G.R. No.

129577-80 February 15, 2000

PEOPLE OF THE PHILIPPINES, vs. BULU CHOWDURY

In November 1995, Bulu Chowduly and Josephine Ong were charged before the Regional Trial Court
of Manila with the crime of illegal recruitment in large scale committed as follows:

That sometime between the period from August 1994 to October 1994 in the City of Manila,
Philippines and within the jurisdiction of this Honorable Court, the above-named accused,
representing themselves to have the capacity to contract, enlist and transport workers for
employment abroad, conspiring, confederating and mutually helping one another, did then and
there willfully, unlawfully and feloniously recruit the herein complainants: Estrella B. Calleja,
Melvin C. Miranda and Aser S. Sasis, individually or as a group for employment in Korea
without first obtaining the required license and/or authority from the Philippine Overseas
Employment Administration.1

They were likewise charged with three counts of estafa committed against private complainants.2 The
State Prosecutor, however, later dismissed the estafa charges against Chowdury3 and filed an
amended information indicting only Ong for the offense.4

Chowdury was arraigned on April 16, 1996 while Ong remained at large. He pleaded "not guilty" to
the charge of illegal recruitment in large scale.5Trial ensued. The prosecution presented four
witnesses: private complainants Aser Sasis, Estrella Calleja and Melvin Miranda, and Labor
Employment Officer Abbelyn Caguitla.

Sasis testified that he first met Chowdury in August 1994 when he applied with Craftrade Overseas
Developers (Craftrade) for employment as factory worker in South Korea. Chowdury, a consultant of
Craftrade, conducted the interview. During the interview, Chowdury informed him about the
requirements for employment. He told him to submit his passport, NBI clearance, passport size
picture and medical certificate. He also required him to undergo a seminar. He advised him that
placement would be on a first-come-first-serve basis and urged him to complete the requirements
immediately. Sasis was also charged a processing fee of P25,000.00. Sasis completed all the
requirements in September 1994. He also paid a total amount of P16,000.00 to Craftrade as
processing fee. All payments were received by Ong for which she issued three receipts.6 Chowdury
then processed his papers and convinced him to complete his payment.7

Sasis further said that he went to the office of Craftrade three times to follow up his application but he
was always told to return some other day. In one of his visits to Craftrade's office, he was informed
that he would no longer be deployed for employment abroad. This prompted him to withdraw his
payment but he could no longer find Chowdury. After two unsuccessful attempts to contact him, he
decided to file with the Philippine Overseas Employment Administration (POEA) a case for illegal
recruitment against Chowdury. Upon verification with the POEA, he learned that Craftrade's license
had already expired and has not been renewed and that Chowdury, in his personal capacity, was not
a licensed recruiter.8

Calleja testified that in June 1994, she applied with Craftrade for employment as factory worker in
South Korea. She was interviewed by Chowdury. During the interview, he asked questions regarding
her marital status, her age and her province. Toward the end of the interview, Chowdury told her that
she would be working in a factory in Korea. He required her to submit her passport, NBI clearance, ID
pictures, medical certificate and birth certificate. He also obliged her to attend a seminar on overseas
employment. After she submitted all the documentary requirements, Chowdury required her to pay
P20,000.00 as placement fee. Calleja made the payment on August 11, 1994 to Ong for which she
was issued a receipt.9 Chowdury assured her that she would be able to leave on the first week of
September but it proved to be an empty promise. Calleja was not able to leave despite several follow-
ups. Thus, she went to the POEA where she discovered that Craftrade's license had already expired.
She tried to withdraw her money from Craftrade to no avail. Calleja filed a complaint for illegal
recruitment against Chowdury upon advice of POEA's legal counsel.10

Miranda testified that in September 1994, his cousin accompanied him to the office of Craftrade in
Ermita, Manila and introduced him to Chowdury who presented himself as consultant and interviewer.
Chowdury required him to fill out a bio-data sheet before conducting the interview. Chowdury told
Miranda during the interview that he would send him to Korea for employment as factory worker.
Then he asked him to submit the following documents: passport, passport size picture, NBI clearance
and medical certificate. After he complied with the requirements, he was advised to wait for his visa
and to pay P25,000.00 as processing fee. He paid the amount of P25,000.00 to Ong who issued
receipts therefor.11 Craftrade, however, failed to deploy him. Hence, Miranda filed or complaint with
the POEA against Chowdury for illegal recruitment.12

Labor Employment Officer Abbelyn Caguitla of the Licensing Branch of the POEA testified that she
prepared a certification on June 9, 1996 that Chowdury and his co-accused, Ong, were not, in their
personal capacities, licensed recruiters nor were they connected with any licensed agency. She
nonetheless stated that Craftrade was previously licensed to recruit workers for abroad which expired
on December 15, 1993. It applied for renewal of its license but was only granted a temporary license
effective December 16, 1993 until September 11, 1994. From September 11, 1994, the POEA
granted Craftrade another temporary authority to process the expiring visas of overseas workers who
have already been deployed. The POEA suspended Craftrade's temporary license on December 6,
1994.13

For his defense, Chowdury testified that he worked as interviewer at Craftrade from 1990 until 1994.
His primary duty was to interview job applicants for abroad. As a mere employee, he only followed the
instructions given by his superiors, Mr. Emmanuel Geslani, the agency's President and General
Manager, and Mr. Utkal Chowdury, the agency's Managing Director. Chowdury admitted that he
interviewed private complainants on different dates. Their office secretary handed him their bio-data
and thereafter he led them to his room where he conducted the interviews. During the interviews, he
had with him a form containing the qualifications for the job and he filled out this form based on the
applicant's responses to his questions. He then submitted them to Mr. Utkal Chowdury who in turn
evaluated his findings. He never received money from the applicants. He resigned from Craftrade on
November 12, 1994.14

Another defense witness, Emelita Masangkay who worked at the Accreditation Branch of the POEA
presented a list of the accredited principals of Craftrade Overseas Developers15 and a list of
processed workers of Craftrade Overseas Developers from 1988 to 1994.16

The trial court found Chowdury guilty beyond reasonable doubt of the crime of illegal recruitment in
large scale. It sentenced him to life imprisonment and to pay a fine of P100,000.00. It further ordered
him to pay Aser Sasis the amount of P16,000.00, Estrella Calleja, P20,000.00 and Melvin Miranda,
P25,000.00. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing considerations, the prosecution having proved the guilt of the
accused Bulu Chowdury beyond reasonable doubt of the crime of Illegal Recruitment in large scale, he
is hereby sentenced to suffer the penalty of life imprisonment and a fine of P100,000.00 under Art. 39
(b) of the New Labor Code of the Philippines. The accused is ordered to pay the complainants Aser
Sasis the amount of P16,000.00; Estrella Calleja the amount of P20,000.00; Melvin Miranda the
amount of P25,000.00.17
Chowdury appealed.

