PABLITO MURAO and NELIO HUERTAZUELA, petitioners,. vs.

PEOPLE OF THE
PHILIPPINES, respondent.

DECISION

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari under Rule 45 of the Rules of Court, petitioners pray for the reversal
of the Decision of the Court of Appeals in CA-G.R. CR No. 21134, dated 31 May 1999, 1 affirming with
modification the Judgment of the Regional Trial Court (RTC) of Puerto Princesa City, Palawan, in Criminal
Case No. 11943, dated 05 May 1997, 2 finding petitioners guilty beyond reasonable doubt of the crime of
estafa under Article 315(1)(b) of the Revised Penal Code.

Petitioner Pablito Murao is the sole owner of Lorna Murao Industrial Commercial Enterprises (LMICE), a
company engaged in the business of selling and refilling fire extinguishers, with branches in Palawan, Naga,
Legaspi, Mindoro, Aurora, Quezon, Isabela, and Laguna. Petitioner Nelio Huertazuela is the Branch Manager
of LMICE in Puerto Princesa City, Palawan.3

On 01 September 1994, petitioner Murao and private complainant Chito Federico entered into a Dealership
Agreement for the marketing, distribution, and refilling of fire extinguishers within Puerto Princesa
City.4 According to the Dealership Agreement, private complainant Federico, as a dealer for LMICE, could
obtain fire extinguishers from LMICE at a 50% discount, provided that he sets up his own sales force,
acquires and issues his own sales invoice, and posts a bond with LMICE as security for the credit line
extended to him by LMICE. Failing to comply with the conditions under the said Dealership Agreement,
private complainant Federico, nonetheless, was still allowed to act as a part-time sales agent for LMICE
entitled to a percentage commission from the sales of fire extinguishers.5

The amount of private complainant Federico’s commission as sales agent for LMICE was under contention.
Private complainant Federico claimed that he was entitled to a commission equivalent to 50% of the gross
sales he had made on behalf of LMICE,6 while petitioners maintained that he should receive only 30% of the
net sales. Petitioners even contended that as company policy, part-time sales agents were entitled to a
commission of only 25% of the net sales, but since private complainant Federico helped in establishing the
LMICE branch office in Puerto Princesa City, he was to receive the same commission as the full-time sales
agents of LMICE, which was 30% of the net sales.7

Private complainant Federico’s first successful transaction as sales agent of LMICE involved two fire
extinguishers sold to Landbank of the Philippines (Landbank), Puerto Princesa City Branch, for the price of
₱7,200.00. Landbank issued a check, dated 08 November 1993, pay to the order of "L.M. Industrial Comm’l.
Enterprises c/o Chito Federico," for the amount of ₱5,936.40, 8 after deducting from the original sales price
the 15% discount granted by private complainant Federico to Landbank and the 3% withholding tax. Private
complainant Federico encashed the check at Landbank and remitted only ₱2,436.40 to LMICE, while he kept
₱3,500.00 for himself as his commission from the sale.9

Petitioners alleged that it was contrary to the standard operating procedure of LMICE that private
complainant Federico was named payee of the Landbank check on behalf of LMICE, and that private
complainant Federico was not authorized to encash the said check. Despite the supposed irregularities
committed by private complainant Federico in the collection of the payment from Landbank and in the
premature withholding of his commission from the said payment, petitioners forgave private complainant
Federico because the latter promised to make-up for his misdeeds in the next transaction.10

Private complainant Federico, on behalf of LMICE, subsequently facilitated a transaction with the City
Government of Puerto Princesa for the refill of 202 fire extinguishers. Because of the considerable cost, the
City Government of Puerto Princesa requested that the transaction be split into two purchase orders, and
the City Government of Puerto Princesa shall pay for each of the purchase orders separately. 11 Pursuant to
the two purchase orders, LMICE refilled and delivered all 202 fire extinguishers to the City Government of
Puerto Princesa: 154 units on 06 January 1994, 43 more units on 12 January 1994, and the last five units
on 13 January 1994.12
The subject of this Petition is limited to the first purchase order, Purchase Order No. GSO-856, dated 03
January 1994, for the refill of 99 fire extinguishers, with a total cost of ₱309,000.00. 13 On 16 June 1994,
the City Government of Puerto Princesa issued Check No. 611437 to LMICE to pay for Purchase Order No.
GSO-856, in the amount of ₱300,572.73, net of the 3% withholding tax. 14 Within the same day, petitioner
Huertazuela claimed Check No. 611437 from the City Government of Puerto Princesa and deposited it under
the current account of LMICE with PCIBank.15

On 17 June 1994, private complainant Federico went to see petitioner Huertazuela at the LMICE branch
office in Puerto Princesa City to demand for the amount of ₱154,500.00 as his commission from the payment
of Purchase Order No. GSO-856 by the City Government of Puerto Princesa. Petitioner Huertazuela, however,
refused to pay private complainant Federico his commission since the two of them could not agree on the
proper amount thereof.16

Also on 17 June 1994, private complainant Federico went to the police station to file an Affidavit-Complaint
for estafa against petitioners.17 Petitioners submitted their Joint Counter-Affidavit on 12 July 1994.18 The
City Prosecution Office of Puerto Princesa City issued a Resolution, dated 15 August 1994, finding that
a prima facie case for estafa existed against the petitioners and recommending the filing of an information
for estafa against both of them.19

The Information, docketed as Criminal Case No. 11943 and raffled to the RTC of Puerto Princesa City,
Palawan, Branch 52, reads as follows –

INFORMATION

The undersigned accuses PABLITO MURAO and NELIO C. HUERTAZUELA of the crime of ESTAFA, committed
as follows:

That on or about the 16th day of June, 1994, at Puerto Princesa City, Philippines, and within the jurisdiction
of this Honorable Court, the said accused, conspiring and confederating together and mutually helping one
another, after having received the amount of ₱309,000.00 as payment of the 99 tanks of refilled fire
extinguisher (sic) from the City Government of Puerto Princesa, through deceit, fraud and
misrepresentation, did then and there willfully, unlawfully and feloniously defraud one Chito Federico in the
following manner, to wit: said accused, well knowing that Chito Federico agent of LM Industrial Commercial
Enterprises is entitled to 50% commission of the gross sales as per their Dealership Contract or the amount
of ₱154,500.00 as his commission for his sale of 99 refilled fire extinguishers worth ₱309,000.00, and
accused once in possession of said amount of ₱309,000.00 misappropriate, misapply and convert the
amount of ₱154,500.00 for their own personal use and benefit and despite repeated demands made upon
them by complainant to deliver the amount of ₱154,500.00, accused failed and refused and still fails and
refuses to do so, to the damage and prejudice of said Chito Federico in the amount of ₱154,500.00, Philippine
Currency.20

After holding trial, the RTC rendered its Judgment on 05 May 1997 finding petitioners guilty beyond
reasonable doubt as co-principals of the crime of estafa defined and penalized in Article 315(1)(b) of the
Revised Penal Code. Estafa, under the said provision, is committed by –

ART. 315. Swindling (estafa). – Any person who shall defraud another by any of the means mentioned
hereinbelow . . .

1. With unfaithfulness or abuse of confidence, namely:

(a) …

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any other
personal property 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, even though such
obligation be totally or partially guaranteed by a bond; or by denying having received such money,
goods, or other property; . . .
In the same Judgment, the RTC expounded on its finding of guilt, thus –

For the afore-quoted provision of the Revised Penal Code to be committed, the following requisites must
concur:

1. That money, goods or other personal property be 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 demand made by the offended party to the offender. (Reyes, Revised Penal Code of
the Philippines, p. 716; Manuel Manahan, Jr. vs. Court of Appeals, Et Al., G.R. No. 111656, March
20, 1996)

All the foregoing elements are present in this case. The aborted testimony of Mrs. Norma Dacuan, Cashier
III of the Treasurer’s Office of the City of Puerto Princesa established the fact that indeed, on June 16, 1994,
co-accused Nelio Huertazuela took delivery of Check No. 611437 with face value of ₱300,572.73,
representing payment for the refill of 99 cylinders of fire extinguishers. Although the relationship between
complaining witness Chito Federico and LMIC is not fiduciary in nature, still the clause "any other obligation
involving the duty to make delivery of or to return" personal property is broad enough to include a "civil
obligation" (Manahan vs. C.A., Et. Al., Mar. 20, 1996).

The second element cannot be gainsaid. Both Pablito Murao and Nelio Huertazuela categorically admitted
that they did not give to Chito Federico his commission. Instead, they deposited the full amount of the
consideration, with the PCIBank in the Current Account of LMIC.

The refusal by the accused to give Chito Federico what ever percentage his commission necessarily caused
him prejudice which constitute the third element of estafa. Demand for payment, although not an essential
element of estafa was nonetheless made by the complainant but was rebuffed by the accused. The
fraudulent intent by the accused is indubitably indicated by their refusal to pay Chito Federico any
percentage of the gross sales as commission. If it were true that what the dealer/sales Agent is entitled to
by way of commission is only 30% of the gross sales, then by all means the accused should have paid Chito
Federico 30%. If he refused, they could have it deposited in his name. In that way they may not be said to
have misappropriated for themselves what pertained to their Agent by way of commission.

WHEREFORE, premises considered judgment is hereby rendered finding the accused PABLITO MURAO and
NELIO HUERTAZUELA guilty beyond reasonable doubt as co-principals, of the crime of estafa defined and
penalized in Article 315 par. 1(b) of the Revised Penal Code, and applying the provisions of the
Indeterminate Sentence Law, both accused are hereby sentenced to an indeterminate penalty ranging from
a minimum of TWO (2) YEARS, FOUR (4) MONTHS and ONE (1) DAY of prision correccional in its medium
period, to a maximum of TWENTY (20) YEARS of reclusion temporal in its maximum period; to pay Chito
Federico, jointly and severally:

a. Sales Commission equivalent to

50% of ₱309,000.00 or ------------------- ₱154,500.00

with legal interest thereon from

 June 17, 1994 until fully paid;

b. Attorney’s fees ---------------------------- ₱ 30,0000.00.21

Resolving the appeal filed by the petitioners before it, the Court of Appeals, in its Decision, dated 31 May
1999, affirmed the aforementioned RTC Judgment, finding petitioners guilty of estafa, but modifying the
sentence imposed on the petitioners. The dispositive portion of the Decision of the Court of Appeals reads
–

WHEREFORE, the appealed decision is hereby AFFIRMED with the MODIFICATION that appellants PABLITO
MURAO and NELIO HUERTAZUELA are hereby each sentenced to an indeterminate penalty of eight (8) years
and One (1) day of prision mayor, as minimum, to Twenty (20) years of reclusion temporal, as
maximum. The award for attorney’s fee of ₱30,000.00 is deleted because the prosecution of criminal action
is the task of the State prosecutors. All other aspects of the appealed decision are maintained.22

When the Court of Appeals, in its Resolution, dated 19 January 2000, 23 denied their Motion for
Reconsideration, petitioners filed the present Petition for Review 24 before this Court, raising the following
errors allegedly committed by the Court of Appeals in its Decision, dated 31 May 1999 –

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT
PETITIONERS ARE LIABLE FOR ESTAFA UNDER ARTICLE 315 1(B) OF THE REVISED PENAL CODE UNDER
THE FOREGOING SET OF FACTS, WHEN IT IS CLEAR FROM THE SAID UNDISPUTED FACTS THAT THE
LIABILITY IS CIVIL IN NATURE.

II

WITH DUE RESPECT, THE HONORABLE COURT ERRED WHEN IT UPHOLD (sic) PRIVATE COMPLAINANT’S
CLAIM THAT HE IS ENTITLED TO A FIFTY (50%) PERCENT COMMISSION WITHOUT EVIDENCE TO SUPPORT
SUCH CLAIM.

This Court finds the instant Petition impressed with merit. Absent herein are two essential elements of the
crime of estafa by misappropriation or conversion under Article 315(1)(b) of the Revised Penal Code,
namely: (1) That money, goods or other personal property be 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; and (2) That there be a misappropriation or conversion of such money or property by
the offender.

The findings of the RTC and the Court of Appeals that petitioners committed estafa rest on the erroneous
belief that private complainant Federico, due to his right to commission, already owned 50% of the amount
paid by the City Government of Puerto Princesa to LMICE by virtue of Check No. 611437, so that the
collection and deposit of the said check by petitioners under the account of LMICE constituted
misappropriation or conversion of private complainant Federico’s commission.

However, his right to a commission does not make private complainant Federico a joint owner of
the money paid to LMICE by the City Government of Puerto Princesa, but merely establishes the relation
of agent and principal.25 It is unequivocal that an agency existed between LMICE and private complainant
Federico. Article 1868 of the Civil Code defines agency as a special contract whereby "a person binds himself
to render some service or to do something in representation or on behalf of another, with the consent or
authority of the latter." Although private complainant Federico never had the opportunity to operate as a
dealer for LMICE under the terms of the Dealership Agreement, he was allowed to act as a sales agent for
LMICE. He can negotiate for and on behalf of LMICE for the refill and delivery of fire extinguishers, which
he, in fact, did on two occasions – with Landbank and with the City Government of Puerto Princesa. Unlike
the Dealership Agreement, however, the agreement that private complainant Federico may act as sales
agent of LMICE was based on an oral agreement.26
As a sales agent, private complainant Federico entered into negotiations with prospective clients for and on
behalf of his principal, LMICE. When negotiations for the sale or refill of fire extinguishers were successful,
private complainant Federico prepared the necessary documentation. Purchase orders, invoices, and
receipts were all in the name of LMICE. It was LMICE who had the primary duty of picking up the empty fire
extinguishers, filling them up, and delivering the refilled tanks to the clients, even though private
complainant Federico personally helped in hauling and carrying the fire extinguishers during pick-up from
and delivery to clients.

All profits made and any advantage gained by an agent in the execution of his agency should belong to the
principal.27 In the instant case, whether the transactions negotiated by the sales agent were for the sale of
brand new fire extinguishers or for the refill of empty tanks, evidently, the business belonged to LMICE.
Consequently, payments made by clients for the fire extinguishers pertained to LMICE. When petitioner
Huertazuela, as the Branch Manager of LMICE in Puerto Princesa City, with the permission of petitioner
Murao, the sole proprietor of LMICE, personally picked up Check No. 611437 from the City Government of
Puerto Princesa, and deposited the same under the Current Account of LMICE with PCIBank, he was merely
collecting what rightfully belonged to LMICE. Indeed, Check No. 611437 named LMICE as the lone payee.
Private complainant Federico may claim commission, allegedly equivalent to 50% of the payment received
by LMICE from the City Government of Puerto Princesa, based on his right to just compensation under his
agency contract with LMICE,28 but not as the automatic owner of the 50% portion of the said payment.

Since LMICE is the lawful owner of the entire proceeds of the check payment from the City Government of
Puerto Princesa, then the petitioners who collected the payment on behalf of LMICE did not receive the same
or any part thereof 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 to private complainant Federico, thus, the RTC correctly
found that no fiduciary relationship existed between petitioners and private complainant Federico. A fiduciary
relationship between the complainant and the accused is an essential element of estafa by misappropriation
or conversion, without which the accused could not have committed estafa.29

The RTC used the case of Manahan, Jr. v. Court of Appeals30 to support its position that even in the absence
of a fiduciary relationship, the petitioners still had the civil obligation to return and deliver to private
complainant Federico his commission. The RTC failed to discern the substantial differences in the factual
background of the Manahan case from the present Petition. The Manahan case involved the lease of a dump
truck. Although a contract of lease may not be fiduciary in character, the lessee clearly had the civil
obligation to return the truck to the lessor at the end of the lease period; and failure of the lessee to return
the truck as provided for in the contract may constitute estafa. The phrase "or any other obligation involving
the duty to make delivery of, or to return the same" refers to contracts of bailment, such as, contract of
lease of personal property, contract of deposit, and commodatum, wherein juridical possession of the thing
was transferred to the lessee, depositary or borrower, and wherein the latter is obligated to return the same
thing.31

In contrast, the current Petition concerns an agency contract whereby the principal already received
payment from the client but refused to give the sales agent, who negotiated the sale, his commission. As
has been established by this Court in the foregoing paragraphs, LMICE had a right to the full amount paid
by the City Government of Puerto Princesa. Since LMICE, through petitioners, directly collected the payment,
then it was already in possession of the amount, and no transfer of juridical possession thereof was involved
herein. Given that private complainant Federico could not claim ownership over the said payment or any
portion thereof, LMICE had nothing at all to deliver and return to him. The obligation of LMICE to pay private
complainant Federico his commission does not arise from any duty to deliver or return the money to its
supposed owner, but rather from the duty of a principal to give just compensation to its agent for the
services rendered by the latter.

Furthermore, the Court of Appeals, in its Decision, dated 31 May 1999, defined the words "convert" and
"misappropriate" in the following manner –

The High Court in Saddul v. Court of Appeals [192 SCRA 277] enunciated that the words "convert" and
"misappropriate" in the crime of estafa punished under Art. 315, par. 1(b) connote an act of using or
disposing of another’s property as if it were one’s own, or if devoting it to a purpose or use different from
that agreed upon. To misappropriate to one’s use includes, not only conversion to one’s personal advantage,
but also every attempt to dispose of the property of another without right.32

Based on the very same definition, this Court finds that petitioners did not convert nor misappropriate the
proceeds from Check No. 611437 because the same belonged to LMICE, and was not "another’s property."
Petitioners collected the said check from the City Government of Puerto Princesa and deposited the same
under the Current Account of LMICE with PCIBank. Since the money was already with its owner, LMICE, it
could not be said that the same had been converted or misappropriated for one could not very well
fraudulently appropriate to himself money that is his own.33

Although petitioners’ refusal to pay private complainant Federico his commission caused prejudice or
damage to the latter, said act does not constitute a crime, particularly estafa by conversion or
misappropriation punishable under Article 315(1)(b) of the Revised Penal Code. Without the essential
elements for the commission thereof, petitioners cannot be deemed to have committed the crime.

While petitioners may have no criminal liability, petitioners themselves admit their civil liability to the private
complainant Federico for the latter’s commission from the sale, whether it be 30% of the net sales or 50%
of the gross sales. However, this Court is precluded from making a determination and an award of the civil
liability for the reason that the said civil liability of petitioners to pay private complainant Federico his
commission arises from a violation of the agency contract and not from a criminal act. 34 It would be improper
and unwarranted for this Court to impose in a criminal action the civil liability arising from a civil contract,
which should have been the subject of a separate and independent civil action.35

WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CR No. 21134, dated 31 May 1999,
affirming with modification the Judgment of the RTC of Puerto Princesa City, Palawan, in Criminal Case No.
11943, dated 05 May 1997, finding petitioners guilty beyond reasonable doubt of estafa by conversion or
misappropriation under Article 315(1)(b) of the Revised Penal Code, and awarding the amount of
₱154,500.00 as sales commission to private complainant Federico, is hereby REVERSED and SET ASIDE. A
new Judgment is hereby entered ACQUITTING petitioners based on the foregoing findings of this Court that
their actions did not constitute the crime of estafa by conversion or misappropriation under Article 315(1)(b)
of the Revised Penal Code. The cash bonds posted by the petitioners for their provisional liberty are hereby
ordered RELEASED and the amounts thereof RETURNED to the petitioners, subject to the usual accounting
and auditing procedures.

SO ORDERED.

INTERNATIONAL FILMS (CHINA), LTD., plaintiff-appellant, vs. THE LYRIC FILM EXCHANGE,
INC., defendant-appellee.

VILLA-REAL, J.:

This is an appeal taken by the plaintiff company International Films (China), Ltd. from the judgment of the
Court of First Instance of Manila dismissing the complaint filed by it against the defendant company the
Lyric Film Exchange, Inc., with costs to said plaintiff.

In support of its appeal the appellant assigns six alleged errors as committed by the court a quo in its said
judgment, which will be discussed in the course of this decision.

The record shows that Bernard Gabelman was the Philippine agent of the plaintiff company International
Films (China), Ltd. by virtue of a power of attorney executed in his favor on April 5, 1933 (Exhibit 1). On
June 2, 1933, the International Films (China), Ltd., through its said agent, leased the film entitled "Monte
Carlo Madness" to the defendant company, the Lyric Film Exchange, Inc., to be shown in Cavite for two
consecutive days, that is, on June 1 and 2, 1933, for 30 per cent of the receipts; in the Cuartel de España
for one day, or on June 6, 1933, for P45; in the University Theater for two consecutive days, or on June 8,
and 9, 1933, for 30 per cent of the receipts; in Stotsenburg for two consecutive days, or on June 18 and
19, 1933, for 30 per cent of the receipts, and in the Paz Theater for two consecutive days, or on June 21
and 22, 1933, for 30 per cent of the receipts (Exhibit C). One of the conditions of the contract was that the
defendant company would answer for the loss of the film in question whatever the cause. On June 23, 1933,
following the last showing of the film in question in the Paz Theater, Vicente Albo, then chief of the film
department of the Lyric Film Exchange, Inc., telephoned said agent of the plaintiff company informing him
that the showing of said film had already finished and asked, at the same time, where he wished to have
the film returned to him. In answer, Bernard Gabelman informed Albo that he wished to see him personally
in the latter's office. At about 11 o'clock the next morning, Gabelman went to Vicente Albo's office and asked
whether he could deposit the film in question in the vault of the Lyric Film Exchange, Inc., as the
International Films (China) Ltd. did not yet have a safety vault, as required by the regulations of the fire
department. After the case had been referred to O'Malley, Vicente Albo's chief, the former answered that
the deposit could not be made inasmuch as the film in question would not be covered by the insurance
carried by the Lyric Film Exchange, Inc. Bernard Gabelman then requested Vicente Albo to permit him to
deposit said film in the vault of the Lyric Film Exchange, Inc., under Gabelman's own responsibility. As there
was a verbal contract between Gabelman and the Lyric Film Exchange Inc., whereby the film "Monte Carlo
Madness" would be shown elsewhere, O'Malley agreed and the film was deposited in the vault of the
defendant company under Bernard Gabelman's responsibility.

About July 27, 1933, Bernard Gabelman severed his connection with the plaintiff company, being succeeded
by Lazarus Joseph. Bernard Gabelman, upon turning over the agency to the new agent, informed the latter
of the deposit of the film "Monte Carlo Madness" in the vault of the defendant company as well as of the
verbal contract entered into between him and the Lyric Film Exchange, Inc., whereby the latter would act
as a subagent of the plaintiff company, International Films (China) Ltd., with authority to show this film
"Monte Carlo Madness" in any theater where said defendant company, the Lyric Film Exchange, Inc., might
wish to show it after the expiration of the contract Exhibit C. As soon as Lazarus Joseph had taken possession
of the Philippine agency of the International Films (China) Ltd., he went to the office of the Lyric Film
Exchange, Inc., to ask for the return not only of the film "Monte Carlo Madness" but also of the films "White
Devils" and "Congress Dances". On August 13 and 19, 1933, the Lyric Film Exchange, Inc., returned the
films entitled "Congress Dances" and "White Devils" to Lazarus Joseph, but not the film "Monte Carlo
Madness" because it was to be shown in Cebu on August 29 and 30, 1933. Inasmuch as the plaintiff would
profit by the showing of the film "Monte Carlo Madness", Lazarus Joseph agreed to said exhibition. It
happened, however, that the bodega of the Lyric Film Exchange, Inc., was burned on August 19, 1933,
together with the film "Monte Carlo Madness" which was not insured.

The first question to be decided in this appeal, which is raised in the first assignment of alleged error, is
whether or not the court a quo erred in allowing the defendant company to amend its answer after both
parties had already rested their respective cases.

In Torres Viuda de Nery vs. Tomacruz (49 Phil., 913, 915), this court, through Justice Malcolm, said:

Sections 109 and 110 of the Philippine Code of Civil Procedure, relating to the subjects of Variance
and Amendments in General, should be equitably applied to the end that cases may be favorably
and fairly presented upon their merits, and that equal and exact justice may be done between the
parties. Under code practice, amendments to pleadings are favored, and should be liberally allowed
in furtherance of justice. This liberality, it has been said, is greatest in the early stages of a lawsuit,
decreases as it progresses, and changes at times to a strictness amounting to a prohibition. The
granting of leave to file amended pleadings is a matter peculiarly within the sound discretion of the
trial court. The discretion will not be disturbed on appeal, except in case of an evident abuse thereof.
But the rule allowing amendments to pleadings is subject to the general but not inflexible limitation
that the cause of action or defense shall not be substantially changed, or that the theory of the case
shall not be altered. (21 R. C. L., pp. 572 et seq.; 3 Kerr's Cyc. Codes of California, sections 469,
470 and 473; Ramirez vs. Murray [1855], 5 Cal., 222; Hayden vs. Hayden [1873], 46 Cal., 332;
Hackett vs. Bank of California [1881], 57 Cal., 335; Hancock vs. Board of Education of City of Santa
Barbara [1903], 140 Cal., 554; Dunphy vs. Dunphy [1911], 161 Cal., 87; 38 L. R. A. [N. S.],
818.)lawphi1.net

In the case of Gould vs. Stafford (101 Cal., 32, 34), the Supreme Court of California, interpreting section
473 of the Code of Civil Procedure of said State, from which section 110 of our Code was taken, stated as
follows:
 The rule is that courts will be liberal in allowing an amendment to a pleading when it does not
seriously impair the rights of the opposite party — and particularly an amendment to an answer. A
defendant can generally set up as many defenses as he may have. Appellant contends that the
affidavits upon which the motion to amend was made show that it was based mainly on a mistake of
law made by respondent's attorney; but, assuming that to be, so, still the power of a court to allow
an amendment is not limited by the character of the mistake which calls forth its exercise. The
general rule that a party cannot be relieved from an ordinary contract which is in its nature final, on
account of a mistake of law, does not apply to proceedings in an action at law while it is pending and
undetermined. Pleadings are not necessarily final until after judgment. Section 473 of the Code of
Civil Procedure provides that the court may allow an amendment to a pleading to correct certain
enumerated mistakes or "a mistake in any other respect," and "in other particulars." The true rule is
well stated in Ward vs. Clay (62 Cal. 502). In the case at bar evidence of the lease was given at the
first trial; and we cannot see that the amendment before the second trial put plaintiff in a position
any different from that which he would have occupied if the amendment had been made before the
first trial.

In the case of Ward vs. Clay (82 Cal., 502, 510), the Supreme Court of said State stated:

The principal purpose of vesting the court with this discretionary power is to enable it "to mold and
direct its proceedings so as to dispose of cases upon their substantial merits," when it can be done
without injustice to either party, whether the obstruction to such a disposition of cases be a mistake
of fact or a mistake as to the law; although it may be that the court should require a stronger showing
to justify relief from the effect of a mistake in law than in case of a mistake as to matter of fact. The
exercise of the power conferred by section 473 of the code, however, should appear to have, been
"in furtherance of justice," and the relief, if any, should be granted upon just terms.

Lastly, in the case of Simpson vs. Miller (94 Pac., 253), the said Supreme Court of California said:

In an action to recover property which had vested in plaintiff's trustee in bankruptcy prior to the suit,
an amendment to the answer, made after both parties had rested, but before the cause was
submitted, pleading plaintiff's bankruptcy in bar to the action, was properly allowed in the discretion
of the court.

Under the above-cited doctrines, it is discretionary in the court which has cognizance of a case to allow or
not the amendment of an answer for the purpose of questioning the personality of the plaintiff to bring the
action, even after the parties had rested their cases, as it causes no injustice to any of the parties, and this
court will not interfere in the exercise of said discretion unless there is an evident abuse thereof, which does
not exist in this case.

The second question to be decided is whether or not the defendant company, the Lyric Film Exchange, Inc.,
is responsible to the plaintiff, International Films (China) Ltd., for the destruction by fire of the film in
question, entitled "Monte Carlo Madness".

The plaintiff company claims that the defendant's failure to return the film "Monte Carlo Madness" to the
former was due to the fact that the period for the delivery thereof, which expired on June 22, 1933, had
been extended in order that it might be shown in Cebu on August 29 and 30, 1933, in accordance with an
understanding had between Lazarus Joseph, the new agent of the plaintiff company, and the defendant.
The defendant company, on the other hand, claims that when it wanted to return the film "Monte Carlo
Madness" to Bernard Gabelman, the former agent of the plaintiff company, because of the arrival of the
date for the return thereof, under the contract Exhibit C, said agent, not having a safety vault, requested
Vicente Albo, chief of the film department of the defendant company, to keep said film in the latter's vault
under Gabelman's own responsibility, verbally stipulating at the same time that the defendant company, as
subagent of the International Films (China) Ltd., might show the film in question in its theaters.

It does not appear sufficiently proven that the understanding had between Lazarus Joseph, second agent of
the plaintiff company, and Vicente Albo, chief of the film department of the defendant company, was that
the defendant company would continue showing said film under the same contract Exhibit C. The
preponderance of evidence shows that the verbal agreement had between Bernard Gabelman, the former
agent of the plaintiff company, and Vicente Albo, chief of the film department of the defendant company,
was that said film "Monte Carlo Madness" would remain deposited in the safety vault of the defendant
company under the responsibility of said former agent and that the defendant company, as his subagent,
could show it in its theaters, the plaintiff company receiving 5 per cent of the receipts up to a certain amount,
and 15 per cent thereof in excess of said amount.

If, as it has been sufficiently proven in our opinion, the verbal contract had between Bernard Gabelman, the
former agent of the plaintiff company, and Vicente Albo, chief of the film department of the defendant
company, was a sub-agency or a submandate, the defendant company is not civilly liable for the destruction
by fire of the film in question because as a mere submandatary or subagent, it was not obliged to fulfill
more than the contents of the mandate and to answer for the damages caused to the principal by his failure
to do so (art. 1718, Civil Code). The fact that the film was not insured against fire does not constitute fraud
or negligence on the part of the defendant company, the Lyric Film Exchange, Inc., because as a subagent,
it received no instruction to that effect from its principal and the insurance of the film does not form a part
of the obligation imposed upon it by law.

As to the question whether or not the defendant company having collected the entire proceeds of the fire
insurance policy of its films deposited in its vault, should pay the part corresponding to the film in question
which was deposited therein, the evidence shows that the film "Monte Carlo Madness" under consideration
was not included in the insurance of the defendant company's films, as this was one of the reasons why
O'Malley at first refused to receive said film for deposit and he consented thereto only when Bernard
Gabelman, the former agent of the plaintiff company, insisted upon his request, assuming all responsibility.
Furthermore, the defendant company did not collect from the insurance company an amount greater than
that for which its films were insured, notwithstanding the fact that the film in question was included in the
vault, and it would have collected the same amount even if said film had not been deposited in its safety
vault. Inasmuch as the defendant company, The Lyric Film Exchange, Inc., had not been enriched by the
destruction by fire of the plaintiff company's film, it is not liable to the latter.

For the foregoing considerations, we are of the opinion and so hold: (1) That the court a quo acted within
its discretionary power in allowing the defendant company to amend its answer by pleading the special
defense of the plaintiff company's lack of personality to bring the action, after both parties had already
rested their respective cases; (2) that the defendant company, as subagent of the plaintiff in the exhibition
of the film "Monte Carlo Madness", was not obliged to insure it against fire, not having received any express
mandate to that effect, and it is not liable for the accidental destruction thereof by fire.

