G.R. No. 156262 July 14, 2005
MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses
ANASTACIO and MARY T. BUENAVENTURA, Petitioners,
vs.
HEIRS OF BARTOLOME RAMOS, Respondents.
DECISION
PANGANIBAN, J.:
Stripped of nonessentials, the present case involves the collection of a sum of
money. Specifically, this case arose from the failure of petitioners to pay
respondents’ predecessor-in-interest. This fact was shown by the non-
encashment of checks issued by a third person, but indorsed by herein
Petitioner Maria Tuazon in favor of the said predecessor. Under these
circumstances, to enable respondents to collect on the indebtedness, the check
drawer need not be impleaded in the Complaint. Thus, the suit is directed, not
against the drawer, but against the debtor who indorsed the checks in payment
of the obligation.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court,
challenging the July 31, 2002 Decision2 of the Court of Appeals (CA) in CA-GR CV
No. 46535. The decretal portion of the assailed Decision reads:
"WHEREFORE, the appeal is DISMISSED and the appealed decision is
AFFIRMED."
On the other hand, the affirmed Decision3 of Branch 34 of the Regional Trial
Court (RTC) of Gapan, Nueva Ecija, disposed as follows:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendants, ordering the defendants spouses Leonilo Tuazon and
Maria Tuazon to pay the plaintiffs, as follows:
"1. The sum of ₱1,750,050.00, with interests from the filing of the second
amended complaint;
"2. The sum of ₱50,000.00, as attorney’s fees;
"3. The sum of ₱20,000.00, as moral damages
"4. And to pay the costs of suit.
x x x x x x x x x"4
The Facts
The facts are narrated by the CA as follows:
"[Respondents] alleged that between the period of May 2, 1988 and June 5,
1988, spouses Leonilo and Maria Tuazon purchased a total of 8,326 cavans of
rice from [the deceased Bartolome] Ramos [predecessor-in-interest of
respondents]. That of this [quantity,] x x x only 4,437 cavans [have been paid for
so far], leaving unpaid 3,889 cavans valued at ₱1,211,919.00. In payment
therefor, the spouses Tuazon issued x x x [several] Traders Royal Bank checks.
xxxxxxxxx
[B]ut when these [checks] were encashed, all of the checks bounced due to
insufficiency of funds. [Respondents] advanced that before issuing said checks[,]
spouses Tuazon already knew that they had no available fund to support the
checks, and they failed to provide for the payment of these despite repeated
demands made on them.
"[Respondents] averred that because spouses Tuazon anticipated that they
would be sued, they conspired with the other [defendants] to defraud them as
creditors by executing x x x fictitious sales of their properties. They executed x x
x simulated sale[s] [of three lots] in favor of the x x x spouses Buenaventura x x
x[,] as well as their residential lot and the house thereon[,] all located at Nueva
Ecija, and another simulated deed of sale dated July 12, 1988 of a Stake Toyota
registered with the Land Transportation Office of Cabanatuan City on
September 7, 1988. [Co-petitioner] Melecio Tuazon, a son of spouses Tuazon,
registered a fictitious Deed of Sale on July 19, 1988 x x x over a residential lot
located at Nueva Ecija. Another simulated sale of a Toyota Willys was executed
on January 25, 1988 in favor of their other son, [co-petitioner] Alejandro
Tuazon x x x. As a result of the said sales, the titles of these properties issued in
the names of spouses Tuazon were cancelled and new ones were issued in favor
of the [co-]defendants spouses Buenaventura, Alejandro Tuazon and Melecio
Tuazon. Resultantly, by the said ante-dated and simulated sales and the
corresponding transfers there was no more property left registered in the
names of spouses Tuazon answerable to creditors, to the damage and prejudice
of [respondents].
"For their part, defendants denied having purchased x x x rice from [Bartolome]
Ramos. They alleged that it was Magdalena Ramos, wife of said deceased, who
owned and traded the merchandise and Maria Tuazon was merely her agent.
They argued that it was Evangeline Santos who was the buyer of the rice and
issued the checks to Maria Tuazon as payments therefor. In good faith[,] the
checks were received [by petitioner] from Evangeline Santos and turned over to
Ramos without knowing that these were not funded. And it is for this reason
that [petitioners] have been insisting on the inclusion of Evangeline Santos as
an indispensable party, and her non-inclusion was a fatal error. Refuting that
the sale of several properties were fictitious or simulated, spouses Tuazon
contended that these were sold because they were then meeting financial
difficulties but the disposals were made for value and in good faith and done
before the filing of the instant suit. To dispute the contention of plaintiffs that
they were the buyers of the rice, they argued that there was no sales invoice,
official receipts or like evidence to prove this. They assert that they were merely
agents and should not be held answerable."5
The corresponding civil and criminal cases were filed by respondents against
Spouses Tuazon. Those cases were later consolidated and amended to include
Spouses Anastacio and Mary Buenaventura, with Alejandro Tuazon and Melecio
Tuazon as additional defendants. Having passed away before the pretrial,
Bartolome Ramos was substituted by his heirs, herein respondents.
Contending that Evangeline Santos was an indispensable party in the case,
petitioners moved to file a third-party complaint against her. Allegedly, she was
primarily liable to respondents, because she was the one who had purchased
the merchandise from their predecessor, as evidenced by the fact that the
checks had been drawn in her name. The RTC, however, denied petitioners’
Motion.
Since the trial court acquitted petitioners in all three of the consolidated
criminal cases, they appealed only its decision finding them civilly liable to
respondents.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioners had failed to prove the
existence of an agency between respondents and Spouses Tuazon. The appellate
court disbelieved petitioners’ contention that Evangeline Santos should have
been impleaded as an indispensable party. Inasmuch as all the checks had been
indorsed by Maria Tuazon, who thereby became liable to subsequent holders
for the amounts stated in those checks, there was no need to implead Santos.
Hence, this Petition.6
Issues
Petitioners raise the following issues for our consideration:
"1. Whether or not the Honorable Court of Appeals erred in ruling that
petitioners are not agents of the respondents.
"2. Whether or not the Honorable Court of Appeals erred in rendering judgment
against the petitioners despite x x x the failure of the respondents to include in
their action Evangeline Santos, an indispensable party to the suit."7
The Court’s Ruling
The Petition is unmeritorious.
First Issue:
Agency
Well-entrenched is the rule that the Supreme Court’s role in a petition under
Rule 45 is limited to reviewing errors of law allegedly committed by the Court of
Appeals. Factual findings of the trial court, especially when affirmed by the CA,
are conclusive on the parties and this Court.8 Petitioners have not given us
sufficient reasons to deviate from this rule.
In a contract of agency, one binds oneself to render some service or to do
something in representation or on behalf of another, with the latter’s consent or
authority.9 The following are the elements of agency: (1) the parties’ consent,
express or implied, to establish the relationship; (2) the object, which is the
execution of a juridical act in relation to a third person; (3)
the representation, by which the one who acts as an agent does so, not for
oneself, but as a representative; (4) the limitation that the agent acts within the
scope of his or her authority.10 As the basis of agency is representation, there
must be, on the part of the principal, an actual intention to appoint, an intention
naturally inferable from the principal’s words or actions. In the same manner,
there must be an intention on the part of the agent to accept the appointment
and act upon it. Absent such mutual intent, there is generally no agency.11
This Court finds no reversible error in the findings of the courts a quo that
petitioners were the rice buyers themselves; they were not mere agents of
respondents in their rice dealership. The question of whether a contract is one
of sale or of agency depends on the intention of the parties.12
The declarations of agents alone are generally insufficient to establish the fact
or extent of their authority.13 The law makes no presumption of agency; proving
its existence, nature and extent is incumbent upon the person alleging it.14 In the
present case, petitioners raise the fact of agency as an affirmative defense, yet
fail to prove its existence.
The Court notes that petitioners, on their own behalf, sued Evangeline Santos
for collection of the amounts represented by the bounced checks, in a separate
civil case that they sought to be consolidated with the current one. If, as they
claim, they were mere agents of respondents, petitioners should have brought
the suit against Santos for and on behalf of their alleged principal, in accordance
with Section 2 of Rule 3 of the Rules on Civil Procedure.15 Their filing a suit
against her in their own names negates their claim that they acted as mere
agents in selling the rice obtained from Bartolome Ramos.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
Costs against petitioners.
G.R. No. 151319             November 22, 2004
MANILA MEMORIAL PARK CEMETERY, INC., petitioner,
vs.
PEDRO L. LINSANGAN, respondent.
DECISION
TINGA, J.:
For resolution in this case is a classic and interesting texbook question in the
law on agency.
This is a petition for review assailing the Decision1 of the Court of Appeals dated
22 June 2001, and its Resolution2 dated 12 December 2001 in CA G.R. CV No.
49802 entitled "Pedro L. Linsangan v. Manila Memorial Cemetery, Inc. et al.,"
finding Manila Memorial Park Cemetery, Inc. (MMPCI) jointly and severally
liable with Florencia C. Baluyot to respondent Atty. Pedro L. Linsangan.
The facts of the case are as follows:
Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot
called Garden State at the Holy Cross Memorial Park owned by petitioner
(MMPCI). According to Baluyot, a former owner of a memorial lot under
Contract No. 25012 was no longer interested in acquiring the lot and had opted
to sell his rights subject to reimbursement of the amounts he already paid. The
contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once
reimbursement is made to the former buyer, the contract would be transferred
to him. Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the
amount to be reimbursed to the original buyer and to complete the down
payment to MMPCI.3 Baluyot issued handwritten and typewritten receipts for
these payments.4
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be
issued Contract No. 28660, a new contract covering the subject lot in the name
of the latter instead of old Contract No. 25012. Atty. Linsangan protested, but
Baluyot assured him that he would still be paying the old price of P95,000.00
with P19,838.00 credited as full down payment leaving a balance of about
P75,000.00.5
Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No.
