ATP Cases

C
 G.R. No. L-42465 November 19, 1936

INTERNATIONAL FILMS (CHINA), LTD. vs. THE LYRIC FILM EXCHANGE, INC.

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.)

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.

G.R. Nos. 148404-05 April 11, 2002

NELITA M. BACALING, vs. FELOMINO MUYA

Before us is a Petition for Review of the consolidated Decision1 dated January 31, 2001
of the Court of Appeals2 in CA-G.R. SP No. 54413,3 and in CA-G.R. SP No.
54414,4 and of its Resolution5 dated June 5, 2001 reversing the Decision6 dated May
22, 1998 and Resolution July 22, 1999 of the Office of the President.

The facts of the case are as follows:

Petitioner Nelita M. Bacaling and her spouse Ramon Bacaling were the owners of
three (3) parcels of land, with a total area of 9.9631 hectares, located in Barangay
Cubay, Jaro, Iloilo City, and designated as Lot No. 2103-A (Psd-24069), Lot No. 2103-
B-12 (Psd 26685) and Lot No. 2295. These lots were duly covered by Transfer
Certificates of Title Nos. T-5801, T-5833 and T-5834, respectively. In 1955 the
landholding was subdivided into one hundred ten (110) sub-lots covered by TCT Nos.
T-10664 to T-10773, inclusive of the Registry of Deeds of the City of Iloilo. On May 16,
1955, the landholding was processed and approved as "residential" or "subdivision" by
the National Urban Planning Commission (NUPC).7 On May 24, 1955 the Bureau of
Lands approved the corresponding subdivision plan for purposes of developing the
said property into a low-cost residential community which the spouses referred to as
the Bacaling-Moreno Subdivision.8

In 1957, a real estate loan of Six Hundred Thousand Pesos (P600,000.00) was
granted to the spouses Nelita and Ramon Bacaling by the Government Service
Insurance System (GSIS) for the development of the subdivision.9 To secure the
repayment of the loan, the Bacalings executed in favor of the GSIS a real estate
mortgage over their parcels of land including the one hundred ten (110) sub-lots.10 Out
of the approved loan of Six Hundred Thousand Pesos (P600,000.00), only Two
Hundred Forty Thousand Pesos (P240,000.00) was released to them.11 The
Bacalings failed to pay the amortizations on the loan and consequently the
mortgage constituted on the one hundred ten (110) sub-lots was foreclosed by the
GSIS.12 After a court case that reached all the way to this Court,13 Nelita Bacaling (by
then a widow) in 1989 was eventually able to restore to herself ownership of the one
hundred ten (110) sub-lots.14

According to the findings of the Office of the President, in 1972 and thereafter,
respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and
Nemesio Tonocante clandestinely entered and occupied the entire one hundred ten
(110) sub-lots (formerly known as Lot No. 2103-A, Lot No. 2103-B-12 and Lot No.
2295) and grabbed exclusively for themselves the said 9.9631 hectare
landholding.15 Apparently, respondents took advantage of the problematic peace and
order situation at the onset of martial law and the foreclosure of the lots by
GSIS.16 They sowed the lots as if the same were their own, and altered the roads,
drainage, boundaries and monuments established thereon.17

Respondents, on the other hand, claim that in 1964 they were legally instituted by
Bacaling's administrator/overseer as tenant-tillers of the subject parcels of land on
sharing basis with two and a half (2½) hectares each for respondents Muya, Amor,
Tonocante and Lazarte, and one and a half (1½) hectares for respondent Jereza. In
1974, their relationship with the landowner was changed to one of leasehold. They
religiously delivered their rental payments to Bacaling as agricultural lessor. In 1980,
they secured certificates of land transfer in their names for the one hundred ten (110)
sub-lots. They have made various payments to the Land Bank of the Philippines as
amortizing owners-cultivators of their respective tillage.

In 1977, however, the City Council of Iloilo enacted Zoning Ordinance No. 212
declaring the one hundred ten (110) sub-lots as "residential" and "non-agricultural,"
which was consistent with the conversion effected in 1955 by the NUPC and the
Bureau of Lands. In 1978, Nelita Bacaling was able to register the subject property as
the Bacaling-Moreno Subdivision with the National Housing Authority and to obtain
therefrom a license to sell the subject one hundred ten (110) sub-lots comprising the
said subdivision to consummate the original and abiding design to develop a low-cost
residential community.