Wherefore, and although on a different ground, the appealed judgment is affirmed, with the costs to the
appellant. So ordered

METROPOLITAN BANK & TRUST COMPANY, petitioner, vs. COURT OF APPEALS, GOLDEN SAVINGS
& LOAN ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO and GLORIA
CASTILLO, respondents.

CRUZ, J.:

This case, for all its seeming complexity, turns on a simple question of negligence. The facts, pruned of all
non-essentials, are easily told.

The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the Philippines and
even abroad. Golden Savings and Loan Association was, at the time these events happened, operating in
Calapan, Mindoro, with the other private respondents as its principal officers.

In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and deposited over a
period of two months 38 treasury warrants with a total value of P1,755,228.37. They were all drawn by the
Philippine Fish Marketing Authority and purportedly signed by its General Manager and countersigned by its
Auditor. Six of these were directly payable to Gomez while the others appeared to have been indorsed by
their respective payees, followed by Gomez as second indorser. 1
On various dates between June 25 and July 16, 1979, all these warrants were subsequently indorsed by
Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account No. 2498 in the Metrobank
branch in Calapan, Mindoro. They were then sent for clearing by the branch office to the principal office of
Metrobank, which forwarded them to the Bureau of Treasury for special clearing. 2

More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask
whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was meanwhile not
allowed to withdraw from his account. Later, however, "exasperated" over Gloria's repeated inquiries and
also as an accommodation for a "valued client," the petitioner says it finally decided to allow Golden Savings
to withdraw from the proceeds of the
warrants.3

The first withdrawal was made on July 9, 1979, in the amount of P508,000.00, the second on July 13, 1979,
in the amount of P310,000.00, and the third on July 16, 1979, in the amount of P150,000.00. The total
withdrawal was P968.000.00.4

In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually
collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared warrants. The last
withdrawal was made on July 16, 1979.

On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the
Bureau of Treasury on July 19, 1979, and demanded the refund by Golden Savings of the amount it had
previously withdrawn, to make up the deficit in its account.

The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of Mindoro. 5 After
trial, judgment was rendered in favor of Golden Savings, which, however, filed a motion for reconsideration
even as Metrobank filed its notice of appeal. On November 4, 1986, the lower court modified its decision
thus:

ACCORDINGLY, judgment is hereby rendered:

1. Dismissing the complaint with costs against the plaintiff;

2. Dissolving and lifting the writ of attachment of the properties of defendant Golden Savings and
Loan Association, Inc. and defendant Spouses Magno Castillo and Lucia Castillo;

3. Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of the sum of
P1,754,089.00 and to reinstate and credit to such account such amount existing before the debit
was made including the amount of P812,033.37 in favor of defendant Golden Savings and Loan
Association, Inc. and thereafter, to allow defendant Golden Savings and Loan Association, Inc. to
withdraw the amount outstanding thereon before the debit;

4. Ordering the plaintiff to pay the defendant Golden Savings and Loan Association, Inc. attorney's
fees and expenses of litigation in the amount of P200,000.00.

5. Ordering the plaintiff to pay the defendant Spouses Magno Castillo and Lucia Castillo attorney's
fees and expenses of litigation in the amount of P100,000.00.

SO ORDERED.

On appeal to the respondent court,6 the decision was affirmed, prompting Metrobank to file this petition for
review on the following grounds:

1. Respondent Court of Appeals erred in disregarding and failing to apply the clear contractual terms
and conditions on the deposit slips allowing Metrobank to charge back any amount erroneously
credited.
 (a) Metrobank's right to charge back is not limited to instances where the checks or treasury
warrants are forged or unauthorized.

(b) Until such time as Metrobank is actually paid, its obligation is that of a mere collecting
agent which cannot be held liable for its failure to collect on the warrants.

2. Under the lower court's decision, affirmed by respondent Court of Appeals, Metrobank is made to
pay for warrants already dishonored, thereby perpetuating the fraud committed by Eduardo Gomez.

3. Respondent Court of Appeals erred in not finding that as between Metrobank and Golden Savings,
the latter should bear the loss.

4. Respondent Court of Appeals erred in holding that the treasury warrants involved in this case are
not negotiable instruments.

The petition has no merit.

From the above undisputed facts, it would appear to the Court that Metrobank was indeed negligent in
giving Golden Savings the impression that the treasury warrants had been cleared and that, consequently,
it was safe to allow Gomez to withdraw the proceeds thereof from his account with it. Without such
assurance, Golden Savings would not have allowed the withdrawals; with such assurance, there was no
reason not to allow the withdrawal. Indeed, Golden Savings might even have incurred liability for its refusal
to return the money that to all appearances belonged to the depositor, who could therefore withdraw it any
time and for any reason he saw fit.

It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to its
account with Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank to
determine the validity of the warrants through its own services. The proceeds of the warrants were withheld
from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own deposit. 7 It was
only when Metrobank gave the go-signal that Gomez was finally allowed by Golden Savings to withdraw
them from his own account.

The argument of Metrobank that Golden Savings should have exercised more care in checking the personal
circumstances of Gomez before accepting his deposit does not hold water. It was Gomez who was entrusting
the warrants, not Golden Savings that was extending him a loan; and moreover, the treasury warrants were
subject to clearing, pending which the depositor could not withdraw its proceeds. There was no question of
Gomez's identity or of the genuineness of his signature as checked by Golden Savings. In fact, the treasury
warrants were dishonored allegedly because of the forgery of the signatures of the drawers, not of Gomez
as payee or indorser. Under the circumstances, it is clear that Golden Savings acted with due care and
diligence and cannot be faulted for the withdrawals it allowed Gomez to make.

By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not trifling — more
than one and a half million pesos (and this was 1979). There was no reason why it should not have waited
until the treasury warrants had been cleared; it would not have lost a single centavo by waiting. Yet, despite
the lack of such clearance — and notwithstanding that it had not received a single centavo from the proceeds
of the treasury warrants, as it now repeatedly stresses — it allowed Golden Savings to withdraw — not once,
not twice, but thrice — from the uncleared treasury warrants in the total amount of P968,000.00

Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance and it
also wanted to "accommodate" a valued client. It "presumed" that the warrants had been cleared simply
because of "the lapse of one week." 8 For a bank with its long experience, this explanation is unbelievably
naive.

And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the dorsal side
of the deposit slips through which the treasury warrants were deposited by Golden Savings with its Calapan
branch. The conditions read as follows:
 Kindly note that in receiving items on deposit, the bank obligates itself only as the depositor's
collecting agent, assuming no responsibility beyond care in selecting correspondents, and until such
time as actual payment shall have come into possession of this bank, the right is reserved to charge
back to the depositor's account any amount previously credited, whether or not such item is returned.
This also applies to checks drawn on local banks and bankers and their branches as well as on this
bank, which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft or any other
reason. (Emphasis supplied.)

According to Metrobank, the said conditions clearly show that it was acting only as a collecting agent for
Golden Savings and give it the right to "charge back to the depositor's account any amount previously
credited, whether or not such item is returned. This also applies to checks ". . . which are unpaid due to
insufficiency of funds, forgery, unauthorized overdraft of any other reason." It is claimed that the said
conditions are in the nature of contractual stipulations and became binding on Golden Savings when Gloria
Castillo, as its Cashier, signed the deposit slips.

Doubt may be expressed about the binding force of the conditions, considering that they have apparently
been imposed by the bank unilaterally, without the consent of the depositor. Indeed, it could be argued that
the depositor, in signing the deposit slip, does so only to identify himself and not to agree to the conditions
set forth in the given permit at the back of the deposit slip. We do not have to rule on this matter at this
time. At any rate, the Court feels that even if the deposit slip were considered a contract, the petitioner
could still not validly disclaim responsibility thereunder in the light of the circumstances of this case.

In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to be
suggesting that as a mere agent it cannot be liable to the principal. This is not exactly true. On the contrary,
Article 1909 of the Civil Code clearly provides that —

Art. 1909. — The agent is responsible not only for fraud, but also for negligence, which shall be
judged 'with more or less rigor by the courts, according to whether the agency was or was not for a
compensation.

The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was the clearance
given by it that assured Golden Savings it was already safe to allow Gomez to withdraw the proceeds of the
treasury warrants he had deposited Metrobank misled Golden Savings. There may have been no express
clearance, as Metrobank insists (although this is refuted by Golden Savings) but in any case that clearance
could be implied from its allowing Golden Savings to withdraw from its account not only once or even twice
but three times. The total withdrawal was in excess of its original balance before the treasury warrants were
deposited, which only added to its belief that the treasury warrants had indeed been cleared.

Metrobank's argument that it may recover the disputed amount if the warrants are not paid for any reason is
not acceptable. Any reason does not mean no reason at all. Otherwise, there would have been no need at
all for Golden Savings to deposit the treasury warrants with it for clearance. There would have been no need
for it to wait until the warrants had been cleared before paying the proceeds thereof to Gomez. Such a
condition, if interpreted in the way the petitioner suggests, is not binding for being arbitrary and
unconscionable. And it becomes more so in the case at bar when it is considered that the supposed dishonor
of the warrants was not communicated to Golden Savings before it made its own payment to Gomez.

The belated notification aggravated the petitioner's earlier negligence in giving express or at least implied
clearance to the treasury warrants and allowing payments therefrom to Golden Savings. But that is not all.
On top of this, the supposed reason for the dishonor, to wit, the forgery of the signatures of the general
manager and the auditor of the drawer corporation, has not been established. 9 This was the finding of the
lower courts which we see no reason to disturb. And as we said in MWSS v. Court of Appeals: 10

Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA 238). It must be established by
clear, positive and convincing evidence. This was not done in the present case.
A no less important consideration is the circumstance that the treasury warrants in question are not
negotiable instruments. Clearly stamped on their face is the word "non-negotiable." Moreover, and this is
of equal significance, it is indicated that they are payable from a particular fund, to wit, Fund 501.

The following sections of the Negotiable Instruments Law, especially the underscored parts, are pertinent:

Sec. 1. — Form of negotiable instruments. — An instrument to be negotiable must conform to the

following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein
with reasonable certainty.

xxx xxx xxx

Sec. 3. When promise is unconditional. — An unqualified order or promise to pay is unconditional

within the meaning of this Act though coupled with —

(a) An indication of a particular fund out of which reimbursement is to be made or a particular account
to be debited with the amount; or

(b) A statement of the transaction which gives rise to the instrument judgment.

But an order or promise to pay out of a particular fund is not unconditional.

The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the
order or promise to pay "not unconditional" and the warrants themselves non-negotiable. There should be
no question that the exception on Section 3 of the Negotiable Instruments Law is applicable in the case at
bar. This conclusion conforms to Abubakar vs. Auditor General 11 where the Court held:

The petitioner argues that he is a holder in good faith and for value of a negotiable instrument and
is entitled to the rights and privileges of a holder in due course, free from defenses. But this treasury
warrant is not within the scope of the negotiable instrument law. For one thing, the document bearing
on its face the words "payable from the appropriation for food administration, is actually an Order
for payment out of "a particular fund," and is not unconditional and does not fulfill one of the essential
requirements of a negotiable instrument (Sec. 3 last sentence and section [1(b)] of the Negotiable
Instruments Law).

Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they
were "genuine and in all respects what they purport to be," in accordance with Section 66 of the Negotiable
Instruments Law. The simple reason is that this law is not applicable to the non-negotiable treasury
warrants. The indorsement was made by Gloria Castillo not for the purpose of guaranteeing the genuineness
of the warrants but merely to deposit them with Metrobank for clearing. It was in fact Metrobank that made
the guarantee when it stamped on the back of the warrants: "All prior indorsement and/or lack of
endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch."

The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the Philippine Islands, 12 but we feel this
case is inapplicable to the present controversy.1âwphi1 That case involved checks whereas this case
involves treasury warrants. Golden Savings never represented that the warrants were negotiable but signed
them only for the purpose of depositing them for clearance. Also, the fact of forgery was proved in that case
but not in the case before us. Finally, the Court found the Jai Alai Corporation negligent in accepting the
checks without question from one Antonio Ramirez notwithstanding that the payee was the Inter-Island Gas
Services, Inc. and it did not appear that he was authorized to indorse it. No similar negligence can be
imputed to Golden Savings.

We find the challenged decision to be basically correct. However, we will have to amend it insofar as it
directs the petitioner to credit Golden Savings with the full amount of the treasury checks deposited to its
account.

The total value of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez was allowed
to withdraw P1,167,500.00 before Golden Savings was notified of the dishonor. The amount he has
withdrawn must be charged not to Golden Savings but to Metrobank, which must bear the consequences of
its own negligence. But the balance of P586,589.00 should be debited to Golden Savings, as obviously
Gomez can no longer be permitted to withdraw this amount from his deposit because of the dishonor of the
warrants. Gomez has in fact disappeared. To also credit the balance to Golden Savings would unduly enrich
it at the expense of Metrobank, let alone the fact that it has already been informed of the dishonor of the
treasury warrants.

WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of the dispositive
portion of the judgment of the lower court shall be reworded as follows:

3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter allowing
defendant Golden Savings & Loan Association, Inc. to withdraw the amount outstanding thereon, if
any, after the debit.

SO ORDERED.

THE PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. PAZ AGUDELO Y GONZAGA, ET

AL., defendants. PAZ AGUDELO Y GONZAGA, appellant.

VILLA-REAL, J.:

The defendant Paz Agudelo y Gonzaga appeals to this court from the judgment rendered by the Court of
First Instance of Occidental Negros, the dispositive part of which reads as follows:

Wherefore, judgment is rendered herein absolving the defendant Mauro A. Garrucho from the
complaint and ordering the defendant Paz Agudelo y Gonzaga to pay to the plaintiff the sum of
P31,091.55, Philippine currency, together with the interest on the balance of P20,774.73 at 8 per
cent per annum of P4.55 daily from July 16, 1929, until fully paid, plus the sum of P1,500 as
attorney's fees, and the costs of this suit.

It is hereby ordered that in case the above sums adjudged in favor of the defendant by virtue of this
judgment are not paid to the Philippine National Bank or deposited in the office of the clerk of this
court, for delivery to the plaintiff, within three months from the date of this decision, the provincial
sheriff of Occidental Negros shall set at public auction the mortgaged properties described in annex
E of the second amended complaint, and apply the proceeds thereof to the payment of the sums in
question.

It is further ordered that in case the proceeds of the mortgaged properties are not sufficient to cover
the amount of this judgment, a writ of execution be issued against any other property belonging to
the defendant Paz Agudelo y Gonzaga, not otherwise exempt from execution, to cover the balance
resulting therefrom.

In support of her appeal, the appellant assigns six alleged errors as committed by the trial court, which we
shall discuss in the course of this decision.
The following pertinent facts, which have been proven without dispute during the trial, are necessary for
the decision of the questions raised in the present appeal, to wit:

On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga executed in favor of her nephew,
Mauro A. Garrucho, the document Exhibit K conferring upon him a special power of attorney sufficiently
broad in scope to enable him to sell, alienate and mortgage in the manner and form he might deem
convenient, all her real estate situated in the municipalities of Murcia and Bacolod, Occidental Negros,
consisting in lots Nos. 61 and 207 of the cadastral survey of Bacolod, Occidental Negros, together with the
improvement thereon.

On December 22, 1920, Amparo A. Garrucho executed the document Exhibit H whereby she conferred upon
her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope to enable him to sell,
alienate, mortgage or otherwise encumber, in the manner and form he might deem convenient, all her real
estate situated in the municipalities of Murcia and Bago, Occidental Negros.

Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any loan
nor to constitute a mortgage on the properties belonging to the respective principals, to secure his
obligations.

On December 23, 1920, Mauro A. Garrucho executed in the favor of the plaintiff entity, the Philippine
National bank, the document Exhibit G, whereby he constituted a mortgage on lot No. 878 of the cadastral
survey of Murcia, Occidental Negros, with all the improvements thereon, described in transfer certificate of
title No. 2415 issued in the name of Amparo A. Garrucho, to secure the payment of credits, loans,
commercial overdrafts, etc., not exceeding P6,000, together with interest thereon, which he might obtain
from the aforesaid plaintiff entity, issuing the corresponding promissory note to that effect.

During certain months of the year 1921 and 1922, Mauro A. Garrucho maintained a personal current account
with the plaintiff bank in the form of a commercial credit withdrawable through checks (Exhibits S, 1 and
T).

On August 24, 1931, the said Mauro A. Garrucho executed in favor of the plaintiff entity, the Philippine
National Bank, the document Exhibit J whereby he constituted a mortgage on lots Nos. 61 and 207 of the
cadastral survey of Bacolod together with the buildings and improvements thereon, described in original
certificates of title Nos. 2216 and 1148, respectively, issued in the name of Paz Agudelo y Gonzaga, to
secure the payment of credits, loans and commercial overdrafts which the said bank might furnish him to
the amount of P16,00, payable on August 24, 1922, executing the corresponding promissory note to that
effect.

The mortgage deeds Exhibit G and J as well as the corresponding promissory notes for P6,000 and P16,000,
respectively, were executed in Mauro A. Garrucho's own name and signed by him in his personal capacity,
authorizing the mortgage creditor, the Philippine National Bank, to take possession of the mortgaged
properties, by means of force if necessary, in case he failed to comply with any of the conditions stipulated
therein.

On January 4, 1922, the manager of the Iloilo branch of the Philippine National Bank notified Mauro A.
Garrucho that his promissory note for P6,000 of 10 days within which to make payment thereof (Exhibit
O).1awphil.net

On May 9, 1922, the said manager notified Mauro A. Garrucho that his commercial credit was closed from
that date (Exhibit S).

Inasmuch as Mauro A. Garrucho had overdrawn his credit with the plaintiff-appellee, the said manager
thereof, in a letter dated June 27, 1922 (Exhibit T), requested him to liquidate his account amounting to
P15,148.15, at the same time notifying him that his promissory note for P16,000 giving as security for the
commercial overdraft in question, had fallen due some time since.
On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff entity the deed Exhibit C whereby
he constituted a mortgage on lots Nos. 61 and 207 of the cadastral survey of Bacolod, together with the
improvements thereon, described in transfer certificates of title Nos. 2216 and 1148, respectively, issued in
the name of Paz Agudelo y Gonzaga, and on lot No. 878 of the cadastral survey of Murcia, described in
transfer certificate of title No. 2415, issued in the name of Amparo A. Garrucho.

In connection of the credits, loans, and commercial overdrafts amounting to P21,000 which had been
granted him, Mauro A. Garrucho, on the said date July 15, 1922, executed the promissory note, Exhibit B,
for P21,000 as a novation of the former promissory notes for P6,000 and P16,000, respectively.

In view of the aforesaid consolidated mortgage, Exhibit C, the Philippine National Bank, on the said date of
July 15, 1922, cancelled the mortgages constituted on lots Nos. 61, 207 and 878 described in Torrens titles
Nos. 2216, 1148 and 2415, respectively.

On November 25, 1925, Amparo A. Garrucho sold lot No. 878 described in certificate of title No. 2415, to
Paz Agudelo y Gonzaga (Exhibit M).

On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga signed the affidavit, Exhibit N, which
reads as follows:

Know all men by these presents: That I, Paz Agudelo y Gonzaga, single, of age, and resident
of the City of Manila, P. I., by these present do hereby agree and consent to the transfer in
my favor of lot No. 878 of the Cadastre of Murcia, Occidental Negros, P. I., by Miss Amparo
A. Garrucho, as evidenced by the public instrument dated November 25, 1925, executed
before the notary public Mr. Genaro B. Benedicto, and do hereby further agree to the amount
of the lien thereon stated in the mortgage deed executed by Miss Amparo A. Garrucho in favor
of the Philippine National Bank.

In testimony whereof, I hereunto affix my signature in the City of Manila, P.I., this 15th of
January, 1926.

(Sgd.) PAZ AGUDELO Y GONZAGA.

Pursuant to the sale made by Amparo A. Garrucho in favor of Paz Agudelo y Gonzaga, of lot No. 878 of the
cadastral survey of Murcia, described in certificate of title No. 2145 issued in the name of said Amparo A.
Garrucho, and to the affidavit, Exhibit N, transfer certificate of title No. 5369 was issued in the name of Paz
Agudelo y Gonzaga.

Without discussing and passing upon whether or not the powers of attorney issued in favor of Mauro A.
Garrucho by his sister, Amparo A. Garrucho, and by his aunt, Paz Agudelo y Gonzaga, respectively, to
mortgage their respective real estate, authorized him to obtain loans secured by mortgage in the properties
in question, we shall consider the question of whether or not Paz Agudelo y Gonzaga is liable for the payment
of the loans obtained by Mauro A. Garrucho from the Philippine National Bank for the security of which he
constituted a mortgage on the aforesaid real estate belonging to the defendant-appellant Paz Agudelo y
Gonzaga.

Article 1709 of the Civil Code provides the following:

ART. 1709. By the contract of agency, one person binds himself to render some service, or to do
something for the account or at the request of another.

And article 1717 of the same Code provides as follows:

ART. 1717. When an agent acts in his own name, the principal shall have no right of action against
the persons with whom the agent has contracted, or such persons against the principal.
 In such case, the agent is directly liable to the person with whom he has contracted, as if the
transaction were his own. Cases involving things belonging to the principal are excepted.

The provisions of this article shall be understood to be without prejudice to actions between principal
and agent.

Aside from the phrases "attorney in fact of his sister, Amparo A. Garrucho, as evidenced by the power of
attorney attached hereto" and "attorney in fact of Paz Agudelo y Gonzaga" written after the name of Mauro
A. Garrucho in the mortgage deeds, Exhibits G. and J, respectively, there is nothing in the said mortgage
deeds to show that Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of Paz Agudelo y
Gonzaga, and that he obtained the loans mentioned in the aforesaid mortgage deeds and constituted said
mortgages as security for the payment of said loans, for the account and at the request of said Amparo A.
Garrucho and Paz Agudelo y Gonzaga. The above-quoted phrases which simply described his legal
personality, did not mean that Mauro A. Garrucho obtained the said loans and constituted the mortgages in
question for the account, and at the request, of his principals. From the titles as well as from the signatures
therein, Mauro A. Garrucho, appears to have acted in his personal capacity. In the aforesaid mortgage
deeds, Mauro A. Garrucho, in his capacity as mortgage debtor, appointed the mortgage creditor Philippine
National Bank as his attorney in fact so that it might take actual and full possession of the mortgaged
properties by means of force in case of violation of any of the conditions stipulated in the respective
mortgage contracts. If Mauro A. Garrucho acted in his capacity as mere attorney in fact of Amparo A.
Garrucho and of Paz Agudelo y Gonzaga, he could not delegate his power, in view of the legal principle
of "delegata potestas delegare non potest" (a delegated power cannot be delegated), inasmuch as there is
nothing in the records to show that he has been expressly authorized to do so.

He executed the promissory notes evidencing the aforesaid loans, under his own signature, without authority
from his principal and, therefore, were not binding upon the latter (2 Corpus Juris, pp. 630-637, par. 280).
Neither is there anything to show that he executed the promissory notes in question for the account, and at
the request, of his respective principals (8 Corpus Juris, pp. 157-158).

Furthermore, it is noted that the mortgage deeds, Exhibits C and J, were cancelled by the documents,
Exhibits I and L, on July 15, 1922, and in their stead the mortgage deed, Exhibit C, was executed, in which
there is absolutely no mention of Mauro A. Garrucho being attorney in fact of anybody, and which shows
that he obtained such credit fro himself in his personal capacity and secured the payment thereof by
mortgage constituted by him in his personal capacity, although on properties belonging to his principal Paz
Agudelo y Gonzaga.

Furthermore, the promissory notes executed by Mauro A. Garrucho in favor of the Philippine National Bank,
evidencing loans of P6,000 and P16,000 have been novated by the promissory notes for P21,000 (Exhibit
B) executed by Mauro A. Garrucho, not only without express authority from his principal Paz Agudelo y
Gonzaga but also under his own signature.

In the case of National Bank vs. Palma Gil (55 Phil., 639), this court laid down the following doctrine:

A promissory note and two mortgages executed by the agent for and on behalf of his principal, in
accordance with a power of attorney executed by the principal in favor of the agent, are valid, and
as provided by article 1727 of contracted by the agent; but a mortgage on real property of the
principal not made and signed in the name of the principal is not valid as to the principal.

It has been intimated, and the trial judge so stated. that it was the intention of the parties that Mauro A.
Garrucho would execute the promissory note, Exhibit B, and the mortgage deed, Exhibit C, in his capacity
as attorney in facts of Paz Agudelo y Gonzaga, and that although the terms of the aforesaid documents
appear to be contrary to the intention of the parties, such intention should prevail in accordance with article
1281 of the Civil Code.

Commenting on article 1281 of the Civil Code, Manresa, in his Commentaries to the Civil Code, says the
following:
 IV. Intention of the contracting parties; its appreciation. — In order that the intention may prevail,
it is necessary that the question of interpretation be raised, either because the words used appear
to be contrary thereto, or by the existence of overt acts opposed to such words, in which the intention
of the contracting parties is made manifest. Furthermore, in order that it may prevail against the
terms of the contract, it must be clear or, in other words, besides the fact that such intention should
be proven by admissible evidence, the latter must be of such charter as to carry in the mind of the
judge an unequivocal conviction. This requisite as to the kind of evidence is laid down in the decision
relative to the Mortgage Law of September 30, 1891, declaring that article 1281 of the Civil Code
gives preference to intention only when it is clear. When the aforesaid circumstances is not present
in a document, the only thing left for the register of deeds to do is to suspend the registration thereof,
leaving the solution of the problem to the free will of the parties or to the decision of the courts.

However, the evident intention which prevails against the defective wording thereof is not that of
one of the parties, but the general intent, which, being so, is to a certain extent equivalent to mutual
consent, inasmuch as it was the result desired and intended by the contracting parties. (8 Manresa,
3d edition, pp. 726 and 727.)

Furthermore, the records do not show that the loan obtained by Mauro A. Garrucho, evidenced by the
promissory note, Exhibit B, was for his principal Paz Agudelo y Gonzaga. The special power of attorney,
Exhibit K, does not authorize Mauro A. Garrucho to constitute a mortgage on the real estate of his principal
to secure his personal obligations. Therefore, in doing so by virtue of the document, Exhibit C, he exceeded
the scope if his authority and his principal is not liable for his acts. (2 Corpus Juris, p. 651; article 1714,
Civil Code.)

It is further claimed that inasmuch as the properties mortgaged by Mauro A. Garrucho belong to Paz Agudelo
y Gonzaga, the latter is responsible for the acts of the former although he acted in his own name, in
accordance with the exception contained in article 1717 of the Civil Code. It would be an exception with the
properties of his own name in connection with the properties of his principal, does so within the scope of his
authority. It is noted that Mauro A. Garrucho was not authorized to execute promissory notes even in the
name of his principal Paz Agudelo y Gonzaga, nor to constitute a mortgage on her real properties to secure
such promissory notes. The plaintiff Philippine National Bank should know this inasmuch as it is in duty
bound to ascertain the extent of the agent's authority before dealing with him. Therefore, Mauro A. Garrucho
and not Paz Agudelo y Gonzaga is personally liable for the amount of the promissory note Exhibit B. (2
Corpus Juris, pp. 563-564.)

However, Paz Agudelo y Gonzaga in an affidavit dated January 15, 1926 (Exhibit AA), and in a letter dated
January 16, 1926 (Exhibit Z), gave her consent to the lien on lot No. 878 of the cadastre of Murcia, Occidental
Negros, described in Torrens title No. 5369, the ownership of which was transferred to her by her niece
Amparo A. Garrucho. This acknowledgment, however, does not extend to lots Nos. 207 and 61 of the
cadastral survey of Bacolod, described in transfer certificates of title Nos. 1148 and 2216, respectively,
inasmuch as, although it is true that a mortgage is indivisible as to the contracting parties and as top their
successors in interest (article 1860, Civil Code), it is not so with respect to a third person who did not take
part in the constitution thereof either personally or through an agent, inasmuch as he can make the
acknowledgment thereof in the form and to the extent he may deem convenient, on the ground that he is
not in duty bound to acknowledge the said mortgage. Therefore, the only liability of the defendant-appellant
Paz Agudelo y Gonzaga is that which arises from the aforesaid acknowledgment, but only with respect to
the lien and not to the principal obligation secured by the mortgage acknowledged by her to have been
constituted on said lot No. 878 of the cadastral survey of Murcia, Occidental Negros. Such liability is not
direct but a subsidiary one.

Having reach this contention, it is unnecessary to pass upon the other questions of law raised by the
defendant- appellant in her brief and upon the law cited therein.

In view of the foregoing consideration, we are of the opinion and so hold that when an agent negotiates a
loan in his personal capacity and executes a promissory note under his own signature, without express
authority from his principal, giving as security therefor real estate belonging to the letter, also in his own
name and not in the name and representation of the said principal, the obligation do constructed by him is
personal and does not bind his aforesaid principal.
Wherefore, it is hereby held that the liability constructed by the aforesaid defendant-appellant Paz Agudelo
y Gonzaga is merely subsidiary to that of Mauro A. Garrucho, limited lot No. 878 of the cadastral survey of
Murcia, Occidental Negros, described in Torrens title No. 2415. However, inasmuch as the principal obligator,
Mauro A. Garrucho, has been absolved from the complaint and the plaintiff- appellee has not appealed from
the judgment absolving him, the law does not afford any remedy whereby Paz Agudelo y Gonzaga may be
required to comply with the said subsidiary obligation in view of the legal maxim that the accessory follows
the principal. Wherefore, the defendant herein should also be absolved from the complaint which is hereby
dismissed, with the costs against the appellee. So ordered.

PHILIPPINE PRODUCTS COMPANY, plaintiff-appellant, vs. PRIMATERIA SOCIETE ANONYME POUR

LE COMMERCE EXTERIEUR: PRIMATERIA (PHILIPPINES) INC., ALEXANDER G. BAYLIN and JOSE
M. CRAME, defendants-appellees.

BENGZON, C.J.:

This is an action to recover from defendants, the sum of P33,009.71 with interest and attorney's fees of
P8,000.00.

Defendant Primateria Societe Anonyme Pour Le Commerce Exterieur (hereinafter referred to as Primateria
Zurich) is a foreign juridical entity and, at the time of the transactions involved herein, had its main office
at Zurich, Switzerland. It was then engaged in "Transactions in international trade with agricultural products,
particularly in oils, fats and oil-seeds and related products."

The record shows that:

On October 24, 1951, Primateria Zurich, through defendant Alexander B. Baylin, entered into an agreement
with plaintiff Philippine Products Company, whereby the latter undertook to buy copra in the Philippines for
the account of Primateria Zurich, during "a tentative experimental period of one month from date." The
contract was renewed by mutual agreement of the parties to cover an extended period up to February 24,
1952, later extended to 1953. During such period, plaintiff caused the shipment of copra to foreign countries,
pursuant to instructions from defendant Primateria Zurich, thru Primateria (Phil.) Inc. — referred to
hereafter as Primateria Philippines — acting by defendant Alexander G. Baylin and Jose M. Crame, officers
of said corporation. As a result, the total amount due to the plaintiff as of May 30, 1955, was P33,009.71.

