behalf of the
petitioner.1âwphi1Records do not show that the
petitioner executed any special power of attorney
(SPA) in favor of Gutierrez. In fact, the petitioner’s
testimony confirmed that he never authorized
Gutierrez (or anyone for that matter), whether
verbally or in writing, to borrow money in his behalf,
nor was he aware of any such transaction
Marasigan however submits that the petitioner’s acts
of pre-signing the blank checks and releasing
them to Gutierrez suffice to establish that the
petitioner had authorized Gutierrez to fill them out
and contract the loan in his behalf.
Marasigan’s submission fails to persuade us.
In the absence of any authorization, Gutierrez could
not enter into a contract of loan in behalf of the
petitioner. Furthermore, that the petitioner entrusted
the blank pre-signed checks to Gutierrez is not legally
sufficient because the authority to enter into a loan can
never be presumed. The contract of agency and the
special fiduciary relationship inherent in this contract
must exist as a matter of fact. The person alleging it
has the burden of proof to show, not only the fact of
agency, but also its nature and extent
(2) NO, Section 52(c) of the NIL states that a holder in
due course is one who takes the instrument "in good
faith and for value." It also that in order that one may
be a holder in due course, it is necessary that at the
time it was negotiated to him he had no notice of any
infirmity in the instrument or defect in the title of the
person negotiating it.
Considering that Marasigan is not a holder in due
course, the petitioner can validly set up the personal
defense that the blanks were not filled up in
accordance with the authority he gave. Consequently,
Marasigan has no right to enforce payment against the
petitioner and the latter cannot be obliged to pay the
face value of the check
Considering that Marasigan is not a holder in due
course, the petitioner can validly set up the personal
defense that the blanks were not filled up in
accordance with the authority he gave. Consequently,
Marasigan has no right to enforce payment against the
petitioner and the latter cannot be obliged to pay the
face value of the check.
Leonardo Castillo vs Security Bank Corp.
FACTS: Petitioner Leonardo C. Castillo and
respondent Leon C. Castillo, Jr. are siblings. Leon and
Teresita Flores-Castillo (the Spouses Castillo) were
doing business under the name of JRC Poultry Farms.
Sometime in 1994, the Spouses Castillo obtained a
loan from respondent SBC in the amount of
₱45,000,000.00. To secure said loan, they executed a
real estate mortgage over (11) parcels of land
belonging to different members of the Castillo family
and which are all located in San Pablo City.4 They also
procured a second loan5 amounting to ₱2,500,000.00,
which was covered by a mortgage on a land in Pasay
City. Subsequently, the Spouses Castillo failed to
settle the loan, prompting SBC to proceed with the
foreclosure of the properties. SBC was then adjudged
as the winning bidder in the foreclosure. Thereafter,
they were able to redeem the foreclosed properties,
except for 2.
On January 30, 2002, Leonardo filed a complaint for
the partial annulment of the real estate mortgage. He
alleged that he owns one of the properties and that the
Spouses Castillo used it as one of the collaterals for a
loan without his consent. He contested his supposed
Special Power of Attorney (SPA) in Leon’s favor,
claiming that it is falsified. According to him, the
date of issuance of his Community Tax Certificate
(CTC) as indicated on the notarization of said SPA
is January 11, 1993, when he only secured the same on
May 17, 1993. He also assailed the foreclosure of the
lots under TCT Nos.20030 and 10073 which were still
registered in the name of their deceased father.
On the other hand, the Spouses Castillo insisted on the
validity of Leonardo’s SPA. They alleged that they
incurred the loan not only for themselves, but also
for the other members of the Castillo family who
needed money at that time. Upon receipt of the
proceeds of the loan, they distributed the same to
their family members, as agreed upon. However, when
the loan became due, their relatives failed to pay their
respective shares such that Leon was forced to use his
own money until SBC had to finally foreclose the
mortgage over the lots.6
RTC of San Pablo City ruled in Leonardo’s favor
Both parties elevated the case to the CA. On
November 26, 2010, the CA denied Leonardo’s
appeal and granted that of the Spouses Castillo and
SBC. It reversed and set aside the RTC Decision,
essentially ruling that the August 5, 1994 real estate
mortgage is valid. Leonardo filed a Motion for
Reconsideration, but the same was denied for lack of
merit.
Hence, Leonardo brought the case to the Court and
filed the instant Petition for Review
Issue: whether or not the real estate mortgage
constituted over the property in dispute is valid and
binding.