In August 21, 1990, petitioner Jose Juan Tong, together with Vicente Juan and Victoria
Siady, bought from Nelita Bacaling the subject one hundred ten (110) sub-lots for One
Million Seven Hundred Thousand Pesos (P1,700,000.00).18 The said sale was effected
after Bacaling has repurchased the subject property from the Government Service
Insurance System. To secure performance of the contract of absolute sale and
facilitate the transfer of title of the lots to Jose Juan Tong, Bacaling appointed him in
1992 as her attorney-in-fact, under an irrevocable special power of attorney with the
following mandate-

1. To file, defend and prosecute any case/cases involving lots nos. 1 to 110 covered by TCT
Nos. T-10664 to T-10773 of the Register of Deeds of the City of Iloilo;
 2. To assume full control, prosecute, terminate and enter into an amicable settlement and
compromise agreement of all cases now pending before the DARAB, Region VI, Iloilo City,
which involved portion of Lots 1 to 110, covered by TCT Nos. T-10664 to T-10773 of the
Register of Deeds of Iloilo City, which were purchased by Jose Juan Tong, Vicente Juan Tong
and Victoria Siady;

3. To hire a lawyer/counsel which he may deem fit and necessary to effect and attain the
foregoing acts and deeds; handle and prosecute the aforesaid cases;

4. To negotiate, cause and effect a settlement of occupation and tenants on the aforesaid lots;

5. To cause and effect the transfer of the aforesaid lots in the name of the VENDEES;

6. To execute and deliver document/s or instrument of whatever nature necessary to

accomplish the foregoing acts and deeds.19

It is significant to note that ten (10) years after the perfection and execution of the sale,
or on April 26, 2000, Bacaling filed a complaint to nullify the contract of sale. The suit
was, however, dismissed with prejudice and the dismissal has long become final and
executory.20

Following the sale of the one hundred ten (110) sub-lots and using the irrevocable
special power of attorney executed in his favor, petitioner Tong (together with
Bacaling) filed a petition for cancellation of the certificates of land transfer against
respondents and a certain Jaime Ruel with the Department of Agrarian Reform (DAR)
Region VI Office in Iloilo City.21 The DAR, however, dismissed the petition on the
ground that there had been no legitimate conversion of the classification of the 110
sub-lots from agricultural to residential prior to October 21, 1972 when Operation Land
Transfer under P.D. No. 72 took effect.22 Bacaling and Tong appealed to the DAR
Central Office but their appeal was similarly rejected.23 The motion for reconsideration
failed to overturn the ruling of the Central Office Order.24

On September 19, 1997, Bacaling and Tong appealed the adverse DAR Orders to the
Office of the President which reversed them in toto in a Decision25 dated May 22, 1998
(OP Decision, for brevity), the dispositive portion of which reads:

WHEREFORE, premises [considered], the assailed order of the Regional Director, DAR
Region VI, dated April 3, 1996, as well as the orders of the DAR Secretary dated December
12, 1996 and September 4, 1997, are hereby REVERSED AND SET ASIDE and subject
landholdings declared exempt from coverage of the CARL. The Certificates of Land Transfer
(CLTs) issued to the appellees are hereby cancelled and the Department of Agrarian Reform
directed to implement the voluntary offer made by appellant with respect to the payment of
disturbance compensation and relocation of the affected parties. SO ORDERED.26

The OP Decision found that the one hundred ten (110) parcels of land had been
completely converted from agricultural to residential lots as a result of the declarations
of the NUPC and the Bureau of Lands and the factual circumstances, i.e., the GSIS
loan with real estate mortgage, the division of the original three (3) parcels of land into
one hundred ten (110) sub-lots under individual certificates of title, and the
establishment of residential communities adjacent to the subject property, which
indubitably proved the intention of Nelita and Ramon Bacaling to develop a residential
subdivision thereon. The OP Decision also categorically acknowledged the
competence of the NUPC and the Bureau of Lands to classify the one hundred ten
(110) sub-lots into residential areas. On July 22, 1999, separate motions for
reconsideration thereof were denied.27

Respondents elevated the OP Decision to the Court of Appeals on a petition for review
under Rule 43 of the Rules of Civil Procedure.28 Before the petition was resolved, or on
December 2, 1999, Nelita Bacaling manifested to the appellate court that she was
revoking the irrevocable power of attorney in favor of Jose Juan Tong and that she was
admitting the status of respondents as her tenants of the one hundred ten (110) sub-
lots which allegedly were agricultural in character. The manifestation was however
characterized by an obvious streak of ambivalence when her prayer therein urged the
Court of Appeals to decide the case, curiously, "on the basis of the clear intent of
Private Respondent" and "in accordance with the perception of this Honorable
Court."29

On January 31, 2001 the Court of Appeals reversed the OP Decision and validated the
certificates of land transfers in favor of respondents without however promulgating a
ruling on petitioner Tong's supposedly ensuing lack of material interest in the
controversy as a result of the manifestation.30 The dispositive portion of the decision
reads:

WHEREFORE, premises considered, petition is GRANTED; and the May 22, 1998 Decision of
the Office of the President is hereby REVERSED and SET ASIDE. The April 3, 1996 Order of
the Regional Director, DARAB, Region VI, is REINSTATED.31

The appellate court refused to recognize the 1955 NUPC and Bureau of Lands
classification of the subject lots as residential subdivision. Tong moved for
reconsideration of the CA Decision which Bacaling did not oppose despite her
manifestation. On June 5, 2001, again without a single reference to Bacaling's alleged
repudiation of Tong's actions, the Court of Appeals denied reconsideration of its
decision,32 Hence, this petition for review on certiorari based on the following
assignment of errors:

I. SUBJECT LANDHOLDINGS ARE EXEMPT FROM THE COVERAGE OF P.D. 27 AND

OPERATION LAND TRANSFER (1972, AS WELL (sic) THE COMPREHENSIVE
AGRARIAN REFORM LAW (1988) AS THEY WERE CLASSIFIED AS RESIDENTIAL
WAY BACK IN 1955 BY THE THEN NATIONAL PLANNING COMMISSION AND THE
SUBDIVSION PLAN WAS APPROVED BY THE BUREAU OF LANDS. AS A
CONSEQUENCE, THE CLTs ISSUED TO PRIVATE RESPONENTS IN OCTOBER,
1980 ARE INVALID AS HAVING BEEN ISSUED WITHOUT JURISDICTION.

II. PRIVATE RESPONDENTS ARE NOT BONA FIDE TENANTS OF THE LANDS INVOLVED.
PUBLIC REPSONDENT'S RULING THAT THE LATTER ARE SUCH IS CONTRARY TO LAW
 AS IT IGNORED THE FACT THAT THE LANDHOLDINGS ARE RESIDENTIAL AND NO
COMPETENT PROOF OF CONSENT OF THE OWNER WAS EVER PRESENTED BY
PRIVATE RESPONDENTS.

III. APPROVAL OF THE SECRETARY OF AGRARIAN REFORM IS NOT NECESSARY FOR

THE VALID CLASSIFICATION OF THE LANDS INVOLVED INTO RESIDENTIAL BECAUSE
THE CARL, AS ALSO THE RELATED AGRARIAN LAWS, HAVE NO RETROACTIVE
APPLICATION.33

Long after issues were joined in the instant proceedings, or on October 8, 2001,
petitioner Nelita Bacaling resurrected her manifestation with the Court of Appeals and
moved to withdraw/dismiss the present petition on the ground that the irrevocable
power of attorney in favor of petitioner Jose Juan Tong had been nullified by her and
that Tong consequently lacked the authority to appear before this Court.34 She also
manifested that, contrary to the arguments of petitioner Tong, respondents were bona
fide tenants of the one hundred ten (110) sub-lots which were allegedly agricultural and
not residential pieces of realty.35 Accordingly, petitioner Tong was left all alone to
pursue the instant case.

The issues in this case can be summarized as follows: (1) Does petitioner Tong have
the requisite interest to litigate this petition for review on certiorari?; (2) Are the
respondents agricultural lessees?; and (3) Are the one hundred ten (110) sub-lots
admittedly classified for residential use by the National Urban Planning Commission
and the Bureau of Lands prior to October 21, 197236 covered by the Operation Land
Transfer under P.D. No. 72?

We hold that petitioner Jose Juan Tong possesses adequate and legitimate interest to
file the instant petition. Under our rules of procedure, interest means material interest,
that is, an interest in issue and to be affected by the judgment,37 while a real party in
interest is the party who would be benefited or injured by the judgment or the party
entitled to the avails of the suit.38 There should be no doubt that as transferee of the
one hundred ten (110) sub-lots through a contract of sale and as the attorney-in-fact of
Nelita Bacaling, former owner of the subject lots, under an irrevocable special power of
attorney, petitioner Tong stands to be benefited or injured by the judgment in the
instant case as well as the orders and decisions in the proceedings a quo. The deed of
sale categorically states that petitioner Tong and his co-sellers have fully paid for the
subject parcels of land. The said payment has been duly received by Bacaling. Hence,
it stands to reason that he has adequate and material interest to pursue the present
petition to finality.