At the trial, before the Manila court of first instance, it was proven that the amount due from defendant
Primateria Zurich, on account of the various shipments of copra, was P31,009.71, because it had paid
P2,000.00 of the original claim of plaintiff. There is no dispute about accounting.

And there is no question that Alexander G. Baylin and Primateria Philippines acted as the duly authorized
agents of Primateria Zurich in the Philippines. As far as the record discloses, Baylin acted indiscriminately
in these transactions in the dual capacities of agent of the Zurich firm and executive vice-president of
Primateria Philippines, which also acted as agent of Primateria Zurich. It is likewise undisputed that
Primateria Zurich had no license to transact business in the Philippines.

For failure to file an answer within the reglementary period, defendant Primateria Zurich was declared in
default.

After trial, judgment was rendered by the lower court holding defendant Primateria Zurich liable to the
plaintiff for the sums of P31,009.71, with legal interest from the date of the filing of the complaint, and
P2,000.00 as and for attorney's fees; and absolving defendants Primateria (Phil.), Inc., Alexander G. Baylin,
and Jose M. Crame from any and all liability.

Plaintiff appealed from that portion of the judgment dismissing its complaint as regards the three
defendants.
It is plaintiff's theory that Primateria Zurich is a foreign corporation within the meaning of Sections 68 and
69 of the Corporation Law, and since it has transacted business in the Philippines without the necessary
license, as required by said provisions, its agents here are personally liable for contracts made in its behalf.

Section 68 of the Corporation Law states: "No foreign corporation or corporation formed, organized, or
existing under any laws other than those of the Philippines shall be permitted to transact business in the
Philippines, until after it shall have obtained a license for that purpose from the Securities and Exchange
Commission .. ." And under Section 69, "any officer or agent of the corporation or any person transacting
business for any foreign corporation not having the license prescribed shall be punished by imprisonment
for etc. ... ."

The issues which have to be determined, therefore, are the following:

1. Whether defendant Primateria Zurich may be considered a foreign corporation within the meaning of
Sections 68 and 69 of the Corporation Law;

2. Assuming said entity to be a foreign corporation, whether it may be considered as having transacted
business in the Philippines within the meaning of said sections; and

3. If so, whether its agents may be held personally liable on contracts made in the name of the entity with
third persons in the Philippines.

The lower court ruled that the Primateria Zurich was not duly proven to be a foreign corporation; nor that
a societe anonyme ("sociedad anomima") is a corporation; and that failing such proof, the societe cannot
be deemed to fall within the prescription of Section 68 of the Corporation Law. We agree with the said
court's conclusion. In fact, our corporation law recognized the difference between sociedades anonimas and
corporations.

At any rate, we do not see how the plaintiff could recover from both the principal (Primateria Zurich) and
its agents. It has been given judgment against the principal for the whole amount. It asked for such
judgment, and did not appeal from it. It clearly stated that its appeal concerned the other three defendants.

But plaintiff alleges that the appellees as agents of Primateria Zurich are liable to it under Art. 1897 of the
New Civil Code which reads as follows:

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.

But there is no proof that, as agents, they exceeded the limits of their authority. In fact, the principal —
Primateria Zurich — who should be the one to raise the point, never raised it, denied its liability on the
ground of excess of authority. At any rate, the article does not hold that in cases of excess of
authority, both the agent and the principal are liable to the other contracting party.

This view of the cause dispenses with the necessity of deciding the other two issues, namely: whether the
agent of a foreign corporation doing business, but not licensed here is personally liable for contracts made
by him in the name of such corporation.1 Although, the solution should not be difficult, since we already
held that such foreign corporation may be sued here (General Corporation vs. Union Ins., 87 Phil. 509). And
obviously, liability of the agent is necessarily premised on the inability to sue the principal or non-liability of
such principal. In the absence of express legislation, of course.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the appealed judgment is affirmed, with costs against
appellant.

NATIONAL POWER CORPORATION, Plaintiff-Appellant, v. NATIONAL MERCHANDISING

CORPORATION and DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES, Defendants-
Appellants.
SYNOPSIS

Plaintiff-appellant National Power Corporation (NPC) and defendant- appellant National Merchandising
Corporation (NAMERCO), the Philippine representative of New York-based International Commodities
Corporation, executed a contract of sale of sulfur with a stipulation for liquidated damages in case of breach.
Defendant-appellant Domestic Insurance Company executed a performance bond in favor of NPC to
guarantee the seller’s obligation. In entering into the contract, Namerco, however, did not disclose to NPC
that Namerco’s principal, in a cabled instruction, stated that the sale was subject to availability of a steamer,
and contrary to its principal’s instruction, Namerco agreed that non-availability of a steamer was not a
justification for non-payment of liquidated damages. The New York supplier was not able to deliver the sulfur
due to its inability to secure shipping space. Consequently, the Government Corporate Counsel rescinded
the contract of sale due to the supplier’s non-performance of its obligations, and demanded payment of
liquidated damages from both Namerco and the surety. Thereafter, NPC sued for recovery of the stipulated
liquidated damages. After trial, the Court of First Instance rendered judgment ordering defendants-
appellants to pay solidarity to the NPC reduced liquidated damages with interest.

The Supreme Court held that Namerco is liable fur 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 Court, however, further reduced the solidary
liability of defendants-appellants for liquidated damages.

D E C I S I O N

AQUINO, J.:

This case is about the recovery of liquidated damages from a seller’s agent that allegedly exceeded its
authority in negotiating the sale.

Plaintiff National Power Corporation appealed on questions of law from the decision of the Court of First
Instance of Manila dated October 10, 1966, ordering defendants National Merchandising Corporation and
Domestic Insurance Company of the Philippines to pay solidarily to the National Power Corporation reduced
liquidated damages in the sum of P72,114.66 plus legal, rate of interest from the filing of the complaint and
the costs (Civil Case No. 33114).

The two defendants appealed from the same decision allegedly because it is contrary to law and the
evidence. As the amount originally involved is P360,572.80 and defendants’ appeal is tied up with plaintiff’s
appeal on questions of law, defendants’ appeal can be entertained under Republic Act No. 2613 which
amended section 17 of the Judiciary Law.

On October 17, 1956, the National Power Corporation and National Merchandising Corporation (Namerco)
of 3111 Nagtahan Street, Manila, as the representative of the International Commodities Corporation of 11
Mercer Street, New York City (Exh. C), 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 (450,716 (Exh. E).

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 (Exh. F).

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 two-
fifth of one percent of the full contract price for the first thirty days of default and four-fifth of one percent
for every day thereafter until complete delivery is made (Art. 8, p. 111, Defendants’ Record on Appeal).

In a letter dated November 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 (Exh. I). Notice of that letter of credit was, received by cable by
the New York firm on November 15, 1956 (Exh. 80-Wallick). 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 (Exh. K).

In a letter dated February 27, 1957, the general manager of the NPC advised Namerco and the Domestic
Insurance Company that under Article 9 of the contract of sale "non-availability of bottom or vessel" was
not a fortuitous event that would excuse non-performance and that the NPC would resort to legal remedies
to enforce its rights (Exh. L and M).

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 non-performance of its obligations (Exh. G). 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 (Exh. H and H-
1).

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.

On November 5, 1957, the NPC sued the New York firm, Namerco and the Domestic Insurance Company
for the recovery of the stipulated liquidated damages (Civil Case No. 33114).

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 (p. 60, Defendants Record on Appeal).

On the other hand, 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 (Civil Case No. 37019). The two cases, both filed in the Court of First Instance of Manila,
were consolidated. A joint trial was held. The lower court rendered separate decisions in the two cases on
the same date.

In Civil Case No. 37019, the trial court dismissed Wallick’s action for damages against Namerco because the
assignment in favor of Wallick was champertous 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 (Res. of
July 11, 1972 in L-33893).In this 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.

Defendants’ appeal L-33819. — They contend that the delivery of the sulfur was conditioned on the
availability of a vessel to carry the shipment and that Namerco acted within the scope of its authority as
agent in signing the contract of sale.

The documentary evidence belies these contentions. The invitation to bid issued by the NPC provides that
non-availability of a steamer to transport the sulfur is not a ground for non-payment of the liquidated
damages in case of non-performance 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."cralaw virtua1aw
library

"15. Liquidated damages. — . . .

"Availability of vessel being a responsibility of the Contractor as specified in item 4 of this specification, 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 nonavailability 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 nonavailability of vessel shall, in no case, be considered as a ground for extension of time.
. . . ."cralaw virtua1aw library

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" (Exh. B, p. 22, Defendants’ Record on Appeal).

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" (Exh. E, p. 36,
Record on Appeal).

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 (Exh. N). However, Namerco did not disclose that cable to the NPC
and, contrary to its principal’s instruction, it agreed that nonavailability of a steamer was not a justification
for nonpayment of the liquidated damages.

The trial court rightly concluded that Namerco acted beyond the bounds of its authority because it violated
its principal’s cabled instructions (1) that the delivery of the sulfur should be "C & F Manila", not "C & F
Iligan City" ; (2) that the sale be subject to the availability of a steamer and (3) that the seller should be
allowed to withdraw right away the full amount of the letter of credit and not merely eighty percent thereof
(pp- 123-124, Record on Appeal).

The defendants argue that 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.

The NPC counter-argues that Namerco should’ have advised the NPC of the limitations on its authority to
negotiate the sale.

We agree with the trial court that 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 (Exh. T).

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 (Exh. 14, 14-A
and Exh. V).

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 (Exh. W).

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 (Exh. Y and Y-1).

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 repeated instructions of the former (Exh. U and Z). Said the vice-president of the New York firm to
Namerco:chanrobles virtual lawlibrary

"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."cralaw virtua1aw library

The rule relied upon by the defendants-appellants 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 it 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.

As observed by Castan Tobeñas, an agent "que haya traspasado los limites dew mandato, lo que equivale
a obrar sin mandato" (4 Derecho Civil Español, 8th Ed., 1956, p. 520).

As opined by Olivieri, "si el mandante contesta o impugna el negocio juridico concluido por el mandatario
con el tercero, aduciendo el exceso de los limites impuestos, es justo que el mandatario, que ha tratado con
engaño al tercero, sea responsable personalmente respecto de el des las consecuencias de tal falta de
aceptacion por parte del mandate. Tal responsabilidad del mandatario se informa en el principio de la falta
de garantia de la existencia del mandato y de la cualidad de mandatario, garantia impuesta coactivamente
por la ley, que quire que aquel que contrata como mandatario este obligado a garantizar al tercero la efectiva
existencia de los poderes que afirma se halla investido, siempre que el tercero mismo sea de buena fe.
Efecto de tal garantia es el resarcimiento de los daños causados al tercero como consecuencia de la negativa
del mandante a reconocer lo actuado por el mandatario." (26, part II, Scaveola, Codigo Civil, 1951, pp.
358-9).

Manresa says that the agent who exceeds the limits of his authority is personally liable "porque realmente
obra sin poderes" 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 (11 Codigo Civil, 6th Ed., 1972, p. 725).

The defendants also contend that the trial court erred in holding as enforceable the stipulation for liquidated
damages despite its finding that the contract was executed by the agent in excess of its authority and is,
therefore, allegedly unenforceable.

In support of that contention, 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.

We hold that defendants’ contention is untenable because article 1403 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 it principal but against the agent and its surety.

It is being enforced against the agent because article 1807 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."

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 the 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.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

The New York corporation in its letter of April 26, 1956 said:jgc:chanrobles.com.ph

"We hereby certify that National Merchandising Corporation . . . are our exclusive representatives in the
Philippines for the sale of our products.

"Furthermore, we certify that they are empowered to present our offers in our behalf in accordance with our
cabled or written instructions." (Exh. C).

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.

Defendants’ contention that Namerco’s liability should be based on tort or quasi-delict, as held in some
American cases, like Mendelsohn v. Holton, 149 N.E. 38, 42 ALR 1307, is not well-taken. As correctly argued
by the NPC, it would be unjust and inequitable for Namerco to escape liability after it had deceived the NPC.

Another contention of the defendants is that the 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" (72 C.J.S. 525).

Defendants’ other contentions are that 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 nondelivery.

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
nondelivery of the sulfur.chanrobles.com.ph : virtual law library

The parties foresaw that it might be difficult to ascertain the exact amount of damages for nondelivery of
the sulfur. So, they fixed the liquidated damages to be paid as indemnity to the NPC.

On the other hand, nominal damages are damages in name only or are in fact the same as no damages (25
C.J.S. 466). 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.

As to the contention that the damages should be computed on the basis of forty-five days, the period
required by a vessel leaving Galveston, Texas to reach Iligan City, that point need not be resolved in view
of our conclusion that the liquidated damages should be equivalent to the amount of the bidder’s bond
posted by Namerco.

NPC’s appeal, L-33897. — The trial court reduced the liquidated damages to twenty percent of the stipulated
amount. the NPC contends the it is entitled to the full amount of liquidated damages in the sum of
P360,572.80.

In reducing the liquidated damages, the trial court relied on article 2227 of the Civil Code which provides
that "liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they
are iniquitous or unconscionable."

Apparently, the trial court regarded as an equitable consideration the persistent efforts of Namerco and its
principal to charter a steamer and that the failure of the New York firm to secure shipping space was not
attributable to its fault or negligence.

The trial court also took into account the fact that the selling price of the sulfur was P450,716 and that to
award as liquidated damages more than eighty percent of the price would not be altogether reasonable.

The NPC contends that Namerco was an obligor in bad faith and, therefore, it should be responsible for all
damages which could be reasonably attributed to its nonperformance of the obligation as provided in article
2201 of the Civil Code.

On the other hand, the defendants argue that Namerco having acted as a mere agent, was not liable for the
liquidated damages stipulated in the alleged unenforceable contract of sale; that, as already noted,
Namerco’s liability should be based on tort or quasi-delict and not on the contract of sale; that if Namerco
is not liable, then the insurance company, its surety, is likewise not liable; that the NPC is entitled only to
nominal damages because it was able to secure the sulfur from another source (58-59 tsn November 10,
1960) and that the reduced award of stipulated damages is highly iniquitous, considering that Namerco
acted in good faith and that the NPC did not suffer any actual damages.chanrobles law library : red

These contentions have already been resolved in the preceding discussion. 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.

Ruling on the amount of damages. — 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.

SO ORDERED.

NICHOLAS Y. CERVANTES, petitioner, vs. COURT OF APPEALS AND THE PHILIPPINE AIR LINES,
INC., respondent.

PURISMA, 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 toto the judgment of
the trial court dismissing petitioner's 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 Las 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 petitioner's 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 carrier's 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 PAL's
agents in Los Angeles and San Francisco changed the compromise agreement between the parties.

As aptly by the appellate court:

. . . 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 PAL's 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 1989 11 of the New Civil Code, the acts 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
principal's ratification. 12

Anent the second issue, petitioner's 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 PAL's 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 PAL's legal counsel was
authorized to do so.

However, notwithstanding PAL's 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. . . .

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 attorney's 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.

GOLD STAR MINING CO., INC., petitioner, vs. MARTA LIM-JIMENA, CARLOS JIMENA, GLORIA
JIMENA, AURORA JIMENA, JAIME JIMENA, DANTE JIMENA, JORGE JIMENA, JOYCE JIMENA, as
legal heirs of the deceased VICTOR JIMENA, and JOSE HIDALGO, respondents.

REYES, J.B.L., J.:

From an affirmance in toto by the Court of Appeals1 of a decision of the Court of First Instance of
Manila,2 specifically the portion thereof condemning Gold Star Mining Co., Inc. to pay Marta Lim Vda. de
Jimena, et al., the sum of P30,691.92 solidarily with Ananias Isaac Lincallo for violation of an injunction this
appeal is taken.

It is of record that in 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena one-half
(1/2) of the proceeds from all mining claims that he would purchase with the money to be advanced by the
latter. This agreement was later on modified (in a 1939 notarial instrument duly registered with the Register
of Deeds of Marinduque in his capacity as mining recorder) so as to include in the equal sharing arrangement
not only the proceeds from several mining claims, which by that time had already been purchased by Lincallo
with various sums totalling P5,800.00 supplied by Jimena, but also the lands constituting the same, and so
as to bind thereby their "heirs, assigns, or legal representatives." Apparently, the mining rights over part of
the claims were assigned by Lincallo to Gold Star Mining Co., Inc., sometime before World War Il because
in 1950 the corporation paid him P5,000 in consideration of, and as a quitclaim for, pre-war royalties.
On several occasions thereafter, the mining claims in question were made subject-matter of contracts
entered into by Lincallo in his own name and for his benefit alone without the slightest intimation of Jimena's
interests over the same. Thus, on 19 September 1951, Lincallo and one Alejandro Marquez, as separate
owners of particular mining claims, entered into an agreement with Gold Star Mining Co., Inc., the assignee
thereof, regarding allotment to Lincallo of 45% of the royalties due from the corporation. Four months later,
Lincallo, Marquez and Congressman Panfilo Manguerra, again as owners, leased certain mining claims to
Jacob Cabarrus, who, in turn, transferred to Marinduque Iron Mines Agents, Inc., his rights under the lease
contract. By virtue of still another contract executed by these lessors on 29 February 1952, 43% of the
royalties due from Marinduque Iron Mines Agents, Inc., were agreed upon to be paid to Lincallo.

As early as August, 1939 and down to September, 1952, Jimena repeatedly apprised Gold Star Mining Co.,
Inc., and Marinduque Iron Mines Agents, Inc., of his interests over the mining claims so assigned and/or
leased by Lincallo and, accordingly, demanded recognition and payment of his one-half share in all the
royalties, allocated and paid and, thereafter, to be paid to the latter. Both corporations, however, ignored
Jimena's demands.

Payment of the P5,800 advanced for the purchase of the mining claims, as well as the one-half share in the
royalties paid by the two corporations, were also repeatedly demanded by Jimena from Lincallo.
Acknowledging Jimena's contractual claim, Lincallo off and on promised to settle his obligations. And on 14
July 1952, Lincallo promised for the last time, to settle everything on or before the 30th day of the same
month.

Lincallo, however, did not only fail to settle his accounts with Jimena but transferred on 16 August 1952, a
month after he promised to pay Jimena, 35 of his 45% share in the royalties due from Gold Star Mining Co.,
Inc., to one Gregorio Tolentino, a salaried employee, for an alleged consideration of P10,000.00.

On 2 September 1954, Jimena commenced a suit against Lincallo for recovery of his advances and his one-
half share in the royalties. Gold Star Mining Co., Inc., and Marinduque Iron Mines, Inc., together with
Tolentino, were later joined as defendants.

On 17 September 1954, the trial court issued, upon petition of Jimena, a writ of preliminary injunction
restraining Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., from paying royalties during
the pendency of the case to Lincallo, his assigns or legal representatives. Despite the injunction, however,
Gold Star Mining Co., Inc., was found out to have paid P30, 691.92 to Lincallo and Tolentino. Said corporation
claimed later on (on appeal) that the injunction had been superseded and/or dissolved on 25 May 1955 by
the trial court's grant of Jimena's petition for a writ of preliminary attachment "to supersede the writ of
preliminary injunction previously issued." But as the grant was conditioned upon filing of a bond to be
approved by the trial court, no writ of attachment was issued because the bond offered by Jimena was
disapproved.3

Jimena and Tolentino died successively during the pendency of the case in the trial court and were,
accordingly, substituted by their respective widows and children.

After a protracted trial, the lower court rendered a decision, the dispositive portion of which reads as follows:

IN VIEW WHEREOF, judgment is rendered:

1. Declaring the plaintiffs —

(a) as successors in interest of Victor Jimena to be entitled to 1/2 of the 45% share of the
royalties of defendant Lincallo under the latter's contract with Gold Star, Exh. D or Exh. D-l,
dated September 19, 1951;

(b) to 1/2 of the 43% shares of the rental of defendant Lincallo under his contract with Jesus
(Jacob) Cabarrus assigned to Marinduque Iron Mines, and his contract with Alejandro
Marquez, dated December 5, 1951, and February 29, 1952, Exhs. J and J-1; .
 (c) and condemning defendants Gold Star and Marinduque Iron Mines to pay direct to plaintiffs
said 1/2 shares of the royalties until said contracts are terminated;

2. Condemning defendant Lincallo to pay unto plaintiffs, as successors in interest of Victor Jimena —

(a) the sum of P5,800 with legal interest from the date of the filing of the complaint;

(b) the sum of P40,167.52 which is the 1/2 share of the royalties paid by Gold Star unto
Lincallo as of the September 14, 1957;

(c) the sum of P3,235.64 which is the 1/2 share of Jimena on the rentals amounting to
P6,471.27 corresponding to Lincallo's share paid by Marinduque Iron Mines unto Lincallo from
December, 1951 to August 25, 1954; under Exhibit N;

(d) P1,000.00 as attorneys fees;

3. Declaring that the deed of sale, Exh. H, dated August 16, 1952, between defendant Lincallo and
Gregorio Tolentino was effective and transferred only 1/2 of the 45% (43%) share of Lincallo, and
ordering Gold Star Mining Company to make payment hereafter unto plaintiffs, pursuant to this
decision on the royalties due unto Lincallo, notwithstanding the cession unto Tolentino, so that of the
royalties due unto Lincallo 1/2 should always be paid by Gold Star unto plaintiffs notwithstanding
said session, Exh. H, unto Tolentino by Lincallo;

4. Judgment is also rendered condemning the estate of Gregorio Tolentino but not the heirs
personally, to pay unto plaintiffs the sum of P24,386.51 with legal interest from the date of the filing
of the complaint against Gregorio Tolentino.

5. Judgment is rendered condemning defendant Gold Star Mining Company to pay to plaintiffs
solidarily with Lincallo and to be imputed to Lincallo's liability under this judgment unto Jimena, the
sum of P30,691.92;

6. Judgment is rendered condemning defendant Marinduque Iron Mines to pay unto plaintiffs the
sum of P7,330.36;

7. The counterclaims of defendants are dismissed;

8. Costs against defendant Lincallo.

SO ORDERED. (Emphasis supplied.)

From this judgment, all four defendants, namely, Lincallo, the widow and children of Tolentino, and the two
corporations, appealed to the Court of Appeals. The appeal interposed by Marinduque Iron Mines Agents,
Inc., was, however, withdrawn, while that of Lincallo was dismissed for the failure to file brief. Pending
outcome of the appeal, the royalties due from Gold Star Mining Co., Inc., were required to be deposited
with the trial court, as per order of 17 June 1958 issued by the same court. In compliance therewith, Gold
Star Mining Co., Inc., made a judicial deposit in the amount of P30,691.92.

On 8 October 1965, the Court of Appeals handed down a decision sustaining in its entirety that of the trial
court. Gold Star Mining Co., Inc., moved for reconsideration of said decision insofar as its adjudged solidary
liability with Lincallo to pay to the Jimenas the sum of P30,691.92 "for flagrant violation of the injunction"
was concerned. The motion was denied. Hence, the present appeal.

Petitioner Gold Star Mining Co., Inc., argues that the Court of Appeals' decision finding that respondents
Jimenas have a cause of action against it, and condemning it to pay the sum of P30,691.92 for violation of
an allegedly non-existent injunction, are reversible errors. Reasons: As to respondents Jimena's cause of
action, the same does not allegedly appear in the complaint filed against petitioner corporation. And as to
the P30,691.92 penalty for violation of the injunction, the same can not allegedly be imposed because (1)
the sum of P30,691.92 was not prayed for, (2) the injunction in question had already been superseded
and/or dissolved by the trial court's grant of Jimena's petition for writ of preliminary attachment; and (3)
the corporation was never charged, heard, nor found guilty in accordance with, and pursuant to, the
provisions, of Rule 64 of the (Old) Rules of Court.

We are of the same opinion with the Court of Appeals that respondents Jimenas have a cause of action
against petitioner corporation and that the latter's joinder as one of the defendants before the trial court is
fitting and proper. Said the Court of Appeals, and we adopt the same:

There first assigned error is the Trial Court erred in not dismissing this instant action as "there is no
privity of contract between Gold Star and Jimena." This contention is without merit.

The situation at bar is similar to the status of the first and second mortgagees of a duly registered
real estate mortgage. While there exists no privity of contract between them, yet the common
subject-matter supplies the juridical link.

Here the evidence overwhelmingly established that Jimena made prewar and postwar demands upon
Gold Star for the payment of his 1/2 share of the royalties but all in vain so he (Jimena) was
constrained to implead Gold Star because it refused to recognize his right.

Jimena now seeks for accounting of the royalties paid by Gold Star to Lincallo, and for direct payment
to himself of his share of the royalties. This relief cannot be granted without joining the Gold Star
specially in the face of the attitude it had displayed towards Jimena.

Borrowing the Spanish maxim cited by Jimena's counsel, "el deudor de mi deudor es deudor mio,"
this legal maxim finds sanction in Article 1177, new Civil Code which provides that "creditors, after
having pursued the property in possession of the debtor to satisfy their claims, may exercise all the
rights and bring all the actions of the latter (debtor) for the same purpose, save those which are
inherent in his person; they may also impugn the acts which the debtor may have done to defraud
them (1111)."

From another standpoint, equally valid and acceptable, it can be said that Lincallo, in transferring
the mining claims to Gold Star (without disclosing that Jimena was a co-owner although Gold Star
had knowledge of the fact as shown by the proofs heretofore mentioned) acted as Jimena's agent
with respect to Jimena's share of the claims.

Under such conditions, Jimena has an action against Gold Star, pursuant to Article 1883, New Civil
Code, which provides that the principal may sue the person with whom the agent dealt with in his
(agent's) own name, when the transaction "involves things belonging to the principal."

As counsel for Jimena has correctly contended, "the remedy of garnishment suggested by Gold Star
is utterly inadequate for the enforcement of Jimena's right against Lincallo because Jimena wanted
an accounting and wanted to receive directly his share of the royalties from Gold Star. That recourse
is not open to Jimena unless Gold Star is made a party in this action."

Coming now to the violation of the injunction, we observe that the facts speak for themselves. Considering
that no writ of preliminary attachment was issued by the trial court, the condition for its issuance not having
been met by Jimena, nothing can be said to have superseded the writ of preliminary injunction in question.
The preliminary injunction was, therefore, subsisting and evidently violated by petitioner corporation when
it paid the sum of P30,691.92 to Lincallo and Tolentino.

Gold Star Mining Co., Inc., insists that it may not be penalized for breach of the injunction, issued by the
court of origin, without prior written charge for indirect contempt, and due hearing, citing section 3 of Rule
64 of the old Rules of Court, now Rule 71 of the Revised Rules. We fail to see any merit in this contention,
as it misses the true nature and intent of the award of P30,691.92 to Jimena, payable by Gold Star and
Lincallo's estate.
Said award is not so much a penalty against petitioner as a decree of restitution, in order to make the
violated injunction effective, as it should be, by placing the parties in the same condition as if the injunction
had been fully obeyed. If Gold Star Mining Co., Inc., had only heeded the injunction and had not paid to
Lincallo the royalties of P30,691.92, such amount would now be available for the satisfaction of the claims
of Jimena and his heirs against Lincallo. By sentencing Gold Star Mining Co., Inc., to pay, for the account of
Lincallo, the sum aforesaid, the court merely endeavoured to prevent its award from being rendered pro
tanto nugatory and ineffective, and thus make it conformable to law and justice.

That the questioned award was not intended to be a penalty against appellant Gold Star Mining Co., Inc., is
shown by the provision in the judgment that the P30,691.92 to be paid by it to Jimena is "to be imputed to
Lincallo's liability under this judgment." The court thus left the way open for Gold Star Mining Co., Inc., to
recover later the whole amount from Lincallo, whether by direct action against him or by deducting it from
the royalties that may fall due under his 1951 contract with appellant.

That the recovery of this particular amount was not specifically sought in the complaint is of no moment,
since the complaint prayed in general for "other equitable relief."

WHEREFORE, finding no reversible error in the decision appealed from, the same is affirmed, with costs
against petitioner-appellant, Gold Star Mining Co., Inc.

GOLD STAR MINING CO., INC., petitioner, vs. MARTA LIM-JIMENA, CARLOS JIMENA, GLORIA
JIMENA, AURORA JIMENA, JAIME JIMENA, DANTE JIMENA, JORGE JIMENA, JOYCE JIMENA, as
legal heirs of the deceased VICTOR JIMENA, and JOSE HIDALGO, respondents.

REYES, J.B.L., J.:

From an affirmance in toto by the Court of Appeals1 of a decision of the Court of First Instance of
Manila,2 specifically the portion thereof condemning Gold Star Mining Co., Inc. to pay Marta Lim Vda. de
Jimena, et al., the sum of P30,691.92 solidarily with Ananias Isaac Lincallo for violation of an injunction this
appeal is taken.

It is of record that in 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena one-half
(1/2) of the proceeds from all mining claims that he would purchase with the money to be advanced by the
latter. This agreement was later on modified (in a 1939 notarial instrument duly registered with the Register
of Deeds of Marinduque in his capacity as mining recorder) so as to include in the equal sharing arrangement
not only the proceeds from several mining claims, which by that time had already been purchased by Lincallo
with various sums totalling P5,800.00 supplied by Jimena, but also the lands constituting the same, and so
as to bind thereby their "heirs, assigns, or legal representatives." Apparently, the mining rights over part of
the claims were assigned by Lincallo to Gold Star Mining Co., Inc., sometime before World War Il because
in 1950 the corporation paid him P5,000 in consideration of, and as a quitclaim for, pre-war royalties.

On several occasions thereafter, the mining claims in question were made subject-matter of contracts
entered into by Lincallo in his own name and for his benefit alone without the slightest intimation of Jimena's
interests over the same. Thus, on 19 September 1951, Lincallo and one Alejandro Marquez, as separate
owners of particular mining claims, entered into an agreement with Gold Star Mining Co., Inc., the assignee
thereof, regarding allotment to Lincallo of 45% of the royalties due from the corporation. Four months later,
Lincallo, Marquez and Congressman Panfilo Manguerra, again as owners, leased certain mining claims to
Jacob Cabarrus, who, in turn, transferred to Marinduque Iron Mines Agents, Inc., his rights under the lease
contract. By virtue of still another contract executed by these lessors on 29 February 1952, 43% of the
royalties due from Marinduque Iron Mines Agents, Inc., were agreed upon to be paid to Lincallo.

As early as August, 1939 and down to September, 1952, Jimena repeatedly apprised Gold Star Mining Co.,
Inc., and Marinduque Iron Mines Agents, Inc., of his interests over the mining claims so assigned and/or
leased by Lincallo and, accordingly, demanded recognition and payment of his one-half share in all the
royalties, allocated and paid and, thereafter, to be paid to the latter. Both corporations, however, ignored
Jimena's demands.
Payment of the P5,800 advanced for the purchase of the mining claims, as well as the one-half share in the
royalties paid by the two corporations, were also repeatedly demanded by Jimena from Lincallo.
Acknowledging Jimena's contractual claim, Lincallo off and on promised to settle his obligations. And on 14
July 1952, Lincallo promised for the last time, to settle everything on or before the 30th day of the same
month.