RULING: YES
Leonardo asserts that his signature in the SPA
authorizing his brother, Leon, to mortgage his property
covered by TCT No. T-28297 was falsified. He claims
that he was in America at the time of its execution. As
proof of the forgery, he focuses on his alleged CTC
used for the notarization10 of the SPA on May 5, 1993
and points out that it appears to have been issued on
January 11, 1993 when, in fact, he only obtained it on
May 17, 1993. But it is a settled rule that allegations
of forgery, like all other allegations, must be proved by
clear, positive, and convincing evidence by the party
alleging it. It should not be presumed, but must be
established by comparing the alleged forged signature
with the genuine signatures.11 Here, Leonardo simply
relied on his self-serving declarations and refused to
present further corroborative evidence, saying that the
falsified document itself is the best evidence.12 He did
not even bother comparing the alleged forged
signature on the SPA with samples of his real and
actual signature. What he consistently utilized as lone
support for his allegation was the supposed
discrepancy on the date of issuance of his CTC as
reflected on the subject SPA’s notarial
acknowledgment. On the contrary, in view of the
great ease with which CTCs are obtained these
days,13 there is reasonable ground to believe that, as
the CA correctly observed, the CTC could have been
issued with the space for the date left blank and
Leonardo merely filled it up to accommodate his
assertions. Also, upon careful examination, the
handwriting appearing on the space for the date of
issuance is different from that on the computation of
fees, which in turn was consistent with the rest of the
writings on the document.14 He did not likewise
attempt to show any evidence that would back up his
claim that at the time of the execution of the SPA on
May 5, 1993, he was actually in America and therefore
could not have possibly appeared and signed the
document before the notary.
And even if the Court were to assume, simply for the
sake of argument, that Leonardo indeed secured his
CTC only on May 17, 1993, this does not
automatically render the SPA invalid. The appellate
court aptly held that defective notarization will simply
strip the document of its public character and reduce it
to a private instrument, but nonetheless, binding,
provided its validity is established by preponderance
of evidence.15 Article 1358 of the Civil Code requires
that the form of a contract that transmits or
extinguishes real rights over immovable property
should be in a public document, yet the failure to
observe the proper form does not render the
transaction invalid.16 The necessity of a public
document for said contracts is only for convenience; it
is not essential for validity or enforceability.17 Even a
sale of real property, though not contained in a public
instrument or formal writing, is nevertheless valid and
binding, for even a verbal contract of sale or real estate
produces legal effects between the
parties.18 Consequently, when there is a defect in the
notarization of a document, the clear and convincing
evidentiary standard originally attached to a duly
notarized document is dispensed with, and the measure
to test the validity of such document is preponderance
of evidence.19
Here, the preponderance of evidence indubitably tilts
in favor of the respondents, still making the SPA
binding between the parties even with the
aforementioned assumed irregularity.1âwphi1 There
are several telling circumstances that would clearly
demonstrate that Leonardo was aware of the mortgage
and he indeed executed the SPA to entrust Leon with
the mortgage of his property. Leon had in his
possession all the titles covering the eleven (11)
properties mortgaged, including that of
Leonardo.20 Leonardo and the rest of their relatives
could not have just blindly ceded their respective
TCTs to Leon.21 It is likewise ridiculous how
Leonardo seemed to have been totally oblivious to the
status of his property for eight (8) long years, and
would only find out about the mortgage and
foreclosure from a nephew who himself had consented
to the mortgage of his own lot.22 Considering the lapse
of time from the alleged forgery on May 5, 1993 and
the mortgage on August 5, 1994, to the foreclosure on
July 29, 1999, and to the supposed discovery in 2001,
it appears that the suit is a mere afterthought or a last-
ditch effort on Leonardo’s part to extend his hold
over his property and to prevent SBC from
consolidating ownership over the same. More
importantly, Leonardo himself admitted on cross-
examination that he granted Leon authority to
mortgage, only that, according to him, he thought
it was going to be with China Bank, and not
SBC.23 But as the CA noted, there is no mention of a
certain bank in the subject SPA with which Leon must
specifically deal. Leon, therefore, was simply acting
within the bounds of the SPA’s authority when he
mortgaged the lot to SBC.
True, banks and other financing institutions, in
entering into mortgage contracts, are expected to
exercise due diligence.24 The ascertainment of the
status or condition of a property offered to it as
security for a loan must be a standard and
indispensable part of its operations.25 In this case,
however, no evidence was presented to show that SBC
was remiss in the exercise of the standard care and
prudence required of it or that it was negligent in
accepting the mortgage.26 SBC could not likewise be
faulted for relying on the presumption of regularity of
the notarized SPA when it entered into the subject
mortgage agreement.
NPC v. NAMERCO
FACTS
On October 17, 1956, NPC and Namerco of 3111
Nagtahan Street, Manila, as the representative of the
International Commodities Corporation of 11 Mercer
Street, New York City executed in Manila a contract
for the purchase by the NPC from the New York firm
of four thousand long tons of crude sulfur for its Maria
Cristina Fertilizer Plant in Iligan City at a total price of
P450,716
On that same date, a performance bond in the sum of
P90,143.20 was executed by the Domestic Insurance
Company in favor of the NPC to guarantee the seller’s
obligations.