Respondents put too much weight on the motion to dismiss/withdraw filed by Nelita
Bacaling. Under the facts obtaining in this case, the motion should be treated
cautiously, and more properly, even skeptically. It is a matter of law that when a party
adopts a certain theory in the court below, he will not be permitted to change his theory
on appeal, for to permit him to do so would not only be unfair to the other party but it
would also be offensive to the basic rules of fair play, justice and due
process.39 Bacaling's motion to dismiss the instant petition comes at the heels of her
admission that she had immensely benefited from selling the said one hundred ten
(110) sub-lots to petitioner Tong and of the dismissal with prejudice of the civil case
which she had earlier filed to nullify the sale.40 It appears that the motion to dismiss is a
crude and belated attempt long after the dismissal of the civil case to divest Tong of his
indubitable right of ownership over the one hundred ten (110) sub-lots through the
pretext of revoking the irrevocable special power of attorney which Bacaling had
executed in his favor hoping that in the process that her act would cause the assailed
orders of the DAR to become final and executory.

The records also bear out the fact that Bacaling's design to dispossess petitioner Tong
of material interest in the subject matter of the instant petition appears to be subtly
coordinated with respondents' legal maneuvers when it began as a side pleading (a
mere Manifestation) in the proceedings before the Court of Appeals (CA-G.R. SP No.
54413 and CA-G.R. SP No. 54414) but which was never pursued to its ultimate
conclusion until it again surfaced before this Court long after respondents' voluminous
comment to the instant petition had been filed. Under these circumstances, we
certainly cannot place our trust upon such an unsolicited motion having dubious roots,
character and purpose.

Substantively, we rule that Bacaling cannot revoke at her whim and pleasure the
irrevocable special power of attorney which she had duly executed in favor of petitioner
Jose Juan Tong and duly acknowledged before a notary public. The agency, to stress,
is one coupled with interest which is explicitly irrevocable since the deed of agency
was prepared and signed and/or accepted by petitioner Tong and Bacaling with a view
to completing the performance of the contract of sale of the one hundred ten (110) sub-
lots. It is for this reason that the mandate of the agency constituted Tong as the real
party in interest to remove all clouds on the title of Bacaling and that, after all these
cases are resolved, to use the irrevocable special power of attorney to ultimately
"cause and effect the transfer of the aforesaid lots in the name of the vendees [Tong
with two (2) other buyers] and execute and deliver document/s or instrument of
whatever nature necessary to accomplish the foregoing acts and deeds."41 The
fiduciary relationship inherent in ordinary contracts of agency is replaced by material
consideration which in the type of agency herein established bars the removal or
dismissal of petitioner Tong as Bacaling's attorney-in-fact on the ground of alleged loss
of trust and confidence.

While Bacaling alleges fraud in the performance of the contract of agency to justify its
revocation, it is significant to note that allegations are not proof, and that proof requires
the intervention of the courts where both petitioners Tong and Bacaling are heard.
Stated otherwise, Bacaling cannot vest in herself just like in ordinary contracts the
unilateral authority of determining the existence and gravity of grounds to justify the
rescission of the irrevocable special power of attorney. In Sevilla v. Court of
Appeals42 we thus held-
 But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one
coupled with an interest, the agency having been created for the mutual interest of the agent
and the principal xxx [Petitioner's] interest, obviously, is not limited to the commissions she
earned as a result of her business transactions, but one that extends to the very subject matter
of the power of management delegated to her. It is an agency that, as we said, cannot be
revoked at the pleasure of the principal. Accordingly, the revocation complained of should
entitle the petitioner x x x to damages.

The requirement of a judicial process all the more assumes significance in light of the
dismissal with prejudice, hence, res judicata, of Bacaling's complaint to annul the
contract of sale which in turn gave rise to the irrevocable special power of attorney. It is
clear that prima facie there are more than sufficient reasons to deny the revocation of
the said special power of attorney which is coupled with interest. Inasmuch as no
judgment has set aside the agency relationship between Bacaling and Tong, we rule
that petitioner Tong maintains material interest to prosecute the instant petition with or
without the desired cooperation of Bacaling.

On the issue of whether the private respondents are agricultural tenants and entitled to
the benefits accorded by our agrarian laws, we rule in the negative. The requisites in
order to have a valid agricultural leasehold relationship are: (1) The parties are the
landowner and the tenant or agricultural lessee; (2) The subject matter of the
relationship is agricultural land; (3) There is consent between the parties to the
relationship; (4) the purpose of the relationship is to bring about agricultural production;
(5) There is personal cultivation on the part of the tenant or agricultural lessee; and (6)
The harvest is shared between the landowner and the tenant or agricultural lessee.