A11 (15), Block 83, Garden Estate I denominated as Contract No. 28660 and the
Official Receipt No. 118912 dated 6 April 1985 for the amount of P19,838.00.
Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan objected
to the new contract price, as the same was not the amount previously agreed
upon. To convince Atty. Linsangan, Baluyot executed a document6 confirming
that while the contract price is P132,250.00, Atty. Linsangan would pay only the
original price of P95,000.00.
The document reads in part:
The monthly installment will start April 6, 1985; the amount of P1,800.00 and
the difference will be issued as discounted to conform to the previous price as
previously agreed upon. --- P95,000.00
Prepared by:
(Signed)
(MRS.) FLORENCIA C. BALUYOT
Agency Manager
Holy Cross Memorial Park
4/18/85
Dear Atty. Linsangan:
This will confirm our agreement that while the offer to purchase under Contract
No. 28660 states that the total price of P132,250.00 your undertaking is to pay
only the total sum of P95,000.00 under the old price. Further the total sum of
P19,838.00 already paid by you under O.R. # 118912 dated April 6, 1985 has
been credited in the total purchase price thereby leaving a balance of
P75,162.00 on a monthly installment of P1,800.00 including interests (sic)
charges for a period of five (5) years.
(Signed)
FLORENCIA C. BALUYOT
By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted
Official Receipt No. 118912. As requested by Baluyot, Atty. Linsangan issued
twelve (12) postdated checks of P1,800.00 each in favor of MMPCI. The next
year, or on 29 April 1986, Atty. Linsangan again issued twelve (12) postdated
checks in favor of MMPCI.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No.
28660 was cancelled for reasons the latter could not explain, and presented to
him another proposal for the purchase of an equivalent property. He refused the
new proposal and insisted that Baluyot and MMPCI honor their undertaking.
For the alleged failure of MMPCI and Baluyot to conform to their agreement,
Atty. Linsangan filed a Complaint7 for Breach of Contract and Damages against
the former.
Baluyot did not present any evidence. For its part, MMPCI alleged that Contract
No. 28660 was cancelled conformably with the terms of the contract8 because of
non-payment of arrearages.9 MMPCI stated that Baluyot was not an agent but an
independent contractor, and as such was not authorized to represent MMPCI or
to use its name except as to the extent expressly stated in the Agency Manager
Agreement.10 Moreover, MMPCI was not aware of the arrangements entered into
by Atty. Linsangan and Baluyot, as it in fact received a down payment and
monthly installments as indicated in the contract.11 Official receipts showing the
application of payment were turned over to Baluyot whom Atty. Linsangan had
from the beginning allowed to receive the same in his behalf. Furthermore,
whatever misimpression that Atty. Linsangan may have had must have been
rectified by the Account Updating Arrangement signed by Atty. Linsangan which
states that he "expressly admits that Contract No. 28660 'on account of serious
delinquency…is now due for cancellation under its terms and conditions.'''12
The trial court held MMPCI and Baluyot jointly and severally liable.13 It found
that Baluyot was an agent of MMPCI and that the latter was estopped from
denying this agency, having received and enchased the checks issued by Atty.
Linsangan and given to it by Baluyot. While MMPCI insisted that Baluyot was
authorized to receive only the down payment, it allowed her to continue to
receive postdated checks from Atty. Linsangan, which it in turn consistently
encashed.14
The dispositive portion of the decision reads:
WHEREFORE, judgment by preponderance of evidence is hereby rendered in
favor of plaintiff declaring Contract No. 28660 as valid and subsisting and
ordering defendants to perform their undertakings thereof which covers burial
lot No. A11 (15), Block 83, Section Garden I, Holy Cross Memorial Park located
at Novaliches, Quezon City. All payments made by plaintiff to defendants should
be credited for his accounts. NO DAMAGES, NO ATTORNEY'S FEES but with
costs against the defendants.
The cross claim of defendant Manila Memorial Cemetery Incorporated as
against defendant Baluyot is GRANTED up to the extent of the costs.
SO ORDERED.15
MMPCI appealed the trial court's decision to the Court of Appeals.16 It claimed
that Atty. Linsangan is bound by the written contract with MMPCI, the terms of
which were clearly set forth therein and read, understood, and signed by the
former.17 It also alleged that Atty. Linsangan, a practicing lawyer for over
thirteen (13) years at the time he entered into the contract, is presumed to
know his contractual obligations and is fully aware that he cannot belatedly and
unilaterally change the terms of the contract without the consent, much less the
knowledge of the other contracting party, which was MMPCI. And in this case,
MMPCI did not agree to a change in the contract and in fact implemented the
same pursuant to its clear terms. In view thereof, because of Atty. Linsangan's
delinquency, MMPCI validly cancelled the contract.
MMPCI further alleged that it cannot be held jointly and solidarily liable with
Baluyot as the latter exceeded the terms of her agency, neither did MMPCI ratify
Baluyot's acts. It added that it cannot be charged with making any
misrepresentation, nor of having allowed Baluyot to act as though she had full
powers as the written contract expressly stated the terms and conditions which
Atty. Linsangan accepted and understood. In canceling the contract, MMPCI
merely enforced the terms and conditions imposed therein.18
Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was
the former's obligation, as a party knowingly dealing with an alleged agent, to
determine the limitations of such agent's authority, particularly when such
alleged agent's actions were patently questionable. According to MMPCI, Atty.
Linsangan did not even bother to verify Baluyot's authority or ask copies of
official receipts for his payments.19
The Court of Appeals affirmed the decision of the trial court. It upheld the trial
court's finding that Baluyot was an agent of MMPCI at the time the disputed
contract was entered into, having represented MMPCI's interest and acting on
its behalf in the dealings with clients and customers. Hence, MMPCI is
considered estopped when it allowed Baluyot to act and represent MMPCI even
beyond her authority.20 The appellate court likewise found that the acts of
Baluyot bound MMPCI when the latter allowed the former to act for and in its
behalf and stead. While Baluyot's authority "may not have been expressly
conferred upon her, the same may have been derived impliedly by habit or
custom, which may have been an accepted practice in the company for a long
period of time."21 Thus, the Court of Appeals noted, innocent third persons such
as Atty. Linsangan should not be prejudiced where the principal failed to adopt
the needed measures to prevent misrepresentation. Furthermore, if an agent
misrepresents to a purchaser and the principal accepts the benefits of such
misrepresentation, he cannot at the same time deny responsibility for such
misrepresentation.22 Finally, the Court of Appeals declared:
There being absolutely nothing on the record that would show that the court a
quo overlooked, disregarded, or misinterpreted facts of weight and significance,
its factual findings and conclusions must be given great weight and should not
be disturbed by this Court on appeal.
WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the
appealed decision in Civil Case No. 88-1253 of the Regional Trial Court, National
Capital Judicial Region, Branch 57 of Makati, is hereby AFFIRMED in toto.
SO ORDERED.23
MMPCI filed its Motion for Reconsideration,24 but the same was denied for lack
of merit.25
In the instant Petition for Review, MMPCI claims that the Court of Appeals
seriously erred in disregarding the plain terms of the written contract and Atty.
Linsangan's failure to abide by the terms thereof, which justified its
cancellation. In addition, even assuming that Baluyot was an agent of MMPCI,
she clearly exceeded her authority and Atty. Linsangan knew or should have
known about this considering his status as a long-practicing lawyer. MMPCI
likewise claims that the Court of Appeals erred in failing to consider that the
facts and the applicable law do not support a judgment against Baluyot only "up
to the extent of costs."26
Atty. Linsangan argues that he did not violate the terms and conditions of the
contract, and in fact faithfully performed his contractual obligations and
complied with them in good faith for at least two years.27 He claims that
contrary to MMPCI's position, his profession as a lawyer is immaterial to the
validity of the subject contract and the case at bar.28 According to him, MMPCI
had practically admitted in its Petition that Baluyot was its agent, and thus, the
only issue left to be resolved is whether MMPCI allowed Baluyot to act as
though she had full powers to be held solidarily liable with the latter.29
We find for the petitioner MMPCI.
The jurisdiction of the Supreme Court in a petition for review under Rule 45 of
the Rules of Court is limited to reviewing only errors of law, not fact, unless the
factual findings complained of are devoid of support by the evidence on record
or the assailed judgment is based on misapprehension of facts.30 In BPI
Investment Corporation v. D.G. Carreon Commercial Corporation,31 this Court
ruled:
There are instances when the findings of fact of the trial court and/or Court of
Appeals may be reviewed by the Supreme Court, such as (1) when the
conclusion is a finding grounded entirely on speculation, surmises and
conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) where there is a grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of fact
are conflicting; (6) when the Court of Appeals, in making its findings, went
beyond the issues of the case and the same is contrary to the admissions of both
appellant and appellee; (7) when the findings are contrary to those of the trial
court; (8) when the findings of fact are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the petition as
well as in the petitioners' main and reply briefs are not disputed by the
respondents; and (10) the findings of fact of the Court of Appeals are premised
on the supposed absence of evidence and contradicted by the evidence on
record.32
In the case at bar, the Court of Appeals committed several errors in the
apprehension of the facts of the case, as well as made conclusions devoid of
evidentiary support, hence we review its findings of fact.
By the contract of agency, a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or
authority of the latter.33 Thus, the elements of agency are (i) consent, express or
implied, of the parties to establish the relationship; (ii) the object is the
execution of a juridical act in relation to a third person; (iii) the agent acts as a
representative and not for himself; and (iv) the agent acts within the scope of
his authority.34
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that
under its Agency Manager Agreement; an agency manager such as Baluyot is
considered an independent contractor and not an agent.35 However, in the same
contract, Baluyot as agency manager was authorized to solicit and remit to
MMPCI offers to purchase interment spaces belonging to and sold by the
latter.36 Notwithstanding the claim of MMPCI that Baluyot was an independent
contractor, the fact remains that she was authorized to solicit solely for and in
behalf of MMPCI. As properly found both by the trial court and the Court of
Appeals, Baluyot was an agent of MMPCI, having represented the interest of the
latter, and having been allowed by MMPCI to represent it in her dealings with its
clients/prospective buyers.
Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be
bound by the contract procured by Atty. Linsangan and solicited by Baluyot.
Baluyot was authorized to solicit and remit to MMPCI offers to purchase
interment spaces obtained on forms provided by MMPCI. The terms of the offer
to purchase, therefore, are contained in such forms and, when signed by the
buyer and an authorized officer of MMPCI, becomes binding on both parties.
The Offer to Purchase duly signed by Atty. Linsangan, and accepted and
validated by MMPCI showed a total list price of P132,250.00. Likewise, it was
clearly stated therein that "Purchaser agrees that he has read or has had read to
him this agreement, that he understands its terms and conditions, and that
there are no covenants, conditions, warranties or representations other than
those contained herein."37 By signing the Offer to Purchase, Atty. Linsangan
signified that he understood its contents. That he and Baluyot had an agreement
different from that contained in the Offer to Purchase is of no moment, and
should not affect MMPCI, as it was obviously made outside Baluyot's authority.
To repeat, Baluyot's authority was limited only to soliciting purchasers. She had
no authority to alter the terms of the written contract provided by MMPCI. The
document/letter "confirming" the agreement that Atty. Linsangan would have
to pay the old price was executed by Baluyot alone. Nowhere is there any
indication that the same came from MMPCI or any of its officers.
It is a settled rule that persons dealing with an agent are bound at their peril, if
they would hold the principal liable, to ascertain not only the fact of agency but
also the nature and extent of authority, and in case either is controverted, the
burden of proof is upon them to establish it.38 The basis for agency is
representation and a person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent.39 If he does not make such an
inquiry, he is chargeable with knowledge of the agent's authority and his
ignorance of that authority will not be any excuse.40
As noted by one author, the ignorance of a person dealing with an agent as to
the scope of the latter's authority is no excuse to such person and the fault
cannot be thrown upon the principal.41 A person dealing with an agent assumes
the risk of lack of authority in the agent. He cannot charge the principal by
relying upon the agent's assumption of authority that proves to be unfounded.
The principal, on the other hand, may act on the presumption that third persons
dealing with his agent will not be negligent in failing to ascertain the extent of
his authority as well as the existence of his agency.42
In the instant case, it has not been established that Atty. Linsangan even
bothered to inquire whether Baluyot was authorized to agree to terms contrary
to those indicated in the written contract, much less bind MMPCI by her
commitment with respect to such agreements. Even if Baluyot was Atty.
Linsangan's friend and known to be an agent of MMPCI, her declarations and
actions alone are not sufficient to establish the fact or extent of her
authority.43 Atty. Linsangan as a practicing lawyer for a relatively long period of
time when he signed the contract should have been put on guard when their
agreement was not reflected in the contract. More importantly, Atty. Linsangan
should have been alerted by the fact that Baluyot failed to effect the transfer of
rights earlier promised, and was unable to make good her written commitment,
nor convince MMPCI to assent thereto, as evidenced by several attempts to
induce him to enter into other contracts for a higher consideration. As properly
pointed out by MMPCI, as a lawyer, a greater degree of caution should be
expected of Atty. Linsangan especially in dealings involving legal documents. He
did not even bother to ask for official receipts of his payments, nor inquire from
MMPCI directly to ascertain the real status of the contract, blindly relying on the
representations of Baluyot. A lawyer by profession, he knew what he was doing
when he signed the written contract, knew the meaning and value of every
word or phrase used in the contract, and more importantly, knew the legal
effects which said document produced. He is bound to accept responsibility for
his negligence.
The trial and appellate courts found MMPCI liable based on ratification and
estoppel. For the trial court, MMPCI's acts of accepting and encashing the checks
issued by Atty. Linsangan as well as allowing Baluyot to receive checks drawn in
the name of MMPCI confirm and ratify the contract of agency. On the other
hand, the Court of Appeals faulted MMPCI in failing to adopt measures to
prevent misrepresentation, and declared that in view of MMPCI's acceptance of
the benefits of Baluyot's misrepresentation, it can no longer deny responsibility
therefor.
The Court does not agree. Pertinent to this case are the following provisions of
the Civil Code:
Art. 1898. If the agent contracts in the name of the principal, exceeding the
scope of his authority, and the principal does not ratify the contract, it shall be
void if the party with whom the agent contracted is aware of the limits of the
powers granted by the principal. In this case, however, the agent is liable if he
undertook to secure the principal's ratification.
Art. 1910. The principal must comply with all the obligations that the agent may
have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is
not bound except when he ratifies it expressly or tacitly.
Art. 1911. Even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to act as though
he had full powers.
Thus, the acts of an agent beyond the scope of his authority do not bind the
principal, unless he ratifies them, expressly or impliedly. Only the principal can
ratify; the agent cannot ratify his own unauthorized acts. Moreover, the
principal must have knowledge of the acts he is to ratify.44
Ratification in agency is the adoption or confirmation by one person of an act
performed on his behalf by another without authority. The substance of the
doctrine is confirmation after conduct, amounting to a substitute for a prior
authority. Ordinarily, the principal must have full knowledge at the time of
ratification of all the material facts and circumstances relating to the
unauthorized act of the person who assumed to act as agent. Thus, if material
facts were suppressed or unknown, there can be no valid ratification and this
regardless of the purpose or lack thereof in concealing such facts and regardless
of the parties between whom the question of ratification may
arise.45 Nevertheless, this principle does not apply if the principal's ignorance of
the material facts and circumstances was willful, or that the principal chooses to
act in ignorance of the facts.46 However, in the absence of circumstances putting
a reasonably prudent man on inquiry, ratification cannot be implied as against
the principal who is ignorant of the facts.47
No ratification can be implied in the instant case.
A perusal of Baluyot's Answer48 reveals that the real arrangement between her
and Atty. Linsangan was for the latter to pay a monthly installment of P1,800.00
whereas Baluyot was to shoulder the counterpart amount of P1,455.00 to meet
the P3,255.00 monthly installments as indicated in the contract. Thus, every
time an installment falls due, payment was to be made through a check from
Atty. Linsangan for P1,800.00 and a cash component of P1,455.00 from
Baluyot.49 However, it appears that while Atty. Linsangan issued the post-dated
checks, Baluyot failed to come up with her part of the bargain. This was
supported by Baluyot's statements in her letter50 to Mr. Clyde Williams, Jr., Sales
Manager of MMPCI, two days after she received the copy of the Complaint. In
the letter, she admitted that she was remiss in her duties when she consented to
Atty. Linsangan's proposal that he will pay the old price while the difference will
be shouldered by her. She likewise admitted that the contract suffered
arrearages because while Atty. Linsangan issued the agreed checks, she was
unable to give her share of P1,455.00 due to her own financial difficulties.
Baluyot even asked for compassion from MMPCI for the error she committed.
Atty. Linsangan failed to show that MMPCI had knowledge of the arrangement.
As far as MMPCI is concerned, the contract price was P132,250.00, as stated in
the Offer to Purchase signed by Atty. Linsangan and MMPCI's authorized officer.
The down payment of P19,838.00 given by Atty. Linsangan was in accordance
with the contract as well. Payments of P3,235.00 for at least two installments
were likewise in accord with the contract, albeit made through a check and
partly in cash. In view of Baluyot's failure to give her share in the payment,
MMPCI received only P1,800.00 checks, which were clearly insufficient
payment. In fact, Atty. Linsangan would have incurred arrearages that could
have caused the earlier cancellation of the contract, if not for MMPCI's
application of some of the checks to his account. However, the checks alone
were not sufficient to cover his obligations.
If MMPCI was aware of the arrangement, it would have refused the latter's
check payments for being insufficient. It would not have applied to his account
the P1,800.00 checks. Moreover, the fact that Baluyot had to practically explain
to MMPCI's Sales Manager the details of her "arrangement" with Atty. Linsangan
and admit to having made an error in entering such arrangement confirm that
MMCPI had no knowledge of the said agreement. It was only when Baluyot filed
her Answer that she claimed that MMCPI was fully aware of the agreement.
Neither is there estoppel in the instant case. The essential elements of estoppel
are (i) conduct of a party amounting to false representation or concealment of
material facts or at least calculated to convey the impression that the facts are
otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; (ii) intent, or at least expectation, that this conduct shall be
acted upon by, or at least influence, the other party; and (iii) knowledge, actual
or constructive, of the real facts.51
While there is no more question as to the agency relationship between Baluyot
and MMPCI, there is no indication that MMPCI let the public, or specifically, Atty.
Linsangan to believe that Baluyot had the authority to alter the standard
contracts of the company. Neither is there any showing that prior to signing
Contract No. 28660, MMPCI had any knowledge of Baluyot's commitment to
Atty. Linsangan. One who claims the benefit of an estoppel on the ground that
he has been misled by the representations of another must not have been
misled through his own want of reasonable care and circumspection.52 Even
assuming that Atty. Linsangan was misled by MMPCI's actuations, he still cannot
invoke the principle of estoppel, as he was clearly negligent in his dealings with
Baluyot, and could have easily determined, had he only been cautious and
prudent, whether said agent was clothed with the authority to change the terms
of the principal's written contract. Estoppel must be intentional and
unequivocal, for when misapplied, it can easily become a most convenient and
effective means of injustice.53 In view of the lack of sufficient proof showing
estoppel, we refuse to hold MMPCI liable on this score.