It was stipulated in the contract of sale that the seller
would deliver the sulfur at Iligan City within sixty days
from notice of the establishment in its favor of a letter
of credit for $212,120 and that failure to effect delivery
would subject the seller and its surety to the payment
of liquidated damages at the rate of 2/5 of 1% of the
full contract price for the first thirty days of default and
4/5 of 1% for every day thereafter until complete
delivery is made.
Letter 11/12/1956 - the NPC advised John Z. Sycip,
the president of Namerco, of the opening on
November 8 of a letter of credit for $212,120 in favor
of International Commodities Corporation which
would expire on January 31, 1957. Notice of that letter
of credit was received by cable by the New York firm
on November 15, 1956. Thus, the deadline for the
delivery of the sulfur was January 15, 1957.
The New York supplier was not able to deliver the
sulfur due to its inability to secure shipping space.
During the period from January 20 to 26, 1957 there
was a shut­down of the NPC’s fertilizer plant
because there was no sulfur. No fertilizer was
produced.
Letter O2/27/1957 - the general manager of the NPC
advised Namerco and the Domestic Insurance
Company that under Article 9 of the contract of sale
“nonavailability of bottom or vessel” was not a
fortuitous event that would excuse
nonperformance and that the NPC would resort
to legal remedies to enforce its rights.
The Government Corporate Counsel in his letter to
Sycip dated May 8, 1957 rescinded the contract of sale
due to the New York supplier’s nonperformance of its
obligations. The same counsel in his letter of June 8,
1957 demanded from Namerco the payment of
P360,572.80 as liquidated damages. He explained that
time was of the essence of the contract. A similar
demand was made upon the surety.
The liquidated damages were computed on the basis of
the 115-day period between January 15, 1957, the
deadline for the delivery of the sulfur at Iligan City,
and May 9, 1957 when Namerco was notified of the
rescission of the contract, or P54,085.92 for the first
thirty days and P306,486.88 for the remaining eighty-
five days. Total: P360,572.80.
Cases - RTC
Civil Case No. 33114: The NPC sued the New York
firm, Namerco and the Domestic Insurance Company
for the recovery of the stipulated liquidated damages.
The trial court in its order of January 17, 1958
dismissed the case as to the New York firm for lack of
jurisdiction because it was not doing business in the
Philippines.
Civil Case No. 37019: Melvin Wallick, as the assignee
of the New York corporation and after the latter was
dropped as a defendant in Civil Case No. 33114, sued
Namerco for damages in connection with the same
sulfur transaction.
The two cases were consolidated. The lower court
rendered separate decisions in the two cases on the
same date.
Decisions:
Civil Case No. 37019: dismissed Namerco because the
assignment in favor of Wallick was champertous
(cham-per-tuhs - a sharing in the proceeds of litigation
by one who agrees with either the plaintiff or
defendant to help promote it or carry it on.) in
character. Wallick appealed to this Court. The appeal
was dismissed because the record on appeal did not
disclose that the appeal was perfected on time.
Civil Case No. 33114: although the records on appeal
were approved in 1967, inexplicably, they were
elevated to this Court in 1971. That anomaly initially
contributed to the delay in the adjudication of this case.
ISSUES:
W/N the delivery of the sulfur was conditioned on the
availability of a vessel to carry the shipment - NO
W/N Namerco acted within the scope of its authority
as agent in signing the contract of sale - NO
RULING - The documentary evidence belies these
contentions.
1st Issue
The invitation to bid issued by the NPC provides that
non-availability of a steamer to transport the sulfur is
not a ground for nonpayment of the liquidated
damages in case of nonperformance by the seller:
“4. Responsibility for availability of vessel. – The
availability of vessel to transport the quantity of
sulfur within the time specified in item 14 of this
specification shall be the responsibility of the bidder.
In case of award of contract, failure to ship on time
allegedly due to non-availability of vessels shall not
exempt the Contractor from payment of liquidated
damages provided in item 15 of this specification.”
“15. Liquidated damages. – x x x x x x x x x
“Availability of vessel being a responsibility of the
Contractor as specified in item 4 of this specifi-cation,
the terms ‘unforeseeable causes beyond the
control and without the fault or negligence of the
Contractor’ and ‘force majeure’ as used herein
shall not be deemed to embrace or include lack or
non-availability of bottom or vessel. It is agreed that
prior to making his bid, a bidder shall have made
previous arrangements regarding shipments within the
required time. It is clearly understood that in no event
shall the Contractor be exempt from the payment of
liquidated damages herein specified for reason of lack
of bottom or vessel. Lack of bottom or non-
availability of vessel shall, in no case, be considered
as a ground for extension of time. x x x.”