The elements of illegal recruitment in large scale are:

(1) The accused undertook any recruitment activity defined under Article 13 (b) or any
prohibited practice enumerated under Article 34 of the Labor Code;

(2) He did not have the license or authority to lawfully engage in the recruitment and placement
of workers; and

(3) He committed the same against three or more persons, individually or as a group.18

The last paragraph of Section 6 of Republic Act (RA) 804219 states who shall be held liable for the
offense, thus:

The persons criminally liable for the above offenses are the principals, accomplices and
accessories. In case of juridical persons, the officers having control, management or direction
of their business shall be liable.

The Revised Penal Code which supplements the law on illegal recruitment20 defines who are the
principals, accomplices and accessories. The principals are: (1) those who take a direct part in the
execution of the act; (2) those who directly force or induce others to commit it; and (3) those who
cooperate in the commission of the offense by another act without which it would not have been
accomplished.21 The accomplices are those persons who may not be considered as principal as
defined in Section 17 of the Revised Penal Code but cooperate in the execution of the offense by
previous or simultaneous act.22 The accessories are those who, having knowledge of the commission
of the crime, and without having participated therein, either as principals or accomplices, take part
subsequent to its commission in any of the following manner: (1) by profiting themselves or assisting
the offenders to profit by the effects of the crime; (2) by concealing or destroying the body of the
crime, or the effects or instruments thereof, in order to prevent its discovery; and (3) by harboring,
concealing, or assisting in the escape of the principal of the crime, provided the accessory acts with
abuse of his public functions or whenever the author of the crime is guilty of treason, parricide,
murder, or an attempt at the life of the chief executive, or is known to be habitually guilty of some
other crime.23

Citing the second sentence of the last paragraph of Section 6 of RA 8042, accused-appellant
contends that he may not be held liable for the offense as he was merely an employee of Craftrade
and he only performed the tasks assigned to him by his superiors. He argues that the ones who
should be held liable for the offense are the officers having control, management and direction of the
agency.

As stated in the first sentence of Section 6 of RA 8042, the persons who may be held liable for illegal
recruitment are the principals, accomplices and accessories. An employee of a company or
corporation engaged in illegal recruitment may be held liable as principal, together with his
employer,24 if it is shown that he actively and consciously participated in illegal recruitment.25 It has
been held that the existence of the corporate entity does not shield from prosecution the corporate
agent who knowingly and intentionally causes the corporation to commit a crime. The corporation
obviously acts, and can act, only by and through its human agents, and it is their conduct which the
law must deter, The employee or agent of a corporation engaged in unlawful business naturally aids
and abets in the carrying on of such business and will be prosecuted as principal if with knowledge of
the business, its purpose and effect, he consciously contributes his efforts to its conduct and
promotion, however slight his contribution may be.26 The law of agency, as applied in civil cases, has
no application in criminal cases, and no man can escape punishment when he participates in the
commission of a crime upon the ground that he simply acted as an agent of any party.27 The
culpability of the employee therefore hinges on his knowledge of the offense and his active
participation in its commission. Where it is shown that the employee was merely acting under the
direction of his superiors and was unaware that his acts constituted a crime, he may not be held
criminally liable for an act done for and in behalf of his employer.28

The fundamental issue in this case, therefore, is whether accused-appellant knowingly and
intentionally participated in the commission of the crime charged.

We find that he did not.

Evidence shows that accused-appellant interviewed private complainants in the months of June,
August and September in 1994 at Craftrade's office. At that time, he was employed as interviewer of
Craftrade which was then operating under a temporary authority given by the POEA pending renewal
of its license.29 The temporary license included the authority to recruit workers.30 He was convicted
based on the fact that he was not registered with the POEA as employee of Craftrade. Neither was
he, in his personal capacity, licensed to recruit overseas workers. Section 10 Rule II Book II of the
Rules and Regulation Governing Overseas Employment (1991) requires that every change,
termination or appointment of officers, representatives and personnel of licensed agencies be
registered with the POEA. Agents or representatives appointed by a licensed recruitment agency
whose appointments are not previously approved by the POEA are considered "non-licensee" or
"non-holder of authority" and therefore not authorized to engage in recruitment activity.31

Upon examination of the records, however, we find that the prosecution failed to prove that accused-
appellant was aware of Craftrade's failure to register his name with the POEA and that he actively
engaged in recruitment despite this knowledge. The obligation to register its personnel with the POEA
belongs to the officers of the agency.32 A mere employee of the agency cannot be expected to know
the legal requirements for its operation. The evidence at hand shows that accused-appellant carried
out his duties as interviewer of Craftrade believing that the agency was duly licensed by the POEA
and he, in turn, was duly authorized by his agency to deal with the applicants in its behalf. Accused-
appellant in fact confined his actions to his job description. He merely interviewed the applicants and
informed them of the requirements for deployment but he never received money from them. Their
payments were received by the agency's cashier, Josephine Ong. Furthermore, he performed his
tasks under the supervision of its president and managing director. Hence, we hold that the
prosecution failed to prove beyond reasonable doubt accused-appellant's conscious and active
participation in the commission of the crime of illegal recruitment. His conviction, therefore, is without
basis.

This is not to say that private complainants are left with no remedy for the wrong committed against
them. The Department of Justice may still file a complaint against the officers having control,
management or direction of the business of Craftrade Overseas Developers (Craftrade), so long as
the offense has not yet prescribed. Illegal recruitment is a crime of economic sabotage which need to
be curbed by the strong arm of the law. It is important, however, to stress that the government's
action must be directed to the real offenders, those who perpetrate the crime and benefit from it.