Likewise, this Court does not find favor in the Court of Appeals' findings that
"the authority of defendant Baluyot may not have been expressly conferred
upon her; however, the same may have been derived impliedly by habit or
custom which may have been an accepted practice in their company in a long
period of time." A perusal of the records of the case fails to show any indication
that there was such a habit or custom in MMPCI that allows its agents to enter
into agreements for lower prices of its interment spaces, nor to assume a
portion of the purchase price of the interment spaces sold at such lower price.
No evidence was ever presented to this effect.
As the Court sees it, there are two obligations in the instant case. One is the
Contract No. 28660 between MMPCI and by Atty. Linsangan for the purchase of
an interment space in the former's cemetery. The other is the agreement
between Baluyot and Atty. Linsangan for the former to shoulder the amount
P1,455.00, or the difference between P95,000.00, the original price, and
P132,250.00, the actual contract price.
To repeat, the acts of the agent beyond the scope of his authority do not bind the
principal unless the latter ratifies the same. It also bears emphasis that when
the third person knows that the agent was acting beyond his power or
authority, the principal cannot be held liable for the acts of the agent. If the said
third person was aware of such limits of authority, he is to blame and is not
entitled to recover damages from the agent, unless the latter undertook to
secure the principal's ratification.54
This Court finds that Contract No. 28660 was validly entered into both by
MMPCI and Atty. Linsangan. By affixing his signature in the contract, Atty.
Linsangan assented to the terms and conditions thereof. When Atty. Linsangan
incurred delinquencies in payment, MMCPI merely enforced its rights under the
said contract by canceling the same.
Being aware of the limits of Baluyot's authority, Atty. Linsangan cannot insist on
what he claims to be the terms of Contract No. 28660. The agreement, insofar as
the P95,000.00 contract price is concerned, is void and cannot be enforced as
against MMPCI. Neither can he hold Baluyot liable for damages under the same
contract, since there is no evidence showing that Baluyot undertook to secure
MMPCI's ratification. At best, the "agreement" between Baluyot and Atty.
Linsangan bound only the two of them. As far as MMPCI is concerned, it bound
itself to sell its interment space to Atty. Linsangan for P132,250.00 under
Contract No. 28660, and had in fact received several payments in accordance
with the same contract. If the contract was cancelled due to arrearages, Atty.
Linsangan's recourse should only be against Baluyot who personally undertook
to pay the difference between the true contract price of P132,250.00 and the
original proposed price of P95,000.00. To surmise that Baluyot was acting on
behalf of MMPCI when she promised to shoulder the said difference would be to
conclude that MMPCI undertook to pay itself the difference, a conclusion that is
very illogical, if not antithetical to its business interests.
However, this does not preclude Atty. Linsangan from instituting a separate
action to recover damages from Baluyot, not as an agent of MMPCI, but in view
of the latter's breach of their separate agreement. To review, Baluyot obligated
herself to pay P1,455.00 in addition to Atty. Linsangan's P1,800.00 to complete
the monthly installment payment under the contract, which, by her own
admission, she was unable to do due to personal financial difficulties. It is
undisputed that Atty. Linsangan issued the P1,800.00 as agreed upon, and were
it not for Baluyot's failure to provide the balance, Contract No. 28660 would not
have been cancelled. Thus, Atty. Linsangan has a cause of action against Baluyot,
which he can pursue in another case.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of
Appeals dated 22 June 2001 and its Resolution dated 12 December 2001 in CA-
G.R. CV No. 49802, as well as the Decision in Civil Case No. 88-1253 of the
Regional Trial Court, Makati City Branch 57, are hereby REVERSED and SET
ASIDE. The Complaint in Civil Case No. 88-1253 is DISMISSED for lack of cause
of action. No pronouncement as to costs.
SO ORDERED.
G.R. No. L-57339 December 29, 1983
AIR FRANCE, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE G. GANA (Deceased), CLARA A.
GANA, RAMON GANA, MANUEL GANA, MARIA TERESA GANA, ROBERTO
GANA, JAIME JAVIER GANA, CLOTILDE VDA. DE AREVALO, and EMILY SAN
JUAN, respondents.
Benjamin S. Valte for petitioner.
Napoleon Garcia for private respondents.
MELENCIO-HERRERA, J.:
In this petition for review on certiorari, petitioner AIR FRANCE assails the
Decision of then respondent Court of Appeals 1 promulgated on 15 December
1980 in CA-G.R. No. 58164-R, entitled "Jose G. Gana, et al. vs. Sociedad Nacionale
Air France", which reversed the Trial Court's judgment dismissing the
Complaint of private respondents for damages arising from breach of contract
of carriage, and awarding instead P90,000.00 as moral damages.
Sometime in February, 1970, the late Jose G. Gana and his family, numbering
nine (the GANAS), purchased from AIR FRANCE through Imperial Travels,
Incorporated, a duly authorized travel agent, nine (9) "open-dated" air passage
tickets for the Manila/Osaka/Tokyo/Manila route. The GANAS paid a total of
US$2,528.85 for their economy and first class fares. Said tickets were bought at
the then prevailing exchange rate of P3.90 per US$1.00. The GANAS also paid
travel taxes of P100.00 for each passenger.
On 24 April 1970, AIR FRANCE exchanged or substituted the aforementioned
tickets with other tickets for the same route. At this time, the GANAS were
booked for the Manila/Osaka segment on AIR FRANCE Flight 184 for 8 May
1970, and for the Tokyo/Manila return trip on AIR FRANCE Flight 187 on 22
May 1970. The aforesaid tickets were valid until 8 May 1971, the date written
under the printed words "Non valuable apres de (meaning, "not valid after
the").
The GANAS did not depart on 8 May 1970.
Sometime in January, 1971, Jose Gana sought the assistance of Teresita
Manucdoc, a Secretary of the Sta. Clara Lumber Company where Jose Gana was
the Director and Treasurer, for the extension of the validity of their tickets,
which were due to expire on 8 May 1971. Teresita enlisted the help of Lee Ella
Manager of the Philippine Travel Bureau, who used to handle travel
arrangements for the personnel of the Sta. Clara Lumber Company. Ella sent the
tickets to Cesar Rillo, Office Manager of AIR FRANCE. The tickets were returned
to Ella who was informed that extension was not possible unless the fare
differentials resulting from the increase in fares triggered by an increase of the
exchange rate of the US dollar to the Philippine peso and the increased travel
tax were first paid. Ella then returned the tickets to Teresita and informed her of
the impossibility of extension.
In the meantime, the GANAS had scheduled their departure on 7 May 1971 or
one day before the expiry date. In the morning of the very day of their scheduled
departure on the first leg of their trip, Teresita requested travel agent Ella to
arrange the revalidation of the tickets. Ella gave the same negative answer and
warned her that although the tickets could be used by the GANAS if they left on
7 May 1971, the tickets would no longer be valid for the rest of their trip
because the tickets would then have expired on 8 May 1971. Teresita replied
that it will be up to the GANAS to make the arrangements. With that assurance,
Ella on his own, attached to the tickets validating stickers for the Osaka/Tokyo
flight, one a JAL. sticker and the other an SAS (Scandinavian Airways System)
sticker. The SAS sticker indicates thereon that it was "Reevaluated by: the
Philippine Travel Bureau, Branch No. 2" (as shown by a circular rubber stamp)
and signed "Ador", and the date is handwritten in the center of the circle. Then
appear under printed headings the notations: JL. 108 (Flight), 16 May (Date),
1040 (Time), OK (status). Apparently, Ella made no more attempt to contact AIR
FRANCE as there was no more time.
Notwithstanding the warnings, the GANAS departed from Manila in the
afternoon of 7 May 1971 on board AIR FRANCE Flight 184 for Osaka, Japan.
There is no question with respect to this leg of the trip.
However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines refused to
honor the tickets because of their expiration, and the GANAS had to purchase
new tickets. They encountered the same difficulty with respect to their return
trip to Manila as AIR FRANCE also refused to honor their tickets. They were able
to return only after pre-payment in Manila, through their relatives, of the
readjusted rates. They finally flew back to Manila on separate Air France Frights
on 19 May 1971 for Jose Gana and 26 May 1971 for the rest of the family.
On 25 August 1971, the GANAS commenced before the then Court of First
Instance of Manila, Branch III, Civil Case No. 84111 for damages arising from
breach of contract of carriage.
AIR FRANCE traversed the material allegations of the Complaint and alleged
that the GANAS brought upon themselves the predicament they found
themselves in and assumed the consequential risks; that travel agent Ella's
affixing of validating stickers on the tickets without the knowledge and consent
of AIR FRANCE, violated airline tariff rules and regulations and was beyond the
scope of his authority as a travel agent; and that AIR FRANCE was not guilty of
any fraudulent conduct or bad faith.
On 29 May 1975, the Trial Court dismissed the Complaint based on Partial and
Additional Stipulations of Fact as wen as on the documentary and testimonial
evidence.
The GANAS appealed to respondent Appellate Court. During the pendency of the
appeal, Jose Gana, the principal plaintiff, died.
On 15 December 1980, respondent Appellate Court set aside and reversed the
Trial Court's judgment in a Decision, which decreed:
WHEREFORE, the decision appealed from is set aside. Air France is hereby
ordered to pay appellants moral damages in the total sum of NINETY
THOUSAND PESOS (P90,000.00) plus costs.
SO ORDERED. 2
Reconsideration sought by AIR FRANCE was denied, hence, petitioner's
recourse before this instance, to which we gave due course.
The crucial issue is whether or not, under the environmental milieu the GANAS
have made out a case for breach of contract of carriage entitling them to an
award of damages.
We are constrained to reverse respondent Appellate Court's affirmative ruling
thereon.