Namerco’s bid or offer is even more explicit. It
provides that it was “responsible for the availability
of bottom or vessel” and that it “guarantees the
availability of bottom or vessel to ship the quantity
of sulfur within the time specified in this bid”
In the contract of sale itself item 15 of the invitation to
bid is reproduced in Article 9 which provides that “it is
clearly understood that in no event shall the seller
be entitled to an extension of time or be exempt
from the payment of liquidated damages herein
specified for reason of lack of bottom or vessel”
2nd Issue (sinama ko yung mga ibang discussions kasi
minsan out of this world magtanong si Sir)
It is true that the New York corporation in its cable to
Namerco dated August 9, 1956 stated that the sale was
subject to availability of a steamer. However,
Namerco did not disclose that cable to the NPC and,
contrary to its principal’s instruction, it agreed that
non-availability of a steamer was not a
justification for nonpayment of the liquidated
damages.
Namerco acted beyond the bounds of its authority
because it violated its principal’s cabled instructions:
The delivery of the sulfur should be “C & F Manila”,
not “C & F Iligan City”
The sale be subject to the availability of a steamer and
The seller should be allowed to withdraw right away
the full amount of the letter of credit and not merely
eighty percent thereof.
Defendants’ contention: it was incumbent upon the
NPC to inquire into the extent of the agent’s authority
and, for its failure to do so, it could not claim any
liquidated damages which, according to the
defendants, were provided for merely to make the
seller more diligent in looking for a steamer to
transport the sulfur.
NPC’s counter-argument: Namerco should have
advised the NPC of the limitations on its authority to
negotiate the sale.
Namerco is liable for damages because under article
1897 of the Civil Code the agent who exceeds the
limits of his authority without giving the party with
whom he contracts sufficient notice of his powers is
personally liable to such party.
The truth is that even before the contract of sale was
signed Namerco was already aware that its principal
was having difficulties in booking shipping space. In
a cable dated October 16, 1956, or one day before the
contract of sale was signed, the New York supplier
advised Namerco that the latter should not sign the
contract unless it (Namerco) wished to assume sole
responsibility for the shipment.
Sycip, Namerco’s president, replied in his letter to
the seller dated also October 16, 1956, that he had
no choice but to finalize the contract of sale because
the NPC would forfeit Namerco’s bidder’s bond in
the sum of P45,100 posted by the Domestic
Insurance Company if the contract was not
formalized.
Three days later, or on October 19, the New York firm
cabled Namerco that the firm did not consider itself
bound by the contract of sale and that Namerco signed
the contract on its own responsibility.
In its letters dated November 8 and 19, 1956, the New
York corporation informed Namerco that since the
latter acted contrary to the former’s cabled
instructions, the former disclaimed responsibility
for the contract and that the responsibility for the
sale rested on Namerco.
The letters of the New York firm dated November 26
and December 11, 1956 were even more revealing. It
bluntly told Namerco that the latter was never
authorized to enter into the contract and that it acted
contrary to the re-peated instructions of the former.
VP of the NY firm to Namerco: “As we have pointed
out to you before, you have acted strictly contrary to
our repeated instructions and, however regretfully, you
have no one but yourselves to blame.” (epitome ng
intrimitidang palaka @Karen)
Who should be held liable for the liquidated damages?
Answer to the defendants’ contention that every
person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent
would apply in this case if the principal is sought to be
held liable on the contract entered into by the agent.
That is not so in this case. Here, it is the agent that is
sought to be held liable on a contract of sale which
was expressly repudiated by the principal because the
agent took chances, it exceeded its authority and, in
effect, it acted in its own name.
Manresa says that the agent who exceeds the limits of
his authority is personally liable and the third person
who contracts with the agent in such a case would be
defrauded if he would not be allowed to sue the agent.
Unenforceable contract? Yes – against the principal.
But it is enforceable against NAMERCO and the
surety.
The defendants cite article 1403 of the Civil Code
which provides that a contract entered into in the name
of another person by one who has acted beyond his
powers is unenforceable.
This refers to the unenforceability of the contract
against the principal. In the instant case, the contract
containing the stipulation for liquidated damages is not
being enforced against its principal but against the
agent and its surety.
It is being enforced against the agent because article
1897 implies that the agent who acts in excess of his
authority is personally liable to the party with whom
he contracted.
And that rule is complemented by article 1898 of the
Civil Code which provides that “if the agent contracts
in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract,
it shall be void if the party with whom the agent
contracted is aware of the limits of the powers granted
by the principal”.
As priorly discussed, Namerco, as agent, exceeded the
limits of its authority in contracting with the NPC in
the name of its principal. The NPC was unaware of
the limitations on the powers granted by the New York
firm to Namerco.
Namerco never disclosed to the NPC the cabled or
written instructions of its principal. For that reason
and because Namerco exceeded the limits of its
authority, it virtually acted in its own name and not as
agent and it is, therefore, bound by the contract of sale
which, however, is not enforceable against its
principal.