Lincallo, however, did not only fail to settle his accounts with Jimena but transferred on 16 August 1952, a
month after he promised to pay Jimena, 35 of his 45% share in the royalties due from Gold Star Mining Co.,
Inc., to one Gregorio Tolentino, a salaried employee, for an alleged consideration of P10,000.00.

On 2 September 1954, Jimena commenced a suit against Lincallo for recovery of his advances and his one-
half share in the royalties. Gold Star Mining Co., Inc., and Marinduque Iron Mines, Inc., together with
Tolentino, were later joined as defendants.

On 17 September 1954, the trial court issued, upon petition of Jimena, a writ of preliminary injunction
restraining Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., from paying royalties during
the pendency of the case to Lincallo, his assigns or legal representatives. Despite the injunction, however,
Gold Star Mining Co., Inc., was found out to have paid P30, 691.92 to Lincallo and Tolentino. Said corporation
claimed later on (on appeal) that the injunction had been superseded and/or dissolved on 25 May 1955 by
the trial court's grant of Jimena's petition for a writ of preliminary attachment "to supersede the writ of
preliminary injunction previously issued." But as the grant was conditioned upon filing of a bond to be
approved by the trial court, no writ of attachment was issued because the bond offered by Jimena was
disapproved.3

Jimena and Tolentino died successively during the pendency of the case in the trial court and were,
accordingly, substituted by their respective widows and children.

After a protracted trial, the lower court rendered a decision, the dispositive portion of which reads as follows:

IN VIEW WHEREOF, judgment is rendered:

1. Declaring the plaintiffs —

(a) as successors in interest of Victor Jimena to be entitled to 1/2 of the 45% share of the
royalties of defendant Lincallo under the latter's contract with Gold Star, Exh. D or Exh. D-l,
dated September 19, 1951;

(b) to 1/2 of the 43% shares of the rental of defendant Lincallo under his contract with Jesus
(Jacob) Cabarrus assigned to Marinduque Iron Mines, and his contract with Alejandro
Marquez, dated December 5, 1951, and February 29, 1952, Exhs. J and J-1; .

(c) and condemning defendants Gold Star and Marinduque Iron Mines to pay direct to plaintiffs
said 1/2 shares of the royalties until said contracts are terminated;

2. Condemning defendant Lincallo to pay unto plaintiffs, as successors in interest of Victor Jimena —

(a) the sum of P5,800 with legal interest from the date of the filing of the complaint;

(b) the sum of P40,167.52 which is the 1/2 share of the royalties paid by Gold Star unto
Lincallo as of the September 14, 1957;

(c) the sum of P3,235.64 which is the 1/2 share of Jimena on the rentals amounting to
P6,471.27 corresponding to Lincallo's share paid by Marinduque Iron Mines unto Lincallo from
December, 1951 to August 25, 1954; under Exhibit N;

(d) P1,000.00 as attorneys fees;

 3. Declaring that the deed of sale, Exh. H, dated August 16, 1952, between defendant Lincallo and
Gregorio Tolentino was effective and transferred only 1/2 of the 45% (43%) share of Lincallo, and
ordering Gold Star Mining Company to make payment hereafter unto plaintiffs, pursuant to this
decision on the royalties due unto Lincallo, notwithstanding the cession unto Tolentino, so that of the
royalties due unto Lincallo 1/2 should always be paid by Gold Star unto plaintiffs notwithstanding
said session, Exh. H, unto Tolentino by Lincallo;

4. Judgment is also rendered condemning the estate of Gregorio Tolentino but not the heirs
personally, to pay unto plaintiffs the sum of P24,386.51 with legal interest from the date of the filing
of the complaint against Gregorio Tolentino.

5. Judgment is rendered condemning defendant Gold Star Mining Company to pay to plaintiffs
solidarily with Lincallo and to be imputed to Lincallo's liability under this judgment unto Jimena, the
sum of P30,691.92;

6. Judgment is rendered condemning defendant Marinduque Iron Mines to pay unto plaintiffs the
sum of P7,330.36;

7. The counterclaims of defendants are dismissed;

8. Costs against defendant Lincallo.

SO ORDERED. (Emphasis supplied.)

From this judgment, all four defendants, namely, Lincallo, the widow and children of Tolentino, and the two
corporations, appealed to the Court of Appeals. The appeal interposed by Marinduque Iron Mines Agents,
Inc., was, however, withdrawn, while that of Lincallo was dismissed for the failure to file brief. Pending
outcome of the appeal, the royalties due from Gold Star Mining Co., Inc., were required to be deposited
with the trial court, as per order of 17 June 1958 issued by the same court. In compliance therewith, Gold
Star Mining Co., Inc., made a judicial deposit in the amount of P30,691.92.

On 8 October 1965, the Court of Appeals handed down a decision sustaining in its entirety that of the trial
court. Gold Star Mining Co., Inc., moved for reconsideration of said decision insofar as its adjudged solidary
liability with Lincallo to pay to the Jimenas the sum of P30,691.92 "for flagrant violation of the injunction"
was concerned. The motion was denied. Hence, the present appeal.

Petitioner Gold Star Mining Co., Inc., argues that the Court of Appeals' decision finding that respondents
Jimenas have a cause of action against it, and condemning it to pay the sum of P30,691.92 for violation of
an allegedly non-existent injunction, are reversible errors. Reasons: As to respondents Jimena's cause of
action, the same does not allegedly appear in the complaint filed against petitioner corporation. And as to
the P30,691.92 penalty for violation of the injunction, the same can not allegedly be imposed because (1)
the sum of P30,691.92 was not prayed for, (2) the injunction in question had already been superseded
and/or dissolved by the trial court's grant of Jimena's petition for writ of preliminary attachment; and (3)
the corporation was never charged, heard, nor found guilty in accordance with, and pursuant to, the
provisions, of Rule 64 of the (Old) Rules of Court.

We are of the same opinion with the Court of Appeals that respondents Jimenas have a cause of action
against petitioner corporation and that the latter's joinder as one of the defendants before the trial court is
fitting and proper. Said the Court of Appeals, and we adopt the same:

There first assigned error is the Trial Court erred in not dismissing this instant action as "there is no
privity of contract between Gold Star and Jimena." This contention is without merit.

The situation at bar is similar to the status of the first and second mortgagees of a duly registered
real estate mortgage. While there exists no privity of contract between them, yet the common
subject-matter supplies the juridical link.
 Here the evidence overwhelmingly established that Jimena made prewar and postwar demands upon
Gold Star for the payment of his 1/2 share of the royalties but all in vain so he (Jimena) was
constrained to implead Gold Star because it refused to recognize his right.

Jimena now seeks for accounting of the royalties paid by Gold Star to Lincallo, and for direct payment
to himself of his share of the royalties. This relief cannot be granted without joining the Gold Star
specially in the face of the attitude it had displayed towards Jimena.

Borrowing the Spanish maxim cited by Jimena's counsel, "el deudor de mi deudor es deudor mio,"
this legal maxim finds sanction in Article 1177, new Civil Code which provides that "creditors, after
having pursued the property in possession of the debtor to satisfy their claims, may exercise all the
rights and bring all the actions of the latter (debtor) for the same purpose, save those which are
inherent in his person; they may also impugn the acts which the debtor may have done to defraud
them (1111)."

From another standpoint, equally valid and acceptable, it can be said that Lincallo, in transferring
the mining claims to Gold Star (without disclosing that Jimena was a co-owner although Gold Star
had knowledge of the fact as shown by the proofs heretofore mentioned) acted as Jimena's agent
with respect to Jimena's share of the claims.

Under such conditions, Jimena has an action against Gold Star, pursuant to Article 1883, New Civil
Code, which provides that the principal may sue the person with whom the agent dealt with in his
(agent's) own name, when the transaction "involves things belonging to the principal."

As counsel for Jimena has correctly contended, "the remedy of garnishment suggested by Gold Star
is utterly inadequate for the enforcement of Jimena's right against Lincallo because Jimena wanted
an accounting and wanted to receive directly his share of the royalties from Gold Star. That recourse
is not open to Jimena unless Gold Star is made a party in this action."

Coming now to the violation of the injunction, we observe that the facts speak for themselves. Considering
that no writ of preliminary attachment was issued by the trial court, the condition for its issuance not having
been met by Jimena, nothing can be said to have superseded the writ of preliminary injunction in question.
The preliminary injunction was, therefore, subsisting and evidently violated by petitioner corporation when
it paid the sum of P30,691.92 to Lincallo and Tolentino.

Gold Star Mining Co., Inc., insists that it may not be penalized for breach of the injunction, issued by the
court of origin, without prior written charge for indirect contempt, and due hearing, citing section 3 of Rule
64 of the old Rules of Court, now Rule 71 of the Revised Rules. We fail to see any merit in this contention,
as it misses the true nature and intent of the award of P30,691.92 to Jimena, payable by Gold Star and
Lincallo's estate.

Said award is not so much a penalty against petitioner as a decree of restitution, in order to make the
violated injunction effective, as it should be, by placing the parties in the same condition as if the injunction
had been fully obeyed. If Gold Star Mining Co., Inc., had only heeded the injunction and had not paid to
Lincallo the royalties of P30,691.92, such amount would now be available for the satisfaction of the claims
of Jimena and his heirs against Lincallo. By sentencing Gold Star Mining Co., Inc., to pay, for the account of
Lincallo, the sum aforesaid, the court merely endeavoured to prevent its award from being rendered pro
tanto nugatory and ineffective, and thus make it conformable to law and justice.

That the questioned award was not intended to be a penalty against appellant Gold Star Mining Co., Inc., is
shown by the provision in the judgment that the P30,691.92 to be paid by it to Jimena is "to be imputed to
Lincallo's liability under this judgment." The court thus left the way open for Gold Star Mining Co., Inc., to
recover later the whole amount from Lincallo, whether by direct action against him or by deducting it from
the royalties that may fall due under his 1951 contract with appellant.

That the recovery of this particular amount was not specifically sought in the complaint is of no moment,
since the complaint prayed in general for "other equitable relief."
WHEREFORE, finding no reversible error in the decision appealed from, the same is affirmed, with costs
against petitioner-appellant, Gold Star Mining Co., Inc.

MACONDRAY & CO., INC., plaintiff-appellee, vs. GEORGE S. SELLNER, defendant-appellant.

CARSON, J.:

This action was brought to recover the sum of P17, 175 by way of damages alleged to have been suffered
by the plaintiff as a result of the sale of a parcel of land which it is alleged was made by the defendant for
and on behalf of the plaintiff after authority to make the sale had been revoked. Judgment was rendered in
favor of the plaintiff for the sum of P3,435, together with interest at 6 per cent per annum from the date of
the institution of this action. From this judgment defendant appealed, and brought the case have on his duly
certified bill of exceptions.

Early in 1912 the defendant, a real estate broker, sold the parcel of land described in the complaint to the
plaintiff company for P17,175. The formal deed of sale was not executed and accepted until July 29, 1912,
the agreement to purchase being conditioned on the delivery of a Torrens title, which was not secured until
early in that month. In the meantime the land was flooded by high tides, and the plaintiff company became
highly dissatisfied with its purchase. When the final transfer was made the plaintiff company informed
defendant that the land was wholly unsuited for use as a coal-yard, for which it had been purchased, and
requested him to find another purchaser. At that time it was expressly understood and agreed that the
plaintiff company was willing to dispose of the land for P17,175, and that defendant was to have as his
commission for securing a purchaser anything over that amount which he could get.

A short time thereafter, defendant reported to plaintiff that he had a purchaser for the land in the person of
Antonio M. Barretto, who was willing to pay P2.75 per square meter, or a total of P18,892.50. Plaintiff
thereupon executed a formal deed of conveyance which, together with the certificate of title (Torrens), was
delivered to defendant, with the understanding that he was to conclude the sale, deliver the title-deed and
certificate to Barretto, and received from him the purchase price. The deed was dated August 21, 1912.
Thereafter defendant advised Barretto that plaintiff had executed the title-deed and that he was ready to
close the deal. Barretto agreed to accept the land if, upon examination, the title and the deed should prove
satisfactory; and defendant left the deed of conveyance with him, with the understanding that if the title
and the deed of conveyance were as represented, Barretto would give him his check for the amount of the
purchase price. Defendant retained possession of the Torrens certificate of title. A few days afterwards
Barretto was compelled to go to Tayabas on business and was detained by a typhoon which delayed his
return until the 31st of August.

During Barretto's absence the plaintiff company advised defendant that he must consummate the sale and
collect the purchase money without delay upon Barretto's return to Manila. On the arrival of Barretto on
Saturday, August 31st, defendant called upon him and informed him that the plaintiff company desired to
close up the transaction at once, and Barretto, who was somewhat indisposed from his trip, promised to
examine the papers as soon as he could get to them, and assured the defendant that he would send his
check for the purchased price in a day or two if he found the documents in proper shape. These assurance
were reported to Young, the plaintiff company's general manager and representative throughout the
transaction, on Monday morning, September 2d. Young then formally notified defendant that unless the
purchase price was paid before five o'clock of that same afternoon the deal would be off. Defendants again
called upon Barretto, who informed him that if he would turn over the Torrens certificate of title he would
let him have a check for the purchase price. Defendant sent the certificate as requested, but did not receive
the check until thirty-six hours afterwards, on Wednesday morning. On receipt of Barretto's check he
immediately tendered plaintiff company a check for the agreed selling price, P17,175. Plaintiff's manager
refused to accept the check and soon thereafter filed this action, claiming that the sale had been "cancelled"
upon the failure of defendant to turn over the purchase price on the afternoon of Monday, September 2nd.

The following is a copy of plaintiff company's letter to defendant advising him that the sale would be
"cancelled" unless the purchase price was paid at five o'clock of the day on which it was written.
 SEPT. 2, 1912.

Mr. GEO. C. SELLNER, Manila.

DEAR SIR: In accordance with our conversation today, this is to notify you that we consider the sale
of our lot in Nagtajan to Antonio M. Barretto as cancelled in view of the nonpayment of the purchase
price before five o'clock this afternoon.

Please confirm.

Yours very truly,

MACONDRAY & CO., INC.,

(Sgd.) CARLOS YOUNG,
General Manager.

As to the facts just narrated there is practically no dispute, the only matters of facts as to which there is
any real contention in the record being limited to question as to the value of the land, and as to the original
instructions to defendant in regard to the delivery of the title deeds.

Plaintiffs' manager testified that as he had no confidence in Barretto, he expressly instructed defendant not
to deliver the title deeds until Barretto turned over the purchase price. Defendant swore that he had received
no such instruction. Upon this conflict of testimony we do not deem it necessary to make an express finding,
because, as we view the transaction, it could in no event affect our disposition of this appeal.

We are of opinion that the disputed evidence clearly discloses that on August 21st the plaintiff company,
through the defendant real estate broker, agreed to sell the land to Barretto for P18,892.50, and that
Barretto agreed to buy the land at that price on the usual condition precedent that before turning over the
purchase price the title deeds and deed of transfer from the company should be found to be in due and legal
form. That for the purpose of consummating the sale the plaintiff company turned over to the defendant a
deed of transfer to Barretto, together with a Torrens title certificate to the land, executed as of the day
when the agreement to sell was entered into. That the defendant, with full authority from plaintiff company,
agreed to deliver the deed and certificate to Barretto on payment of the purchase price. That from the very
nature of the transaction it was understood that the purchaser should have a reasonable time in which to
examine the deed of transfer and the other documents of title, and that defendant exercising an authority
impliedly if not expressly conferred upon him, gave the purchaser a reasonable time in which to satisfy
himself as to the legality and correctness of the documents of title. That the company through its manager
Young, acquiesced in and ratified what had been done by defendant in this regard when, with full knowledge
of all the facts, Young advised the defendant, during Barretto's absence in Tayabas, that the deal must be
closed up without delay on Barretto's return to Manila.

No reason appears, nor had any reason been assigned for the demand by the plaintiff company for the
delivery of the purchase price at the hour specified under threat in the event of failure to make payment at
that hour it would decline to carry out the agreement, other than that the manager of the plaintiff company
had been annoyed by the delays which occurred during the earlier stage of the negotiations, and had
changed his mind as to the desirability of making the sale at the price agreed upon, either because he
believed that he could get a better price elsewhere, or that the land was worth more to his company than
the price he had agreed to take for it. It is very evident that plaintiff company's manager hoped that by
setting a limit of a few hours upon the time within which he would receive the money, his company would
be relieved of the obligation to carry out its contract.

Upon the question of the value of the land we think that the evidence clearly discloses that at the date of
the sale its actual and its true market value was not more than the amount paid for it by Barretto, that is
to say, P18,892.50. The evidence discloses that it had been in the hands of an expert real estate agent for
many months prior to the sale, with every inducement to him to secure the highest cash price which could
be gotten for it. That he actually sold it to the plaintiff company, a few months prior to the sale to Barretto,
for P17,175. That the plaintiff company was highly dissatisfied with its purchase, and readily agreed to resell
at that price. That the defendant, in his company was highly dissatisfied with its purchase, and readily
agreed to resell at that price. That the defendant, in his capacity as a real estate agent, with a personal and
direct interest in securing the highest possible price for the land, sold it to Barretto for P18,892.50.

The only evidence in the record tending to prove that the land had a higher market value than the price
actually paid for it under such circumstances is the testimony of a rival real estate broker, who had never
been on the land, but claimed that he was familiar with its general location from maps and description, and
asserted that in his opinion it was worth considerably more than the price actually paid for it, and that he
thought he could have sold the land for P3 a meter, or approximately P20,610. Of course an expert opinion
of this kind, however sincere and honest the witness may have been in forming it, is wholly insufficient to
maintain a finding that the land was worth any more than it actually brought when sold under the conditions
above set forth.

It may be that the land has a speculative value much higher than the actual market value at the time of the
sale, so that if held for an opportune turn in the market, or until a buyer of some special need for it happened
to present himself, a price approximating that indicated by this witness might be secured for it. But the
question of fact ruled upon is the actual market value of the land at the time of its sale to Barretto, and not
any speculative value which might be assigned to it in anticipation of unknown, indefinite and uncertain
contingencies.

Among other definitions of "market value" to be found in "Words and Phrases," vol. 5, p. 4383, and
supported by citation of authority, are the following:

The "market value" of property is the price which the property will bring in a fair market after fair
and reasonable efforts have been made to find a purchaser who will give the highest price for it.

xxx xxx xxx

The market value of land is the price that would in all probability result form fair negotiations where
the seller is willing to sell and the buyer desires to buy.

Upon the foregoing statement of the facts disclosed by the record, we are of opinion that the judgment
entered in the court below should be reversed and the complaint dismissed without costs in this instance.

1. Even were we to admit, which we do not, that the plaintiff company had the right to terminate the
negotiations at the time indicated by its manager, and to direct its real estate not make the sale of Barretto
after the hour indicated, nevertheless we would be compelled to hold, upon the evidence before us, that the
plaintiff company has no cause of action for monetary damages against the defendant real estate agent.

The measure of the damages which the plaintiff would be entitled to recover from the real estate agent for
the unauthorized sale of its property would be the actual market value of the property, title to which had
been lost as a result of the sale. We are not now considering any question as to the right of the owner,
under such circumstances, to recover the property from the purchaser, or damages for its detention or like;
but merely his right to recover monetary damages from his agent should he elect, as the plaintiff company
did in this case, to ratify the sale and recoup from the agent any loss resulting from his alleged unauthorized
consummation of the sale.

The market value of the land in question was P18,892.50. Of this the plaintiff company has received P17,175,
leaving a balance of P1,717.50 unpaid. But, whatever may be the view which should taken as to the right
of the plaintiff company to terminate the negotiations for the sale of the property to Barretto at the time
fixed by it in its letter to the defendant real estate agent, there can be no question as to the liability of the
plaintiff company to the real estate agent, in the event that it did so terminate the negotiations, for the
amount of the commission which it agreed to pay him should he find a purchaser for the land at the price
agreed upon in his agency contract. The commission agreed upon was all over P17,175 which the defendant
could secure from the property, and it is clear that allowing the defendant this commission, and offsetting
it against the unpaid balance of the market value of the land, the plaintiff company is not entitled to a
money judgment against defendant.

We do not mean to question the general doctrine as to the power of a principal to revoke the authority of
his agent at will, in the absence of a contract fixing the duration of the agency (subject, however, to some
well defined exceptions). Our ruling is that at the time fixed by the manager of the plaintiff company for the
termination of the negotiations, the defendant real estate agent had already earned the commissions agreed
upon, and could not be deprived thereof by the arbitrary action of the plaintiff company in declining to
execute the contract of sale for some reason personal to itself.

The question as to what constitutes a sale so as to entitle a real estate broker to his commissions is
extensively annotated in the case of Lunney vs. Healey (Nebraska) 56313 reported in 44 Law Rep. Ann.,
593 [Note], and the long line of authorities there cited support the following rule:

The business of a real estate broker or agent, generally, is only to find a purchaser, and the settled
rule as stated by the courts is that, in the absence of an express contract between the broker and
his principal, the implication generally is that the broker becomes entitled to the usual commissions
whenever he brings to his principal a party who is able and willing to take the property and enter
into a valid contract upon the terms then named by the principal, although the particulars may be
arranged and the matter negotiated and completed between the principal and the purchaser directly.

In the case of Watson vs. Brooks (17 Fed. Rep., 540; 8 Sawy., 316), it was held that a sale of real property
entitling a broker to his commissions, was an agreement by the vendor for a certain valuable consideration
then or thereafter to be paid, and was complete without conveyance, although the legal title remained in
the vendor.

The rights of a real estate broker to be protected against the arbitrary revocation of his agency, without
remuneration for services rendered in finding a suitable purchaser prior to the revocation, are clearly and
forcefully stated in the following citation form the opinion in the case of Blumenthal vs. Goodall (89 Cal.,
251).

The act of the agent in finding a purchaser required time and labor for its completion, and within
three days of the execution of the contract, and prior to its revocation, he had placed the matter in
the position that success was practically certain and immediate, and it would be the height of injustice
to permit the principal then to withdraw the authority and terminate the agency as against an express
provision of the contract, and perchance reap the benefit of the agent's labors, without being liable
to him for his commissions. This would be to make the contract an unconscionable one, and would
offer a premium for fraud by enabling one of the parties to take advantage of his own wrong and
secure the labor of the other without remuneration.

2. We are of opinion that under all the circumstances surrounding the negotiations as disclosed by the
practically undisputed evidence of record, the plaintiff company could not lawfully terminate the negotiations
at the time it attempted to do so and thereafter decline to convey the land to Barretto, who had accepted
an offer of sale made to him by the plaintiff's duly authorized agent, subject only to an examination of the
documents of title, and stood ready to pay the purchase price upon the delivery of the duly executed deed
of conveyance and other necessary documents of title. We are not now considering the right or the power
of the plaintiff company to terminate or revoke the agency of the defendant at that time. The revocation of
the agent's authority at that time could in no wise relieve the plaintiff company of its obligation to sell the
land to Barretto for the price and on the terms agreed upon before the agency was revoked.

If we are correct in our conclusions in this regard, it follows, of course that no matter hat was the actual
value of the land, the plaintiff company suffered no damage by the delivery of the title deeds to Barretto,
and the consummation of the sale by the defendant upon the terms and at the price agreed upon prior to
the revocation of his agency.

Without considering any of the disputed questions of fact it clearly appears that before the manager of the
plaintiff company wrote the letter dated September 2, 1912, which is set forth in the foregoing statement
of facts, and before the conversation was had to which that letter refers, the defendant real estate agent
had offered to sell the land to Barretto for P18,892.50 and that he did so with the knowledge and consent,
and under the authority of the plaintiff company. It further clearly appears that this offer had been duly
accepted by Barretto, who stood ready and willing to pay over the agreed purchase price, upon the
production and delivery of the necessary documents of title, should these documents be found, upon
examination, to be executed in due and legal form. The only question, then, which we need consider, is
whether the plaintiff company could lawfully "cancel" or rescind this agreement for the sale and purchase
of the land, on the sole ground that the purchase price was not paid at the hour designated in the letter to
the defendant.

The only reasons assigned for the sudden and arbitrary demand for the payment of the purchase price which
was made with the manifest hope that it would defeat the agent's deal with Barretto, are that the plaintiff
company's manager had become satisfied that the land was worth more than he had agreed to accept for
it; and that he was piqued and annoyed at the delays which marked the earlier stages of the negotiations.

Time does not appear to have been of the essence of the contract. The agreement to sell was made without
any express stipulation as to the time within which the purchase price was to be paid, except that the
purchaser reserved the right to examine the documents of title before making payment of the purchase
price, though it was understood that the sale was for cash upon the delivery of the documents of title
executed in due form. Under the agreement with the agent of the plaintiff company, the purchaser had a
perfect right to examine the documents of title; and in the absence of an express agreement fixing the time
to be allowed therefore, he was clearly entitled to such time as might be reasonably necessary for that
purpose.

The plaintiff company, through its agent, had given Barretto an opportunity to examine the documents of
title, with the express understanding that if they were satisfactory he would hand the agent his check for
the purchase price, and it is very clear that the plaintiff company could not arbitrarily, and for its own
convenience, deprive Barretto of this opportunity to make such examination of the documents as might be
reasonably necessary.

Of course we are not to be understood as denying the right of the vendor to couple his agreement to sell
with a stipulation that the purchase price must be paid at a specific day, hour and minute; nor that the
obligation to pay over the purchase price forthwith may not be inferred from all the circumstances
surrounding the transaction in a particular case. Time may be, and often is of the very essence of the
contract. But in a contract for the sale of real estate, where no agreement to the contrary appears, it may
fairly be assumed that it was the intention of the parties to allow a reasonable time for the examination of
the documents of title; and in any case in which time has been expressly allowed for that purpose, the
vendor cannot arbitrarily demand the payment of the purchase price before the expiration of the time
reasonably necessary therefor.

The doctrine supported by citation of authority is set forth as follows on page 165, "Maupin on Marketable
Title to Real Estate:"

The contract of sale usually specifies a time in which the purchaser may examine the title before
completing the purchase. If no time be specified, he will be entitled to a reasonable time for that
purpose, but cannot keep the contract open indefinitely so as to avail himself of a rise in the value
of the property or escape loss in case of depreciation. He cannot be required to pay the purchase
money before he has examined the abstract, unless he has expressly stipulated so to do. It has been
held that if the contract provide that the purchaser shall be furnished an abstract of title, and shall
have a specified time in which to examine the title and pay the purchase money, the purchaser must
determine in that time whether he will take the title, and that he cannot tender the purchase money
after that time, even though no abstract of the title was furnished.

The purchaser is entitled to a reasonable time within which to determine by investigation the validity
of apparent liens disclosed by the record. After the purchaser has examined the abstract, or
investigated the title in the time allowed for that purpose, it is his duty to point out or make known
his objections to the title, if any, so as to give the vendor an opportunity to remove them.
In the case of Hoyt vs. Tuxbury (70 Ill., 331, 332), the rule is stated as follows:

Where the purchase of land is made upon condition the title is found good, the purchaser is only
entitled to a reasonable time in which to determine whether he will take the title the vendor has, or
reject it. He cannot keep the contract open indefinitely, so as to avail of a rise in the value of the
property, or relieve himself in case of a depreciation.

In the case of Easton vs. Montgomery (90 Cal., 307), the rule is set forth as follows:

A contract for the sale of land which provides "title to prove good or no sale," without specifying the
time within which the examination is to be made, implies a reasonable time.

In 39 Cyc., 1332, the general rule, supported by numerous citations, is set forth as follows:

If the contract of sale does not specify the time of performance, a reasonable time will be implied.
In other words a reasonable time for performance will be allowed, and performance within a
reasonable time will be required. What is a reasonable time necessarily depends upon the facts and
circumstances of the particular case. The rule permitting and requiring performance within a
reasonable time applies both to the time for making and executing the conveyance by the vendor,
and to the time for making or tendering payment by the purchaser; and where some precedent act
or demand is necessary, the rule applies to the time of performance after such act is done, or after
such demand has been made. It also applies to the time within which any conditions precedent is to
be performed, or within which a contingency upon which the transaction depends is to happen, and
to the performance of various acts by the parties such as the furnishing of an abstract of title, or
making a survey, or any act which is to precede or may affect the time of conveyance or payment,
or which one of the parties may do at his option which may affect the rights of the parties under the
contract. If the purchaser is entitled to an examination of the title a reasonable time therefor will be
implied.

Under all the circumstances surrounding the transaction in the case at bar, as they appear from the evidence
of record, we have no hesitation in holding that the plaintiff company's letter of September 2, 1912
demanding payment before five o'clock of the afternoon of that day, under penalty of the cancellation of its
agreement to sell, was an arbitrary unreasonable attempt to deny to the purchaser the reasonable
opportunity to inspect the documents of title, to which he was entitled by virtue of the express agreement
of the plaintiff company's agent before any attempt was made to revoke his agency. It follows that Barretto's
right to enforce the agreement to sell was in no wise affected by the attempt of the plaintiff company to
"cancel" the agreement; and that the plaintiff company suffered no damage by the consummation of the
agreement by the acceptance of the stipulated purchase price by the defendant real estate agent.

Perhaps we should indicate that in arriving at these conclusions we have not found it necessary to pass upon
the disputed question of fact, as to whether or not the plaintiff company's manager instructed the defendant
not to deliver the title-deed until he had received the purchase price. On this point there is a direct conflict
of evidence. But as we understand the transaction, it was clearly understood that the purchaser would have
a reasonable opportunity to inspect and examine the documents of title before paying over a large sum of
money in exchange therefor, whether the agent did or did not have the authority to make actual delivery of
the title deed for that purpose.

Twenty days hereafter let judgment be entered reversing the judgment entered in the court below without
costs in this instance, and directing the dismissal of the complaint with the costs in first instance against
the plaintiff company, and ten days thereafter let the record be returned to the court wherein it originated.
So ordered.

JULIO DANON, plaintiff-appellee, vs. ANTONIO A. BRIMO & CO., defendant-appellant.

JOHNSON, J.:
This action was brought to recover the sum of P60,000, alleged to be the value of services rendered to the
defendant by the plaintiff as a broker. The plaintiff alleges that in the month of August, 1918, the defendant
company, through its manager, Antonio A. Brimo, employed him to look for a purchaser of its factory known
as "Holland American Oil Co.," for the sum of P1,200,000, payable in cash; that the defendant promised to
pay the plaintiff, as compensation for his services, a commission of five per cent on the said sum of
P1,200,000, if the sale was consummated, or if the plaintiff should find a purchaser ready, able and willing
to buy said factory for the said sum of P1,200,000; that subsequently the plaintiff found such a purchaser,
but that the defendant refused to sell the said factory without any justifiable motive or reason therefor and
without having previously notified the plaintiff of its desistance or variation in the price and terms of the
sale.

To that complaint the defendant interposed a general denial. Upon the issue thus presented, the Honorable
Simplicio del Rosario, judge, after hearing and considering the evidence adduced during the trial of the
cause, rendered a judgment in favor of the plaintiff and against the defendant for the sum of P60,000, with
costs. From that judgment the defendant appealed to this court.