Pursuant to tariff rules and regulations of the International Air Transportation
Association (IATA), included in paragraphs 9, 10, and 11 of the Stipulations of
Fact between the parties in the Trial Court, dated 31 March 1973, an airplane
ticket is valid for one year. "The passenger must undertake the final portion of
his journey by departing from the last point at which he has made a voluntary
stop before the expiry of this limit (parag. 3.1.2. ) ... That is the time allowed a
passenger to begin and to complete his trip (parags. 3.2 and 3.3.). ... A ticket can
no longer be used for travel if its validity has expired before the passenger
completes his trip (parag. 3.5.1.) ... To complete the trip, the passenger must
purchase a new ticket for the remaining portion of the journey" (ibid.) 3
From the foregoing rules, it is clear that AIR FRANCE cannot be faulted for
breach of contract when it dishonored the tickets of the GANAS after 8 May
1971 since those tickets expired on said date; nor when it required the GANAS
to buy new tickets or have their tickets re-issued for the Tokyo/Manila segment
of their trip. Neither can it be said that, when upon sale of the new tickets, it
imposed additional charges representing fare differentials, it was motivated by
self-interest or unjust enrichment considering that an increase of fares took
effect, as authorized by the Civil Aeronautics Board (CAB) in April, 1971. This
procedure is well in accord with the IATA tariff rules which provide:
6. TARIFF RULES
7. APPLICABLE FARE ON THE DATE OF DEPARTURE
3.1 General Rule.
All journeys must be charged for at the fare (or charge) in effect on the date on
which transportation commences from the point of origin. Any ticket sold prior
to a change of fare or charge (increase or decrease) occurring between the date
of commencement of the journey, is subject to the above general rule and must
be adjusted accordingly. A new ticket must be issued and the difference is to be
collected or refunded as the case may be. No adjustment is necessary if the
increase or decrease in fare (or charge) occurs when the journey is already
commenced. 4
The GANAS cannot defend by contending lack of knowledge of those rules since
the evidence bears out that Teresita, who handled travel arrangements for the
GANAS, was duly informed by travel agent Ella of the advice of Reno, the Office
Manager of Air France, that the tickets in question could not be extended
beyond the period of their validity without paying the fare differentials and
additional travel taxes brought about by the increased fare rate and travel taxes.
ATTY. VALTE
Q What did you tell Mrs. Manucdoc, in turn after being told this by Mr. Rillo?
A I told her, because that is the reason why they accepted again the tickets when
we returned the tickets spin, that they could not be extended. They could be
extended by paying the additional fare, additional tax and additional exchange
during that time.
Q You said so to Mrs. Manucdoc?
A Yes, sir." ... 5
The ruling relied on by respondent Appellate Court, therefore, in KLM. vs. Court
of Appeals, 65 SCRA 237 (1975), holding that it would be unfair to charge
respondents therein with automatic knowledge or notice of conditions in
contracts of adhesion, is inapplicable. To all legal intents and purposes, Teresita
was the agent of the GANAS and notice to her of the rejection of the request for
extension of the validity of the tickets was notice to the GANAS, her principals.
The SAS validating sticker for the Osaka/Tokyo flight affixed by Era showing
reservations for JAL. Flight 108 for 16 May 1971, without clearing the same with
AIR FRANCE allegedly because of the imminent departure of the GANAS on the
same day so that he could not get in touch with Air France 6 was certainly in
contravention of IATA rules although as he had explained, he did so upon
Teresita's assurance that for the onward flight from Osaka and return, the
GANAS would make other arrangements.
Q Referring you to page 33 of the transcript of the last session, I had this
question which reads as follows: 'But did she say anything to you when you said
that the tickets were about to expire?' Your answer was: 'I am the one who
asked her. At that time I told her if the tickets being used ... I was telling her
what about their bookings on the return. What about their travel on the return?
She told me it is up for the Ganas to make the arrangement.' May I know from
you what did you mean by this testimony of yours?
A That was on the day when they were asking me on May 7, 1971 when they
were checking the tickets. I told Mrs. Manucdoc that I was going to get the
tickets. I asked her what about the tickets onward from the return from Tokyo,
and her answer was it is up for the Ganas to make the arrangement, because I
told her that they could leave on the seventh, but they could take care of that
when they arrived in Osaka.
Q What do you mean?
A The Ganas will make the arrangement from Osaka, Tokyo and Manila.
Q What arrangement?
A The arrangement for the airline because the tickets would expire on May 7,
and they insisted on leaving. I asked Mrs. Manucdoc what about the return
onward portion because they would be travelling to Osaka, and her answer was,
it is up to for the Ganas to make the arrangement.
Q Exactly what were the words of Mrs. Manucdoc when you told her that? If you
can remember, what were her exact words?
A Her words only, it is up for the Ganas to make the arrangement.
Q This was in Tagalog or in English?
A I think it was in English. ... 7
The circumstances that AIR FRANCE personnel at the ticket counter in the
airport allowed the GANAS to leave is not tantamount to an implied ratification
of travel agent Ella's irregular actuations. It should be recalled that the GANAS
left in Manila the day before the expiry date of their tickets and that "other
arrangements" were to be made with respect to the remaining segments.
Besides, the validating stickers that Ella affixed on his own merely reflect the
status of reservations on the specified flight and could not legally serve to
extend the validity of a ticket or revive an expired one.
The conclusion is inevitable that the GANAS brought upon themselves the
predicament they were in for having insisted on using tickets that were due to
expire in an effort, perhaps, to beat the deadline and in the thought that by
commencing the trip the day before the expiry date, they could complete the
trip even thereafter. It should be recalled that AIR FRANCE was even unaware
of the validating SAS and JAL. stickers that Ella had affixed spuriously.
Consequently, Japan Air Lines and AIR FRANCE merely acted within their
contractual rights when they dishonored the tickets on the remaining segments
of the trip and when AIR FRANCE demanded payment of the adjusted fare rates
and travel taxes for the Tokyo/Manila flight.
WHEREFORE, the judgment under review is hereby reversed and set aside, and
the Amended Complaint filed by private respondents hereby dismissed.
No costs.
SO ORDERED.
G.R. No. 161757             January 25, 2006
SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON.
ERNESTO S. DINOPOL, in his capacity as Labor Arbiter, NLRC; NCR,
Arbitration Branch, Quezon City and DIVINA A.
MONTEHERMOZO, Respondents.
DECISION
CARPIO MORALES, J.:
Petitioner, Sunace International Management Services (Sunace), a corporation
duly organized and existing under the laws of the Philippines, deployed to
 Taiwan Divina A. Montehermozo (Divina) as a domestic helper under a 12-
month contract effective February 1, 1997.1 The deployment was with the
assistance of a Taiwanese broker, Edmund Wang, President of Jet Crown
International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina continued
working for her Taiwanese employer, Hang Rui Xiong, for two more years, after
which she returned to the Philippines on February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a
complaint2 before the National Labor Relations Commission (NLRC) against
Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-foreign
principal alleging that she was jailed for three months and that she was
underpaid.
The following day or on February 15, 2000, Labor Arbitration Associate Regina
T. Gavin issued Summons3 to the Manager of Sunace, furnishing it with a copy of
Divina’s complaint and directing it to appear for mandatory conference on
February 28, 2000.
The scheduled mandatory conference was reset. It appears to have been
concluded, however.
On April 6, 2000, Divina filed her Position Paper4 claiming that under her
original one-year contract and the 2-year extended contract which was with the
knowledge and consent of Sunace, the following amounts representing income
tax and savings were deducted:
Year Deduction for Income Tax Deduction for Savings
1997 NT10,450.00 NT23,100.00
1998 NT9,500.00 NT36,000.00
1999 NT13,300.00 NT36,000.00;5
and while the amounts deducted in 1997 were refunded to her, those deducted
in 1998 and 1999 were not. On even date, Sunace, by its Proprietor/General
Manager Maria Luisa Olarte, filed its Verified Answer and Position
Paper,6 claiming as follows, quoted verbatim:
COMPLAINANT IS NOT ENTITLED FOR THE REFUND OF HER 24 MONTHS
SAVINGS
3. Complainant could not anymore claim nor entitled for the refund of her 24
months savings as she already took back her saving already last year and the
employer did not deduct any money from her salary, in accordance with
a Fascimile Message from the respondent SUNACE’s employer, Jet Crown
International Co. Ltd., a xerographic copy of which is herewith attached
as ANNEX "2" hereof;
COMPLAINANT IS NOT ENTITLED TO REFUND OF HER 14 MONTHS TAX
AND PAYMENT OF ATTORNEY’S FEES
4. There is no basis for the grant of tax refund to the complainant as the she
finished her one year contract and hence, was not illegally dismissed by her
employer. She could only lay claim over the tax refund or much more be
awarded of damages such as attorney’s fees as said reliefs are available only
when the dismissal of a migrant worker is without just valid or lawful cause as
defined by law or contract.
The rationales behind the award of tax refund and payment of attorney’s fees is
not to enrich the complainant but to compensate him for actual injury suffered.
Complainant did not suffer injury, hence, does not deserve to be compensated
for whatever kind of damages.
Hence, the complainant has NO cause of action against respondent SUNACE for
monetary claims, considering that she has been totally paid of all the monetary
benefits due her under her Employment Contract to her full satisfaction.
6. Furthermore, the tax deducted from her salary is in compliance with the
Taiwanese law, which respondent SUNACE has no control and complainant has
to obey and this Honorable Office has no authority/jurisdiction to intervene
because the power to tax is a sovereign power which the Taiwanese
Government is supreme in its own territory. The sovereign power of taxation of
a state is recognized under international law and among sovereign states.
7. That respondent SUNACE respectfully reserves the right to file supplemental
Verified Answer and/or Position Paper to substantiate its prayer for the
dismissal of the above case against the herein respondent. AND BY WAY OF -
x x x x (Emphasis and underscoring supplied)
Reacting to Divina’s Position Paper, Sunace filed on April 25, 2000 an ". . .
answer to complainant’s position paper"7 alleging that Divina’s 2-year extension
of her contract was without its knowledge and consent, hence, it had no liability
attaching to any claim arising therefrom, and Divina in fact executed a
Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance,
copy of each document was annexed to said ". . . answer to complainant’s
position paper."