If, as contemplated in articles 1897 and 1898,
Namerco is bound under the contract of sale, then it
follows that it is bound by the stipulation for liquidated
damages in that contract.
It would be unjust and inequitable for Namerco to
escape liability after it had deceived the NPC.
Domestic Insurance Company’s liability
Contention: Domestic Insurance Company is not liable
to the NPC because its bond was posted, not for
Namerco, the agent, but for the New York firm which
is not liable on the contract of sale.
That contention cannot be sustained because it was
Namerco that actually solicited the bond from the
Domestic Insurance Company and, as explained
already, Namerco is being held liable under the
contract of sale because it virtually acted in its own
name. It became the principal in the performance
bond. In the last analysis, the Domestic Insurance
Company acted as surety for Namerco.
The rule is that “want of authority of the person who
executes an obligation as the agent or
representative of the principal will not, as a general
rule, affect the surety’s liability thereon, especially
in the absence of fraud, even though the
obligation is not binding on the principal.”
Nominal vs. Liquidated damages
Contention: They should be held liable only for
nominal damages, that interest should not be collected
on the amount of damages and that the damages should
be computed on the basis of a forty-five-day period
and not for a period of one hundred fifteen days.
With respect to the imposition of the legal rate of
interest on the damages from the filing of the
complaint in 1957, or a quarter of a century ago,
defendants’ contention is meritorious. It would be
manifestly inequitable to collect interest on the
damages especially considering that the disposition
of this case has been considerably delayed due to no
fault of the defendants.
The contention that only nominal damages should be
adjudged is contrary to the intention of the parties
(NPC, Namerco and its surety) because it is clearly
provided that liquidated damages are recoverable for
delay in the delivery of the sulfur and, with more
reason, for non-delivery.
No proof of pecuniary loss is required for the recovery
of liquidated damages. The stipulation for liquidated
damages is intended to obviate controversy on the
amount of damages. There can be no question that the
NPC suffered damages because its production of
fertilizer was disrupted or diminished by reason of the
non-delivery of the sulfur.
The parties foresaw that it might be difficult to
ascertain the exact amount of damages for non-
delivery of the sulfur. So, they fixed the liquidated
damages to be paid as indemnity to the NPC.
Nominal damages: On the other hand, nominal
damages are damages in name only or are in fact the
same as no damages. It would not be correct to hold
in this case that the NPC suffered damages in name
only or that the breach of contract was merely
technical in character.
NPC’s appeal, L-33897. (Lahat nung mga sa taas sa
isang appeal yun. Kasi diba nga consolidated.
Basically gusto ng NPC na full amount yung iaward sa
kanila pero binabaan ng CFI to 20% so nag-appeal sila.
Ito ngayon yung decision ng SC. Maraming sinabi
pero wala na yun. Di important.)
We find no sanction or justification for NPC’s claim
that it is entitled to the full payment of the
liquidated damages computed by its official.
A painstaking evaluation of the equities of the case in
the light of the arguments of the parties as expounded
in their five briefs leads to the conclusion that the
damages due from the defendants should be further
reduced to P45,100 which is equivalent to their
bidder’s bond or to about ten percent of the selling
price of the sulfur.
WHEREFORE, the lower court’s judgment is
modified and defendants National Merchandising
Corporation and Domestic Insurance Company of the
Philippines are ordered to pay solidarily to the
National Power Corporation the sum of P45,100.00 as
liquidated damages. No costs.
LILLIAN N. MERCADO, CYNTHIA M.
FEKARIS, and JULIAN MERCADO, JR.,
represented by their Attorney-In-Fact, ALFREDO
M. PEREZ,
vs.
ALLIED BANKING CORPORATION
FACTS:
Perla executed a (SPA) in favor of her husband, Julian
over several pieces of real property registered under
her name, authorizing the latter to perform the
following acts:
1. To act in my behalf, to sell, alienate, mortgage, lease
and deal otherwise over the different parcels of land
described hereinafter
On the strength of the aforesaid SPA, Julian, obtained
a loan from the respondent secured by real estate
mortgage which covers a parcel of land. Still using the
subject property as security, Julian obtained an
additional loan from the respondent
It appears, however, that there was no property
identified in the SPA and registered with the Registry
of Deeds of Quezon City. What was identified in the
SPA instead was another property covered by TCT
No. RT-106338 registered with the Registry of Deeds
of Pasig.
Subsequently, Julian defaulted on the payment of his
loan obligations. Thus, respondent initiated extra-
judicial foreclosure proceedings over the subject
property which was subsequently sold at public
auction wherein the respondent was declared as the
highest bidder.
Petitioners initiated with the RTC an action for the
annulment of REM constituted over the subject
property on the ground that the same was not covered
by the SPA and that the said SPA, at the time the loan
obligations were contracted authority of Julian was
previously revoked by Perla.