The proof with regard to the authority of the plaintiff to sell the factory in question for the defendant, on
commission, is extremely unsatisfactory. It consists solely of the testimony of the plaintiff, on the one hand,
and of the manager of the defendant company, Antonio A. Brimo, on the other. From a reading of their
testimony we believe that neither of them has been entirely free from prevarications. However, after giving
due weight to the finding of the trial court in this regard and after carefully considering the inherent
probability or improbability of the testimony of each of said witnesses, we believe we are approximating the
truth in finding: (1) That Antonio A. Brimo, in a conversation with the plaintiff, Julio Danon, about the middle
of August, 1918, informed the latter that he (Brimo) desired to sell his factory, the Holland American Oil
Co., for the sum of P1,200,000; (2) that he agreed and promised to pay to the plaintiff a commission of 5
per cent provided the latter could sell said factory for that amount; and (3) that no definite period of time
was fixed within which the plaintiff should effect the sale. It seems that another broker, Sellner, was also
negotiating the sale, or trying to find a purchaser for the same property and that the plaintiff was informed
of the fact either by Brimo himself or by someone else; at least, it is probable that the plaintiff was aware
that he was not alone in the field, and his whole effort was to forestall his competitor by being the first to
find a purchaser and effect the sale. Such, we believe. was the contract between the plaintiff and the
defendant, upon which the present action is based.

The next question to determine is whether the plaintiff had performed all that was required of him under
that contract to entitle him to recover the commission agreed upon. The proof in this regard is no less
unsatisfactory. It seems that immediately after having an interview with Mr. Brimo, as above stated, the
plaintiff went to see Mr. Mauro Prieto, president of the Santa Ana Oil Mill, a corporation, and offered to sell
to him the defendant's property at P1,200,000. The said corporation was at that time in need of such a
factory as the plaintiff was offering for sale, and Mr. Prieto, its president, instructed the manager, Samuel
E. Kane, to see Mr. Brimo and ascertain whether he really wanted to sell said factory, and, if so, to get
permission from him to inspect the premises. Mr. Kane inspected the factory and, presumably, made a
favorable report to Mr. Prieto. The latter asked for an appointment with Mr. Brimo to perfect the negotiation.
In the meantime Sellner, the other broker referred to, had found a purchaser for the same property, who
ultimately bought it for P1,300,000. For that reason Mr. Prieto, the would be purchaser found by the plaintiff,
never came to see Mr. Brimo to perfect the proposed negotiation.

Under the proofs in this case, the most that can be said as to what the plaintiff had accomplished is, that
he had found a person who might have bought the defendant's factory if the defendant had not sold it to
someone else. The evidence does not show that the Santa Ana Oil Mill had definitely decided to buy the
property in question at the fixed price of P1,200,000. The board of directors of said corporation had not
resolved to purchase said property; and even if its president could legally make the purchase without
previous formal authorization of the board of directors, yet said president does not pretend that he had
definitely and formally agreed to buy the factory in question on behalf of his corporation at the price stated.
On direct examination he testified for the plaintiff as follows:

Q. You say that we were going to accept or that it was beneficial for us; will you say to whom
your refer, when you say "we?" —
 A. Our company, the Santa Ana Oil Mill.

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

A. Yes, sir.

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

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

Q. And did you inform Mr. Danon of this acceptance? —

A. I did not explain to Mr. Danon.

On cross-examination the same witness testified:

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

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

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

A. No; it was Mr. Danon who made the offer and we were sure to put the deal through
because we have bound ourselves.

The plaintiff claims that the reasons why the sale to the Santa Ana Mill was not consummated was because
Mr. Brimo refused to sell to a Filipino firm and preferred an American buyer; that upon learning such attitude
of the defendant the plaintiff endeavored to procure another purchaser and found a Mr. Leas, who delivered
to the plaintiff a letter addressed to Mr. Brimo, offering to buy the factory in question at P1,200,000. the
offer being good for twenty-four; that said offer was not accepted by Brimo because while he was reading
the letter of Leas, Sellner came in, drew Brimo into another room, and then and there closed the deal at
P1,300,000. The last statement is admitted by the defendant.

Such are the facts in this case, as nearly accurate as we can gather them from the conflicting evidence
before us. Under those facts, is the plaintiff entitled to recover the sum of P60,000, claimed by him as
compensation for his services? It will be noted that, according to the plaintiff's own testimony, the defendant
agreed and promised to pay him a commission of 5 per cent provided he (the plaintiff) could sell the factory
at P1,200.000 ("con tal que V. me venda la fabrica en P1,200.000"). It will also be noted that all that the
plaintiff had accomplished by way of performance of his contract was, that he had found a person who might
have bought the factory in question had not the defendant sold it to someone else. (Beaumont vs. Prieto,
41 Phil., 670; 249 U.S., 554.)

Under these circumstances it is difficult to see how the plaintiff can recover anything in the premises. The
plaintiff's action is not one for damages for breach of contract; it is an action to recover "the reasonable
value" of services rendered. this is unmistakable both from the plaintiff's complaint and his testimony as a
witness during the trial.

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

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

Q. Upon what do you base your qualification that those services were reasonable? —
 A. First, because that is the common rate in the city, and, secondly, because of the big gain
that he obtained from the sale.

What benefit did the plaintiff, by his "services," bestow upon the defendant to entitle him to recover from
the latter the sum of P60,000? It is perfectly clear and undisputed that his "services" did not any way
contribute towards bringing about the sale of the factory in question. He was not "the efficient agent or the
procuring cause of the sale."

The broker must be the efficient agent or the procuring cause of sale. The means employed by him
and his efforts must result in the sale. He must find the purchaser, and the sale must proceed from
his efforts acting as broker. (Wylie vs. Marine National Bank, 61 N. Y., 414; 416; citing:
McClure vs. Paine, 49 N. Y., 561; Lloyd vs. Mathews, 51 id., 124; Lyon vs. Mitchell, 36 id., 235;
Briggs vs. Rowe, 4 Keyes, 424; Murray vs. Currie, 7 Carr. and Payne, 584; Wilkinson vs. Martin,
8 id., 5.)

A leading case on the subject is that of Sibbald vs. Bethlehem Iron Co. (83 N. Y., 378; 38 Am. Rep., 441).
In the case, after an exhaustive review of various cases, the Court of Appeals of New York stated the rule
as follows:

In all the cases, under all and varying forms of expression, the fundamental and correct doctrine, is,
that the duty assumed by the broker is to bring the minds of the buyer and seller to an agreement
for a sale, and the price and terms on which it is to be made, and until that is done his right to
commissions does not accrue. (McGavock vs. Woodlief, 20 How., 221; Barnes vs. Roberts, 5 Bosw.,
73; Holly vs. Gosling, 2 E. D., Smith, 262; Jacobs vs. Kolff, 2 Hilt., 133; Kock vs. Emmerling, 22
How., 72; Corning vs. Calvert, 2 Hilt., 56; Trundy vs. N.Y. and Hartf. Steamboat Co., 6 Robt., 312;
Van Lien vs. Burns, 1 Hilt., 134.)

xxx xxx xxx

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

One other principle applicable to such a contract as existed in the present case needs to be kept in
view. Where no time for the continuance of the contract is fixed by its terms either party is at liberty
to terminate it at will, subject only to the ordinary requirements of good faith. Usually the broker is
entitled to a fair and reasonable opportunity to perform his obligation, subject of course to the right
of the seller to sell independently. But having been granted him, the right of the principal to terminate
his authority is absolute and unrestricted, except only that he may not do it in bad faith, and as a
mere device to escape the payment of the broker's commissions. Thus, if in the midst of negotiations
instituted by the broker, and which were plainly and evidently approaching success, the seller should
revoke the authority of the broker, with the view of concluding the bargain without his aid, and
avoiding the payment of commission about to be earned, it might be well said that the due
performance his obligation by the broker was purposely prevented by the principal. But if the latter
acts in good faith, not seeking to escape the payment of commissions, but moved fairly by a view of
his own interest, he has the absolute right before a bargain is made while negotiations remain
unsuccessful, before commissions are earned, to revoke the broker's authority, and the latter cannot
thereafter claim compensation for a sale made by the principal, even though it be to a customer with
whom the broker unsuccessfully negotiated, and even though, to some extent, the seller might justly
be said to have availed himself of the fruits of the broker's labor. (Ibid. pp. 444, 445 and 446.)

The rule laid down in the foregoing case was adopted and followed in the cases of Zeimer vs. Antisell (75
Cal. 509), and Ayres vs. Thomas (116 Cal., 140).

The undertaking to procure a purchaser requires of the party so undertaking, not simply to name or
introduce a person who may be willing to make any sort of contract in reference to the property, but
to produce a party capable, and who ultimately becomes the purchaser. (Kimberly vs. Henderson
and Lupton, 29 Md., 512, 515, citing: Keener vs. Harrod and Brooke, 2 Md. 63;
McGavock vs. Woodlief, 20 How., 221. See also Richards, Executor, vs. Jackson, 31 Md., 250.)

The defendant sent a proposal to a broker in these words: If you send or cause to be sent to me, by
advertisement or otherwise, any party with whom I may see fit and proper to effect a sale or
exchange of my real estate, above described I will pay you the sum of $200. The broker found a
person who proposed to purchase the property, but the sale was not affected. Held: That the broker
was not entitled to compensation. (Walker vs. Tirrel, 3 Am. Rep., 352.)

It is clear from the foregoing authorities that, although the present plaintiff could probably have effected
the sale of the defendant's factory had not the defendant sold it to someone else, he is not entitled to the
commissions agreed upon because he had no intervention whatever in, and much sale in question. It must
be borne in mind that no definite period was fixed by the defendant within which the plaintiff might effect
the sale of its factory. Nor was the plaintiff given by the defendant the exclusive agency of such sale.
Therefore, the plaintiff cannot complaint of the defendant's conduct in selling the property through another
agent before the plaintiff's efforts were crowned with success. "One who has employed a broker can himself
sell the property to a purchaser whom he has procured, without any aid from the broker."
(Hungerford vs. Hicks, 39 Conn., 259; Wylie vs. Marine National Bank, 61 N.Y., 415, 416.)

For the foregoing reasons the judgment appealed from is hereby revoked and the defendant is hereby
absolved from all liability under the plaintiff's complaint, with costs in both instances against the plaintiff.
So ordered.

CARLOS SANCHEZ, Petitioners, vs. MEDICARD PHILIPPINES, INC., DR. NICANOR MONTOYA and
CARLOS EJERCITO, Respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:
This petition for review on certiorari seeks to reverse the Decision1 of the Court of Appeals dated February
24, 1999 and its Resolution dated January 12, 2000 in CA-G.R. CV No. 47681.

The facts, as established by the trial court and affirmed by the Court of Appeals, follow:

Sometime in 1987, Medicard Philippines, Inc. (Medicard), respondent, appointed petitioner as its special
corporate agent. As such agent, Medicard gave him a commission based on the "cash brought in."

In September, 1988, through petitioner’s efforts, Medicard and United Laboratories Group of Companies
(Unilab) executed a Health Care Program Contract. Under this contract, Unilab shall pay Medicard a fixed
monthly premium for the health insurance of its personnel. Unilab paid Medicard ₱4,148,005.00 representing
the premium for one (1) year. Medicard then handed petitioner 18% of said amount or ₱746,640.90
representing his commission.

Again, through petitioner’s initiative, the agency contract between Medicard and Unilab was renewed for
another year, or from October 1, 1989 to September 30, 1990, incorporating therein the increase of
premium from ₱4,148,005.00 to ₱7,456,896.00. Medicard paid petitioner ₱1,342,241.00 as his commission.

Prior to the expiration of the renewed contract, Medicard proposed to Unilab, through petitioner, an increase
of the premium for the next year. Unilab rejected the proposal "for the reason that it was too high,"
prompting Dr. Nicanor Montoya (Medicard’s president and general manager), also a respondent, to request
petitioner to reduce his commission, but the latter refused.

In a letter dated October 3, 1990, Unilab, through Carlos Ejercito, another respondent, confirmed its decision
not to renew the health program contract with Medicard.

Meanwhile, in order not to prejudice its personnel by the termination of their health insurance, Unilab,
through respondent Ejercito, negotiated with Dr. Montoya and other officers of Medicard, to discuss ways in
order to continue the insurance coverage of those personnel.

Under the new scheme, Unilab shall pay Medicard only the amount corresponding to the actual
hospitalization expenses incurred by each personnel plus 15% service fee for using Medicard facilities, which
amount shall not be less than ₱780,000.00.

Medicard did not give petitioner any commission under the new scheme.

In a letter dated March 15, 1991, petitioner demanded from Medicard payment of ₱338,000.00 as his
commission plus damages, but the latter refused to heed his demand.

Thus, petitioner filed with the Regional Trial Court (RTC), Branch 66, Makati City, a complaint for sum of
money against Medicard, Dr. Nicanor Montoya and Carlos Ejercito, herein respondents.

After hearing, the RTC rendered its Decision dismissing petitioner’s complaint and respondents’
counterclaim.

On appeal, the Court of Appeals affirmed the trial court’s assailed Decision. The Appellate Court held that
there is no proof that the execution of the new contract between the parties under the "cost plus" system
is a strategy to deprive petitioner of his commission; that Medicard did not commit any fraudulent act in
revoking its agency contract with Sanchez; that when Unilab rejected Medicard’s proposal for an increase
of premium, their Health Care Program Contract on its third year was effectively revoked; and that where
the contract is ineffectual, then the agent is not entitled to a commission.

Petitioner filed a motion for reconsideration, but this was denied by the Court of Appeals on January 12,
2000.

Hence, the instant petition for review on certiorari.

The basic issue for our resolution is whether the Court of Appeals erred in holding that the contract of agency
has been revoked by Medicard, hence, petitioner is not entitled to a commission.

It is dictum that in order for an agent to be entitled to a commission, he must be the procuring cause of the
sale, which simply means that the measures employed by him and the efforts he exerted must result in a
sale.2 In other words, an agent receives his commission only upon the successful conclusion of a
sale.3 Conversely, it follows that where his efforts are unsuccessful, or there was no effort on his part, he is
not entitled to a commission.

In Prats vs. Court of Appeals,4 this Court held that for the purpose of equity, an agent who is not the efficient
procuring cause is nonetheless entitled to his commission, where said agent, notwithstanding the expiration
of his authority, nonetheless, took diligent steps to bring back together the parties, such that a sale
was finalized and consummated between them. In Manotok Borthers vs. Court of Appeals,5 where the
Deed of Sale was only executed after the agent’s extended authority had expired, this Court, applying its
ruling in Prats, held that the agent (in Manotok) is entitled to a commission since he was the efficient
procuring cause of the sale, notwithstanding that the sale took place after his authority had lapsed. The
proximate, close, and causal connection between the agent’s efforts and the principal’s sale of his property
can not be ignored.

It may be recalled that through petitioner’s efforts, Medicard was able to enter into a one-year Health Care
Program Contract with Unilab. As a result, Medicard paid petitioner his commission. Again, through his
efforts, the contract was renewed and once more, he received his commission. Before the expiration of the
renewed contract, Medicard, through petitioner, proposed an increase in premium, but Unilab rejected this
proposal. Medicard then requested petitioner to reduce his commission should the contract be renewed on
its third year, but he was obstinate. Meantime, on October 3, 1990, Unilab informed Medicard it was no
longer renewing the Health Care Program contract.

In order not to prejudice its personnel, Unilab, through respondent Ejercito, negotiated with respondent Dr.
Montoya of Medicard, in order to find mutually beneficial ways of continuing the Health Care Program. The
negotiations resulted in a new contract wherein Unilab shall pay Medicard the hospitalization expenses
actually incurred by each employees, plus a service fee. Under the "cost plus" system which replaced the
premium scheme, petitioner was not given a commission.

It is clear that since petitioner refused to reduce his commission, Medicard directly negotiated with Unilab,
thus revoking its agency contract with petitioner. We hold that such revocation is authorized by Article 1924
of the Civil Code which provides:

"Art. 1924. The agency is revoked if the principal directly manages the business entrusted to the agent,
dealing directly with third persons."

Moreover, as found by the lower courts, petitioner did not render services to Medicard, his principal, to
entitle him to a commission. There is no indication from the records that he exerted any effort in order that
Unilab and Medicard, after the expiration of the Health Care Program Contract, can renew it for the third
time. In fact, his refusal to reduce his commission constrained Medicard to negotiate directly with Unilab.
We find no reason in law or in equity to rule that he is entitled to a commission. Obviously, he was not the
agent or the "procuring cause" of the third Health Care Program Contract between Medicard and Unilab.

WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the Court of Appeals in
CA-G.R. CV No. 47681 are AFFIRMED IN TOTO. Costs against petitioner.

SO ORDERED.

CONSEJO INFANTE, petitioner, vs. JOSE CUNANAN, JUAN MIJARES and THE COURT OF APPEALS,
SECOND DIVISION, respondents.

BAUTISTA ANGELO, J.:

This is a petition for review of a decision of the Court of appeals affirming the judgement of the court of
origin which orders the defendant to pay the plaintiffs the sum of P2,500 with legal interest thereon from
February 2,1949 and the costs of action.

Consejo Infante, defendant herein, was the owner of two parcels of land, together with a house built thereon,
situated in the City of Manila and covered by Transfer Certificate of Title No. 61786. On or before November
30, 1948, she contracted the services of Jose Cunanan and Juan Mijares, plaintiff herein, to sell the above-
mentioned property for a price of P30,000 subject to the condition that the purchaser would assume the
mortgage existing thereon in the favor of the Rehabilitation Finance Corporation. She agreed to pay them a
commission of 5 per cent on the purchase price plus whatever overprice they may obtain for the property.
Plaintiffs found one Pio S. Noche who was willing to buy the property under the terms agreed upon with
defendant, but when they introduced him to defendant, the latter informed them that she was no longer
interested in selling the property and succeeded in making them sign a document stating therein that the
written authority she had given them was already can-celled. However, on December 20, 1948, defendant
dealt directly with Pio S. Noche selling to him the property for P31,000. Upon learning this transaction,
plaintiffs demanded from defendant the payment of their commission, but she refused and so they brought
the present action.

Defendant admitted having contracted the services of the plaintiffs to sell her property as set forth in the
complaint, but stated that she agreed to pay them a commission of P1,200 only on condition that they buy
her a property somewhere in Taft Avenue to where she might transfer after selling her property. Defendant
avers that while plaintiffs took steps to sell her property as agreed upon, they sold the property at Taft
Avenue to another party and because of this failure it was agreed that the authority she had given them be
cancelled.

The lower court found that the preponderance of evidence was in favor of the plaintiffs and rendered
judgement sentensing the defendant to pay the plaintiff the sum of P2,500 with legal interest thereon from
February 2,1949 plus the costs of action. This decision was affirmed in toto by the Court of Appeals.

There is no dispute that respondents were authorized by petitioner to sell her property for the sum of
P30,000 with the understanding that they will be given a commission of 5 percent plus whatever overprice
they may obtain for the property. Petitioner, however, contends that authority has already been withdrawn
on November 30, 1948 when, by the voluntary act of respondents, they executed a document stating that
said authority shall be considered cancelled and without any effect, so that when petitioner sold the property
to Pio S. Noche on December 20, 1948, she was already free from her commitment with respondents and,
therefore, was not in duty bound to pay them any commission for the transaction..

If the facts were as claimed by petitioner, there is in-deed no doubt that she would have no obligation to
pay respondents the commission which was promised them under the original authority because, under the
old Civil Code, her right to withdraw such authority is recognized. A principal may withdraw the authority
given to an agent at will. (Article 1733.) But this fact is disputed. Thus, respondents claim that while they
agreed to cancel the written authority given to them, they did so merely upon the verbal assurance given
by petitioner that, should the property be sold to their own buyer, Pio S. Noche, they would be given the
commission agreed upon. True, this verbal assurance does not appear in the written cancellation, Exhibit 1,
and, on the other hand, it is disputed by petitioner, but respondents were allowed to present oral evidence
to prove it, and this is now assigned as error in this petition for review.

The plea that oral evidence should not have been allowed to prove the alleged verbal assurance is well taken
it appearing that the written authority given to respondents has been cancelled in a written statement. The
rule on this matter is that "When the terms of an agreement have been reduced to writing, it is to be
considered as containing all those terms, and, therefore, there can be, between parties and their successors
in interest, no evidence of the terms of the agreement other than the contents of the writing." (Section 22,
Rule 123, Rules of Court.) The only exceptions to this rule are: "(a)Where a mistake or imperfection of the
writing, or its failure to express the true intent and agreement of the parties, or the validity of the agreement
is put in issue by the pleadings"; and "(b) Where there is an intrinsic ambiguity in the writing." (Ibid.) There
is no doubt that the point raised does not come under any of the cases excepted, for there is nothing therein
that has been put in issue by respondents in their complaint. The terms of the document, Exhibit 1, seem
to be clear and they do not contain any reservation which may in any way run counter to the clear intention
of the parties.

But even disregarding the oral evidence adduced by respondents in contravention of the parole evidence
rule, we are, however, of the opinion that there is enough justification for the conclusion reached by the
lower court as well as by the Court of Appeals to the effect that respondents are entitled to the commission
originally agreed upon. It is a fact found by the Court of Appeals that after petitioner had given the written
authority to respondents to sell her land for the sum of P30,000, respondents found a buyer in the person
of one Pio S. Noche who was willing to buy the property under the terms agreed upon, and this matter was
immediately brought to the knowledge of petitioner. But the latter, perhaps by way of strategem, advised
respondents that she was no longer interested in the deal and was able to prevail upon them to sign a
document agreeing to the cancellation of the written authority.

That petitioner had changed her mind even if respondents had found a buyer who was willing to close the
deal, is a matter that would not give rise to a legal consequence if respondents agree to call off the
transaction in deference to the request of the petitioner. But the situation varies if one of the parties takes
advantage of the benevolence of the other and acts in a manner that would promote his own selfish interest.
This act is unfair as would amount to bad faith. This act cannot be sanctioned without ac-cording to the
party prejudiced the reward which is due him. This is the situation in which respondents were placed by
petitioner. Petitioner took advantage of the services rendered by respondents, but believing that she could
evade payment of their commission, she made use of a ruse by inducing them to sign the deed of
cancellation Exhibit 1. This act of subversion cannot be sanctioned and cannot serve as basis for petitioner
to escape payment of the commission agreed upon.

Wherefore, the decision appealed from is hereby affirmed, with costs against petitioner.

Separate Opinions

LABRADOR, J., concurring and dissenting:

I concur in the result. I can not agree, however, to the ruling made in the majority decision that the
petitioners can not introduce evidence of the circumstances under which the document was signed, i.e. upon
promise by respondent that should the property be sold to petitioner's buyer they would nevertheless be
entitled to the commission agreed upon. Such evidence is not excluded by the parole evidence rule, because
it does not tend to alter or vary the terms of the document. This document was merely a withdrawal of the
authority granted the petitioner to sell the property, not an agreement that they shall not be paid their
commission.

PHILIPPINE HEALTH-CARE PROVIDERS, INC. (MAXICARE), petitioner, vs. CARMELA

ESTRADA/CARA HEALTH SERVICES, respondent.

DECISION

NACHURA, J.:

This petition for review on certiorari assails the Decision1 dated June 16, 2005 of the Court of Appeals (CA)
in CA-G.R. CV No. 66040 which affirmed in toto the Decision2 dated October 8, 1999 of the Regional Trial
Court (RTC), Branch 135, of Makati City in an action for breach of contract and damages filed by respondent
Carmela Estrada, sole proprietor of Cara Health Services, against Philippine Health-Care Providers, Inc.
(Maxicare).

The facts, as found by the CA and adopted by Maxicare in its petition, follow:

[Maxicare] is a domestic corporation engaged in selling health insurance plans whose Chairman Dr.
Roberto K. Macasaet, Chief Operating Officer Virgilio del Valle, and Sales/Marketing Manager
Josephine Cabrera were impleaded as defendants-appellants.
On September 15, 1990, [Maxicare] allegedly engaged the services of Carmela Estrada who was
doing business under the name of CARA HEALTH [SERVICES] to promote and sell the prepaid group
practice health care delivery program called MAXICARE Plan with the position of Independent Account
Executive. [Maxicare] formally appointed [Estrada] as its "General Agent," evidenced by a letter-
agreement dated February 16, 1991. The letter agreement provided for plaintiff-appellee’s
[Estrada’s] compensation in the form of commission, viz.:

Commission

In consideration of the performance of your functions and duties as specified in this letter-
agreement, [Maxicare] shall pay you a commission equivalent to 15 to 18% from individual,
family, group accounts; 2.5 to 10% on tailored fit plans; and 10% on standard plans of
commissionable amount on corporate accounts from all membership dues collected and
remitted by you to [Maxicare].

[Maxicare] alleged that it followed a "franchising system" in dealing with its agents whereby an agent
had to first secure permission from [Maxicare] to list a prospective company as client. [Estrada]
alleged that it did apply with [Maxicare] for the MERALCO account and other accounts, and in fact,
its franchise to solicit corporate accounts, MERALCO account included, was renewed on February 11,
1991.

Plaintiff-appellee [Estrada] submitted proposals and made representations to the officers of

MERALCO regarding the MAXICARE Plan but when MERALCO decided to subscribe to the MAXICARE
Plan, [Maxicare] directly negotiated with MERALCO regarding the terms and conditions of the
agreement and left plaintiff-appellee [Estrada] out of the discussions on the terms and conditions.

On November 28, 1991, MERALCO eventually subscribed to the MAXICARE Plan and signed a Service
Agreement directly with [Maxicare] for medical coverage of its qualified members, i.e.: 1) the
enrolled dependent/s of regular MERALCO executives; 2) retired executives and their dependents
who have opted to enroll and/or continue their MAXICARE membership up to age 65; and 3) regular
MERALCO female executives (exclusively for maternity benefits). Its duration was for one (1) year
from December 1, 1991 to November 30, 1992. The contract was renewed twice for a term of three
(3) years each, the first started on December 1, 1992 while the second took effect on December 1,
1995.

The premium amounts paid by MERALCO to [Maxicare] were alleged to be the following:
a) P215,788.00 in December 1991; b) P3,450,564.00 in 1992; c) P4,223,710.00 in 1993;
d) P4,782,873.00 in 1994; e) P5,102,108.00 in 1995; and P2,394,292.00 in May 1996. As of May
1996, the total amount of premium paid by MERALCO to [Maxicare] was P20,169,335.00.

On March 24, 1992, plaintiff-appellee [Estrada], through counsel, demanded from [Maxicare] that it
be paid commissions for the MERALCO account and nine (9) other accounts. In reply, [Maxicare],
through counsel, denied [Estrada’s] claims for commission for the MERALCO and other accounts
because [Maxicare] directly negotiated with MERALCO and the other accounts(,) and that no agent
was given the go signal to intervene in the negotiations for the terms and conditions and the signing
of the service agreement with MERALCO and the other accounts so that if ever [Maxicare] was
indebted to [Estrada], it was only for P1,555.00 and P43.l2 as commissions on the accounts of
Overseas Freighters Co. and Mr. Enrique Acosta, respectively.

[Estrada] filed a complaint on March 18, 1993 against [Maxicare] and its officers with the Regional
Trial Court (RTC) of Makati City, docketed as Civil Case No. 93-935, raffled to Branch 135.

Defendants-appellants [Maxicare] and its officers filed their Answer with Counterclaim on September
13, 1993 and their Amended Answer with Counterclaim on September 28, 1993, alleging that:
plaintiff-appellee [Estrada] had no cause of action; the cause of action, if any, should be is against
[Maxicare] only and not against its officers; CARA HEALTH’s appointment as agent under the
February 16, 1991 letter-agreement to promote the MAXICARE Plan was for a period of one (1) year
 only; said agency was not renewed after the expiration of the one (1) year period; [Estrada] did not
intervene in the negotiations of the contract with MERALCO which was directly negotiated by
MERALCO with [Maxicare]; and [Estrada’s] alleged other clients/accounts were not accredited with
[Maxicare] as required, since the agency contract on the MAXICARE health plans were not renewed.
By way of counterclaim, defendants-appellants [Maxicare] and its officers claimed P100,000.00 in
moral damages for each of the officers of [Maxicare] impleaded as defendant, P100,000.00 in
exemplary damages, P100,000.00 in attorney’s fees, and P10,000.00 in litigation expenses.3

After trial, the RTC found Maxicare liable for breach of contract and ordered it to pay Estrada actual damages
in the amount equivalent to 10% of P20,169,335.00, representing her commission for the total premiums
paid by Meralco to Maxicare from the year 1991 to 1996, plus legal interest computed from the filing of the
complaint on March 18, 1993, and attorney’s fees in the amount of P100,000.00.

On appeal, the CA affirmed in toto the RTC’s decision. In ruling for Estrada, both the trial and appellate
courts held that Estrada was the "efficient procuring cause" in the execution of the service agreement
between Meralco and Maxicare consistent with our ruling in Manotok Brothers, Inc. v. Court of Appeals.4

Undaunted, Maxicare comes to this Court and insists on the reversal of the RTC Decision as affirmed by the
CA, raising the following issues, to wit:

1. Whether the Court of Appeals committed serious error in affirming Estrada’s entitlement to
commissions for the execution of the service agreement between Meralco and Maxicare.

2. Corollarily, whether Estrada is entitled to commissions for the two (2) consecutive renewals of the
service agreement effective on December 1, 19925 and December 1, 1995.6

We are in complete accord with the trial and appellate courts’ ruling. Estrada is entitled to commissions for
the premiums paid under the service agreement between Meralco and Maxicare from 1991 to 1996.

Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed
by the appellate court, are accorded the highest degree of respect and are considered conclusive between
the parties.7 A review of such findings by this Court is not warranted except upon a showing of highly
meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on
speculation, surmises or conjectures; (2) when a lower court’s inference from its factual findings is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation
of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail to notice
certain relevant facts which, if properly considered, will justify a different conclusion; (5) when there is a
misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific
evidence on which they are based, are premised on the absence of evidence, or are contradicted by evidence
on record.8 None of the foregoing exceptions which would warrant a reversal of the assailed decision obtains
in this instance.

Maxicare urges us that both the RTC and CA failed to take into account the stipulations contained in the
February 19, 1991 letter agreement authorizing the payment of commissions only upon satisfaction of twin
conditions, i.e., collection and contemporaneous remittance of premium dues by Estrada to Maxicare.
Allegedly, the lower courts disregarded Estrada’s admission that the negotiations with Meralco failed. Thus,
the flawed application of the "efficient procuring cause" doctrine enunciated in Manotok Brothers, Inc. v.
Court of Appeals,9 and the erroneous conclusion upholding Estrada’s entitlement to commissions on
contracts completed without her participation.

We are not persuaded.

Contrary to Maxicare’s assertion, the trial and the appellate courts carefully considered the factual backdrop
of the case as borne out by the records. Both courts were one in the conclusion that Maxicare successfully
landed the Meralco account for the sale of healthcare plans only by virtue of Estrada’s involvement and
participation in the negotiations. The assailed Decision aptly states:
 There is no dispute as to the role that plaintiff-appellee [Estrada] played in selling [Maxicare’s] health
insurance plan to Meralco. Plaintiff-appellee [Estrada’s] efforts consisted in being the first to offer
the Maxicare plan to Meralco, using her connections with some of Meralco Executives, inviting said
executives to dinner meetings, making submissions and representations regarding the health plan,
sending follow-up letters, etc.