We find that the first, third and sixth requisites are lacking in the case at bar. One legal
conclusion adduced from the facts in Government Service Insurance System v. Court
of Appeals43 provides that GSIS, not Bacaling, was the owner of the subject properties
from 1961 up to 1989 as a result of the foreclosure and confirmation of the sale of the
subject properties. Although the confirmation only came in 1975, the ownership is
deemed to have been vested to GSIS way back in 1961, the year of the sale of the
foreclosed properties. This is due to the fact that the date of confirmation by the trial
court of the foreclosure sale retroacts to the date of the actual sale itself.44

Thus, the respondents cannot validly claim that they are legitimate and recognized
tenants of the subject parcels of land for the reason that their agreement to till the land
was not with GSIS, the real landowner. There is no showing that GSIS consented to
such tenancy relationship nor is there proof that GSIS received a share in the harvest
of the tenants. Consequently, the respondents cannot claim security of tenure and
other rights accorded by our agrarian laws considering that they have not been validly
instituted as agricultural lessees of the subject parcels of land. And from the time
Bacaling recovered the subject properties from GSIS up to the time the former
changed her legal position in the instant case, Bacaling has consistently disclaimed
respondents as her alleged tenants. Bacaling's current legal posture cannot also
overturn our finding since, as earlier mentioned, the said change of mind of Bacaling
has little or no evidentiary weight under the circumstances.

The respondents argue that GSIS cannot be considered as the owner of the said
properties from 1961 up to 1989 inasmuch as the foreclosure proceedings that started
in 1957 only attained finality during its promulgation by this Court in 1989.
Respondents contend that GSIS was the owner of the said parcels of land only from
1989.

We disagree. The pendency of the GSIS case cannot be construed as a maintenance

of status quo with Bacaling as the owner from 1957 up to 1989 for the reason that what
was appealed to this Court was only the issue of redemption, and not the validity of the
foreclosure proceedings including the public auction sale, the confirmation of the public
auction sale and the confirmation and transfer of ownership of the foreclosed parcels of
land to GSIS. The ownership of GSIS over the subject parcels of land was not
disputed. It was the existence of the right to redeem in a judicial foreclosure that was
the subject of the controversy. We ruled that there was no longer any right of
redemption in a judicial foreclosure proceeding after the confirmation of the public
auction. Only foreclosures of mortgages in favor of banking institutions and those
made extrajudicially are subject to legal redemption. Since GSIS is not a banking
institution and the procedure of the foreclosure is not extrajudicial in nature, no right of
redemption exists after the judicial confirmation of the public auction sale of the said
lots.

With respect to the third issue, we find that the one hundred ten (110) sub-lots are
indeed residential. In Tiongson v. Court of Appeals45 we held that if the lot in question
is not an agricultural land then the rules on agrarian reform do not apply since the "key
factor in ascertaining whether there is a landowner-tenant relationship xxx is the nature
of the disputed property."46 We reiterated this rule in Natalia Realty, Inc. v. Department
of Agrarian Reform47 where we excluded lands not devoted to agricultural activity, i.e.,
lands previously converted to non-agricultural or residential uses prior to the effectivity
of the 1988 agrarian reform law (R.A. No. 6657) by agencies other than the DAR, from
the coverage of agrarian reform. The statement of the rule is buttressed by P.D. No. 27
which by its terms applies only to "tenant-farmers of private agricultural lands primarily
devoted to rice and corn under a system of shared-crop or lease tenancy, whether
classified as landed estate or not."48

In the case at bar, the indubitable conclusion from established facts is that the one
hundred ten (110) sub-lots, originally three (3) parcels of land, have been officially
classified as residential since 1955. The classification began when the NUPC and the
Bureau of Lands approved the subdivision of the original three (3) parcels of land into
one hundred ten (110) sub-lots each covered with transfer certificates of title. To build
the subdivision project, Nelita Bacaling then obtained a real estate mortgage loan from
the GSIS which she used to fund the project but he was unfortunately unable to
complete it due to the immensity of the project cost. Bacaling undertook to complete
the sale of the subdivision when in 1978 she obtained the registration thereof with the
National Housing Authority as well as a license to sell individually the one hundred ten
(110) sub-lots. Earlier, in 1977, the City Council of Iloilo also recognized the residential
classification of the same one hundred ten (110) sub-lots when it passed the Land Use
Plan and Zoning Ordinance. In 1990, Bacaling sold the same parcels of land to
petitioner Tong who obviously wanted to pursue the development of the subdivision
project. It is clear that Tong bought the property for residential and not agricultural
purposes upon the strong assurance of Bacaling that the one hundred ten (110) sub-
lots were legally available for such prospect. To be sure, the subject lots were valuable
in the buyer's market only for residential use as shown by the example of adjacent lots
which had long been utilized for building subdivisions and the implausibility of believing
that Tong would buy the lands only to lose them at a bargain to agrarian reform.49