Petitioners likewise alleged that together with the copy
of the Revocation of SPA, Perla notified the Registry
of Deeds of Quezon City that any attempt to mortgage
or sell the subject property must be with her full
consent documented in the form of an SPA duly
authenticated.
RTC: declaring the REM constituted over the subject
property null and void, for Julian was not authorized
by the terms of the SPA to mortgage the same.
CA: reversed the RTC Decision and upheld the
validity of the REM.
ISSUE:
(I) WON THERE WAS A VALID MORTGAGE
CONSTITUTED OVER SUBJECT PROPERTY.
(2) WON THERE WAS A VALID REVOCATION
OF THE SPA.
(3) WON THE RESPONDENT WAS A cities, should have put respondent on guard.
MORTGAGEE-IN- GOOD FAITH
RULING:
(1)NO, Petitioners insist that the subject property was
not included in the SPA, considering that it contained
an exclusive enumeration of the pieces of property
over which Julian had authority.
Respondent, on the other hand, mainly hinges its
argument that Perla intended to include the subject
property in the SPA, and the failure of the instrument
to reflect the recent TCT Number or the exact
designation of the Registry of Deeds, should not defeat
Perla’s clear intention.
After an examination of the literal terms of the SPA,
we find that the subject property was not among those
enumerated therein. There was also nothing in the
language of the SPA from which we could deduce the
intention of Perla to include the subject property
therein. We cannot attribute such alleged intention to
Perla who executed the SPA when the language of the
instrument is bare of any indication suggestive of such
intention.
In cases where the terms of the contract are clear as to
leave no room for interpretation, resort to
circumstantial evidence to ascertain the true intent of
the parties, is not countenanced.
Equally relevant is the rule that a power of attorney
must be strictly construed and pursued. The instrument
will be held to grant only those powers which are
specified therein, and the agent may neither go beyond
nor deviate from the power of attorney.
(2)YES, Given that Perla revoked the SPA and that she
informed the Registry of Deeds of Quezon City of such
revocation received by the latter then third parties to
the SPA are constructively notified that the same had
been revoked and Julian no longer had any authority
to mortgage the subject property. Although the
revocation may not be annotated on TCT No. RT-
18206 (106338), as the RTC pointed out, neither the
Registry of Deeds of Quezon City nor respondent
denied that Perla’s letter was received by and filed
with the Registry of Deeds of Quezon City.
Respondent would have undoubtedly come across said
letter if it indeed diligently investigated the subject
property and the circumstances surrounding its
mortgage.
(3)NO, The property listed in the real estate mortgages
Julian executed in favor of PNB is the one covered by
"TCT (106338)." On the other hand, the Special Power
of Attorney referred to TCT No. "RT-106338 –The
palpable difference between the TCT numbers referred
to in the real estate mortgages and Julian’s SPA,
coupled with the fact that the said TCTs are
registered in the Registries of Deeds of different
Respondent’s claim of prudence is debunked by
the fact that it had conveniently or otherwise
overlooked the inconsistent details appearing on the
face of the documents, which it was relying on for its
rights as mortgagee, and which significantly affected
the identification of the property being mortgaged.
Maritime Agencies vs CA
Facts: Transcontinental Fertilizer Company of London
chartered from Hongkong Island Shipping Company
for the shipment of bagged urea
from Novorossisk, Odessa, USSR, to the Philippines,
the parties signing for this purpose a Uniform General
Charter.
Of the total shipment, a part of it was for the account
of Atlas Fertilizer Company as consignee, the other
parts are to be discharged in Manila and in Cebu. The
goods were insured by the consignee with the Union
Insurance Society of Canton, Ltd.
Maritime Agencies & Services, Inc. was
appointed as the charterer's agent
and Macondray Company, Inc. as the owner's agent.
The vessel arrived in MANILA and unloaded part of
the consignee's goods, then proceeded to Cebu to
discharge the rest of the cargo.
On October 31, 1979, the consignee filed a formal
claim against Maritime, copy furnished Macondray,
for the amount of P87,163.54, representing C & F
value of the shortlanded bags.[5] On January 12, 1980,
the consignee filed another formal claim, this time
against Viva Customs Brokerage, for the amount of
P36,030.23, representing the value of 574 bags of
net unrecovered spillage.[6]
These claims having been rejected, the consignee then
went to Union, which on demand paid the total
indemnity of P113,123.86 pursuant to the insurance
contract. As subrogee of the consignee, Union then
filed on September 19, 1980, a complaint for
reimbursement of this amount, with legal interest and
attorney's fees, against Hongkong Island Company,
Ltd., Maritime Agencies & Services, Inc. and/or Viva
Customs Brokerage.[7] On April 20, 1981,
the complaint was amended to drop Viva
and implead Macondray Company, Inc. as a new
defendant.[8]
On January 4, 1984, after trial, the trial court rendered
judgment holding the defendants liable.