These efforts were recognized by Meralco as shown by the certification issued by its Manpower
Planning and Research Staff Head Ruben A. Sapitula on September 5, 1991, to wit:

"This is to certify that Ms. Carmela Estrada has initiated talks with us since November 1990
with regards (sic) to the HMO requirements of both our rank and file employees, managers
and executives, and that it was favorably recommended and the same be approved by the
Meralco Management Committee."

xxxx

This Court finds that plaintiff-appellee [Estrada’s] efforts were instrumental in introducing the Meralco
account to [Maxicare] in regard to the latter’s Maxicare health insurance plans. Plaintiff-appellee
[Estrada] was the efficient "intervening cause" in bringing about the service agreement with Meralco.
As pointed out by the trial court in its October 8, 1999 Decision, to wit:

"xxx Had not [Estrada] introduced Maxicare Plans to her bosom friends, Messrs. Lopez and
Guingona of Meralco, PHPI would still be an anonymity. xxx"10

Under the foregoing circumstances, we are hard pressed to disturb the findings of the RTC, which the CA
affirmed.

We cannot overemphasize the principle that in petitions for review on certiorari under Rules 45 of the Rules
of Court, only questions of law may be put into issue. Questions of fact are not cognizable by this Court.
The finding of "efficient procuring cause" by the CA is a question of fact which we desist from passing upon
as it would entail delving into factual matters on which such finding was based. To reiterate, the rule is that
factual findings of the trial court, especially those affirmed by the CA, are conclusive on this Court when
supported by the evidence on record.11

The jettisoning of the petition is inevitable even upon a close perusal of the merits of the case.

First. Maxicare’s contention that Estrada may only claim commissions from membership dues which she has
collected and remitted to Maxicare as expressly provided for in the letter-agreement does not convince us.
It is readily apparent that Maxicare is attempting to evade payment of the commission which rightfully
belongs to Estrada as the broker who brought the parties together. In fact, Maxicare’s former Chairman
Roberto K. Macasaet testified that Maxicare had been trying to land the Meralco account for two (2) years
prior to Estrada’s entry in 1990.12 Even without that admission, we note that Meralco’s Assistant Vice-
President, Donatila San Juan, in a letter13 dated January 21, 1992 to then Maxicare President Pedro R. Sen,
categorically acknowledged Estrada’s efforts relative to the sale of Maxicare health plans to Meralco, thus:

Sometime in 1989, Meralco received a proposal from Philippine Health-Care Providers, Inc.
(Maxicare) through the initiative and efforts of Ms. Carmela Estrada, who introduced Maxicare to
Meralco. Prior to this time, we did not know that Maxicare is a major health care provider in the
country. We have since negotiated and signed up with Maxicare to provide a health maintenance
plan for dependents of Meralco executives, effective December 1, 1991 to November 30, 1992.

At the very least, Estrada penetrated the Meralco market, initially closed to Maxicare, and laid the
groundwork for a business relationship. The only reason Estrada was not able to participate in the collection
and remittance of premium dues to Maxicare was because she was prevented from doing so by the acts of
Maxicare, its officers, and employees.

In Tan v. Gullas,14 we had occasion to define a broker and distinguish it from an agent, thus:
 [O]ne who is engaged, for others, on a commission, negotiating contracts relative to property with
the custody of which he has no concern; the negotiator between the other parties, never acting in
his own name but in the name of those who employed him. [A] broker is one whose occupation is
to bring the parties together, in matter of trade, commerce or navigation.15

An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker
earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually
made.16

In relation thereto, we have held that the term "procuring cause" in describing a broker’s activity, refers to
a cause originating a series of events which, without break in their continuity, result in the accomplishment
of the prime objective of the employment of the broker—producing a purchaser ready, willing and able to
buy on the owner’s terms.17 To be regarded as the "procuring cause" of a sale as to be entitled to a
commission, a broker’s efforts must have been the foundation on which the negotiations resulting in a sale
began.18 Verily, Estrada was instrumental in the sale of the Maxicare health plans to Meralco. Without her
intervention, no sale could have been consummated.

Second. Maxicare next contends that Estrada herself admitted that her negotiations with Meralco failed as
shown in Annex "F" of the Complaint.

The chicanery and disingenuousness of Maxicare’s counsel is not lost on this Court. We observe that this
Annex "F" is, in fact, Maxicare’s counsel’s letter dated April 10, 1992 addressed to Estrada. The letter
contains a unilateral declaration by Maxicare that the efforts initiated and negotiations undertaken by
Estrada failed, such that the service agreement with Meralco was supposedly directly negotiated by
Maxicare. Thus, the latter effectively declares that Estrada is not the "efficient procuring cause" of the sale,
and as such, is not entitled to commissions.

Our holding in Atillo III v. Court of Appeals,19 ironically the case cited by Maxicare to bolster its position that
the statement in Annex "F" amounted to an admission, provides a contrary answer to Maxicare’s ridiculous
contention. We intoned therein that in spite of the presence of judicial admissions in a party’s pleading, the
trial court is still given leeway to consider other evidence presented. 20 We ruled, thus:

As provided for in Section 4 of Rule 129 of the Rules of Court, the general rule that a judicial
admission is conclusive upon the party making it and does not require proof admits of two exceptions:
1) when it is shown that the admission was made through palpable mistake, and 2) when it is shown
that no such admission was in fact made. The latter exception allows one to contradict an admission
by denying that he made such an admission.

For instance, if a party invokes an "admission" by an adverse party, but cites the admission
"out of context," then the one making the admission may show that he made no "such"
admission, or that his admission was taken out of context.

This may be interpreted as to mean "not in the sense in which the admission is made to
appear." That is the reason for the modifier "such."21

In this case, the letter, although part of Estrada’s Complaint, is not, ipso facto, an admission of the
statements contained therein, especially since the bone of contention relates to Estrada’s entitlement to
commissions for the sale of health plans she claims to have brokered. It is more than obvious from the
entirety of the records that Estrada has unequivocally and consistently declared that her involvement as
broker is the proximate cause which consummated the sale between Meralco and Maxicare.

Moreover, Section 34,22 Rule 132 of the Rules of Court requires the purpose for which the evidence is offered
to be specified. Undeniably, the letter was attached to the Complaint, and offered in evidence, to
demonstrate Maxicare’s bad faith and ill will towards Estrada. 23

Even a cursory reading of the Complaint and all the pleadings filed thereafter before the RTC, CA, and this
Court, readily show that Estrada does not concede, at any point, that her negotiations with Meralco failed.
Clearly, Maxicare’s assertion that Estrada herself does not pretend to be the "efficient procuring cause" in
the execution of the service agreement between Meralco and Maxicare is baseless and an outright falsehood.

After muddling the issues and representing that Estrada made an admission that her negotiations with
Meralco failed, Maxicare’s counsel then proceeds to cite a case which does not, by any stretch of the
imagination, bolster the flawed contention.

We, therefore, ADMONISH Maxicare’s counsel, and, in turn, remind every member of the Bar that the
practice of law carries with it responsibilities which are not to be trifled with. Maxicare’s counsel ought to be
reacquainted with Canon 1024 of the Code of Professional Responsibility, specifically, Rule 10.02, to wit:

Rule 10.02 – A lawyer shall not knowingly misquote or misrepresent the contents of a paper, the
language or the argument of opposing counsel, or the text of a decision or authority, or knowingly
cite as law a provision already rendered inoperative by repeal or amendment, or assert as a fact that
which has not been proved.

Third. Finally, we likewise affirm the uniform ruling of the RTC and CA that Estrada is entitled to 10% of the
total amount of premiums paid25 by Meralco to Maxicare as of May 1996. Maxicare’s argument that assuming
Estrada is entitled to commissions, such entitlement only covers the initial year of the service agreement
and should not include the premiums paid for the succeeding renewals thereof, fails to impress. Considering
that we have sustained the lower courts’ factual finding of Estrada’s close, proximate and causal connection
to the sale of health plans, we are not wont to disturb Estrada’s complete entitlement to commission for the
total premiums paid until May 1996 in the amount of P20,169,335.00.

WHEREFORE, premises considered and finding no reversible error committed by the Court of Appeals, the
petition is hereby DENIED. Costs against the petitioner.

SO ORDERED.

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

FERNANDEZ, J.:

This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No. 45974-R
entitled "Antonio E. Prats, doing business under the name of Philippine Real Estate Exchange, vs. Alfonso
Doronila and the Philippine National Bank", the dispositive part of which reads:

In view of all the foregoing, it is our considered opinion and so hold that the decision of the
lower court be, as it is hereby reversed, and the complaint, dismissed. On appellant's
counterclaim, judgment is hereby rendered directing appellee to pay attorney's fees in the
sum of P10,000 to appellant, no moral damages as therein claimed being awarded for lack of
evidence to justify the same. The injunction issued by the lower court on the P2,000,000.00
cash deposit of the appellant is hereby lifted. No special pronouncement as to costs.

SO ORDERED. 1

On September 23, 1968 Antonio E. Prats, doing business under the name of "Philippine Real Estate
Exchange" instituted against Alfonso Doronila and Philippine National Bank Civil Case No. Q-12412 in the
Court of First Instance of Rizal at Quezon City to recover a sum of money and damages.

The complaint stated that defendant Alfonso Doronila was the registered owner of 300 hectares of land
situated in Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013, 216747 and
216750; that defendant Doronila had for sometime tried to sell his aforesaid 300 hectares of land and for
that purpose had designated several agents; that at one time, he had offered the same property to the
Social Security System but failed to consummate any sale; that his offer to sell to the Social Security System
having failed, defendant Doronila on February 14, 1968 gave the plaintiff an exclusive option and authority
in writing to negotiate the sale of his aforementioned property, which exclusive option and authority the
plaintiff caused to be published in the Manila Times on February 22, 1968; that it was the agreement
between plaintiff and defendant Doronila that the basic price shall be P3.00 per square meter, that plaintiff
shall be entitled to a commission of 10% based on P2.10 per square meter or at any price finally agreed
upon and if the property be sold over and above P3.00 per square meter, the excess shall be created and
paid to the plaintiff in addition to his 10% commission based on P2.10 per square meter; that as a result of
the grant of the exclusive option and authority to negotiate the sale of his 300 hectares of land situated in
Montalban, Rizal in favor of the plaintiff, the defendant Doronila, on February 20, 1968, wrote a letter to
the Social Security System withdrawing his previous offer to sell the same land and requesting the return
to him of all papers concerning his offered property that the Social Security System, complying with said
request of defendant Doronila, returned all the papers thereon and defendant Doronila, in turn gave them
to the plaintiff as his duly authorized real estate broker; that by virtue of the exclusive written option and
authority granted him and relying upon the announced policy of the President of the Philippines to promote
low housing program the plaintiff immediately worked to negotiate the sale of defendant Doronila's 300
hectares of land to the Social Security System, making the necessary contacts and representations to bring
the parties together, namely, the owner and the buyer, and bring about the ultimate sale of the land by
defendant Doronila to the Social Security System; that on February 27, 1968, after plaintiff had already
contacted the Social Security System, its Deputy Administrator, Reynaldo J. Gregorio, wrote a letter to
defendant Doronila inviting the latter to a conference regarding the property in question with Administrator
Teodoro, Chairman Gaviola and said Reynaldo J. Gregorio on March 4, 1968 at 10:00 o'clock in the morning,
stating that the SSS would like to take up the offer of the lot; that having granted plaintiff the exclusive
written option and authority to negotiate the sale of his 300 hectares of land, defendant Doronila in a letter
dated February 28, 1968 declined the invitation extended by the Social Security System to meet with its
Administrator and Chairman and requested them instead "to deal directly" with the plaintiff, that on March
16, 1968, at the suggestion of defendant Doronila, the plaintiff wrote a letter to the Social Security System
to the effect that plaintiff would be glad to sit with the officials of the Social Security System to discuss the
sale of the property of the defendant Doronila; that on March 18, 1968, the Social Security System sent a
telegram to defendant Doronila to submit certain documents regarding the property offered; that on May 6,
1968, a written offer to sell the 300 hectares of land belonging to defendant Doronila was formally made by
the plaintiff to the Social Security System and accordingly, on May 7, 1968, the Social Security System
Administrator dispatched the following telegram to defendant Doronila: "SSS considering purchase your
property for its housing project Administrator Teodoro"; that a few days thereafter, the plaintiff accompanied
the defendant Doronila to the China Banking Corporation to arrange the matter of clearing payment by
chock and delivery of the titles over the property to the Society Security System; that having been brought
together by the plaintiff, the defendant Doronila and the offices of the Society Security System, on May 29,
1968 and on June 4, 1968, met at the office of the SSS Administrator wherein the price for the purchase of
the defendant Doronila's 300 hectares of land was, among others, taken up; that on June 20, 1968, the
Social Security Commission passed Resolution No. 636 making a counter-offer of P3.25 per square meter
subject to an appraise report; that on June 27, 1968, Resolution No. 662 was adopted by the Social Security
Commission authorizing the Toples & Harding (Far East) Inc. to conduct an appraisal of the property and to
submit a report thereon; that pursuant thereto, the said company submitted its appraisal report specifying
that the present value of the property is P3.34 per square meter and that a housing program development
would represent the highest and best use thereof, that on July 18, 1968, the Social Security Commission,
at its regular meeting, taking note of the favorable appraisal report of the Toples'& Harding (Far East) Inc.,
passed Resolution No. 738, approving the purchase of defendant Doronila's 300 hectares of land in
Montalban, Rizal at a price of P3.25 per square meter or for a total purchase price of Nine Million Seven
Hundred Fifty Thousand Pesos (P9,750,000.00), appropriating the said amount for the purpose and
authorizing the SSS Administrator to sign the necessary documents to implement the said resolution; that
on July 30, 1968, defendant Doronila and the Social Security System executed the corresponding deed of
absolute sale over the 300 hectares of land in Montalban, Rizal covered by Transfer Certificate of Title Nos.
77011, 77013, 216747 and 216750 under the terms of which the total price of P9,750,000.00 shall be
payable as follows: (a) 60% of the agreed purchase price, or Five Million Eight Hundred Fifty Thousand
Pesos (P5,860,000.00) immediately after signing the deed of sale. and (b) the balance of 40% of the agreed
price, or Three Million Nine Hundred Thousand Pesos (P3,900,000.00) thirty days after the signing of the
deed of absolute sale; that on August 21, 1968, after payment of the purchase price, the deed absolute sale
executed by defendant Doronila in favor of the Social Security System was presented for registration in the
Office of the Register of Deeds of Rizal, and Transfer Certificates of Title Nos. 926574, 226575, 226576 and
226577 in the name of the Social Security System were issued; that defendant Doronila has received the
full purchase price for his 300 hectares of land in the total amount of P9,750,000.00, which amount he
deposited in his bank Account No. 0012-443 with the defendant Philippine National Bank; that on September
17, 1968, the plaintiff presented his statement to, and demanded of defendant Doronila the payment of his
processional fee as real estate broker as computed under the agreement of February 14, 1968 in the total
amount of P1,380,000.00; that notwithstanding such demand, the defendant Doronila, in gross and evident
bad faith after having availed of the services of plaintiff as real estate broker, refused to pay the professional
fees due him; that as a result of defendant Doronila's gross and evident bad faith and unjustified refusal to
pay plaintiff the professional fees due him under the agreement, the latter has suffered and continues to
suffer mental anguish, serious anxiety, and social humiliation for which defendant Doronila shall be held
liable to pay moral damages; and, that by reason likewise of the aforesaid act of defendant Doronila, the
plaintiff has been compelled to file this action and to engage the services of counsel at a stipulated
professional fee of P250,000.00.

In his answer filed on November 18, 1968, the defendant Doronila alleged that when the plaintiff offered
the answering defendant's property to the Social Security System on May 6, 1968, said defendant had
already offered his property to, and had a closed transaction or contract of sale of, said property with the
Social Security System; that the letter agreement had become null and void because defendant Doronila
had not received any written offer from any prospective buyers of the plaintiff during the agreed period of
60 days until the last day of the authorization which was April 13, 1968 counting from February 14, 1968;
that it is not true that plaintiff brought together defendant Doronila and the officials of the Social Security
System to take up the purchase price of defendant Doronila's property for the simple reason that the
plaintiff's offer was P6.00 per square meter and later on reduced to P4.50 per square meter because the
SSS Chairman had already a closed transaction with the defendant Doronila at the price of P3.25 per square
meter and that the offer of the plaintiff was refused by the officials of the Social Security System; and that
defendant Doronila did not answer the statement of collection of the plaintiff because the latter had not
right to demand the payment for services not rendered according to the agreement of the parties. The
answering defendant interposed a counterclaim for damages and attorney's fees.

On January 18, 1969, the plaintiff and defendant Alfonso Doronila submitted the following stipulation of
facts:

STIPULATION OF FACTS

COME NOW the plaintiff and defendant DORONILA, through their respective undersigned
counsel, and to this Honorable Court by way of abbreviating the proceeding i the case at bar,
without prejudice to presentation of explanatory evidence, respectfully submit the following
STIPULATION OF FACTS.

1.

The defendant Doronila was the registered owner of 300 hectares of land, situated in
Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013, 216747
(formerly TCT No. 116631) and 216750 (formerly TCT No. 77012).

2.

That on July 3, 1967, defendant DORONILA under his letter (marked Annex "1" of the answer)
addressed to the SSS Chairman, offered his said property to the Social Security System (SSS)
at P4.00 per square meter.

That on July 17, 1967 (Annex "2" of the Answer) the SSS Chairman, Mr. Ramon C. Gaviola,
Jr., replied to defendant DORONILA, as follows:

This will acknowledge your letter of July 3rd, 1967 relative to your offer for sale
of your real estate property.
 In this regard, may I please be informed as to how many hectares, out of the
total 300 hectares offered, are located in Quezon City and how many hectares
are located in Montalban, Rizal. Likewise, as regards your offer of P4.00 per
square meter, would there be any possibility that the same be reduced to P3.25
per square meter Finally and before I submit your proposal for process it is
requested that the NAWASA certify to the effect that they have no objection to
having this parcel of land subdivided for residential house purposes.

Thank you for your offer and may I hear from you at the earliest possible time.

2-a

That on July 19, 1967, defendant DORONILA wrote a letter (a xerox copy, attached hereto
marked as Annex "2-a" for DORONILA) to NAWASA, and that in reply thereto, on July 25,
1967, the NAWASA wrote the following letter (Xerox copy attached hereto to be marked as
Annex "2-b" for DORONILA) to defendant DORONILA.

In connection with your proposed subdivision plan of your properties adjacent

to our Novaliches Watershed, this Office would like to impose the following
conditions:

1. Since your property is an immediate boundary of our Novaliches Watershed,

a 20-meter road should be constructed along our common boundary.

2. That no waste or drainage water from the subdivision should flow towards
the watershed.

3. That the liquid from the septic tanks or similar waste water should be treated
before it is drained to the Alat River above our Alat Dam.

The above conditions are all safeguards to the drinking water of the people of
Manila and Suburbs. It is therefore expected that we all cooperate to make our
drinking water safer from any pollution.

3.

That on July 19, 1967, defendant DORONILA wrote another letter (marked as Annex '3' on
his Answer) addressed to the SSS Chairman, Mr. Ramon Gaviola Jr., stating, among others,
the following:

In this connection, I have your counter-offer of P3.25 per square meter against
my offer of P4.00 per square meter, although your counter-offer is lower
comparing to the prices of adjacent properties, I have to consider the difference
as my privilege and opportunity to contribute or support the Presidential policy
to promote low cost housing in this country particularly to the SSS members
by accepting gladly your counter-offer of P3.25 per square meter with the
condition that it should be paid in cash and such payment shall be made within
a period of 30 days from the above stated date (2nd paragraph of letter dated
July 18, 1967, Annex "3" of the Answer).

3.a

That on August 10, 1967, the SSS Chairman, Mr. Ramon Gaviola Jr., wrote the following
(Xerox copy attached hereto and marked as Annex '2-c' for DORONILA: addressed to
defendant DORONILA:
 With reference to your letter, dated July 1967, please be informed that the
same is now with the Administrator for study and comment. The Commission
will act on receipt of information re such studies.

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

remain.

3-b

That on October 30, 1967, Mr. Pastor B. Sajorda, 'By authority of Atty. Alfonso Doronila,
property owner', wrote the following request (Xerox copy attached hereto and marked as
Annex '2-d' for DORONILA) addressed to Realtor Vicente L. Narciso for a certification
regarding the actual prices of DORONILA's property, quoted as follows:

May I have the honor to request for your certification as a member of the Board
of Realtor regarding the actual prices of my real estate raw-land properties
described as Lots 3-B-7, 26B, 6 and 4-C-3 all adjacent to each other, containing
a total area of 3,000,000 square meters, all registered in the name of Alfonso
Doronila, covered by T.C.T. Nos. 116631, 77013, 77011, and 77012, located
at Montalban, Rizal, all adjacent to the Northern portion of the NAWASA
properties in Quezon City including those other surrounding adjacent properties
and even those properties located before reaching my own properties coming
from Manila.

This request is purposely made for my references in case I decided to sell my

said properties mentioned above.

3-c

That on November 3, 1967, Realtor Vicente Narciso wrote the following reply (Xerox copy
attached hereto and marked as Annex 2 for DORONILA) to Mr. Pastor B. Sajorda:

As per your request dated October 30, 1967, regarding prices of raw land, it is
my finding that the fair market value of raw land in the vicinity of the NAWASA
properties at Quezon City and Montalban, Rizal. including the properties of Atty.
Alfonso Doronila. more particularly known as lots 3-B-7, 26-B, and 4-C-3
containing approximately 3,000,000 square meters is P3.00 to P3.50 per
square meter.

Current prices before reaching Doronila's property range from P6.00 to P7.00
per square meter.

4.

That on February 14, 1968, defendant DORONILA granted plaintiff an exclusive option and
authority (Annex 'A' of the complaint), under the following terms and conditions:

1. The price of the property is THREE (P3.00) PESOS per square meter.

2. A commission of TEN (10%) PERCENT will be paid to us based on P2.10 per

square meter, or at any price that you DORONILA finally agree upon, and all
expenses shall be for our account, including preparation of the corresponding
deed of conveyance, documentary stamps and registration fee, whether the
sale is causes directly or indirectly by us within the time of this option. If the
property is sold over and above P3.00 per square meter, the excess amount
shall be credited and paid to the herein workers. In addition to the 10%
commission based on P2.10 per square meter, provided the brokers shall pay
 the corresponding taxes to the owner of the excess amount over P3.00 per
square meter, unless paid by check which would then be deductible as
additional expenses.

3. This exclusive option and authority is good for a period of sixty (60) days
from the date of your conformity; provided, however, that should negotiations
have been started with a buyer, said period is automatically extended until said
negotiations is terminated, but not more than fifteen (15) days;

4. The written offers must be made by the prospective buyers, unless they
prefer to have us take the offer for and in their behalf some buyers do not want
to be known in the early stages of the negotiations:

5. If no written offer is made to you until the last day of this authorization, this
option and authority shall expire and become null and void;

6. It is clearly understood that prospective buyers and all parties interested in

this property shall be referred to us, and that you will not even quote a price
directly to any agent or buyer. You agree to refer all agents or brokers to us
DURING the time this option is in force; and

7. There are some squatters occupying small portions of the property, which
fact will be reported to the prospective buyers, and said squatters will be
removed at our expense. (Annex "A" of the complaint)

Very truly yours,

PHILIPPINE REAL ESTATE

EXCHANCE

(Sgd) ANTONIO E. PRATS

Generalmanager

CONFORME:

(Sgt.) ALFONSO DORONILA

Date: February 14, 1968

5.

That on February 19, 1968, plaintiff wrote the following letter to defendant DORONILA (Annex
"4" of the Answer), quoted as follows:

February 19, 1968

Don Alfonso Doronila

Plaza Ferguzon

Ermita, Manila

Dear Don Alfonso:

In view of the exclusive option extended to us for the sale of your property consisting 300
hectares located at Montalban, Rizal, we earnestly request that you take immediate steps to
withdraw any and all papers pertaining to this property offered to the SOCIAL SECURITY
SYSTEM

Very truly yours,

PHILIPPINE REAL

ESTATE EXCHANGE

(Sgd) ANTONIO E. PRATS

General Manager

AEP/acc

RECEIVED ORIGINAL

By: (Sgd.) ROGELIO DAPITAN

6.

That on February 20, 1968, pursuant to the letter dated February 19, 1968 of plaintiff,
defendant DORONILA wrote a letter (Annex 'B' of the complaint) to the SSS Administrator
stating:

In as much as the SSS has not acted on my offer to sell a 300 hectare lot
located in Montalban, Rizal, for the last five (5) months I respectfully requested
for the return of all my papers concerning this offered property.

7.

That on February 27, 1968, defendant DORONILA received the following letter (Annex "C" of
the complaint) from the SSS Deputy Administrator, Mr. Reynaldo J. Gregorio, to wit:

May I take this opportunity of inviting you in behalf of Administrator Teodoro, to meet with
him, Chairman Gaviola and myself on Friday, March 4, 10:00 A.M. lot offer.

Thanks and regards.

8.

That on February 28, 1968, defendant DORONILA wrote the following letter (Annex "D" of the
complaint) to the SSS Deputy Administrator:

Thank you for your invitation to meet Administrator Teodoro, Chairman Gaviola
and your goodself, to take up my former offer to sell my property to the Social
Security System.

Since the SSS had not acted on my offer dated July 19, 1967, more than seven
(7) months ago, I have asked for the return of my papers, as per my letter of
February 20, 1968, and which you have kindly returned to me.

As of February 20, 1968, I gave the Philippine Real Estate Exchange an

exclusive option and authority to negotiate the sale of this 300 hectare land,
and I am no longer at liberty to negotiate its sale personally; I shall therefore
request you communicate directly with the Philippine Real Estate Exchange, P.
 O. Box 84, Quezon City, and deal with them directly if you are still interested
in my property.

With my kind personal regards, I am

9.

That on March 16, 1968, plaintiff, acting upon the letter of defendant DORONILA dated
February 28, 1968 (Annex 'D' for plaintiff), wrote the following letter to SSS Administrator:

Don Alfonso Doronila, owner of the 300 hectare land located at Montalban,
Rizal, adjoining the Quezon City boundary, has informed us that the
Administrator of the SOCIAL SECURITY' SYSTEM, through Mr. Reynaldo J.
Gregorio, has invited him to meet with the Administrator and Chairman Gaviola
to take up the former offer to sell his property to the SSS.

In his letter to the Administrator dated February 20, 1968 (which has been
received by the SSS on the same day), Mr. Doronila advised you that as of
February 20,1968, he gave the PHILIPPINE REAL ESTATE EXCHANGE
(PHILREX) the exclusive option and authority to negotiate the sale of his 300
hectare land in Montalban, and that he is no longer at liberty to negotiate its
sale personally, and that, if you are still interested in the property, the SSS
should communicate directly with the PHILIPPINE REAL ESTATE EXCHANGE.

It is by virtue of this arrangement that Mr. Doronila now refers to us invitation

and his reply to the SSS and has requested us to get in touch with you.

While, at present we have several prospective buyers interested in this

property, we shall, in compliance with the request of Mr. Doronila, be happy to
sit down with you and Chairman Ramon Gaviola, Jr.

Please let us know when it will be convenient to hold the conference.

10.

That on April 18, 1968, defendant DORONILA extended the plaintiff exclusive option and
authority to expire May 18, 1968.(annex 'B' — Reply letter of Doronila to SSS Deputy
Administrator dated May 8, 1968).

11.

That on May 6,1968, plaintiff made a formal written offer to the Social Security System to sell
the 300 hectares land of defendant DORONILA at the price of P6.00 per square meter, Xerox
copy of which bearing the stamp or receipt of Social Security System is attached hereof as
Annex "D" — plaintiff.

12.

That on May 16, 1968 the defendant DORONILA received the following telegram (Annex 'E' of
the complaint) form the SSS Administrative, reading:

SSS CONSIDERING PURCHASE YOUR PROPERTY FOR ITS HOUSING PROJECT

13.
That on May 18, 1968, after plaintiff exclusive option and authority had been extended,
plaintiff wrote the following letter (Annex "A"— Reply' of plaintiff's REPLY TO ANSWER) to
defendant DORONILA, to wit:

CONFIDENTIAL

In our conference last Monday, May 13, 1968, you have been definitely advised
by responsible parties that the SOCIAL SECURITY SYSTEM is acquiring your
300-hectare land at Montalban, Rizal, adjoining the Quezon City Boundary —
and that said property will be acquired in accordance with the exclusive option
and authority you gave the PHILIPPINE REAL ESTATE EXCHANCE. You were
assured in that conference that the property will be acquired definitely, but, as
it has been mentioned during the conference, it may take from 30 to 60 days
to have all the papers prepared and to effect the corresponding payment. The
telegram from the SSS confirming these negotiations has already been received
by you, a copy of which you yourself have kindly furnished us.

Pursuant to paragraph 3 of the terms of the option that you have kindly extended, we still
have fifteen days more from today, May 18, 1968, within which to finish the negotiations for
the sale of your property to the SSS. For your convenience, we quote the pertinent portion of
paragraph 3 of the option:

... provided, however, that should negotiation have been started with a buyer,
said period is automatically extended until said negotiation is terminated, but
no more than fifteen (15) days.

Please be assured that we will do our very best to complete these negotiations
for the sale of your property within this fifteen-day period. In the meantime'
we hope you will also observe the provisions of paragraph 6 of the exclusive
option you have extended to us.

14.

That on May 18, 1968, plaintiff wrote the following letter (Xerox copy attached and marked
hereof as Annex 'H' for plaintiff) addressed defendant DORONILA, to wit:

By virtue of the exclusive option and authority you have granted the
PHILIPPINE REAL ESTATE EXCHANGE to negotiate the sale of your 300-hectare
land located at Montalban, Rizal, adjoining the Quezon City boundary, which
properties are covered by Transfer Certificate of Titles Nos. 116631, 77011,
77012 and 77013, of the Registry of Deeds for the Province of Rizal, we hereby
make a firm offer, for and in behalf of our buyer, to purchase said property at
the price of FOUR PESOS AND FIFTY CENTAVOS (P4.50) per square meter, or
the total amount of THIRTEEN MILLION FIVE HUNDRED THOUSAND
(P13,500,000.00) PESOS, Philippine Currency, payable in Cash and D.B.P.
Progress Bonds, on a ratio to be decided between you and our principal.

To expedite the negotiations, we suggest that we sit down sometime early next
week with our principal to take up the final arrangement and other details in
connection with the purchase of the subject property.

To give you further assurance of the validity of this offer, we refer you to the
CHINA BANKING CORPORATION (Trust Department) who has already been
apprised of these negotiations, to which ]sank we strongly recommend that this
transaction be coursed through, for your own security and protection.