IN VIEW WHEREOF, the assailed decision of the Regional Trial Court is REVERSED and SET
ASIDE. Accused-appellant is hereby ACQUITTED. The Director of the Bureau of Corrections is
ordered to RELEASE accused-appellant unless he is being held for some other cause, and to
REPORT to this Court compliance with this order within ten (10) days from receipt of this decision.
Let a copy of this Decision be furnished the Secretary of the Department of Justice for his information
and appropriate action.1âwphi1.nêtSO ORDERED.
 G.R. No. 158907 February 12, 2007

EDUARDO B. OLAGUER, Petitioner, vs. EMILIO PURUGGANAN, JR. AND RAUL LOCSIN

This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the
Decision,1 dated 30 June 2003, promulgated by the Court of Appeals, affirming the Decision of the
Regional Trial Court, dated 26 July 1995, dismissing the petitioner’s suit.

The parties presented conflicting accounts of the facts.

EDUARDO B. OLAGUER’S VERSION

Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of
Businessday Corporation (Businessday) with a total par value of ₱600,000.00, with Certificates of
Stock No. 005, No. 028, No. 034, No. 070, and No. 100.2 At the time he was employed with the
corporation as Executive Vice-President of Businessday, and President of Businessday Information
Systems and Services and of Businessday Marketing Corporation, petitioner, together with
respondent Raul Locsin (Locsin) and Enrique Joaquin (Joaquin), was active in the political opposition
against the Marcos dictatorship.3 Anticipating the possibility that petitioner would be arrested and
detained by the Marcos military, Locsin, Joaquin, and Hector Holifeña had an unwritten agreement
that, in the event that petitioner was arrested, they would support the petitioner’s family by the
continued payment of his salary.4 Petitioner also executed a Special Power of Attorney (SPA), on 26
May 1979, appointing as his attorneys-in-fact Locsin, Joaquin and Hofileña for the purpose of selling
or transferring petitioner’s shares of stock with Businessday. During the trial, petitioner testified that
he agreed to execute the SPA in order to cancel his shares of stock, even before they are sold, for
the purpose of concealing that he was a stockholder of Businessday, in the event of a military
crackdown against the opposition.5 The parties acknowledged the SPA before respondent Emilio
Purugganan, Jr., who was then the Corporate Secretary of Businessday, and at the same time, a
notary public for Quezon City.6

On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an Arrest, Search
and Seizure Order and detained for allegedly committing arson. During the petitioner’s detention,
respondent Locsin ordered fellow respondent Purugganan to cancel the petitioner’s shares in the
books of the corporation and to transfer them to respondent Locsin’s name.7

As part of his scheme to defraud the petitioner, respondent Locsin sent Rebecca Fernando, an
employee of Businessday, to Camp Crame where the petitioner was detained, to pretend to borrow
Certificate of Stock No. 100 for the purpose of using it as additional collateral for Businessday’s then
outstanding loan with the National Investment and Development Corporation. When Fernando
returned the borrowed stock certificate, the word "cancelled" was already written therein. When the
petitioner became upset, Fernando explained that this was merely a mistake committed by
respondent Locsin’s secretary.8

During the trial, petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular
deposits, each amounting to ₱10,000.00, to the Metropolitan Bank and Trust Company accounts of
Manuel and Genaro Pantig, petitioner’s in-laws. The deposits were made on every 15th and 30th of
the month.9 Petitioner alleged that these funds consisted of his monthly salary, which Businessday
agreed to continue paying after his arrest for the financial support of his family.10 After receiving a
total of ₱600,000.00, the payments stopped. Thereafter, respondent Locsin and Fernando went to
ask petitioner to endorse and deliver the rest of his stock certificates to respondent Locsin, but
petitioner refused. 11

On 16 January 1986, petitioner was finally released from detention. He then discovered that he was
no longer registered as stockholder of Businessday in its corporate books. He also learned that
Purugganan, as the Corporate Secretary of Businessday, had already recorded the transfer of shares
in favor of respondent Locsin, while petitioner was detained. When petitioner demanded that
respondents restore to him full ownership of his shares of stock, they refused to do so. On 29 July
1986, petitioner filed a Complaint before the trial court against respondents Purugganan and Locsin
to declare as illegal the sale of the shares of stock, to restore to the petitioner full ownership of the
shares, and payment of damages.12

RESPONDENT RAUL LOCSIN’S VERSION

In his version of the facts, respondent Locsin contended that petitioner approached him and
requested him to sell, and, if necessary, buy petitioner’s shares of stock in Businessday, to assure
support for petitioner’s family in the event that something should happen to him, particularly if he was
jailed, exiled or forced to go underground.13 At the time petitioner was employed with Businessday,
respondent Locsin was unaware that petitioner was part of a group, Light-a-Fire Movement, which
actively sought the overthrow of the Marcos government through an armed struggle.14 He denied that
he made any arrangements to continue paying the petitioner’s salary in the event of the latter’s
imprisonment.15

When petitioner was detained, respondent Locsin tried to sell petitioner’s shares, but nobody wanted
to buy them. Petitioner’s reputation as an oppositionist resulted in the poor financial condition of
Businessday and discouraged any buyers for the shares of stock.16 In view of petitioner’s previous
instructions, respondent Locsin decided to buy the shares himself.1awphi1.net Although the capital
deficiency suffered by Businessday caused the book value of the shares to plummet below par value,
respondent Locsin, nevertheless, bought the shares at par value.17 However, he had to borrow from
Businessday the funds he used in purchasing the shares from petitioner, and had to pay the petitioner
in installments of ₱10,000.00 every 15th and 30th of each month.18

The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner. It
ruled that the sale of shares between petitioner and respondent Locsin was valid. The trial court
concluded that petitioner had intended to sell the shares of stock to anyone, including respondent
Locsin, in order to provide for the needs of his family should he be jailed or forced to go underground;
and that the SPA drafted by the petitioner empowered respondent Locsin, and two other agents, to
sell the shares for such price and under such terms and conditions that the agents may deem proper.
It further found that petitioner consented to have respondent Locsin buy the shares himself. It also
ruled that petitioner, through his wife, received from respondent Locsin the amount of ₱600,000.00 as
payment for the shares of stock.19 The dispositive part of the trial court’s Decision reads:

WHEREFORE, for failure of the [herein petitioner] to prove by preponderance of evidence, his causes
of action and of the facts alleged in his complaint, the instant suit is hereby ordered DISMISSED,
without pronouncement as to costs.