CA held Maritime and Union liable. Maritime and
Union filed separate motions for reconsideration
which were both denied. The movants are now before
us to question the decision of the respondent court.
In G.R. No. 77638, Maritime pleads non-liability on
the ground that it was only the charterer's agent and
should not answer for whatever responsibility might
have attached to the principal. It also argues that the
respondent court erred in applying Articles 1734 and
1735 of the Civil Code in determining
the charterer's liability.
In G.R. No. 77674, Union asks for the modification of
the decision of the respondent court so as to make
Maritime solidarily and solely liable, its principal not
having been impleaded and so not subject to the
jurisdiction of our courts.
These two cases were consolidated. There are three
general categories of charters, to wit, the demise or
"bareboat charter," the time charter and the voyage
charter.
Issue: WON Maritime is soley and solidarily liable as
an agent of the charterer.
Ruling:
A demise charter involves the transfer of full
possession and control of the vessel for the period
covered by the contract, the charterer obtaining the
right to use the vessel and carry whatever cargo it
chooses, while manning and supplying the ship as
well.
A time charter is a contract to use a vessel for a
particular period of time, the charterer obtaining the
right to direct the movements of the vessel during the
chartering period, although the owner retains
possession and control.
A voyage charter is a contract for the hire of a vessel
for one or a series of voyages usually for the purpose
of transporting goods for the charterer. The voyage
charter is a contract of affreightment and is considered
a private carriage.
Tested by those definitions, the agreement entered into
in the cases at bar should be considered. This brings us
to the basic question of who, in this kind of charter,
shall be liable for the cargo.
A voyage charter being a private carriage, the parties
may freely contract respecting liability for damage to
the goods and other matters. The basic principle is that
"the responsibility for cargo loss falls on the one who
agreed to perform the duty involved" in accordance
with the terms of most voyage charters. This is true in
the present cases where the charterer was responsible
for loading, stowage and discharging at the ports
visited, while the owner was responsible for the care
of the cargo during the voyage.
As regards the goods damaged or lost during
unloading, the charterer is liable therefor, having
assumed this activity under the charter party "free of
expense to the vessel." The difficulty is that
Transcontinental has not been impleaded in these
cases and so is beyond our jurisdiction. The liability
imposable upon it cannot be borne by Maritime which,
as a mere agent, is not answerable for injury caused by
its principal. It is a well-settled principle that the agent
shall be liable for the act or omission of the principal
only if the latter is undisclosed. 19
Union seeks to hold Maritime liable as ship agent on
the basis of the ruling of this Court in the case
of Switzerland General Insurance
Co., Ltd. v. Ramirez. 20 However, we do not find that
case is applicable.
In that case, the charterer represented itself on the face
of the bill of lading as the carrier. The vessel owner
and the charterer did not stipulate in the Charter party
on their separate respective liabilities for the cargo.
The loss/damage to the cargo was sustained while it
was still on board or under the custody of the vessel.
As the charterer was itself the carrier, it was made
liable for the acts of the ship captain who was
responsible for the cargo while under the custody of
the vessel.
As for the charterer's agent, the evidence showed that
it represented the vessel when it took charge of the
unloading of the cargo and issued cargo receipts (or
tally sheets) in its own name. Claims against the vessel
for the losses/damages sustained by that cargo were
also received and processed by it. As a result, the
charterer's agent was also considered a ship agent and
so was held to be solidarily liable with its principal.
The facts in the cases at bar are different. The charterer
did not represent itself as a carrier and indeed assumed
responsibility ability only for the unloading of the
cargo, i.e, after the goods were already outside the
custody of the vessel. In supervising the unloading of
the cargo and issuing Daily Operations Report and
Statement of Facts indicating and describing the day-
to-day discharge of the cargo, Maritime acted in
representation of the charterer and not of the vessel. It
thus cannot be considered a ship agent. As a mere
charterer's agent, it cannot be held solidarily liable
with Transcontinental for the losses/damages to the
cargo outside the custody of the vessel. Notably,
Transcontinental was disclosed as the charterer's
principal and there is no question that Maritime acted
within the scope of its authority.
PNB vs Manila Surety
FACTS:
The PNB opened a letter of credit and advanced
$120,000.00 to Edington Oil Refinery for 8,000 tons
of hot asphalt, of which 2,000 tons worth P279,000.00
were delivered to Adams & Taguba Corp. (ATACO)
under a trust receipt guaranteed by Manila Surety &
Fidelity Co. To pay for the asphalt ATACO
constituted PNB its assignee and attorney-in-fact to
receive and collect payments from the Bureau of
Public Works.