15.
That on May 30, 1968, plaintiff wrote the following letter (Xerox copy attached hereto, and
marked as Annex 'I' for plaintiff) to defendant DORONILA, quoted as follows:

This is to advise you that the SOCIAL SECURITY SYSTEM agreed to purchase
your 300-hectare land located at Montalban, Rizal, which purchase can be
conformed by the Chairman of the SOCIAL SECURITY COMMISSION. The details
will have to be taken up between you and the Chairman, and we suggest that
you communicate with the Chairman at your earliest convenience.

This negotiation was made by virtue of the exclusive option and authority you
have granted the PHILIPPINE REAL ESTATE EXCHANGE, which option is in full
force and effect, and covers the transaction referred above.

16.

That on June 6,1968, defendant DORONILA wrote the following letter (Annex" 7" for
DORONILA), to the plaintiff, to wit:

I have to inform you officially, that I have not received any written offer from
the SSS or others, to purchase my Montalban property of which you were given
an option and exclusive authority as appearing in your letter- contract dated
February 14, 1968, during the 60 days of your exclusive authority which
expired on April 14, 1968, nor during the extension which was properly a new
exclusive authority of 30 days from April 18, which expired on May 18, 1968,
nor during the provided 15 days grace, in case that you have closed any
transaction to terminate it during that period, which also expired on June 3,
1968.

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

5. If no written offer is made to you until the last day of this authorization, this
option and authority shall expire and becomes null and void.

As I have informed you, that on April 16, 1968 or two days after your option
expired I have signed an agreement to sell my property to a group of buyers
to whom I asked later that the effectivity of said agreement will be after your
new authority has expired will be on June 2, 1968, and they have accepted; As
your option has expired, and they know that there was no written offer made
by the SSS for any price of my property, aside of their previous letter
announcing me that they are ready to pay, I was notified on June 4, 1968 by
their representative, calling my attention but our agreement; that is why I am
writing you, that having expired your option and exclusive authority to offer for
sale my said property, I notified only this afternoon said to comply our
agreement.

Hoping for your consideration on the matter, as we have to be guided by

contracts that we have to comply, I hereby express to you my sincere
sentiments.

17.

That on June 19, 1968, defendant DORONILA wrote the following letter (Annex "5" of the
Answer) to the SSS Administrator, renewing his offer to sell his 300 hectare land to the SSS
at P4.00 per square meter, to wit:

This is to renew my offer to sell my properties located at Montalban, Rizal

Identified as Lot Nos. 3-B-7, 26-8, 6, and 4-C-3 registered in my name in the
 office of the Registry of Deeds of Rizal under T.C.T. Nos. 116631, 77013, 77011
and 216750, containing a total area of 300 hectares or 3,000,000 square
meters.

You will recall that last year, I offered to the Social Security System the same
properties at the price of Four (P4.00) pesos per square meter. After 3 ocular
inspection of Chairman Gaviola one of said inspections accompanied by
Commissioner Arroyo and after receiving the written apprisal report of Manila
realtor Vicente L. Narciso, the System then made a counter-offer of Three pesos
and twenty-five (P3.25) per square meter which I accepted under the condition
that the total amount be paid within a period of thirty (30) days from the date
of my acceptance (July 19, 1967). My acceptance was motivated by the fact
that within said period of time I had hoped to purchase my sugarcane hacienda
in Iloilo with the proceeds I expected from the sale. No action was however
taken by the System thereon.

Recently the same properties were offered by Antonio E. Prats of the Philippine
Real Estate Exchange to the Presidential Assistant on Housing, at the price of
six pesos (p6.00) per square meter, who referred it to the System, but against
no action had been taken by the System.

Considering the lapse of time since our original offer during which prices of real
estate have increased considerably, on the one hand and in cooperation with
the System's implementation of our government's policy to provide low cost
houses to its members, on the other hand, I am renewing my offer to sell my
properties to the system only at the same price of P4.00 per square meter, or
for a total amount of twelve million pesos (P12,000,000.00), provided the total
amount is paid in cash within a period of fifteen (15) days from this date.

18.

That on June 20, 1968, the Social Security Commission passed Resolution No. 636 by which
the SSS formalized its counter-offer of P3.25 per square meter. (See Annex 'F' of the
complaint)

19.

That on June 25, 1968, the SSS Administrator, Mr. Gilberto Teodoro, wrote the following reply
letter (Annex '6' of the Answer) to defendant DORONILA, to wit:

This has reference to your letter dated June 19, 1966 renewing
your offer to sell your property located at Montalban, Rizal
containing an area of 300 hectares at P4.00 per square meter.
Please be informed that the said letter was submitted for the
consideration of the Social Security Commission at its last
meeting on June 20, 1968 and pursuant to its Resolution No.
636, current series, it decided that the System reiterate its
counter-offer for P3.25 per square meter subject to a favorable
appraisal report by a reputable appraisal entity as regards
particularly to price and housing project feasibility. Should this
counter-offer be acceptable to you, kindly so indicate by signing
hereunder your conformity thereon.

Trusting that the foregoing sufficiently advises you on the matter, I remain

Very truly yours,

GILBERTO TEODORO
 Administrator

CONFORME: With condition that the sale will be consummated within Twenty
(20) days from this date.

ALFONSO DORONILA

Returned and received the original by June 25/68 Admtr's Office

20.

That on June 27, 1968, the Social Security Commission passed Resolution No. 662 authorizing
the Toples & Harding (Far East) to conduct an appraisal of the property of defendant
DORONILA and to submit a report thereon. (See Annex 'F' of the complaint)

21.

That on July 17, 1968, the Social Security Commission taking note of the report of Toples &
Harding (Far East), passed Resolution No. 736, approving the purchase of the 300 hectare
land of defendant DORONILA, at the price of P3.25 per square meter, for a total purchase
price of NINE MILLION SEVEN HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), and
appropriating the said amount of money for the purpose. (See Annex 'F' of the complaint).

22.

That on July 30, 1968, defendant DORONILA executed the deed of absolute sale (Annex "C"
of the complaint) over his 300-hectare land, situated in Montalban, Rizal, covered by TCT
Nos. 77011, 77013, 216747 (formerly TCT No. 116631) and 216750 (formerly TCT No.
77012), in favor of the Social Security System, for the total purchase price of NINE MILLION
SEVEN HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), Philippine currency, which deed
of sale was presented for registration in the Office of the Register of Deeds of Fiscal on August
21, 1968.

23.

That defendant DORONILA had received the full purchase price of NINE MILLION SEVEN
HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), Philippine Currency, in two
installments.

24.

That on September 17, 1968, plaintiff presented his STATEMENT OF ACCOUNT, dated
September 16, 1968 (Xerox copy of which is attached hereto and marked as Annex plaintiff'
to defendant DORONILA for the payment of his professional services as real estate broker in
the amount of P1,380,000.00, as computed on the basis of the letter-agreement, Annex "A"
of the complaint, which defendant failed to pay. Manila, for Quezon City, January 18,1968.

Respectfully submitted:

CRISPIN D. BAIZAS & ASSOCIATES

and A.N. BOLINAO, JR.

By: (Sgd.)

Counsel for the plaintiff

 Suite 305, ShurdutBldg.
Intramuros, Manila

(Sgd.) E. V. Obon

Atty. EUGENIO V. OBON

Counsel for the defendant

9 West Point Street

Quezon City

ALFONSO DORONILA

Counsel for the defendant

428 Plaza de Ferguson

Ermita, Manila 2

The trial court rendered its decision dated December 12, 1969, the initiative part of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff, ordering defendant Alfonso

Doronila, under the first cause of action, to pay to plaintiff the sum of P1,380,000.00 with
interest thereon at the rate of 6% per annum from September 23, 1968 until fully paid; and
under the second Cause of Action, to pay plaintiff the sum of P200,000.00 as moral damages;
the sum of P100,000.00 as exemplary damages; the sum of P150,000.00 as attorney's fees,
including the expenses of. litigation and costs of this suit.

The writ of preliminary injunction issued in this case is hereby made permanent; and the
defendant Philippine National Bank is hereby ordered to pay to the plaintiff the amount of
P1,380,000.00 and interest on the P1,380,000.00 to be computed separately out of the
P2,000,000.00 which it presently holds under a fixed time deposit.

SO ORDERED.

December 12, 1969, Quezon City, Philippines.

(SGD.) LOURDES P. SAN DIEGO

The defendant appealed to the Court of Appeals where the appeal was docketed as CA-G.R. No. 45974-R.

In a decision promulgated on September 19, 1974, the Court of Appeals reversed the derision of the trial
court and dismissed the complaint because:

In any event, since it has been found that the authority of appellee expired on June 2, 1968,
rather than June 12, 1968 as the lower court opined, the inquiry would be whether up to that
time, a written offer was made by appellee in behalf of the SSS. The stipulation is clear on
this point. There should be a written offer by the prospective buyer or by appellee for or in
their behalf, and that if no such written offer is made until the last day of the authorization,
the option and authority shall expire and become null and void. Note that the emphasis is
placed on the need of a written offer to save the authority from an automatic termination on
the last day of the authorization. We note such emphasis with special significance in receive
 of the condition relative to automatic extension of not more than 15 days if negotiations have
been started. The question then is when are negotiations deemed started In the light of the
provisions just cited, it should be when a response is given by the prospective buyer showing
fits interest to buy the property when an offer is made by the seller or broker and make an
offer of the price. Strictly, therefore, prior to May 29, 1968, there were no negotiations yet
started within contemplation of the letter-agreement of brokerage (Exh. A). Nevertheless
appellant extended appellee's exclusive authority to on May 18, 1968 (par. 10, Stipulation of
Facts; R.A. p. 89), which was automatically extended by 15 days under their agreement, to
expire on June 2, 1968, if the period extended up to May 18, 1968 a necessary authority. For,
it may even be considered as taking the of the 15-days automatic extension, since appellee's
pretension is that negotiations have been started within the original period of 60 days.
Appellant in fixing the expiry date on June 2, 1968, has thus made a liberal concession in
favor of appellee, when he chose not to the extension up to May 18, 1968 as the automatic
extension which ougth to have been no more than 15 days, but which he stretched twice as
long. 4

The petitioner assigned the following errors:

THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER WAS NOT
THE EFFICIENT PROCURING CAUSE IN BRING ABOUT THE SALE OF PRIVATE RESPONDENT
DORONILA'S LAND TO THE SSS.

II

THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THERE WAS FAILURE
ON THE PART OF HEREIN PETITIONER TO COMPLY WITH THE TERMS AND CONDITIONS OF
HIS CONTRACT WITH PRIVATE RESPONDENT.

III

THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER IS NOT

ENTITLED TO HIS COMMISSION.

IV

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

RESPONDENT DORONILA INSTEAD OF AFFIRMING THE AWARD OF MORAL AND EXEMPLARY
DAMAGES AS WELL As ATTORNEY FEES TO PETITIONER. 5

The Court in its Resolution of May 23, 1975 originally denied the petition for lack of merit but upon
petitioner's motion for reconsideration and supplemental petition invoking equity, resolved in its Resolution
of August 20, 1975 to give due course thereto.

From the stipulation of facts and the evidence of record, it is clear that the offer of defendant Doronila to
sell the 300 hectares of land in question to the Social Security System was formally accepted by the System
only on June 20, 1968 after the exclusive authority, Exhibit A, in favor of the plaintiff, petitioner herein, had
expired. The respondent court's factual findings that petitioner was not the efficient procuring cause in
bringing about the sale proceeding from the fact of expiration of his exclusive authority) which are admittedly
final for purposes of the present petition, provide no basis law to grant relief to petitioner. The following
pertinent excerpts from respondent court's extensive decision amply demonstrate this:

It is noted, however, that even in his brief, when he said —

According to the testimony of the plaintiff-appellee a few days before May 29,
1968, he arranged with Mr. Gilberto Teodoro, SSS Administrator, a meeting
 with the defendant Manila. He talked with Mr. Teodoro over the telephone and
fixed the date of the meeting with defendant-appellant Doronila for May 29,
1968, and that he was specifically requested by Mr. Teodoro not to be present
at the meeting, as he, Teodoro, wanted to deal directly with the defendant-
appellant alone. (Tsn., pp. 4446, March 1, 1969). Finding nothing wrong with
such a request, as the sale could be caused directly or indirectly (Exh. 'A'), and
believing that as a broker all that he needed to do to be entitled to his
commission was to bring about a meeting between the buyer and the seller as
to ripen into a sale, plaintiff-appellee readily acceded to the request.

appellee is not categorical that it was through his efforts that the meeting took place on inlay
29, 1968. He refers to a telephone call he made "a few days before May 29, 1968," but in the
conversation he had with Mr. Teodoro, the latter requested him not to be present in the
meeting. From these facts, it is manifest that the SSS officials never wanted to be in any way
guided by, or otherwise subject to, the mediation or intervention of, appellee relative to the
negotiation for the purchase of the property. It is thus more reasonable to conclude that if a
meeting was held on May 29, 1968, it was done independently, and not by virtue of, appellee's
wish or efforts to hold such meeting. 6

xxx xxx xxx

... It is even doubtful if he tried to make any arrangement for meeting at all, because on May
18, 1968, he told appellant:

... we hereby make a firm offer, for and in behalf of our buyer, to purchase said
property at the price of Four Pesos and Fifty Centavos (P4.50) per square meter
....

As this offer is evidently made in behalf of buyer other than the SSS which had never offered
the price of P4.50 per square meter, appellee could not have at the same time arranged a
meeting between the SSS officials and appellant with a view to consummating the sale in
favor of the SSS which had made an offer of only PS.25 per sq. m. and thus lose the much
bigger profit he would realize with a higher price of P4.50 per sq. meter. This 'firm offer' of
P4.50 per sq. m. made by appellee betrayed his lack of any efficient intervention in the
negotiations with the SSS for the purchase by it of appellant's property ... 7

xxx xxx xxx

... This becomes more evident when it is considered that on May 6, 1968 he was making his
first offer to sell the property at P6.00 per sq. m. to the SSS to which offer he received no
answer. It is this cold indifference of the SSS to him that must have prompted him to look for
other buyers, resulting in his making the firm offer of 714.50 per sq. m. on May 18, 1968, a
fact which only goes to show that for being ignored by the SSS, he gave up all effort to deal
with the SSS. ... 8

xxx xxx xxx

... For him to claim that it was he who aroused the interest of the SSS in buying appellant's
property is to ignore the fact that as early as June, (July) 1967, the SSS had directly dealt
with appellant to such an extent that the price of P3.25 as offered by the SSS was accepted
by appellant, the latter imposing only the condition that the price should be paid in cash, and
within 30 days from the date of the acceptance. It can truly be said then that the interest of
SSS to acquire the property had been sufficiently aroused for there to be any need for appellee
to stimulate it further. Appellee should know this fact for according to him, the 10-day grace
period was agreed upon to give the SSS a chance to pay the price of the land at P3.25 per
sq. m., as a "compromise" to appellant's insistence that the SSS be excluded from appellee's
option or authority to sell the land. 9
 ... There should be a written offer by the prospective buyer or by appellee for or in their
behalf, and that if no such written offer is made until the last day of the authorization, the
option and authority shall expired and become null and void. ... Yet, no such written offer was
made. ... 10

In equity, however, the Court notes that petitioner had Monthly taken steps to bring back together
respondent Doronila and the SSS, among which may be mentioned the following:

In July, 1967, prior to February 14, 1968, respondent Doronila had offered to sell the land in question to
the Social Security System Direct negotiations were made by Doronila with the SSS. The SSS did not then
accept the offer of Doronila. Thereafter, Doronila executed the exclusive authority in favor of petitioner Prats
on February 14, 1968.

Prats communicated with the Office of the Presidential Housing Commission on February 23, 1968 offering
the Doronila property. Prats wrote a follow-up letter on April is, 1968 which was answered by the
Commission with the suggestion that the property be offered directly to the SSS. Prats wrote the SSS on
March 16, 1968, inviting Chairman Ramon Gaviola, Jr. to discuss the offer of the sale of the property in
question to the SSS. On May 6, 1968, Prats made a formal written offer to the Social Security System to
self the 300 hectare land of Doronila at the price of P6.00 per square meter. Doronila received on May 17,
1968 from the SSS Administrator a telegram that the SSS was considering the purchase of Doronilas
property for its housing project. Prats and his witness Raagas testified that Prats had several dinner and
lunch meetings with Doronila and/or his nephew, Atty. Manuel D. Asencio, regarding the progress of the
negotiations with the SSS.

Atty. Asencio had declared that he and his uncle, Alfonso Doronila, were invited several times by Prats,
sometimes to luncheons and sometimes to dinner. On a Sunday, June 2, 1968, Prats and Raagas had
luncheon in Sulu Hotel in Quezon City and they were joined later by Chairman Gaviola of the SSS.

The Court has noted on the other hand that Doronila finally sold the property to the Social Security System
at P3.25 per square meter which was the very same price counter-offered by the Social Security System
and accepted by him in July, 1967 when he alone was dealing exclusively with the said buyer long before
Prats came into the picture but that on the other hand Prats' efforts somehow were instrumental in bringing
them together again and finally consummating the transaction at the same price of P3.25 square meter,
although such finalization was after the expiration of Prats' extended exclusive authority. Still such price
was higher than that stipulated in the exclusive authority granted by Doronila to Prats.

Under the circumstances, the Court grants in equity the sum of One Hundred Thousand Pesos (P100,000.00)
by way of compensation for his efforts and assistance in the transaction, which however was finalized and
consummated after the expiration of his exclusive authority and sets aside the P10,000.00 — attorneys'
fees award adjudged against him by respondent court.

WHEREFORE, the derision appealed from is hereby affirmed, with the modification that private respondent
Alfonso Doronila in equity is ordered to pay petitioner or his heirs the amount of One Hundred Thousand
Pesos (P100,000.00) and that the portion of the said decision sell petitioner Prats to pay respondent Doronila
attorneys' fees in the sum of P10,000.00 is set aside.

The lifting of the injunction issued by the lower court on the P2,000,000.00 cash deposit of respondent
Doronila as ordered by respondent court is hereby with the exception of the sum of One Hundred Thousand
Pesos (P100,000.00) which is ordered segregated therefrom to satisfy the award herein given to petitioner,
the lifting of said injunction, as herein ordered, is immediately executory upon promulgation hereof.

No pronouncement as to costs.

MANOTOK BROTHERS, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, THE
HONORABLE JUDGE OF THE REGIONAL TRIAL COURT OF MANILA (Branch VI), and SALVADOR
SALIGUMBA, respondents.
SYLLABUS

1. CIVIL LAW; AGENCY; AGENT'S COMMISSION; WHEN ENTITLED' RULE; APPLICATION IN CASE AT BAR.
— In an earlier case, this Court ruled that when there is a close, proximate and causal connection between
the agent's efforts and labor and the principal's sale of his property, the agent is entitled to a commission.
We agree with respondent Court that the City of Manila ultimately became the purchaser of petitioner's
property mainly through the efforts of private respondent. Without discounting the fact that when Municipal
Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, private respondent's authority had
already expired, it is to be noted that the ordinance was approved on April 26, 1968 when private
respondent's authorization was still in force. Moreover, the approval by the City Mayor came only three days
after the expiration of private respondent's authority. It is also worth emphasizing that from the records,
the only party given a written authority by petitioner to negotiate the sale from July 5, 1966 to May 14,
1968 was private respondent.

DECISION

CAMPOS, JR., J p:

Petitioner Manotok Brothers., Inc., by way of the instant Petition docketed as G.R. No. 94753 sought relief
from this Court's Resolution dated May 3, 1989, which reads:

"G.R. No. 78898 (Manotok Brothers, Inc. vs. Salvador Saligumba and Court of Appeals). — Considering the
manifestation of compliance by counsel for petitioner dated April 14, 1989 with the resolution of March 13,
1989 which required the petitioner to locate private respondent and to inform this Court of the present
address of said private respondent, the Court Resolved to DISMISS this case, as the issues cannot be joined
as private respondent's and counsel's addresses cannot be furnished by the petitioner to this court." 1

In addition, petitioner prayed for the issuance of a preliminary injunction to prevent irreparable injury to
itself pending resolution by this Court of its cause. Petitioner likewise urged this Court to hold in contempt
private respondent for allegedly adopting sinister ploy to deprive petitioner of its constitutional right to due
process.

Acting on said Petition, this Court in a Resolution 2 dated October 1, 1990 set aside the entry of judgment
made on May 3, 1989 in case G.R. No. 78898; admitted the amended petition; and issued a temporary
restraining order to restrain the execution of the judgment appealed from.

The amended petition 3 admitted, by this Court sought relief from this Court's Resolution abovequoted. In
the alternative, petitioner begged leave of court to re-file its Petition for Certiorari 4 (G.R. No. 78898)
grounded on the allegation that petitioner was deprived of its opportunity to be heard.

The facts as found by the appellate court, revealed that petitioner herein (then defendant-appellant) is the
owner of a certain parcel of land and building which were formerly leased by the City of Manila and used by
the Claro M. Recto High School, at M.F. Jhocson Street, Sampaloc Manila.

By means of a letter 5 dated July 5, 1966, petitioner authorized herein private respondent Salvador
Saligumba to negotiate with the City of Manila the sale of the aforementioned property for not less than
P425,000.00. In the same writing, petitioner agreed to pay private respondent a five percent (5%)
commission in the event the sale is finally consummated and paid.

Petitioner, on March 4, 1967, executed another letter 6 extending the authority of private respondent for
120 days. Thereafter, another extension was granted to him for 120 more days, as evidenced by another
letter 7 dated June 26, 1967.

Finally, through another letter 8 dated November 16, 1967, the corporation with Rufino Manotok, its
President, as signatory, authorized private respondent to finalize and consummate the sale of the property
to the City of Manila for not less than P410,000.00. With this letter came another extension of 180 days.
The Municipal Board of the City of Manila eventually, on April 26, 1968, passed Ordinance No. 6603,
appropriating the sum of P410,816.00 for the purchase of the property which private respondent was
authorized to sell. Said ordinance however, was signed by the City Mayor only on May 17, 1968, one hundred
eighty three (183) days after the last letter of authorization.

On January 14, 1969, the parties signed the deed of sale of the subject property. The initial payment of
P200,000.00 having been made, the purchase price was fully satisfied with a second payment on April 8,
1969 by a check in the amount of P210,816.00.

Notwithstanding the realization of the sale, private respondent never received any commission, which should
have amounted to P20,554.50. This was due to the refusal of petitioner to pay private respondent said
amount as the former does not recognize the latter's role as agent in the transaction.

Consequently, on June 29, 1969, private respondent filed a complaint against petitioner, alleging that he
had successfully negotiated the sale of the property. He claimed that it was because of his efforts that the
Municipal Board of Manila passed Ordinance No. 6603 which appropriated the sum for the payment of the
property subject of the sale.

Petitioner claimed otherwise. It denied the claim of private respondent on the following grounds: (1) private
respondent would be entitled to a commission only if the sale was consummated and the price paid within
the period given in the respective letters of authority; and (2) private respondent was not the person
responsible for the negotiation and consummation of the sale, instead it was Filomeno E. Huelgas, the PTA
president for 1967-1968 of the Claro M. Recto High School. As a counterclaim, petitioner (then defendant-
appellant) demanded the sum of P4,000.00 as attorney's fees and for moral damages.

Thereafter, trial ensued. Private respondent, then plaintiff, testified as to the efforts undertaken by him to
ensure the consummation of the sale. He recounted that it first began at a meeting with Rufino Manotok at
the office of Fructuoso Ancheta, principal of C.M. Recto High School. Atty. Dominador Bisbal, then president
of the PTA, was also present. The meeting was set precisely to ask private respondent to negotiate the sale
of the school lot and building to the City of Manila. Private respondent then went to Councilor Mariano
Magsalin, the author of the Ordinance which appropriated the money for the purchase of said property, to
present the project. He also went to the Assessor's Office for appraisal of the value of the property. While
these transpired and his letters of authority expired, Rufino Manotok always renewed the former's
authorization until the last was given, which was to remain in force until May 14, 1968. After securing the
report of the appraisal committee, he went to the City Mayor's Office, which indorsed the matter to the
Superintendent of City Schools of Manila. The latter office approved the report and so private respondent
went back to the City Mayor's Office, which thereafter indorsed the same to the Municipal Board for
appropriation. Subsequently, on April 26, 1968, Ordinance No. 6603 was passed by the Municipal Board for
the appropriation of the sum corresponding to the purchase price. Petitioner received the full payment of
the purchase price, but private respondent did not receive a single centavo as commission.

Fructuoso Ancheta and Atty. Dominador Bisbal both testified acknowledging the authority of private
respondent regarding the transaction.

Petitioner presented as its witnesses Filomeno Huelgas and the petitioner's President, Rufino Manotok.

Huelgas testified to the effect that after being inducted as PTA president in August, 1967 he followed up the
sale from the start with Councilor Magsalin until after it was approved by the Mayor on May 17, 1968. He.
also said that he came to know Rufino Manotok only in August, 1968, at which meeting the latter told him
that he would be given a "gratification" in the amount of P20,000.00 if the sale was expedited.

Rufino Manotok confirmed that he knew Huelgas and that there was an agreement between the two of them
regarding the "gratification".

On rebuttal, Atty. Bisbal said that Huelgas was present in the PTA meetings from 1965 to 1967 but he never
offered to help in the acquisition of said property. Moreover, he testified that Huelgas was aware of the fact
that it was private respondent who was negotiating the sale of the subject property.
Thereafter, the then Court of First Instance (now, Regional Trial Court) rendered judgment sentencing
petitioner and/or Rufino Manotok to pay unto private respondent the sum of P20,540.00 by way of his
commission fees with legal interest thereon from the date of the filing of the complaint until payment. The
lower court also ordered petitioner to pay private respondent the amount of P4,000.00 as and for attorney's
fees. 9

Petitioner appealed said decision, but to no avail. Respondent Court of Appeals affirmed the said ruling of
the trial court. 10

Its Motion for Reconsideration having been denied by respondent appellate court in a Resolution dated June
22, 1987, petitioner seasonably elevated its case on Petition for Review on Certiorari on August 10, 1987
before this Court, docketed as G.R. No. 78898.

Acting on said Petition, this Court issued a Minute Resolution 11 dated August 31, 1987 ordering private
respondent to comment on said Petition.

It appearing that the abovementioned Resolution was returned unserved with the postmaster's notation
"unclaimed", this Court in another Resolution 12 dated March 13, 1989, required petitioner to locate private
respondent and to inform this Court of the present address of private respondent within ten (10) days from
notice. As petitioner was unsuccessful in its efforts to locate private respondent, it opted to manifest that
private respondent's last address was the same as that address to which this. Court's Resolution was
forwarded.

Subsequently, this Court issued a Resolution dated May 3, 1989 dismissing petitioner's case on the ground
that the issues raised in the case at bar cannot be joined. Thus, the above-entitled case became final and
executory by the entry of judgment on May 3, 1989.

Thereafter, on January 9, 1990 private respondent filed a Motion to Execute the said judgment before the
court of origin. Upon discovery of said development, petitioner verified with the court of origin the
circumstances by which private respondent obtained knowledge of the resolution of this Court. Sensing a
fraudulent scheme employed by private respondent, petitioner then instituted this instant Petition for Relief,
on August 30, 1990. On September 13, 1990, said petition was amended to include, in the alternative, its
petition to re-file its Petition for Certiorari (G.R. No. 78898).

The sole issue to be addressed in this petition is whether or not private respondent is entitled to the five
percent (5%) agent's commission.

It is petitioner's contention that as a broker, private respondent's job is to bring together the parties to a
transaction. Accordingly, if the broker does not succeed in bringing the minds of the purchaser and the
vendor to an agreement with respect to the sale, he is not entitled to a commission.

Private respondent, on the other hand, opposes petitioner's position maintaining that it was because of his
efforts that a purchase actually materialized between the parties.

We rule in favor of private respondent.

At first sight, it would seem that private respondent is not entitled to any commission as he was not
successful in consummating the sale between the parties, for the sole reason that when the Deed of Sale
was finally executed, his extended authority had already expired. By this alone, one might be misled to
believe that this case squarely falls within the ambit of the established principle that a broker or agent is
not entitled to any commission until he has successfully done the job given to him. 13

Going deeper however into the case would reveal that it is within the coverage of the exception rather than
of the general rule, the exception being that enunciated in the case of Prats vs. Court of Appeals. 14 In the
said case, this Court ruled in favor of claimant-agent, despite the expiration of his authority, when a sale
was finally consummated.
In its decision in the abovecited case, this Court said, that while it was respondent court's (referring to the
Court of Appeals) factual findings that petitioner Prats (claimant-agent) was not the efficient procuring cause
in bringing about the sale (prescinding from the fact of expiration of his exclusive authority), still petitioner
was awarded compensation for his services. And We quote:

"In equity, however, the Court notes that petitioner had diligently taken steps to bring back together
respondent Doronila and the SSS,.

xxx xxx xxx

The court has noted on the other hand that Doronila finally sold the property to the Social Security System
at P3.25 per square meter which was the very same price counter-offered by the Social Security System
and accepted by him in July, 1967 when he alone was dealing exclusively with the said buyer long before
Prats came into the picture but that on the other hand Prats' efforts somehow were instrumental in bringing
them together again and finally consummating the transaction at the same price of P3.25 per square meter,
although such finalization was after the expiration of Prats' extended exclusive authority.

xxx xxx xxx

Under the circumstances, the Court grants in equity the sum of One hundred Thousand Pesos (P100,000.00)
by way of compensation for his efforts and assistance in the transaction, which however was finalized and
consummated after the expiration of his exclusive authority . . ." 15 (Emphasis supplied.).

From the foregoing, it follows then that private respondent herein, with more reason, should be paid his
commission, While in Prats vs. Court of Appeals, the agent was not even the efficient procuring cause in
bringing about the sale, unlike in the case at bar, it was still held therein that the agent was entitled to
compensation. In the case at bar, private respondent is the efficient procuring cause for without his efforts,
the municipality would not have anything to pass and the Mayor would not have anything to approve.

In an earlier case, 16 this Court ruled that when there is a close, proximate and causal connection between
the agent's efforts and labor and the principal's sale of his property, the agent is entitled to a commission.

We agree with respondent Court that the City of Manila ultimately became the purchaser of petitioner's
property mainly through the efforts of private respondent. Without discounting the fact that when Municipal
Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, private respondent's authority had
already expired, it is to be noted that the ordinance was approved on April 26, 1968 when private
respondent's authorization was still in force. Moreover, the approval by the City Mayor came only three days
after the expiration of private respondent's authority. It is also worth emphasizing that from the records,
the only party given a written authority by petitioner to negotiate the sale from July 5, 1966 to May 14,
1968 was private respondent.

Contrary to what petitioner advances, the case of Danon vs. Brimo, 17 on which it heavily anchors its
justification for the denial of private respondent's claim, does not apply squarely to the instant petition.
Claimant-agent in said case fully comprehended the possibility that he may not realize the agent's
commission as he was informed that another agent was also negotiating the sale and thus, compensation
will pertain to the one who finds a purchaser and eventually effects the sale. Such is not the case herein.
On the contrary, private respondent pursued with his goal of seeing that the parties reach an agreement,
on the belief that he alone was transacting the business with the City Government as this was what petitioner
made it to appear.