[Herein respondents’] counterclaims, however, are hereby DISMISSED, likewise, for dearth of
substantial evidentiary support.20

On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected
contract of sale.21It further ruled that granting that there was no perfected contract of sale, petitioner,
nevertheless, ratified the sale to respondent Locsin by his receipt of the purchase price, and his
failure to raise any protest over the said sale.22 The Court of Appeals refused to credit the petitioner’s
allegation that the money his wife received constituted his salary from Businessday since the amount
he received as his salary, ₱24,000.00 per month, did not correspond to the amount he received
during his detention, ₱20,000.00 per month (deposits of ₱10,000.00 on every 15th and 30th of each
month in the accounts of the petitioner’s in-laws). On the other hand, the total amount received,
₱600,000.00, corresponds to the aggregate par value of petitioner’s shares in Businessday.
Moreover, the financial condition of Businessday prevented it from granting any form of financial
assistance in favor of the petitioner, who was placed in an indefinite leave of absence, and, therefore,
not entitled to any salary. 23

The Court of Appeals also ruled that although the manner of the cancellation of the petitioner’s
certificates of stock and the subsequent issuance of the new certificate of stock in favor of respondent
Locsin was irregular, this irregularity will not relieve petitioner of the consequences of a consummated
sale.24

Finally, the Court of Appeals affirmed the Decision of the trial court disallowing respondent Locsin’s
claims for moral and exemplary damages due to lack of supporting evidence.25

Hence, the present petition, where the following issues were raised:

I.

THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A PERFECTED CONTRACT OF
SALE BETWEEN PETITIONER AND MR. LOCSIN OVER THE SHARES;

II.

THE APPELLATE COURT ERRED IN RULING THAT PETITIONER CONSENTED TO THE

ALLEGED SALE OF THE SHARES TO MR. LOCSIN;

III.

THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS RECEIVED BY

PETITIONER’S IN LAWS WERE NOT PETITIONER’S SALARY FROM THE CORPORATION BUT
INSTALLMENT PAYMENTS FOR THE SHARES;

IV.

THE APPELLATE COURT ERRED IN RULING THAT MR. LOCSIN WAS THE PARTY TO THE
ALLEGED SALE OF THE SHARES AND NOT THE CORPORATION; AND

V.

THE APPELLATE COURT ERRED IN RULING THAT THE ALLEGED SALE OF THE SHARES WAS
VALID ALTHOUGH THE CANCELLATION OF THE SHARES WAS IRREGULAR.26

The petition is without merit.

The first issue that the petitioner raised is that there was no valid sale since respondent Locsin
exceeded his authority under the SPA27 issued in his, Joaquin and Holifena’s favor. He alleged that
the authority of the afore-named agents to sell the shares of stock was limited to the following
conditions: (1) in the event of the petitioner’s absence and incapacity; and (2) for the limited purpose
of applying the proceeds of the sale to the satisfaction of petitioner’s subsisting obligations with the
companies adverted to in the SPA.28

Petitioner sought to impose a strict construction of the SPA by limiting the definition of the word
"absence" to a condition wherein "a person disappears from his domicile, his whereabouts being
unknown, without leaving an agent to administer his property,"29 citing Article 381 of the Civil Code,
the entire provision hereunder quoted:

ART 381. When a person disappears from his domicile, his whereabouts being unknown, and without
leaving an agent to administer his property, the judge, at the instance of an interested party, a
relative, or a friend, may appoint a person to represent him in all that may be necessary.

This same rule shall be observed when under similar circumstances the power conferred by the
absentee has expired.

Petitioner also puts forward that the word "incapacity" would be limited to mean "minority, insanity,
imbecility, the state of being deaf-mute, prodigality and civil interdiction."30 He cites Article 38 of the
Civil Code, in support of this definition, which is hereunder quoted:

ART. 38 Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction
are mere restrictions on capacity to act, and do not exempt the incapacitated person, from certain
obligations, as when the latter arise from his acts or from property relations, such as easements.

Petitioner, thus, claims that his arrest and subsequent detention are not among the instances covered
by the terms "absence or incapacity," as provided under the SPA he executed in favor of respondent
Locsin.

Petitioner’s arguments are unpersuasive. It is a general rule that a power of attorney must be strictly
construed; the instrument will be held to grant only those powers that are specified, and the agent
may neither go beyond nor deviate from the power of attorney. However, the rule is not absolute and
should not be applied to the extent of destroying the very purpose of the power. If the language will
permit, the construction that should be adopted is that which will carry out instead of defeat the
purpose of the appointment. Clauses in a power of attorney that are repugnant to each other should
be reconciled so as to give effect to the instrument in accordance with its general intent or
predominant purpose. Furthermore, the instrument should always be deemed to give such powers as
essential or usual in effectuating the express powers.31

In the present case, limiting the definitions of "absence" to that provided under Article 381 of the Civil
Code and of "incapacity" under Article 38 of the same Code negates the effect of the power of
attorney by creating absurd, if not impossible, legal situations. Article 381 provides the necessarily
stringent standards that would justify the appointment of a representative by a judge. Among the
standards the said article enumerates is that no agent has been appointed to administer the property.
In the present case, petitioner himself had already authorized agents to do specific acts of
administration and thus, no longer necessitated the appointment of one by the court. Likewise,
limiting the construction of "incapacity" to "minority, insanity, imbecility, the state of being a deaf-mute,
prodigality and civil interdiction," as provided under Article 38, would render the SPA ineffective.
Article 1919(3) of the Civil Code provides that the death, civil interdiction, insanity or insolvency of the
principal or of the agent extinguishes the agency. It would be equally incongruous, if not outright
impossible, for the petitioner to require himself to qualify as a minor, an imbecile, a deaf-mute, or a
prodigal before the SPA becomes operative. In such cases, not only would he be prevented from
appointing an agent, he himself would be unable to administer his property.
On the other hand, defining the terms "absence" and "incapacity" by their everyday usage makes for
a reasonable construction, that is, "the state of not being present" and the "inability to act," given the
context that the SPA authorizes the agents to attend stockholders’ meetings and vote in behalf of
petitioner, to sell the shares of stock, and other related acts. This construction covers the situation
wherein petitioner was arrested and detained. This much is admitted by petitioner in his testimony.32