To Sunace’s ". . . answer to complainant’s position paper," Divina filed a 2-page
reply,8 without, however, refuting Sunace’s disclaimer of knowledge of the
extension of her contract and without saying anything about the Release,
Waiver and Quitclaim and Affidavit of Desistance.
The Labor Arbiter, rejected Sunace’s claim that the extension of Divina’s
contract for two more years was without its knowledge and consent in this
wise:
We reject Sunace’s submission that it should not be held responsible for the
amount withheld because her contract was extended for 2 more years without
its knowledge and consent because as Annex "B"9 shows, Sunace and Edmund
Wang have not stopped communicating with each other and yet the matter of
the contract’s extension and Sunace’s alleged non-consent thereto has not been
categorically established.
What Sunace should have done was to write to POEA about the extension and
its objection thereto, copy furnished the complainant herself, her foreign
employer, Hang Rui Xiong and the Taiwanese broker, Edmund Wang.
And because it did not, it is presumed to have consented to the extension and
should be liable for anything that resulted thereform (sic).10 (Underscoring
supplied)
The Labor Arbiter rejected too Sunace’s argument that it is not liable on account
of Divina’s execution of a Waiver and Quitclaim and an Affidavit of Desistance.
Observed the Labor Arbiter:
Should the parties arrive at any agreement as to the whole or any part of the
dispute, the same shall be reduced to writing and signed by the parties and their
respective counsel (sic), if any, before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter after being satisfied that
it was voluntarily entered into by the parties and after having explained to them
the terms and consequences thereof.
A compromise agreement entered into by the parties not in the presence of the
Labor Arbiter before whom the case is pending shall be approved by him, if
after confronting the parties, particularly the complainants, he is satisfied that
they understand the terms and conditions of the settlement and that it was
entered into freely voluntarily (sic) by them and the agreement is not contrary
to law, morals, and public policy.
And because no consideration is indicated in the documents, we strike them
down as contrary to law, morals, and public policy.11
He accordingly decided in favor of Divina, by decision of October 9, 2000,12 the
dispositive portion of which reads:
Wherefore, judgment is hereby rendered ordering respondents SUNACE
INTERNATIONAL SERVICES and its owner ADELAIDA PERGE, both in their
personal capacities and as agent of Hang Rui Xiong/Edmund Wang to jointly
and severally pay complainant DIVINA A. MONTEHERMOZO the sum of
NT91,950.00 in its peso equivalent at the date of payment, as refund for the
amounts which she is hereby adjudged entitled to as earlier discussed plus 10%
thereof as attorney’s fees since compelled to litigate, complainant had to engage
the services of counsel.
SO ORDERED.13 (Underescoring supplied)
On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,14 affirmed the
Labor Arbiter’s decision.
Via petition for certiorari,15 Sunace elevated the case to the Court of Appeals
which dismissed it outright by Resolution of November 12, 2002,16 the full text
of which reads:
The petition for certiorari faces outright dismissal.
The petition failed to allege facts constitutive of grave abuse of discretion on the
part of the public respondent amounting to lack of jurisdiction when the NLRC
affirmed the Labor Arbiter’s finding that petitioner Sunace International
Management Services impliedly consented to the extension of the contract of
private respondent Divina A. Montehermozo. It is undisputed that petitioner
was continually communicating with private respondent’s foreign
employer (sic). As agent of the foreign principal, "petitioner cannot profess
ignorance of such extension as obviously, the act of the principal extending
complainant (sic) employment contract necessarily bound it." Grave abuse
of discretion is not present in the case at bar.
ACCORDINGLY, the petition is hereby DENIED DUE COURSE and DISMISSED.17
SO ORDERED.
(Emphasis on words in capital letters in the original; emphasis on words in
small letters and underscoring supplied)
Its Motion for Reconsideration having been denied by the appellate court by
Resolution of January 14, 2004,18 Sunace filed the present petition for review on
certiorari.
The Court of Appeals affirmed the Labor Arbiter and NLRC’s finding that Sunace
knew of and impliedly consented to the extension of Divina’s 2-year contract. It
went on to state that "It is undisputed that [Sunace] was continually
communicating with [Divina’s] foreign employer." It thus concluded that "[a]s
agent of the foreign principal, ‘petitioner cannot profess ignorance of such
extension as obviously, the act of the principal extending complainant (sic)
employment contract necessarily bound it.’"
Contrary to the Court of Appeals finding, the alleged continuous communication
was with the Taiwanese broker Wang, not with the foreign employer Xiong.
The February 21, 2000 telefax message from the Taiwanese broker to Sunace,
the only basis of a finding of continuous communication, reads verbatim:
xxxx
Regarding to Divina, she did not say anything about her saving in police
station. As we contact with her employer, she took back her saving
already last years. And they did not deduct any money from her salary.
Or she will call back her employer to check it again. If her employer said
yes! we will get it back for her.
Thank you and best regards.
(Sgd.)
Edmund Wang
President19
The finding of the Court of Appeals solely on the basis of the above-quoted
telefax message, that Sunace continually communicated with the foreign
"principal" (sic) and therefore was aware of and had consented to the execution
of the extension of the contract is misplaced. The message does not provide
evidence that Sunace was privy to the new contract executed after the
expiration on February 1, 1998 of the original contract. That Sunace and the
Taiwanese broker communicated regarding Divina’s allegedly withheld savings
does not necessarily mean that Sunace ratified the extension of the contract. As
Sunace points out in its Reply20 filed before the Court of Appeals,
As can be seen from that letter communication, it was just an information given
to the petitioner that the private respondent had t[aken] already her savings
from her foreign employer and that no deduction was made on her salary. It
contains nothing about the extension or the petitioner’s consent thereto.21
Parenthetically, since the telefax message is dated February 21, 2000, it is safe
to assume that it was sent to enlighten Sunace who had been directed, by
Summons issued on February 15, 2000, to appear on February 28, 2000 for a
mandatory conference following Divina’s filing of the complaint on February 14,
2000.
Respecting the Court of Appeals following dictum:
As agent of its foreign principal, [Sunace] cannot profess ignorance of such an
extension as obviously, the act of its principal extending [Divina’s] employment
contract necessarily bound it,22
it too is a misapplication, a misapplication of the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace,
to the principal, employer Xiong, not the other way around.23 The knowledge
of the principal-foreign employer cannot, therefore, be imputed to its agent
Sunace.
There being no substantial proof that Sunace knew of and consented to be
bound under the 2-year employment contract extension, it cannot be said to be
privy thereto. As such, it and its "owner" cannot be held solidarily liable for any
of Divina’s claims arising from the 2-year employment extension. As the New
Civil Code provides,
Contracts take effect only between the parties, their assigns, and heirs, except in
case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law.24
Furthermore, as Sunace correctly points out, there was an implied revocation of
its agency relationship with its foreign principal when, after the termination of
the original employment contract, the foreign principal directly negotiated with
Divina and entered into a new and separate employment contract in Taiwan.
Article 1924 of the New Civil Code reading
The agency is revoked if the principal directly manages the business entrusted
to the agent, dealing directly with third persons.
thus applies.
In light of the foregoing discussions, consideration of the validity of the Waiver
and Affidavit of Desistance which Divina executed in favor of Sunace is rendered
unnecessary.
WHEREFORE, the petition is GRANTED. The challenged resolutions of the
Court of Appeals are hereby REVERSED and SET ASIDE. The complaint of
respondent Divina A. Montehermozo against petitioner is DISMISSED.
G.R. No. L-24833             September 23, 1968
FIELDMEN'S INSURANCE CO., INC., petitioner,
vs.
MERCEDES VARGAS VDA. DE SONGCO, ET AL. and COURT OF
APPEALS, respondents.
Jose S. Suarez for petitioner.
Eligio G. Lagman for respondents.
FERNANDO, J.:
An insurance firm, petitioner Fieldmen's Insurance Co., Inc., was not allowed to
escape liability under a common carrier insurance policy on the pretext that
what was insured, not once but twice, was a private vehicle and not a common
carrier, the policy being issued upon the insistence of its agent who discounted
fears of the insured that his privately owned vehicle might not fall within its
terms, the insured moreover being "a man of scant education," finishing only
the first grade. So it was held in a decision of the lower court thereafter affirmed
by respondent Court of Appeals. Petitioner in seeking the review of the above
decision of respondent Court of Appeals cannot be so sanguine as to entertain
the belief that a different outcome could be expected. To be more explicit, we
sustain the Court of Appeals.