Clearly, both intention and overt actions show the classification of the one hundred ten
(110) sub-lots for residential use. There can be no other conclusion from the facts
obtaining in the instant case. Indeed, one cannot imagine Nelita Bacaling borrowing
the substantial amount of Six Hundred Thousand Pesos (P600,000.00) from the GSIS
and spending Two Hundred Fifty Thousand Pesos (P250,000.00) for the purpose of
developing and subdividing the original three (3) parcels of land into one hundred ten
(110) homelots, with individual transfer certificates of title ready and available for sale,
if her purported desire were to keep the landholding for agricultural purposes. It also
makes no sense that petitioner Tong would invest so much money, time and effort in
these sub-lots for planting and cultivating agricultural crops when all the mechanisms
are already in place for building a residential community. One cannot likewise deny the
consistent official government action which decreed the said one hundred ten (110)
sub-lots as most appropriate for human settlements considering that for several times
beginning in 1955 and in accordance with relevant laws and regulations, the said
landholding was categorically reserved as a residential subdivision.

It is also grave error to gloss over the NUPC action since its declarations have long
been recognized in similar cases as the present one as clear and convincing evidence
of residential classification. In Magno-Adamos v. Bagasao50 we found the
endorsements of the NUPC approving albeit tentatively a subdivision plan to be a very
strong evidence of conversion of the disputed parcels of land into a residential
subdivision which would contradict the alleged tenancy relationship. We found nothing
objectionable in the trial court's ruling in Santos v. de Guzman51 ejecting an alleged
tenant from the landholding "because the same was included in a homesite subdivision
duly approved by the National Planning Commission."52 In Republic v. Castellvi53 we
gave great weight to the certification of the NUPC that the subject parcels of land were
classified as residential areas and ordered their appraisal as residential and not
agricultural lands -

The lower court found, and declared, that the lands of Castellvi and Toledo-Gozun are
residential lands. The finding of the lower court is in consonance with the unanimous opinion of
the three commissioners who, in their report to the court, declared that the lands are residential
 lands. The Republic assails the finding that the lands are residential, contending that the plans
of the appellees to convert the lands into subdivision for residential purposes were only on
paper, there being no overt acts on the part of the appellees which indicated that the
subdivision project had been commenced xxx. We find evidence showing that the lands in
question had ceased to be devoted to the production of agricultural crops, that they had
become adaptable for residential purposes, and that the appellees had actually taken steps to
convert their lands into residential subdivisions xxx. The evidence shows that Castellvi
broached the idea of subdividing her land into residential lots as early as July 11, 1956 in her
letter to the Chief of Staff of the Armed Forces of the Philippines xxx. As a matter of fact, the
layout of the subdivision plan was tentatively approved by the National Planning Commission
on September 7, 1956 xxx. The land of Castellvi had not been devoted to agriculture since
1947 when it was leased to the Philippine Army. In 1957 said land was classified as
residential, and taxes based on its classification as residential had been paid since then xxx.
The location of the Castellvi land justifies its suitability for a residential subdivision.

The NUPC was created under EO 98, s. of 194654 to "prepare general plans, zoning
ordinances, and subdivision regulations, to guide and accomplish a coordinated,
adjusted, harmonious reconstruction and future development of urban areas which will
in accordance with present and future needs, best promote health, safety, morals,
order, convenience, prosperity, and general welfare, as well as efficiency and economy
in the process of development; including among other things adequate provisions for
traffic, the promotion of safety from fire and other dangers, adequate provision for light
and air, the promotion of healthful and convenient distribution of populations
xxx."55 Under the express terms of its mandate, the NUPC was therefore duty-bound to
act only upon realty projects which would be used for human settlements and not for
agricultural purposes. It is in this light that we must take stock of the 1955 NUPC
conversion of the one hundred ten (110) sub-lots from agricultural to residential
classification.

To bolster the exclusive role of the NUPC over developmental projects for residential
and industrial purposes, the term "subdivision" (which NUPC was mandated to review
and if properly executed to approve) was defined in EO 98 as "the division of a tract or
parcel of land into two (2) or more lots, sites or other divisions for the purpose, whether
immediate or future, of sale or building development, and includes resubdivision, and
when appropriate to the context, relates to the process of subdividing or to the land or
area subdivided."56 The Subdivision Regulations57 (which the NUPC adopted pursuant
to EO 98) decreed as mandatory the NUPC approval of all subdivisions of land in the
Philippines intended for residential, commercial and industrial purposes, before lots
comprising the subdivision could be legally sold or building development therein could
validly commence -

Any owner of land wishing to subdivide land shall submit to the Director of Planning [who was
the head of NUPC] a plat of the subdivision which shall conform to the requirements set forth
in these Regulations. No subdivider shall proceed with the sale of lots of a subdivision and no
plat of a subdivision shall be filed with the Director of Lands for approval or recorded in the
Office of the Register of Deeds until such plat shall have been approved by the Director of
Planning. Applications for plat approval submitted to the District or City Engineer of a town or
 city in the Philippines shall be forwarded to the Director of Planning together with the District or
City Engineer's recommendations (underscoring supplied).