Petitioner’s contention that the shares may only be sold for the sole purpose of applying the proceeds
of the sale to the satisfaction of petitioner’s subsisting obligations to the company is far-fetched. The
construction, which will carry out the purpose, is that which should be applied. Petitioner had not
submitted evidence that he was in debt with Businessday at the time he had executed the SPA. Nor
could he have considered incurring any debts since he admitted that, at the time of its execution, he
was concerned about his possible arrest, death and disappearance. The language of the SPA clearly
enumerates, as among those acts that the agents were authorized to do, the act of applying the
proceeds of the sale of the shares to any obligations petitioner might have against the Businessday
group of companies. This interpretation is supported by the use of the word "and" in enumerating the
authorized acts, instead of phrases such as "only for," "for the purpose of," "in order to" or any similar
terms to indicate that the petitioner intended that the SPA be used only for a limited purpose, that of
paying any liabilities with the Businessday group of companies.

Secondly, petitioner argued that the records failed to show that he gave his consent to the sale of the
shares to respondent Locsin for the price of ₱600,000.00. This argument is unsustainable. Petitioner
received from respondent Locsin, through his wife and in-laws, the installment payments for a total of
₱600,000.00 from 1980 to 1982, without any protest or complaint. It was only four years after 1982
when petitioner demanded the return of the shares. The petitioner’s claim that he did not instruct
respondent Locsin to deposit the money to the bank accounts of his in-laws fails to prove that
petitioner did not give his consent to the sale since respondent Locsin was authorized, under the
SPA, to negotiate the terms and conditions of the sale including the manner of payment. Moreover,
had respondent Locsin given the proceeds directly to the petitioner, as the latter suggested in this
petition, the proceeds were likely to have been included among petitioner’s properties which were
confiscated by the military. Instead, respondent Locsin deposited the money in the bank accounts of
petitioner’s in-laws, and consequently, assured that the petitioner’s wife received these amounts.
Article 1882 of the Civil Code provides that the limits of an agent’s authority shall not be considered
exceeded should it have been performed in a manner more advantageous to the principal than that
specified by him.

In addition, petitioner made two inconsistent statements when he alleged that (1) respondent Locsin
had not asked the petitioner to endorse and deliver the shares of stock, and (2) when Rebecca
Fernando asked the petitioner to endorse and deliver the certificates of stock, but petitioner refused
and even became upset.33 In either case, both statements only prove that petitioner refused to honor
his part as seller of the shares, even after receiving payments from the buyer. Had the petitioner not
known of or given his consent to the sale, he would have given back the payments as soon as
Fernando asked him to endorse and deliver the certificates of stock, an incident which unequivocally
confirmed that the funds he received, through his wife and his in-laws, were intended as payment for
his shares of stocks. Instead, petitioner held on to the proceeds of the sale after it had been made
clear to him that respondent Locsin had considered the ₱600,000.00 as payment for the shares, and
asked petitioner, through Fernando, to endorse and deliver the stock certificates for cancellation.

As regards the third issue, petitioner’s allegation that the installment payments he was adjudged to
have received for the shares were actually salaries which Businessday promised to pay him during
his detention is unsupported and implausible. Petitioner received ₱20,000.00 per month through his
in-laws; this amount does not correspond to his monthly salary at ₱24,000.00.34 Nor does the amount
received correspond to the amount which Businessday was supposed to be obliged to pay petitioner,
which was only ₱45,000.00 to ₱60,000.00 per annum.35 Secondly, the petitioner’s wife did not receive
funds from respondent Locsin or Businessday for the entire duration of petitioner’s detention. Instead,
when the total amount received by the petitioner reached the aggregate amount of his shares at par
value -- ₱600,000.00 -- the payments stopped. Petitioner even testified that when respondent Locsin
denied knowing the petitioner soon after his arrest, he believed respondent Locsin’s commitment to
pay his salaries during his detention to be nothing more than lip-service.36

Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of
Businessday in favor of petitioner, would be void. An arrangement whereby petitioner will receive
"salaries" for work he will not perform, which is not a demandable debt since petitioner was on an
extended leave of absence, constitutes a donation under Article 72637 of the Civil Code. Under Article
748 of the Civil Code, if the value of the personal property donated exceeds ₱5,000.00, the donation
and the acceptance shall have to be made in writing. Otherwise, the donation will be void. In the
present case, petitioner admitted in his testimony38 that such arrangement was not made in writing
and, hence, is void.

The fact that some of the deposit slips and communications made to petitioner’s wife contain the
phrase "household expenses" does not disprove the sale of the shares. The money was being
deposited to the bank accounts of the petitioner’s in-laws, and not to the account of the petitioner or
his wife, precisely because some of his property had already been confiscated by the military. Had
they used the phrase "sale of shares," it would have defeated the purpose of not using their own bank
accounts, which was to conceal from the military any transaction involving the petitioner’s property.

Petitioner raised as his fourth issue that granting that there was a sale, Businessday, and not
respondent Locsin, was the party to the transaction. The curious facts that the payments were
received on the 15th and 30th of each month and that the payor named in the checks was
Businessday, were adequately explained by respondent Locsin. Respondent Locsin had obtained
cash advances from the company, paid to him on the 15th and 30th of the month, so that he can pay
petitioner for the shares. To support his claim, he presented Businessday’s financial records and the
testimony of Leo Atienza, the Company’s Accounting Manager. When asked why the term "shares of
stock" was used for the entries, instead of "cash advances," Atienza explained that the term "shares
of stock" was more specific rather than the broader phrase "cash advances."39 More to the point, had
the entries been for "shares of stock," the issuance of shares should have been reflected in the stock
and transfer books of Businessday, which the petitioner presented as evidence. Instead the stock and
transfer books reveal that the increase in respondent Locsin’s shares was a result of the cancellation
and transfer of petitioner’s shares in favor of respondent Locsin.

Petitioner alleges that the purported sale between himself and respondent Locsin of the disputed
shares of stock is void since it contravenes Article 1491 of the Civil Code, which provides that:

ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction,
either in person or through the mediation of another:

xxxx

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the
consent of the principal has been given; x x x.