The facts as found by respondent Court of Appeals, binding upon us, follow:
"This is a peculiar case. Federico Songco of Floridablanca, Pampanga, a man of
scant education being only a first grader ..., owned a private jeepney with Plate
No. 41-289 for the year 1960. On September 15, 1960, as such private vehicle
owner, he was induced by Fieldmen's Insurance Company Pampanga agent
Benjamin Sambat to apply for a Common Carrier's Liability Insurance Policy
covering his motor vehicle ... Upon paying an annual premium of P16.50,
defendant Fieldmen's Insurance Company, Inc. issued on September 19, 1960,
Common Carriers Accident Insurance Policy No. 45-HO- 4254 ... the duration of
which will be for one (1) year, effective September 15, 1960 to September 15,
1961. On September 22, 1961, the defendant company, upon payment of the
corresponding premium, renewed the policy by extending the coverage from
October 15, 1961 to October 15, 1962. This time Federico Songco's private
jeepney carried Plate No. J-68136-Pampanga-1961. ... On October 29, 1961,
during the effectivity of the renewed policy, the insured vehicle while being
driven by Rodolfo Songco, a duly licensed driver and son of Federico (the
vehicle owner) collided with a car in the municipality of Calumpit, province of
Bulacan, as a result of which mishap Federico Songco (father) and Rodolfo
Songco (son) died, Carlos Songco (another son), the latter's wife, Angelita
Songco, and a family friend by the name of Jose Manuel sustained physical
injuries of varying degree." 1
It was further shown according to the decision of respondent Court of Appeals:
"Amor Songco, 42-year-old son of deceased Federico Songco, testifying as
witness, declared that when insurance agent Benjamin Sambat was inducing his
father to insure his vehicle, he butted in saying: 'That cannot be, Mr. Sambat,
because our vehicle is an "owner" private vehicle and not for passengers,' to
which agent Sambat replied: 'whether our vehicle was an "owner" type or for
passengers it could be insured because their company is not owned by the
Government and the Government has nothing to do with their company. So they
could do what they please whenever they believe a vehicle is insurable' ... In
spite of the fact that the present case was filed and tried in the CFI of Pampanga,
the defendant company did not even care to rebut Amor Songco's testimony by
calling on the witness-stand agent Benjamin Sambat, its Pampanga Field
Representative." 2
The plaintiffs in the lower court, likewise respondents here, were the surviving
widow and children of the deceased Federico Songco as well as the injured
passenger Jose Manuel. On the above facts they prevailed, as had been
mentioned, in the lower court and in the respondent Court of
Appeals.1awphîl.nèt
The basis for the favorable judgment is the doctrine announced in Qua Chee Gan
v. Law Union and Rock Insurance Co., Ltd., 3 with Justice J. B. L. Reyes speaking for
the Court. It is now beyond question that where inequitable conduct is shown
by an insurance firm, it is "estopped from enforcing forfeitures in its favor, in
order to forestall fraud or imposition on the insured." 4
As much, if not much more so than the Qua Chee Gan decision, this is a case
where the doctrine of estoppel undeniably calls for application. After petitioner
Fieldmen's Insurance Co., Inc. had led the insured Federico Songco to believe
that he could qualify under the common carrier liability insurance policy, and to
enter into contract of insurance paying the premiums due, it could not,
thereafter, in any litigation arising out of such representation, be permitted to
change its stand to the detriment of the heirs of the insured. As estoppel is
primarily based on the doctrine of good faith and the avoidance of harm that
will befall the innocent party due to its injurious reliance, the failure to apply it
in this case would result in a gross travesty of justice.
That is all that needs be said insofar as the first alleged error of respondent
Court of Appeals is concerned, petitioner being adamant in its far-from-
reasonable plea that estoppel could not be invoked by the heirs of the insured
as a bar to the alleged breach of warranty and condition in the policy. lt would
now rely on the fact that the insured owned a private vehicle, not a common
carrier, something which it knew all along when not once but twice its agent, no
doubt without any objection in its part, exerted the utmost pressure on the
insured, a man of scant education, to enter into such a contract.
Nor is there any merit to the second alleged error of respondent Court that no
legal liability was incurred under the policy by petitioner. Why liability under
the terms of the policy 5 was inescapable was set forth in the decision of
respondent Court of Appeals. Thus: "Since some of the conditions contained in
the policy issued by the defendant-appellant were impossible to comply with
under the existing conditions at the time and 'inconsistent with the known
facts,' the insurer 'is estopped from asserting breach of such conditions.' From
this jurisprudence, we find no valid reason to deviate and consequently hold
that the decision appealed from should be affirmed. The injured parties, to wit,
Carlos Songco, Angelito Songco and Jose Manuel, for whose hospital and medical
expenses the defendant company was being made liable, were passengers of the
jeepney at the time of the occurrence, and Rodolfo Songco, for whose burial
expenses the defendant company was also being made liable was the driver of
the vehicle in question. Except for the fact, that they were not fare paying
passengers, their status as beneficiaries under the policy is recognized
therein." 6
Even if it be assumed that there was an ambiguity, an excerpt from the Qua Chee
Gan decision would reveal anew the weakness of petitioner's contention. Thus:
"Moreover, taking into account the well known rule that ambiguities or
obscurities must be strictly interpreted against the party that caused them, the
'memo of warranty' invoked by appellant bars the latter from questioning the
existence of the appliances called for in the insured premises, since its initial
expression, 'the undernoted appliances for the extinction of fire being kept on
the premises insured hereby, ... it is hereby warranted ...,' admits of interpretation
as an admission of the existence of such appliances which appellant cannot now
contradict, should the parol evidence rule apply." 7
To the same effect is the following citation from the same leading case: "This
rigid application of the rule on ambiguities has become necessary in view of
current business practices. The courts cannot ignore that nowadays
monopolies, cartels and concentration of capital, endowed with overwhelming
economic power, manage to impose upon parties dealing with them cunningly
prepared 'agreements' that the weaker party may not change one whit, his
participation in the 'agreement' being reduced to the alternative to 'take it or
leave it' labelled since Raymond Saleilles 'contracts by adherence' (contrats
d'adhesion), in contrast to those entered into by parties bargaining on an equal
footing, such contracts (of which policies of insurance and international bills of
lading are prime examples) obviously call for greater strictness and vigilance on
the part of courts of justice with a view to protecting the weaker party from
abuses and imposition, and prevent their becoming traps for the unwary (New
Civil Code. Article 24; Sent. of Supreme Court of Spain, 13 Dec. 1934, 27
February 1942)." 8
The last error assigned which would find fault with the decision of respondent
Court of Appeals insofar as it affirmed the lower court award for exemplary
damages as well as attorney's fees is, on its face, of no persuasive force at all.
The conclusion that inescapably emerges from the above is the correctness of
the decision of respondent Court of Appeals sought to be reviewed. For, to
borrow once again from the language of the Qua Chee Gan opinion: "The
contract of insurance is one of perfect good faith (uberima fides) not for the
insured alone,but equally so for the insurer; in fact, it is more so for the latter,
since its dominant bargaining position carries with it stricter responsibility." 9
This is merely to stress that while the morality of the business world is not the
morality of institutions of rectitude like the pulpit and the academe, it cannot
descend so low as to be another name for guile or deception. Moreover, should
it happen thus, no court of justice should allow itself to lend its approval and
support.1awphîl.nèt
We have no choice but to recognize the monetary responsibility of petitioner
Fieldmen's Insurance Co., Inc. It did not succeed in its persistent effort to avoid
complying with its obligation in the lower court and the Court of Appeals. Much
less should it find any receptivity from us for its unwarranted and unjustified
plea to escape from its liability.
WHEREFORE, the decision of respondent Court of Appeals of July 20, 1965, is
affirmed in its entirety. Costs against petitioner Fieldmen's Insurance Co., Inc.
G.R. No. 94071 March 31, 1992
NEW LIFE ENTERPRISES and JULIAN SY, petitioners,
vs.
HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION,
RELIANCE SURETY AND INSURANCE CO., INC. and WESTERN GUARANTY
CORPORATION, respondents.
REGALADO, J.:
This appeal by certiorari seeks the nullification of the decision  1 of respondent
Court of Appeals in CA-G.R. CV No. 13866 which reversed the decision of the
Regional Trial Court, Branch LVII at Lucena City, jointly deciding Civil Cases
Nos. 6-84, 7-84 and 8-84 thereof and consequently ordered the dismissal of the
aforesaid actions filed by herein petitioners.
The undisputed background of this case as found by the court a quo and
adopted by respondent court, being sustained by the evidence on record, we
hereby reproduce the same with approval. 2
The antecedents of this case show that Julian Sy and Jose Sy Bang have
formed a business partnership in the City of Lucena. Under the business name
of New Life Enterprises, the partnership engaged in the sale of construction
materials at its place of business, a two storey building situated at Iyam,
Lucena City. The facts show that Julian Sy insured the stocks in trade of New
Life Enterprises with Western Guaranty Corporation, Reliance Surety and
Insurance. Co., Inc., and Equitable Insurance Corporation.
On May 15, 1981, Western  Guaranty Corporation
issued Fire Insurance Policy No. 37201 in the amount of P350,000.00. This
policy was renewed on May, 13, 1982.
On July 30,1981, Reliance Surety and Insurance Co., Inc. issued Fire
Insurance Policy No. 69135 in the amount of P300,000.00 (Renewed under
Renewal Certificate No. 41997) An additional
insurance was issued by the same company on
November 12, 1981 under Fire  Insurance Policy No. 71547 in the amount of
P700,000.00.
On February 8, 1982, Equitable Insurance
Corporation issued Fire Insurance  Policy  No. 39328 in the amount of
P200,000.00.
Thus when the building occupied  by the New Life Enterprises
was gutted by fire at about  2:00
o'clock in the morning  of  October 19,  1982, the stocks in the
trade inside said building  were insured against
fire  in  the total amount of P1,550,000.00.
According to the certification issued by the Headquarters, Philippine
Constabulary /Integrated National Police, Camp Crame, the cause of fire was
electrical in nature.  According to the plaintiffs,
the  building  and the stocks inside were burned.
After the fire, Julian  Sy went to the agent of
Reliance Insurance whom he asked to accompany him to the
office of the company so that he can file
his claim. He  averred that in support of his claim, he
submitted the fire clearance, the insurance policies and inventory
of stocks. He further testified that the three insurance companies are sister
companies, and as a matter of fact when he was following-up his claim with
Equitable Insurance, the Claims Manager told him to go first to Reliance
Insurance and if said  company agrees to pay, they would also pay. The same
treatment  was given him by the other insurance
companies. Ultimately, the three insurance companies denied plaintiffs' claim
for payment.