We are convinced that the 1955 approval by the NUPC of the subdivision of the
subject three (3) parcels of land owned by Nelita Bacaling and her spouse into one
hundred ten (110) sub-lots caused the conversion, if not outright classification, of the
entire landholding into a residential community for sale to interested buyers. This is an
official classification of the sub-lots as residential units and constitutes the only
objective and effectual means of obtaining in 1955 the classification and reservation of
private land for non-agricultural use, i.e. residential, industrial or commercial, since
neither P.D. No. 27 nor R.A. No. 665758 (together with the specified formal
mechanisms stipulated therein for converting a piece of agricultural land into a
residential lot) were then binding and effective. The assignment or conversion of the
one hundred ten (110) sub-lots for residential purposes was not abrogated by P.D. No.
27 under which respondents invalidly secured their certificates of land transfer since
the decree was only prospectively effective59 and its coverage was limited only to
agricultural lands which clearly do not include the residential sub-lots in question.60

By virtue of the official classification made by NUPC and the other circumstances
convincingly proved herein, the only fair and legally acceptable decision in the instant
case would be to declare, as we now indeed rule, that the one hundred ten (110) sub-
lots are truly residential in character as well as in purpose and are thus excluded from
the coverage of P.D. No. 27.

Verily, the Certificates of Land Transfer (CLT) issued in respondents' names are not
valid and do not change our ruling. The respondents cannot rely on said CLTS as proof
of security of tenure. It is well settled that the certificates of land transfer are not
absolute evidence of ownership of the subject lots61 and consequently do not bar the
finding that their issuance is void from inception since they cover residential lands
contrary to the mandate of P.D. No. 27. It follows from the fact of nullity of the
certificates of land transfer in respondents' names that the respondents are not entitled
to occupy and possess the one hundred ten (110) sub-lots or portions thereof without
the consent of the owner, herein petitioner Tong.1âwphi1.nêt

While not raised as issues in the instant petition, we nevertheless rule now
(conformably with Gayos v. Gayos62 that it is a cherished rule of procedure that a court
should always strive to settle the entire controversy in a single proceeding leaving no
root or branch to bear the seeds of future litigation) that respondents cannot claim
disturbance compensation for the reason that the sub-lots are not and have never
been available for agrarian reform. In the same vein, respondents also have no right to
be reimbursed by petitioner Jose Juan Tong for the value of or expenses for
improvements which they might have introduced on the one hundred ten (110) sub-lots
since they did not allege nor prove the existence of such improvements and their right
to compensation thereto, if any.63
WHEREFORE, the Petition for Review is GRANTED. It is further ordered and adjudged that:

1. The certificates of land transfer over the one hundred ten (110) sub-lots located in Barangay
Cubay, Jaro, Iloilo City, in the name of respondents and/or their successors in interest are
hereby DECLARED VOID AB INITIO. The said one hundred ten (110) sub-lots, covered by TCT Nos.
T-10664 to T-10773 of the Registry of Deeds of the City of Iloilo, are declared outside the coverage
and operation of P.D. No. 27 and other land reform laws.

2. The consolidated Decision of the Court of Appeals in CA-G.R. SP No. 54413 ("Felomino Muya and
Crispin Amor v. Nelita Bacaling, represented by her attorney-in-fact, Jose Juan Tong, and the
Executive Secretary, Office of the President") and in CA-G.R. SP No. 54414, ("Wilfredo Jereza,
Rodolfo Lazarte and Nemesio Tonocante v. Hon. Executive Secretary, Office of the President and
Nelita Bacaling") and its Resolution dated June 5, 2001 denying petitioners' Motion for
Reconsideration are REVERSED AND SET ASIDE.

3. The Decision dated May 22, 1998 and the Resolution dated July 22, 1999 of the Office of the
President in OP Case No. 98-K-8180 are REINSTATED with the modification in that the respondents
are not entitled to disturbance compensation; and

4. Respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and Nemesio
Tonocante together with their assigns and successors in interest are ordered to vacate and surrender
peacefully the possession of the one hundred ten (110) sub-lots, covered by TCT Nos. T-10664 to T-
10773-Iloilo City, to petitioner Jose Juan Tong within thirty (30) days from notice of this Decision. No
pronouncement as to costs. SO ORDERED.