It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act as
agent for another cannot be permitted to deal in the agency matter on his own account and for his
own benefit without the consent of his principal, freely given, with full knowledge of every detail known
to the agent which might affect the transaction.40 The prohibition against agents purchasing property
in their hands for sale or management is, however, clearly, not absolute. It does not apply where the
principal consents to the sale of the property in the hands of the agent or administrator.>41

In the present case, the parties have conflicting allegations. While respondent Locsin averred that
petitioner had permitted him to purchase petitioner’s shares, petitioner vehemently denies having
known of the transaction. However, records show that petitioner’s position is less credible than that
taken by respondent Locsin given petitioner’s contemporaneous and subsequent acts.42 In 1980,
when Fernando returned a stock certificate she borrowed from the petitioner, it was marked
"cancelled." Although the petitioner alleged that he was furious when he saw the word cancelled, he
had not demanded the issuance of a new certificate in his name. Instead of having been put on his
guard, petitioner remained silent over this obvious red flag and continued receiving, through his wife,
payments which totalled to the aggregate amount of the shares of stock valued at par. When the
payments stopped, no demand was made by either petitioner or his wife for further payments.

From the foregoing, it is clear that petitioner knew of the transaction, agreed to the purchase price of
₱600,000.00 for the shares of stock, and had in fact facilitated the implementation of the terms of the
payment by providing respondent Locsin, through petitioner’s wife, with the information on the bank
accounts of his in-laws. Petitioner’s wife and his son even provided receipts for the payments that
were made to them by respondent Locsin,43 a practice that bespeaks of an onerous transaction and
not an act of gratuity.

Lastly, petitioner claims that the cancellation of the shares and the subsequent transfer thereof were
fraudulent, and, therefore, illegal. In the present case, the shares were transferred in the name of the
buyer, respondent Locsin, without the petitioner delivering to the buyer his certificates of stock.
Section 63 of the Corporation Code provides that:

Sec.63. Certificate of stock and transfer of shares.— xxx Shares of stock so issued are personal
property and may be transferred by delivery of the certificate or certificates indorsed by the owner or
his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall
be valid, except as between the parties, until the transfer is recorded in the books of the corporation
showing the names of the parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred. (Emphasis provided.)

The aforequoted provision furnishes the procedure for the transfer of shares – the delivery of the
endorsed certificates, in order to prevent the fraudulent transfer of shares of stock. However, this rule
cannot be applied in the present case without causing the injustice sought to be avoided. As had
been amply demonstrated, there was a valid sale of stocks. Petitioner’s failure to deliver the shares to
their rightful buyer is a breach of his duty as a seller, which he cannot use to unjustly profit himself by
denying the validity of such sale. Thus, while the manner of the cancellation of petitioner’s certificates
of stock and the issuance of the new certificates in favor of respondent Locsin was highly irregular,
we must, nonetheless, declare the validity of the sale between the parties. Neither does this
irregularity prove that the transfer was fraudulent. In his testimony, petitioner admitted that they had
intended to conceal his being a stockholder of Businessday.44 The cancellation of his name from the
stock and transfer book, even before the shares were actually sold, had been done with his consent.
As earlier explained, even the subsequent sale of the shares in favor of Locsin had been done with
his consent.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed
Decision of the Court of Appeals, promulgated on 30 June 2003, affirming the validity of the sale of
the shares of stock in favor of respondent Locsin. No costs.

SO ORDERED.
 G.R. No. 112576 October 26, 1994

(CA-GR CV No. 26571)

METROPOLITAN BANK AND TRUST COMPANY, Petitioner, v. THE HON. COURT OF

APPEALS, RURAL BANK OF PADRE GARCIA, INC. and ISABEL R. KATIGBAK,

This petition for certiorari seeks to annul the decision of respondent Court of Appeals
dated October 29, 1992 in CA - GR CV No. 26571 affirming the decision of the Regional
Trial Court of Lipa, Batangas - Branch XIII for damages, and the Resolution dated
November 11, 1993 denying petitioner's motion for reconsideration of the aforesaid
decision. ch an rob lesvirt u alaw lib rarych an rob le s v irt u al la w l ib rary

The case emanated from a dispute between the Rural Bank of Padre Garcia, Inc. (RBPG)
and Metropolitan Bank and Trust Company (MBTC) relative to a credit memorandum
dated April 5, 1982 from the Central Bank in the amount of P304,000.00 in favor of
RBPG. ch an rob lesvirt u al awlib rary ch an rob les virt u al l aw lib rary

The records show that Isabel Katigbak is the president and director of RBPG, owning
65% of the shares thereof. Metropolitan Bank and Trust Company (MBTC) is the rural
bank's depository bank, where Katigbak maintains current accounts with MBTC's main
office in Makati as well as its Lipa City branch. ch an rob lesvirt u ala wlib rarych an rob l es virt u al l aw lib rary

On April 6, 1982, MBTC received from the Central Bank a credit memo dated April 5,
1982 that its demand deposit account was credited with P304,000.00 for the account of
RBPG, representing loans granted by the Central Bank to RBPG. On the basis of said
credit memo, Isabel Katigbak issued several checks against its account with MBTC in the
total amount of P300,000.00, two (2) of which (Metrobank Check Nos. 0069 and 0070)
were payable to Dr. Felipe C. Roque and Mrs. Eliza Roque for P25,000.00 each. Said
checks issued to Dr. and Mrs. Roque were deposited by the Roques with the Philippine
Banking Corporation, Novaliches Branch in Quezon City. When these checks were
forwarded to MBTC on April 12, 1982 for payment (six (6) days from receipt of the
Credit Memo), the checks were returned by MBTC with the annotations "DAIF - TNC"
(Drawn Against Insufficient Funds - Try Next Clearing) so they were redeposited on April
14, 1982. These
were however again dishonored and returned unpaid for the following reason: "DAIF -
TNC - NO ADVICE FROM CB." ch an rob les virt u al l aw lib rary

After the second dishonor of the two (2) checks, Dr. Felipe Roque, a member of the
Board of Directors of Philippine Banking Corporation, allegedly went to the Office of
Antonio Katigbak, an officer of RBPG, chiding him for the bouncing checks. In order to
appease the doctor, RBPG paid Dr. Roque P50,000.00 in cash to replace the aforesaid
checks. ch an rob lesvirt u alawlib rar ych an rob les virt u al la w lib rary