ATACO delivered asphalt worth P431,466.52 to the
Bureau of Public Works, PNB regularly collected the
payments amounting to P106,382.01, until they ceased
to collect payments. Then in 1962 PNB found that
there were more payables to ATACO from the Bureau
of Public Works. PNB sued ATACO and the Surety,
to recover the balance of P158,563.18 when their
demands for payment were refused.
The trial court ordered ATACO and the Surety to pay
PNB the sum of P174,462.34, and the total amount
payable by the Surety shall not exceed P75,000.00.
PNB recoursed to the Court of Appeals, which
rendered an adverse decision and modified the
judgement of the court of origin as to the Surety’s
liability. Motions for reconsideration were also
denied.
ISSUE:
Whether or not it is the duty of the surety and not that
of the creditor, to see to it that the obligor fulfils his
obligation, and that the creditor owed the surety no
duty of active diligence to collect any sum from the
principal debtor.
RULING:
The appealed decision is AFFIRMED.
HELD:
The Court of Appeals did not hold the bank answerable
for negligence in failing to collect from the principal
debtor but for its negligence in collecting the sum due
to the debtor from the Bureau of Public Works,
contrary to its duty as holder of an exclusive and
irrevocable power of attorney to make such
collections, since an agent is required to act with care
of a good father of a family and becomes liable for the
damages which the principal may suffer through his
non performance.
Even if the assignment with power of attorney from
the principal debtor were considered as more
additional security, by allowing the assigned funds to
be exhausted without notifying the surety, the Bank
deprived the former of any possibility of recoursing
against that security. The Bank exonerated the surety,
pursuant to Art. 2080 0f the Civil Code.
BRITISH AIRWAYS,
vs.
COURT OF APPEALS, GOP MAHTANI, and
PHILIPPINE AIRLINES
FACTS:
Mahtani decided to visit his relatives in Bombay,
India. In anticipation of his visit, he obtained the
services of a certain Mr. Gumar to prepare his travel
plans.
Since BA had no direct flights from Manila to
Bombay, Mahtani had to take a flight to Hongkong via
PAL, and to take a connecting flight to Bombay on
board BA.
Prior to his departure, Mahtani checked in at the PAL
counter in Manila his two pieces of luggage containing
his clothings and personal effects, confident that upon
reaching Hongkong, the same would be transferred to
the BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he
discovered that his luggage was missing and that upon
inquiry from the BA representatives, he was told that
the same might have been diverted to London. After
patiently waiting for his luggage for one week, BA
finally advised him to file a claim by accomplishing
the "Property Irregularity Report." 4
Back in the Philippines, Mahtani filed his complaint
for damages and attorney's fees 5 against BA and Mr.
Gumar
BA filed its answer that Mahtani did not have a cause
of action against it. Likewise, , BA filed a third-party
complaint 7 against PAL alleging that the reason for
the non-transfer of the luggage was due to the latter's
late arrival in Hongkong, thus leaving hardly any time
for the proper transfer of Mahtani's luggage to the BA
aircraft bound for Bombay.
PAL filed its answer to the third-party complaint,
wherein it disclaimed any liability, arguing that there
was, in fact, adequate time to transfer the luggage to
BA facilities in Hongkong. Furthermore, the transfer
of the luggage to Hongkong authorities should be
considered as transfer to BA.
RTC: in favor of Mahtani. Third-Party Complaint
against third-party defendant Philippine Airlines is
DISMISSED for lack of cause of action.
CA: Affirmed, When plaintiff boarded the PAL plane
from Manila to Hongkong, PAL was merely acting as
a subcontractor or agent of BA.
ISSUE: WON the dismissal of the third party
complaint against PAL is valid.
RULING: NO, it is worth observing that the contract
of air transportation was exclusively between Mahtani
and BA, the latter merely endorsing the Manila to
Hongkong leg of the former's journey to PAL, as its
subcontractor or agent. In fact, the fourth paragraph of
the "Conditions of Contracts" of the ticket32issued by
BA to Mahtani confirms that the contract was one of
continuous air transportation from Manila to Bombay.
4. . . . carriage to be performed hereunder by several
successive carriers is regarded as a single operation.
Prescinding from the above discussion, it is undisputed
that PAL, in transporting Mahtani from Manila to
Hongkong acted as the agent of BA.
Parenthetically, the Court of Appeals should have been
cognizant of the well-settled rule that an agent is also
responsible for any negligence in the performance of
its function. and is liable for damages which the
principal may suffer by reason of its negligent act.
Hence, the Court of Appeals erred when it opined that
BA, being the principal, had no cause of action against
PAL, its agent or sub-contractor.
Also, it is worth mentioning that both BA and PAL are
members of the International Air Transport
Association (IATA), wherein member airlines are
regarded as agents of each other in the issuance of the
tickets and other matters pertaining to their
relationship.35 Therefore, in the instant case, the
contractual relationship between BA and PAL is one
of agency, the former being the principal, since it was
the one which issued the confirmed ticket, and the
latter the agent.