While it may be true that Filomeno Huelgas followed up the matter with Councilor Magsalin, the author of
Municipal Ordinance No. 6603 and Mayor Villegas, his intervention regarding the purchase came only after
the ordinance had already been passed — when the buyer has already agreed to the purchase and to the
price for which said property is to be paid. Without the efforts of private respondent then, Mayor Villegas
would have nothing to approve in the first place. It was actually private respondent's labor that had set in
motion the intervention of the third party that produced the sale, hence he should be amply compensated.
WHEREFORE, in the light of the foregoing and finding no reversible error committed by respondent Court,
the decision of the Court of Appeals is hereby AFFIRMED. The temporary restraining order issued by this
Court in its Resolution dated October 1, 1990 is hereby lifted.

SO ORDERED.

UNILAND RESOURCES, petitioner, vs. DEVELOPMENT BANK OF THE PHILIPPINES,* respondent.

GANCAYCO, J.:

In the law on agency, it is elementary that when the main transaction between the principal parties does
not materialize, the claim for commission of the duly authorized broker is disallowed.1 How about the
instance when the sale was eventually consummated between parties introduced by a middleman who, in
the first place, had no authority, express or implied, from the seller to broker the transaction? Should the
interloper be allowed a commission? On these simplified terms rests the nature of the controversy on which
this case turns.

As stated by the respondent Court of Appeals,2 the ambient circumstances of this case are as follows:

(1) [Petitioner] Uniland Resources is a private corporation engaged in real estate brokerage and
licensed as such (p. 2, Rec.), while [respondent] DBP, as we all know [sic], is a government
corporation engaged in finance and banking in a proprietary capacity.

(2) Long before this case arose, Marinduque Mining Corporation obtained a loan from the DBP and
as security therefor, mortgaged certain real properties to the latter, among them two lots located in
Makati, M.M., described as follows:

(a) Corner lot, covered by TCT No. 114138, located at Pasong Tamo, Makati with an area of
3,330 sq. mts. on which is constructed a [four]-story concrete building, etc., which, for
brevity, shall be called the office building lot; and

(b) Lot covered by TCT No. 16279 with 12,355 sq. mts located at Pasong Tamo, Makati, on
which is constructed a concrete/steel warehouse, etc., which, for brevity, shall be called the
warehouse lot.

The aforesaid lots had, however, been previously mortgaged by Marinduque Mining Corp., to Caltex,
and the mortgage in favor of DBP was entered on their titles as a second mortgage (Pre-Trial Order,
p. 37, Rec.).

The account of the Marinduque Mining Corp., with the DBP was later transferred to the Assets
Privatization Trust (APT) pursuant to Proclamation No. 50.

(3) For failure of the Marinduque Mining Corp. to pay its obligations to Caltex, the latter foreclosed
its mortgage on the aforesaid two lots (pp. 37-38, Rec.). APT on the other hand, to recover its
investment on the Marinduque Account, offered for sale to the public through DBP its right of
redemption on said two lots by public bidding (Exhs. "1" and "2").

(4) Considering, however, that Caltex had required that both lots be redeemed, the bidding
guidelines set by DBP provided that any bid to purchase either of the two lots would be considered
only should there be two bids or a bid for the two items which, when combined, would fully cover
the sale of the two lots in question (Exh. "1").

(5) The aforesaid bidding was held on May 5, 1987 with only one bidder, the Counsel Realty Corp.
[an affiliate of Glaxo, Philippines, the client of petitioner], which offered a bid only for the warehouse
lot in the amount of P23,900,000.00. Said bid was thus rejected by DBP.
 (6) Seeing, however, that it would make a profit if it redeemed the two lots and then offer them for
sale, and as its right to redeem said lots from Caltex would expire on May 8, 1987, DBP retrieved
the account from APT and, on the last day for the exercise of its right of redemption, May 8, 1987,
redeemed said lots from Caltex for P33,096,321.62 (Exh. "5"), thus acquiring them as its physical
assets.

(7) In preparation for the sale of the two lots in question, DBP called a pre-bidding conference
wherein a new set of bidding guidelines were formulated (Exh. "3"). Then, on July 30,1987, the
public bidding for the sale of the two lots was held and again, there was only one bidder, the Charges
Realty Corp. [another affiliate of Glaxo, Philippines], for only the warehouse lot and for the amount
of P24,070,000.00, which is slightly higher than the amount previously offered by Counsel Realty
Corp., therefor at the May 5, 1987 bidding (see Exh. "5," p. 1 00, Rec.). No bid was submitted for
the office building lot (id.).

(8) Notwithstanding that there was no bidder for the office building lot, the DBP approved the sale
of the warehouse lot to Charges Realty Corp., and on November 23, 1987, the proper documentation
of the sale was made (Exh. "D"). As for the office building lot, it was later sold by DBP in a negotiated
sale to the Bank of P.I. as trustee for the "Perpetual Care Fund of the Manila Memorial Park" for
P17,460,000.00, and proper documentation of the sale was made on November 17, 1987 (Exh. "E"
and submarkings). The DBP admittedly paid the (five percent) broker's fee on this sale to the DBP
Management Corporation, which acted as broker for said negotiated sale (p. 15, Appellant DBP's
brief).

(9) After the aforesaid sale, [petitioner], through its President, wrote two letters to [respondent
DBP], the first through its Senior Vice President (Exh. "C"), and, the second through its Vice Chairman
(Exh. "4" [sic], asking for the payment of its broker's fee in instrumenting the sale of its (DBP's)
warehouse lot to Charges Realty Corp. The claim was referred to the Bidding Committee chaired by
Amanda S. Guiam which met on November 9, 1987, and which, on November 18, 1987, issued a
decision denying [petitioner's] claim (Exh. "5"). Hence, the instant case filed by [petitioner] to
recover from [respondent] DBP the aforesaid broker's fee.

After trial, the lower court, on October 25, 1988, rendered judgment

ORDERING [respondent DBP] to pay [petitioner] the sum of P1,203,500,00 which is the
equivalent of [five percent] broker's fee plus legal interest thereto (sic) from the filing of the
complaint on February 18, 1988 until fully paid and the sum of P50,000.00 as and for
attorney's fees. Costs against [respondent DBP]. (p. 122, Rec.).3

On appeal, the Court of Appeals reversed the judgment of the lower court4 and dismissed the complaint.
The motion for reconsideration filed by petitioner was also subsequently denied. 5

Petitioner is now before this Court alleging that the petition "RAISES A QUESTION OF LAW IN THE SENSE
THAT THE RESPONDENT COURT OF APPEALS BASED ITS DECISION ONLY ON THE CONTROVERSIAL FACTS
FAVORABLE TO THE PRIVATE RESPONDENT DBP,6 primarily making capital of the disparity between the
factual conclusions of the trial court and of the appellate court. Petitioner asserts that the respondent Court
of Appeals disregarded evidence in its favor consisting of its letters to respondent DBP's higher officers sent
prior to the bidding and sale, wherein petitioner requested accreditation as a broker and, in the process of
informing that it had offered the DBP properties for sale, also volunteered the name of its client, Glaxo,
Philippines, as an interested prospective buyer. 7

The rule is that in petitions for certiorari as a mode of appeal, only questions of law distinctly set forth may
be raised.8 Such questions have been defined as those that do not call for any examination of the probative
value of the evidence presented by the parties. 9 Petitioner's singular assignment of error would, however,
have this Court go over the facts of this case because it necessarily involves the examination of the evidence
and its subsequent reevaluation. Under the present proceeding, the same, therefore, cannot be done.
It bears emphasizing that mere disagreement between the Court of Appeals and the trial court as to the
facts of a case does not of itself warrant this Court's review of the same. It has been held that the doctrine
that the findings of fact made by the Court of Appeals, being conclusive in nature, are binding on this Court,
applies even if the Court of Appeals was in disagreement with the lower court as to the weight of evidence
with a consequent reversal of its findings of fact, so long as the findings of the Court of Appeals are borne
out by the record or based on substantial evidence. 10 while the foregoing doctrine is not absolute, petitioner
has not sufficiently proved that his case falls under the known exceptions.11

Be that as it may, the Court has perused the assailed decision of the Court of Appeals and still finds the
primary assertion of petitioner to be unfounded. The Court of Appeals has addressed all the factual
contentions of petitioner and chose not to give credence to petitioner's version. Moreover, the findings of
the Court of Appeals are consistent with, and sufficiently supported by, the records of this case.

It is obvious that petitioner was never able to secure the required accreditation from respondent DBP to
transact business on behalf of the latter. The letters sent by petitioner to the higher officers of the DBP and
the APT are merely indicative of petitioner's desire to secure such accreditation. At best these missives are
self-serving; the most that they prove is that they were sent by petitioner and received by respondent DBP,
which clearly never agreed to be bound thereto. As declared by the trial court even when it found in favor
of petitioner, there was no express reply from the DBP or the APT as to the accreditation sought by
petitioner.12 From the very beginning, therefore, petitioner was aware that it had no express authority from
DBP to find buyers of its properties.

In its reply submitted pursuant to the resolution requiring the same 13 petitioner also invokes Article 1869 of
the new Civil Code14 in contending that an implied agency existed. Petitioner argues that it "should have
been stopped, disauthorized and outrightly prevented from dealing the 12,355 sq. m (with warehouse) [sic]
by the DBP from the inception."15 On the contrary, these steps were never necessary. In the course of
petitioner's dealings with the DBP, it was always made clear to petitioner that only accredited brokers may
look for buyers on behalf of respondent DBP. This is not a situation wherein a third party was prejudiced by
the refusal of respondent DBP to recognize petitioner as its broker. The controversy is only between the DBP
and petitioner, to whom it was emphasized in no uncertain terms that the arrangement sought did not exist.
Article 1869, therefore, has no room for operation in this case.

Petitioner would also disparage the formality of accreditation as merely a mechanical act, which requires
not much discretion, as long as a person or entity looks for a buyer [and] initiate or promote [sic] the
interests of the seller.16 Being engaged in business, petitioner should do better to adopt the opposite attitude
and appreciate that formalities, such as the need for accreditation, result from the evolution of sound
business practices for the protection and benefit of all parties concerned. They are designed and adopted
specifically to prevent the occurrence of situations similar to that obtaining in this case.

More importantly, petitioner's stance goes against the basic axiom in Civil Law that no one may contract in
the name of another without being authorized by the latter, unless the former has by law a right to represent
him.17 From this principle, among others, springs the relationship of agency which, as with other contracts,
is one founded on mutual consent: the principal agrees to be bound by the acts of the agent and the latter
in turn consents to render service on behalf or in representation of the principal. 18

Petitioner, however, also invokes equity considerations, and in equity, the Court recognizes the efforts of
petitioner in bringing together respondent DBP and an interested and financially-able buyer. While not
actively involved in the actual bidding and transfer of ownership of the warehouse property, petitioner may
be said to have initiated, albeit without proper authority, the transaction that eventually took place. The
Court is also aware that respondent DBP was able to realize a substantial profit from the sale of its two
properties. While purely circumstantial, there is sufficient reason to believe that the DBP became more
confident to venture and redeem the properties from the APT due to the presence of a ready and willing
buyer, as communicated and assured by petitioner.

In Prats v. Court of Appeals,19 there was a finding that the petitioner therein as the agent was no longer the
efficient procuring cause in bringing about the sale proceeding from the fact of expiration of his exclusive
authority. There was therefore no basis in law to grant the relief sought. Nevertheless, this Court in equity
granted the sum of P100,000.00, out of the P1,380,000.00 claimed as commission, by way of compensation
for the efforts and assistance rendered by the agent in the transaction prior to the expiration of his authority.
These consist in offering the lot for sale to the eventual buyer, sending follow-up letters, inviting the buyer
to dinner and luncheon meetings, etc.

Parallel circumstances obtain in the case at bar. It was petitioner who advised Glaxo, Philippines of the
availability of the warehouse property and aroused its interest over the same. Through petitioner,
respondent DBP was directly informed of the existence of an interested buyer. Petitioner's persistence in
communicating with respondent DBP reinforced the seriousness of the offer. This piece of information no
doubt had a bearing on the subsequent decisions made by respondent DBP as regards the disposition of its
properties.

Petitioner claims the amount of P1,203,500.00 awarded by the trial court as commission computed at five
percent of the sale price of the warehouse property. Under the foregoing disquisition and following the
precedent, as well as roughly the proportion, set in Prats, the Court in equity grants petitioner the sum of
One Hundred Thousand Pesos (Pl00,000.00) for the role it played in the transaction between respondent
DBP and buyer Glaxo, Philippines. It is emphasized, however, that the circumstances that came into play in
this case do not meet the minimum legal standards required for the existence of an agency relationship and
that the award is based purely on equity considerations. Accordingly, petitioner's other arguments need not
now be discussed.

WHEREFORE, the decision appealed from is hereby AFFIRMED, with the MODIFICATION that in equity
respondent DBP is ordered to pay petitioner the amount of One Hundred Thousand Pesos (P100,000.00).
No pronouncement as to costs.

SO ORDERED.

CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO, petitioners, vs. COURT OF
APPEALS and FRANCISCO ARTIGO, respondents.

CARPIO, J.:

The Case

Before us is a Petition for Review on Certiorari 1 seeking to annul the Decision of the Court of Appeals2 dated
May 4, 1994 in CA-G.R. CV No. 37996, which affirmed in toto the decision3 of the Regional Trial Court of
Quezon City, Branch 80, in Civil Case No. Q-89-2631. The trial court disposed as follows:

"WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro jointly and
solidarily liable to plaintiff the sum of:

a) P303,606.24 representing unpaid commission;

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

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

d) To pay the cost of this suit.

Quezon City, Metro Manila, December 20, 1991."

The Antecedent Facts

On May 29, 1989, private respondent Francisco Artigo ("Artigo" for brevity) sued petitioners Constante A.
De Castro ("Constante" for brevity) and Corazon A. De Castro ("Corazon" for brevity) to collect the unpaid
balance of his broker's commission from the De Castros. 4 The Court of Appeals summarized the facts in this
wise:
 "x x x. Appellants5 were co-owners of four (4) lots located at EDSA corner New York and Denver
Streets in Cubao, Quezon City. In a letter dated January 24, 1984 (Exhibit "A-1, p. 144, Records),
appellee6 was authorized by appellants to act as real estate broker in the sale of these properties for
the amount of P23,000,000.00, five percent (5%) of which will be given to the agent as commission.
It was appellee who first found Times Transit Corporation, represented by its president Mr. Rondaris,
as prospective buyer which desired to buy two (2) lots only, specifically lots 14 and 15. Eventually,
sometime in May of 1985, the sale of lots 14 and 15 was consummated. Appellee received from
appellants P48,893.76 as commission.

It was then that the rift between the contending parties soon emerged. Appellee apparently felt short
changed because according to him, his total commission should be P352,500.00 which is five percent
(5%) of the agreed price of P7,050,000.00 paid by Times Transit Corporation to appellants for the
two (2) lots, and that it was he who introduced the buyer to appellants and unceasingly facilitated
the negotiation which ultimately led to the consummation of the sale. Hence, he sued below to collect
the balance of P303,606.24 after having received P48,893.76 in advance.1âwphi1.nêt

On the other hand, appellants completely traverse appellee's claims and essentially argue that
appellee is selfishly asking for more than what he truly deserved as commission to the prejudice of
other agents who were more instrumental in the consummation of the sale. Although appellants
readily concede that it was appellee who first introduced Times Transit Corp. to them, appellee was
not designated by them as their exclusive real estate agent but that in fact there were more or less
eighteen (18) others whose collective efforts in the long run dwarfed those of appellee's, considering
that the first negotiation for the sale where appellee took active participation failed and it was these
other agents who successfully brokered in the second negotiation. But despite this and out of
appellants' "pure liberality, beneficence and magnanimity", appellee nevertheless was given the
largest cut in the commission (P48,893.76), although on the principle of quantum meruit he would
have certainly been entitled to less. So appellee should not have been heard to complain of getting
only a pittance when he actually got the lion's share of the commission and worse, he should not
have been allowed to get the entire commission. Furthermore, the purchase price for the two lots
was only P3.6 million as appearing in the deed of sale and not P7.05 million as alleged by appellee.
Thus, even assuming that appellee is entitled to the entire commission, he would only be getting 5%
of the P3.6 million, or P180,000.00."

Ruling of the Court of Appeals

The Court of Appeals affirmed in toto the decision of the trial court.

First. The Court of Appeals found that Constante authorized Artigo to act as agent in the sale of two lots in
Cubao, Quezon City. The handwritten authorization letter signed by Constante clearly established a contract
of agency between Constante and Artigo. Thus, Artigo sought prospective buyers and found Times Transit
Corporation ("Times Transit" for brevity). Artigo facilitated the negotiations which eventually led to the sale
of the two lots. Therefore, the Court of Appeals decided that Artigo is entitled to the 5% commission on the
purchase price as provided in the contract of agency.

Second. The Court of Appeals ruled that Artigo's complaint is not dismissible for failure to implead as
indispensable parties the other co-owners of the two lots. The Court of Appeals explained that it is not
necessary to implead the other co-owners since the action is exclusively based on a contract of agency
between Artigo and Constante.

Third. The Court of Appeals likewise declared that the trial court did not err in admitting parol evidence to
prove the true amount paid by Times Transit to the De Castros for the two lots. The Court of Appeals ruled
that evidence aliunde could be presented to prove that the actual purchase price was P7.05 million and not
P3.6 million as appearing in the deed of sale. Evidence aliunde is admissible considering that Artigo is not a
party, but a mere witness in the deed of sale between the De Castros and Times Transit. The Court of
Appeals explained that, "the rule that oral evidence is inadmissible to vary the terms of written instruments
is generally applied only in suits between parties to the instrument and strangers to the contract are not
bound by it." Besides, Artigo was not suing under the deed of sale, but solely under the contract of agency.
Thus, the Court of Appeals upheld the trial court's finding that the purchase price was P7.05 million and not
P3.6 million.

Hence, the instant petition.

The Issues

According to petitioners, the Court of Appeals erred in -

I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO IMPLEAD INDISPENSABLE
PARTIES-IN-INTEREST;

II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT ARTIGO'S CLAIM
HAS BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR ABANDONMENT;

III. CONSIDERING INCOMPETENT EVIDENCE;

IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;

V. SANCTIONING AN AWARD OF MORAL DAMAGES AND ATTORNEY'S FEES;

VI. NOT AWARDING THE DE CASTRO'S MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY'S FEES.

The Court's Ruling

The petition is bereft of merit.

First Issue: whether the complaint merits dismissal for failure to implead other co-owners as
indispensable parties

The De Castros argue that Artigo's complaint should have been dismissed for failure to implead all the co-
owners of the two lots. The De Castros claim that Artigo always knew that the two lots were co-owned by
Constante and Corazon with their other siblings Jose and Carmela whom Constante merely represented.
The De Castros contend that failure to implead such indispensable parties is fatal to the complaint since
Artigo, as agent of all the four co-owners, would be paid with funds co-owned by the four co-owners.

The De Castros' contentions are devoid of legal basis.

An indispensable party is one whose interest will be affected by the court's action in the litigation, and
without whom no final determination of the case can be had. 7 The joinder of indispensable parties is
mandatory and courts cannot proceed without their presence. 8 Whenever it appears to the court in the
course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop
the trial and order the inclusion of such party.9

However, the rule on mandatory joinder of indispensable parties is not applicable to the instant case.

There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to sell
the properties of the De Castros for P23 million at a 5 percent commission. The authority was on a first
come, first serve basis. The authority reads in full:

"24 Jan. 84

To Whom It May Concern:

 This is to state that Mr. Francisco Artigo is authorized as our real estate broker in connection with
the sale of our property located at Edsa Corner New York & Denver, Cubao, Quezon City.

Asking price P 23,000,000.00 with 5% commission as agent's fee.

C.C. de Castro
owner & representing
co-owners

This authority is on a first-come

First serve basis –CAC"

Constante signed the note as owner and as representative of the other co-owners. Under this note, a
contract of agency was clearly constituted between Constante and Artigo. Whether Constante appointed
Artigo as agent, in Constante's individual or representative capacity, or both, the De Castros cannot seek
the dismissal of the case for failure to implead the other co-owners as indispensable parties. The De
Castros admit that the other co-owners are solidarily liable under the contract of agency,10 citing
Article 1915 of the Civil Code, which reads:

Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking,
they shall be solidarily liable to the agent for all the consequences of the agency.

The solidary liability of the four co-owners, however, militates against the De Castros' theory that the other
co-owners should be impleaded as indispensable parties. A noted commentator explained Article 1915 thus
–

"The rule in this article applies even when the appointments were made by the principals in separate
acts, provided that they are for the same transaction. The solidarity arises from the common
interest of the principals, and not from the act of constituting the agency. By virtue of this
solidarity, the agent can recover from any principal the whole compensation and indemnity
owing to him by the others. The parties, however, may, by express agreement, negate this
solidary responsibility. The solidarity does not disappear by the mere partition effected by the
principals after the accomplishment of the agency.

If the undertaking is one in which several are interested, but only some create the agency, only the
latter are solidarily liable, without prejudice to the effects of negotiorum gestio with respect to the
others. And if the power granted includes various transactions some of which are common and others
are not, only those interested in each transaction shall be liable for it."11

When the law expressly provides for solidarity of the obligation, as in the liability of co-principals in a contract
of agency, each obligor may be compelled to pay the entire obligation. 12 The agent may recover the whole
compensation from any one of the co-principals, as in this case.

Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors. This
article reads:

Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an obstacle to those which may
subsequently be directed against the others, so long as the debt has not been fully collected.

Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc. 13 that –

"x x x solidarity does not make a solidary obligor an indispensable party in a suit filed by
the creditor. Article 1216 of the Civil Code says that the creditor `may proceed against anyone of
the solidary debtors or some or all of them simultaneously'." (Emphasis supplied)
Second Issue: whether Artigo's claim has been extinguished by full payment, waiver or
abandonment

The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was given "his proportionate
share and no longer entitled to any balance." According to them, Artigo was just one of the agents involved
in the sale and entitled to a "proportionate share" in the commission. They assert that Artigo did absolutely
nothing during the second negotiation but to sign as a witness in the deed of sale. He did not even prepare
the documents for the transaction as an active real estate broker usually does.

The De Castros' arguments are flimsy.

A contract of agency which is not contrary to law, public order, public policy, morals or good custom is a
valid contract, and constitutes the law between the parties. 14 The contract of agency entered into by
Constante with Artigo is the law between them and both are bound to comply with its terms and conditions
in good faith.

The mere fact that "other agents" intervened in the consummation of the sale and were paid their respective
commissions cannot vary the terms of the contract of agency granting Artigo a 5 percent commission based
on the selling price. These "other agents" turned out to be employees of Times Transit, the buyer Artigo
introduced to the De Castros. This prompted the trial court to observe:

"The alleged `second group' of agents came into the picture only during the so-called `second
negotiation' and it is amusing to note that these (sic) second group, prominent among whom are
Atty. Del Castillo and Ms. Prudencio, happened to be employees of Times Transit, the buyer of the
properties. And their efforts were limited to convincing Constante to 'part away' with the properties
because the redemption period of the foreclosed properties is around the corner, so to speak. (tsn.
June 6, 1991).

xxx

To accept Constante's version of the story is to open the floodgates of fraud and deceit. A seller could
always pretend rejection of the offer and wait for sometime for others to renew it who are much
willing to accept a commission far less than the original broker. The immorality in the instant
case easily presents itself if one has to consider that the alleged `second group' are the
employees of the buyer, Times Transit and they have not bettered the offer secured by Mr.
Artigo for P7 million.

It is to be noted also that while Constante was too particular about the unrenewed real estate broker's
license of Mr. Artigo, he did not bother at all to inquire as to the licenses of Prudencio and Castillo.
(tsn, April 11, 1991, pp. 39-40)."15 (Emphasis supplied)

In any event, we find that the 5 percent real estate broker's commission is reasonable and within the
standard practice in the real estate industry for transactions of this nature.

The De Castros also contend that Artigo's inaction as well as failure to protest estops him from recovering
more than what was actually paid him. The De Castros cite Article 1235 of the Civil Code which reads:

Art. 1235. When the obligee accepts the performance, knowing its incompleteness and irregularity,
and without expressing any protest or objection, the obligation is deemed fully complied with.

The De Castros' reliance on Article 1235 of the Civil Code is misplaced. Artigo's acceptance of partial payment
of his commission neither amounts to a waiver of the balance nor puts him in estoppel. This is the import
of Article 1235 which was explained in this wise:

"The word accept, as used in Article 1235 of the Civil Code, means to take as satisfactory or
sufficient, or agree to an incomplete or irregular performance. Hence, the mere receipt of a
 partial payment is not equivalent to the required acceptance of performance as would
extinguish the whole obligation."16 (Emphasis supplied)

There is thus a clear distinction between acceptance and mere receipt. In this case, it is evident that Artigo
merely received the partial payment without waiving the balance. Thus, there is no estoppel to speak of.

The De Castros further argue that laches should apply because Artigo did not file his complaint in court until
May 29, 1989, or almost four years later. Hence, Artigo's claim for the balance of his commission is barred
by laches.

Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do that which
by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a
right within a reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it.17

Artigo disputes the claim that he neglected to assert his rights. He was appointed as agent on January 24,
1984. The two lots were finally sold in June 1985. As found by the trial court, Artigo demanded in April and
July of 1985 the payment of his commission by Constante on the basis of the selling price of P7.05 million
but there was no response from Constante.18 After it became clear that his demands for payment have fallen
on deaf ears, Artigo decided to sue on May 29, 1989.

Actions upon a written contract, such as a contract of agency, must be brought within ten years from the
time the right of action accrues.19 The right of action accrues from the moment the breach of right or duty
occurs. From this moment, the creditor can institute the action even as the ten-year prescriptive period
begins to run.20

The De Castros admit that Artigo's claim was filed within the ten-year prescriptive period. The De Castros,
however, still maintain that Artigo's cause of action is barred by laches. Laches does not apply because only
four years had lapsed from the time of the sale in June 1985. Artigo made a demand in July 1985 and filed
the action in court on May 29, 1989, well within the ten-year prescriptive period. This does not constitute
an unreasonable delay in asserting one's right. The Court has ruled, "a delay within the prescriptive
period is sanctioned by law and is not considered to be a delay that would bar relief." 21 In
explaining that laches applies only in the absence of a statutory prescriptive period, the Court has stated -

"Laches is recourse in equity. Equity, however, is applied only in the absence, never in
contravention, of statutory law. Thus, laches, cannot, as a rule, be used to abate a
collection suit filed within the prescriptive period mandated by the Civil Code." 22

Clearly, the De Castros' defense of laches finds no support in law, equity or jurisprudence.

Third issue: whether the determination of the purchase price was made in violation of the Rules
on Evidence

The De Castros want the Court to re-examine the probative value of the evidence adduced in the trial court
to determine whether the actual selling price of the two lots was P7.05 million and not P3.6 million. The De
Castros contend that it is erroneous to base the 5 percent commission on a purchase price of P7.05 million
as ordered by the trial court and the appellate court. The De Castros insist that the purchase price is P3.6
million as expressly stated in the deed of sale, the due execution and authenticity of which was admitted
during the trial.

The De Castros believe that the trial and appellate courts committed a mistake in considering incompetent
evidence and disregarding the best evidence and parole evidence rules. They claim that the Court of Appeals
erroneously affirmed sub silentio the trial court's reliance on the various correspondences between
Constante and Times Transit which were mere photocopies that do not satisfy the best evidence rule.
Further, these letters covered only the first negotiations between Constante and Times Transit which failed;
hence, these are immaterial in determining the final purchase price.
The De Castros further argue that if there was an undervaluation, Artigo who signed as witness benefited
therefrom, and being equally guilty, should be left where he presently stands. They likewise claim that the
Court of Appeals erred in relying on evidence which were not offered for the purpose considered by the trial
court. Specifically, Exhibits "B", "C", "D" and "E" were not offered to prove that the purchase price was
P7.05 Million. Finally, they argue that the courts a quo erred in giving credence to the perjured testimony
of Artigo. They want the entire testimony of Artigo rejected as a falsehood because he was lying when he
claimed at the outset that he was a licensed real estate broker when he was not.

Whether the actual purchase price was P7.05 Million as found by the trial court and affirmed by the Court
of Appeals, or P3.6 Million as claimed by the De Castros, is a question of fact and not of law. Inevitably, this
calls for an inquiry into the facts and evidence on record. This we can not do.

It is not the function of this Court to re-examine the evidence submitted by the parties, or analyze or weigh
the evidence again.23 This Court is not the proper venue to consider a factual issue as it is not a trier of
facts. In petitions for review on certiorari as a mode of appeal under Rule 45, a petitioner can only raise
questions of law. Our pronouncement in the case of Cormero vs. Court of Appeals24 bears reiteration:

"At the outset, it is evident from the errors assigned that the petition is anchored on a plea to review
the factual conclusion reached by the respondent court. Such task however is foreclosed by the rule
that in petitions for certiorari as a mode of appeal, like this one, only questions of law distinctly set
forth may be raised. These questions have been defined as those that do not call for any examination
of the probative value of the evidence presented by the parties. (Uniland Resources vs. Development
Bank of the Philippines, 200 SCRA 751 [1991] citing Goduco vs. Court of appeals, et al., 119 Phil.
531; Hernandez vs. Court of Appeals, 149 SCRA 67). And when this court is asked to go over the
proof presented by the parties, and analyze, assess and weigh them to ascertain if the trial court
and the appellate court were correct in according superior credit to this or that piece of evidence and
eventually, to the totality of the evidence of one party or the other, the court cannot and will not do
the same. (Elayda vs. Court of Appeals, 199 SCRA 349 [1991]). Thus, in the absence of any showing
that the findings complained of are totally devoid of support in the record, or that they are so glaringly
erroneous as to constitute serious abuse of discretion, such findings must stand, for this court is not
expected or required to examine or contrast the oral and documentary evidence submitted by the
parties. (Morales vs. Court of Appeals, 197 SCRA 391 [1991] citing Santa Ana vs. Hernandez, 18
SCRA 973 [1966])."

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

Fourth Issue: whether award of moral damages and attorney's fees is proper

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

Law and jurisprudence support the award of moral damages and attorney's fees in favor of Artigo. The
award of damages and attorney's fees is left to the sound discretion of the court, and if such discretion is
well exercised, as in this case, it will not be disturbed on appeal.25 Moral damages may be awarded when in
a breach of contract the defendant acted in bad faith, or in wanton disregard of his contractual
obligation.26 On the other hand, attorney's fees are awarded in instances where "the defendant acted in
gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable
claim."27 There is no reason to disturb the trial court's finding that "the defendants' lack of good faith and
unkind treatment of the plaintiff in refusing to give his due commission deserve censure." This warrants the
award of P25,000.00 in moral damages and P 45,000.00 in attorney's fees. The amounts are, in our view,
fair and reasonable. Having found a buyer for the two lots, Artigo had already performed his part of the
bargain under the contract of agency. The De Castros should have exercised fairness and good judgment in
dealing with Artigo by fulfilling their own part of the bargain - paying Artigo his 5 percent broker's
commission based on the actual purchase price of the two lots.
WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of Appeals dated May 4,
1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.

SO ORDERED.