On April 13, 1982, Isabel Katigbak who was in Hongkong on a

business-vacation trip together with her sons Alfredo and Antonio, both of whom were
also officers of RBPG, received overseas phone calls from Mrs. Maris Katigbak-San Juan
at her residence in San Lorenzo Village, Makati, informing Isabel Katigbak that a certain
Mr. Rizal Dungo, Assistant Cashier of MBTC insisted on talking to her (Mrs. San Juan),
berating her about the checks which bounced, saying "Nag-issue kayo ng tseke, wala
namang pondo," even if it was explained to Mr. Dungo that Mrs. San Juan was not in
any way connected with RBPG. ch an rob lesvirt u alawlib rar ych an rob les virt u al law lib rary

Mrs. Katigbak testified that she informed Mrs. San Juan to request defendant MBTC to
check and verify the records regarding the aforementioned Central Bank credit memo for
P304,000.00 in favor of RBPG as she was certain that the checks were sufficiently
covered by the CB credit memo as early as April 6, 1994, but the following day, Mrs.
San Juan received another insulting call from Mr. Dungo ("Bakit kayo nag-issue ng tseke
na wala namang pondo, Three Hundred Thousand na.") 1When Mrs. San Juan explained
to him the need to verify the records regarding the Central Bank memo, he merely
brushed it aside, telling her sarcastically that he was very sure that no such credit memo
existed. Mrs. San Juan was constrained to place another long distance call to Mrs.
Katigbak in Hongkong that evening. Tense and angered, the Katigbaks had to cut short
their Hongkong stay with their respective families and flew back to Manila, catching the
first available flight on April 15, 1982. ch an rob lesvirt u alawlib rary ch an rob les virt u al l aw lib rary

Immediately upon arrival, Mrs. Katigbak called up MBTC, through a

Mr. Cochico, for a re-examination of the records of MBTC regarding the Central Bank
credit memo dated April 5, 1982 for P304,000.00. Mr. Dungo, to whom Cochico handed
over the phone, allegedly arrogantly said: "Bakit kayo magagalit, wala naman kayong
pondo?" These remarks allegedly so shocked Mrs. Katigbak that her blood pressure rose
to a dangerous level and she had to undergo medical treatment at the Makati Medical
Center for two (2) days. ch an rob lesvirt u alawlib rarych an rob l es virt u al l aw lib rary

Metrobank not only dishonored the checks issued by RBPG, the latter was issued four
(4) debit memos representing service and penalty charges for the returned checks. ch an rob lesvirt u ala wlib rarych an rob l es virt u al l aw lib rary

RBPG and Isabel Katigbak filed Civil Case No. V-329 in the RTC of Lipa, Batangas -
Branch XIII against the Metropolitan Bank and Trust Company for damages on April 26,
1983.ch an rob lesvirt u alawlib rar ych an rob les virt u al la w lib rary

The ultimate facts as alleged by the defendant MBTC in its answer are as follows: that
on April 6, 1982, its messenger, Elizer Gonzales, received from the Central Bank several
credit advices on rural bank accounts, which included that of plaintiff RBPG in the
amount of P304,000.00; that due to the inadvertence of said messenger, the credit
advice issued in favor of plaintiff RBPG was not delivered to the department in charge of
processing the same; consequently, when MBTC received from the clearing department
the checks in question, the stated balance in RBPG's account was only P5,498.58 which
excluded the unprocessed credit advice of P304,000.00 resulting in the dishonor of the
aforementioned checks; that as regards the P304,000.00 which was
a re-discounting loan from the Central Bank, the same was credited only on April 15,
1982 after the Central Bank finally confirmed that a credit advice was indeed issued in
favor of RBPG; that after the confirmation, MBTC credited the amount of the credit
advice to plaintiff RBPG's account and thru its officers, allegedly conveyed personally on
two occasions its apologies to plaintiffs to show that the bank and its officers acted with
no deliberate intent on their part to cause injury or damage to plaintiffs, explaining the
circumstances that gave rise to the bouncing checks situation. Metrobank's negligence
arising from their messenger's misrouting of the credit advice resulting in the return of
the checks in question, despite daily reporting of credit memos and a corresponding
daily radio message confirmation, (as shown by Exhibit "I," the Investigation Report of
the bank's Mr. Valentino Elevado) and Mr. Dungo's improper handling of clients led to
the messenger's dismissal from service and Mr. Dungo's transfer from Metro Manila to
Mindoro. ch an rob les virt u ala wlib rarych an rob l es virt u al l aw lib rary

The threshold issue was whether or not, under the facts and circumstances of the case,
plaintiff may be allowed to recover actual, moral and exemplary damages, including
attorney's fees, litigation expenses and the costs of the suit. On August 25, 1989, the
RTC of Lipa City rendered a decision 2in favor of plaintiffs and against the defendant
MBTC, ordering the latter to:

1. pay plaintiff Isabel Katigbak P50,000.00 as temperate damages; ch anrob les virt u al la w lib rar y

2. pay P500,000.00 as moral damages, considering that RBPG's credit standing and
business reputation were damaged by the wrongful acts of defendant's employees,
coupled with the rude treatment received by Isabel Katigbak at the hands of Mr. Dungo,
all of which impelled her to seek medical treatment; ch an rob les virt u al l aw lib rary

3. pay P100,000.00 as attorney's fees and litigation expenses; and. ch an rob lesvirt u alawl ib rarych an rob les virt u al la w lib rar y

4. pay the costs of suit.