G.R. No. 75640 April 5, 1990

NATIONAL FOOD AUTHORITY, (NFA), vs. IAC, SG Shipping

This is a petition for review on certiorari made by National Food Authority (NFA for
brevity) then known as the National Grains Authority or NGA from the decision 1 of the
Intermediate Appellate Court affirming the decision 2 of the trial court, the decretal
portion of which reads:

WHEREFORE, defendants Gil Medalla and National Food Authority are ordered to pay jointly
and severally the plaintiff:

a. the sum of P25,974.90, with interest at the legal rate from October 17, 1979 until the
same is fully paid; and,

b. the sum of P10,000.00 as and for attorney's fees.

Costs against both defendants.

SO ORDERED. (p. 22, Rollo)

Hereunder are the undisputed facts as established by the then Intermediate Appellate
Court (now Court of Appeals), viz:

On September 6, 1979 Gil Medalla, as commission agent of the plaintiff Superior Shipping
Corporation, entered into a contract for hire of ship known as "MV Sea Runner" with defendant
National Grains Authority. Under the said contract Medalla obligated to transport on the "MV
Sea Runner" 8,550 sacks of rice belonging to defendant National Grains Authority from the
port of San Jose, Occidental Mindoro, to Malabon, Metro Manila.

Upon completion of the delivery of rice at its destination, plaintiff on October 17, 1979, wrote a
letter requesting defendant NGA that it be allowed to collect the amount stated in its statement
of account (Exhibit "D"). The statement of account included not only a claim for freightage but
also claims for demurrage and stevedoring charges amounting to P93,538.70.

On November 5, 1979, plaintiff wrote again defendant NGA, this time specifically requesting
that the payment for freightage and other charges be made to it and not to defendant Medalla
because plaintiff was the owner of the vessel "MV Sea Runner" (Exhibit "E"). In reply,
defendant NGA on November 16, 1979 informed plaintiff that it could not grant its request
because the contract to transport the rice was entered into by defendant NGA and defendant
Medalla who did not disclose that he was acting as a mere agent of plaintiff (Exhibit "F").
Thereupon on November 19, 1979, defendant NGA paid defendant Medalla the sum of
P25,974.90, for freight services in connection with the shipment of 8,550 sacks of rice (Exhibit
"A").

On December 4, 1979, plaintiff wrote defendant Medalla demanding that he turn over to
plaintiff the amount of P27,000.00 paid to him by defendant NFA. Defendant Medalla,
however, "ignored the demand."

Plaintiff was therefore constrained to file the instant complaint.

Defendant-appellant National Food Authority admitted that it entered into a contract with Gil
Medalla whereby plaintiffs vessel "MV Sea Runner" transported 8,550 sacks of rice of said
defendant from San Jose, Mindoro to Manila.

For services rendered, the National Food Authority paid Gil Medalla P27,000.00 for freightage.

Judgment was rendered in favor of the plaintiff. Defendant National Food Authority appealed to
this court on the sole issue as to whether it is jointly and severally liable with defendant Gil
Medalla for freightage. (pp. 61-62, Rollo)

The appellate court affirmed the judgment of the lower court, hence, this appeal by way
of certiorari, petitioner NFA submitting a lone issue to wit: whether or not the instant
case falls within the exception of the general rule provided for in Art. 1883 of the Civil
Code of the Philippines.

It is contended by petitioner NFA that it is not liable under the exception to the rule (Art.
1883) since it had no knowledge of the fact of agency between respondent Superior
Shipping and Medalla at the time when the contract was entered into between them
(NFA and Medalla). Petitioner submits that "(A)n undisclosed principal cannot maintain
an action upon a contract made by his agent unless such principal was disclosed in
such contract. One who deals with an agent acquires no right against the undisclosed
principal." Petitioner NFA's contention holds no water. It is an undisputed fact that Gil
Medalla was a commission agent of respondent Superior Shipping Corporation which
owned the vessel "MV Sea Runner" that transported the sacks of rice belonging to
petitioner NFA. The context of the law is clear. Art. 1883, which is the applicable law in
the case at bar provides:

Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things
belonging to the principal.

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

Consequently, when things belonging to the principal (in this case, Superior Shipping
Corporation) are dealt with, the agent is bound to the principal although he does not
assume the character of such agent and appears acting in his own name. In other
words, the agent's apparent representation yields to the principal's true representation
and that, in reality and in effect, the contract must be considered as entered into
between the principal and the third person (Sy Juco and Viardo v. Sy Juco, 40 Phil.
634). Corollarily, if the principal can be obliged to perform his duties under the contract,
then it can also demand the enforcement of its rights arising from the contract.

WHEREFORE, PREMISES CONSIDERED, the petition is hereby DENIED and the appealed decision
is hereby AFFIRMED. SO ORDERED.

G.R. No. L-25301 October 26, 1968

GOLD STAR MINING CO., INC. vs. LIM-JIMENA,

From an affirmance in toto by the Court of Appeals1 of a decision of the Court of First
Instance of Manila,2specifically 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.