The lower court did not award actual damages in the amount of P50,000.00 representing
the amount of the two (2) checks payable to Dr. Felipe C. Roque and Mrs. Elisa Roque
for P25,000 each, as it found no showing that Mr. Antonio Katigbak who allegedly paid
the amount was actually reimbursed by plaintiff RBPG. Moreover, the court held that no
actual damages could have been suffered by plaintiff RBPG because on April 15, 1982,
the Central Bank credit advice in the amount of P304,000 which included the two (2)
checks issued to the Roque spouses in the sum of P50,000.00 were already credited to
the account of RBPG and the service, as well as penalty charges, were all reversed. ch an rob lesvirt u al awlib rary ch an rob les virt u al l aw lib rary

MBTC appealed from the decision to the Court of Appeals in CA - GR CV No. 26571,
alleging that the trial court erred in awarding temperate and moral damages, as well as
attorney's fees, plus costs and expenses of litigation without factual or legal basis
therefor. ch an rob lesvirt u ala wlib rarych an rob le s virt u al la w l ib rary

On October 29, 1992, the Court of Appeals rendered a decision 3affirming that of the
trial court, except for the deletion of the award of temperate damages, the reduction of
moral damages from P500,000.00 to P50,000.00 in favor of RBPG and P100,000.00 for
Isabel Katigbak and P50,000.00, as attorney's fees. Plaintiffs-appellees filed a motion for
reconsideration of the decision, questioning the deletion of the award of temperate
damages and the reduction of the award of moral damages and attorney's fees. The
motion was denied. ch an rob lesvirt u alawlib rarych an rob l es virt u al l aw lib rary

MBTC filed this petition, presenting the following issues for resolution:
1. whether or not private respondents RBPG and Isabel Rodriguez are legally entitled to
moral damages and attorney's fees, and chan rob les virt u al l aw lib rary

2. assuming that they are so entitled, whether or not the amounts awarded are
excessive and unconscionable.

The petition is devoid of merit. ch an rob lesvirt u alaw lib rarych an rob les v irt u al la w l ib rary

The case at bench was instituted to seek damages caused by the dishonor through
negligence of respondent bank's checks which were actually sufficiently funded, and the
insults from petitioner bank's officer directed against private respondent Isabel R.
Katigbak. The presence of malice and the evidence of besmirched reputation or loss of
credit and business standing, as well as a reappraisal of its probative value, involves
factual matters which, having been already thoroughly discussed and analyzed in the
courts below, are no longer reviewable here. While this rule admits of exceptions, this
case does not fall under any of these. ch an rob lesvirt u alawlib rarych an rob l es virt u al l aw lib rary

There is no merit in petitioner's argument that it should not be considered negligent,

much less be held liable for damages on account of the inadvertence of its bank
employee as Article 1173 of the Civil Code only requires it to exercise the diligence of a
good pater familias.ch an rob lesvirt u alawlib rarych an rob l es virt u al l aw lib rary

As borne out by the records, the dishonoring of the respondent's checks committed
through negligence by the petitioner bank on April 6, 1982 was rectified only on April
15, 1992 or nine (9) days after receipt of the credit memo. Clearly, petitioner bank was
remiss in its duty and obligation to treat private respondent's account with the highest
degree of care, considering the fiduciary nature of their relationship. The bank is under
obligation to treat the accounts of its depositors with meticulous care, whether such
account consists only of a few hundred pesos or of millions. It must bear the blame for
failing to discover the mistake of its employee despite the established procedure
requiring bank papers to pass through bank personnel whose duty it is to check and
countercheck them for possible errors. 4Responsibility arising from negligence in the
performance of every kind of obligation is demandable.5While the bank's negligence may
not have been attended with malice and bad faith, nevertheless, it caused serious
anxiety, embarrassment and humiliation to private respondents for which they are
entitled to recover reasonable moral damages. 6 ch an rob les v irt u al la w l ib rary

As the records bear out, insult was added to injury by petitioner bank's issuance of debit
memoranda representing service and penalty charges for the returned checks, not to
mention the insulting remarks from its Assistant Cashier. ch an rob lesvirt u alawlib rary ch an rob les virt u al l aw lib rary

In the case of Leopoldo Araneta v. Bank of America, 7we held that:

The financial credit of a businessman is a prized and valuable asset, it being a significant
part of the foundation of his business. Any adverse reflection thereon constitutes some
financial loss to him. As stated in the case of Atlanta National Bank vs. Davis, 96 Ga
334, 23 SE 190, citing 2 Morse Banks, Sec. 458, "it can hardly be possible that a
customer's check can be wrongfully refused payment without some impeachment of his
credit, which must in fact be an actual injury, though he cannot, from the nature of the
case, furnish independent, distinct proof thereof".

It was established that when Mrs. Katigbak learned that her checks were not being
honored and Mr. Dungo repeatedly made the insulting phone calls, her wounded feelings
and the mental anguish suffered by her caused her blood pressure to rise beyond normal
limits, necessitating medical attendance for two (2) days at a hospital. ch an rob lesvirt u alawl ib rarych an rob les virt u al la w lib rar y

The damage to private respondents' reputation and social standing entitles them to
moral damages. Moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation and similar injury. 8Temperate or moderate damages which are more than
nominal but less than compensatory damages, may be recovered when the court finds
that some pecuniary loss has been suffered but its amount cannot, from the nature of
the case, be proved with certainty. 9Temperate damages may be allowed in cases where
from the nature of the case, definite proof of pecuniary loss cannot be adduced,
although the court is convinced that there has been such loss. The appellate court,
however, justified its deletion when MBTC reasoned out that the amount of P50,000.00
is not part of the relief prayed for in the complaint, aside from the fact that the amount
allegedly suffered by Mrs. Katigbak is susceptible of proof. 10 ch an rob les virt u al l aw lib rary

Moral and temperate damages which are not susceptible of pecuniary estimation are not
awarded to penalize the petitioner but to compensate the respondents for injuries
suffered as a result of the former's fault and negligence, taking into account the latter's
credit and social standing in the banking community, particularly since this is the very
first time such humiliation has befallen private respondents. The amount of such losses
need not be established with exactitude, precisely due to their nature. 11 ch an rob les virt u al l aw lib rary

The carelessness of petitioner bank, aggravated by the lack of promptness in repairing

the error and the arrogant attitude of the bank officer handling the matter, justifies the
grant of moral damages, which are clearly not excessive and unconscionable. ch an rob lesvirt u alawl ib rarych an rob les virt u al la w lib rary

Moreover, considering the nature and extent of the services rendered by private
respondent's counsel, both in the trial and appellate courts, the Court deems it just and
equitable that attorney's fees in the amount of P50,000.00 be awarded. ch an rob lesvirt u ala wlib rarych an rob les virt u al l aw lib rary

WHEREFORE, the decision of respondent Court of Appeals is AFFIRMED in all

respects.ch an rob lesvirt u al awlib rary ch an rob les virt u al l aw lib rary

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. 1âwphi1.nêt

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:

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.