In its letter of denial dated March 9, 1983, (Exhibit "C" No. 8-
84) Western Guaranty Corporation through Claims Manager Bernard S. Razon 
told the plaintiff  that his claim "is
denied for  breach of policy conditions." Reliance Insurance purveyed the same
message in its letter dated November 23, 1982 and signed by Executive Vice-
President Mary Dee Co (Exhibit "C" No. 7-84) which said that "plaintiff's
claim is denied for  breach of policy conditions."
The  letter  of  denial received by the plaintiff from Equitable Insurance
Corporation (Exhibit "C" No. 6-84) was of the same tenor, as said letter dated
February 22, 1983, and signed by Vice-President
Elma R. Bondad, said "we find that certain
policy  conditions were violated, therefore, we regret,
we have to deny your claim, as it is hereby denied in its entirety."
In relation to the case against Reliance
Surety and Insurance Company, a certain Atty. Serafin
D. Dator, acting in behalf of the plaintiff, sent a letter dated February 13, 1983
(Exhibit "G-l" No 7-84) to Executive Vice-President Mary Dee Co asking that he
be informed as to the specific policy conditions allegedly
violated by the plaintiff. In her reply-letter dated March
30, 1983, Executive Vice-President Mary Dee Co informed Atty.
Dator that Julian Sy violated Policy Condition No.
"3" which requires the insured
to give notice of any insurance or insurances already effected covering the
stocks in trade. 3
Because of the denial of their  claims for payment by the three (3) insurance
companies, petitioner filed separate
civil actions against the former before the  Regional Trial
Court of Lucena City, which cases were consolidated for trial,
and thereafter the court  below rendered  its decision on December 19, l986
with the following disposition:
WHEREFORE, judgment in the above-entitled cases is rendered in the
following manner, viz:
1. In Civil Case No. 6-84, judgment is rendered for the
plaintiff New Life Enterprises and  against the defendant Equitable Insurance
Corporation ordering  the latter  to pay  the former the sum of
Two Hundred Thousand  (P200,000.00) Pesos and
considering that payment of the claim of the  insured has been unreasonably  trial court, hence this petition the crux wherein is whether or not Conditions
denied, pursuant to Sec.  244 of the Insurance  Code, defendant is further orde
red to pay the plaintiff attorney's fees in the amount of Twenty Thousand
(P20,000.00) Pesos. All sums of money to be paid by virtue
hereof shall bear interest  at 12%  per annum (pursuant
to Sec. 244 of the Insurance Code) from
February 14, 1983, (91st day from November 16,
1982, when Sworn Statement of Fire Claim
was received from the insured) until they are fully paid;
2. In Civil Case No. 7-
84, judgment is rendered  for the plaintiff Julian Sy and against
the defendant Reliance Surety and Insurance Co.,
Inc., ordering the latter to pay the former the sum
of P1,000,000.00 (P300,000.00 under Policy
No. 69135 and P700,000.00 under  Policy No.  71547)
and considering that payment  of  the claim of the
insured has been unreasonably  denied, pursuant to
Sec. 244 of the Insurance Code, defendant is further ordered
to pay the plaintiff the amount of P100,000.00 as attorney's fees.
All sums of money to be  paid  by virtue hereof shall bear interest  at 12%  per
annum (pursuant to Sec. 244 of the Insurance Code)  from February 14, 1983,
(91st day from November 16,
1982 when Sworn Statement of Fire  Claim was received from the insured)
until they are fully paid;
3. In Civil Case No. 8-84, judgment is rendered for
the plaintiff New Life  Enterprises and against the defendant Western Guarant
y Corporation ordering the latter to  pay the sum  of P350,000.00
to the Consolidated Bank and Trust Corporation,
Lucena Branch, Lucena City, as stipulated on the
face of Policy  No. 37201, and considering that payment of the
aforementioned sum  of money has been
unreasonably  denied, pursuant to Sec. 244 of the Insurance Code,
defendant  is further  ordered to pay the
plaintiff attorney's fees in the amount of P35,000.00.
All sums of money to be paid by virtue hereof shall bear interest at 12% per
annum  (pursuant to Sec. 244 of the Insurance Code) from February 5, 1982,
(91st day from 1st week of November 1983 when
insured filed formal claim for full indemnity according to adjuster
Vetremar Dela Merced) until they are fully paid. 4
As aforestated, respondent Court of Appeals reversed said judgment of the
Nos. 3 and 27 of the insurance contracts were violated by petitioners thereby
resulting in their forfeiture of all the benefits thereunder.
Condition No. 3 of said insurance policies, otherwise known as
the  "Other Insurance Clause," is uniformly contained in all the aforestated
insurance contracts of herein petitioners, as follows:
3. The insured shall give notice to the Company
of any insurance or  insurances already effected, or which
may subsequently be effected, covering any of the property or properties
consisting of stocks in trade, goods in process
and/or inventories only hereby insured, and unless
such notice be given and the particulars of such
insurance or insurances be stated therein or endorsed on this policy pursuant
to Section 50 of the Insurance Code, by or on behalf of the Company
before the occurrence of any loss or damage, all benefits
under this  policy shall be deemed forfeited, provided however, that this
condition shall not apply when the total insurance or insurances in force at
the  time  of  loss or damage not more than P200,000.00. 5
Petitioners admit that  the respective insurance policies
issued by private  respondents did not state or endorse thereon
the  other insurance coverage obtained or subsequently effected on the same
stocks in trade for the loss of which compensation is claimed by
petitioners.  6 The policy
issued by respondent  Western Guaranty Corporation (Western) did not
declare respondent Reliance Surety and Insurance Co., Inc. (Reliance) and
respondent Equitable Insurance Corporation (Equitable) as co-
insurers on the same stocks,
while Reliance's  Policies covering the same stocks did not
likewise declare Western and Equitable as such co-insurers. It is
further admitted by petitioners that  Equitable's policy stated "nil" in the space
thereon requiring indication of any co-insurance although there were three (3)
policies subsisting on the same stocks in trade at  the time of the loss, namely,
that of Western in the amount of P350,000.00 and two (2) policies of Reliance
in the total amount of P1,000,000.00. 7
In other words, the coverage by other insurance or co-insurance effected
or subsequently arranged by petitioners were
neither stated nor endorsed in the policies of the three (3) private
respondents, warranting forfeiture  of  all benefits
thereunder if we are to follow  the express stipulation in the aforequoted
Policy Condition No. 3.
Petitioners contend that they are not to be blamed for the omissions,
alleging that insurance agent Leon Alvarez (for Western) and Yap Kam Chuan
(for Reliance and Equitable) knew about the existence of the additional
insurance coverage and that they were not
informed about the requirement that such other or additional insurance
should be stated in the policy, as they have not even read  policies.8 These
contentions cannot pass judicial muster.
The terms of the contract are clear and  unambiguous.
The insured is specifically  required  to disclose to the insurer any other
insurance and its particulars which he  may have effected on the
same subject matter. The knowledge of such insurance
by the insurer's agents, even assuming  the acquisition thereof by the former,
is not the "notice" that would estop the insurers from denying the claim.
Besides, the so-called theory of imputed knowledge, that is, knowledge of the
agent is knowledge of  the principal, aside  from being
of dubious applicability here  has likewise been roundly
refuted by respondent court whose  factual  findings  we find acceptable.
Thus, it points out that while petitioner Julian Sy
claimed that he had informed insurance agent Alvarez regarding the co-
insurance on the property, he contradicted
himself by inexplicably  claiming that he had  not read the terms of the policies;
that Yap Dam Chuan could not likewise have obtained such
knowledge for the same reason, aside from the fact that
the insurance with Western was obtained before those of
Reliance and Equitable; and that  the conclusion  of
the trial court that Reliance and Equitable are "sister
companies" is an unfounded  conjecture drawn from  the mere fact that Yap
Kam Chuan was an agent for  both companies  which also had the
same insurance claims adjuster. Availment  of the
services of the same agents and adjusters by different companies is a
common practice in the insurance business and such facts
do not  warrant the speculative conclusion of the trial court.
Furthermore, when the words and language of documents are clear and plain
or readily understandable by an ordinary reader thereof, there is absolutely no
room for interpretation or construction anymore.9 Courts are not allowed to
make contracts for the parties; rather, they will intervene
only when the terms of the policy are ambiguous, equivocal,
or uncertain.  10 The  parties must abide by the
terms of the contract because such terms constitute the
measure of the insurer's liability and compliance therewith is a
condition precedent to the insured's right of recovery from the insurer.  11
While it is a cardinal principle of insurance law that a policy or contract
of insurance is  to be construed liberally
in favor of the insured and strictly against the insurer
company, yet contracts of insurance, like other contracts, are to be construed
according to the sense and meaning of the terms which
the  parties themselves have used. If such terms are clear and
unambiguous, they must be taken and understood in their plain, ordinary and
popular sense. 12 Moreover,
obligations arising from contracts have the force of law between
the  contracting parties and should be complied with in good faith.  13
Petitioners should be aware of the fact that a party is not relieved of the duty
to exercise the ordinary care and
prudence that  would  be exacted in relation to other contracts. The conformity
of the insured to the terms of the policy is implied from his failure to
express any disagreement with what is provided for.14 It may be true that
the  majority rule, as cited by petitioners, is that injured
persons may accept policies without reading them, and that this is not
negligence per se. 15 But, this is not without any exception. It is and was
incumbent upon petitioner Sy to read the insurance contracts, and this can be
reasonably expected of him considering that he has been a businessman since
196516 and the contract concerns indemnity in case of loss in his money-
making trade of which important
consideration he could not have been unaware as it was pre-in case of loss in
his money-making trade of which important consideration he could not have
been unaware as it was precisely the reason for his procuring the same.
We reiterate our pronouncement in Pioneer Insurance and Surety Corporation
vs. Yap: 17
...
And considering the terms of the policy which required the  insured to declar
e other insurances, the statement in question must be deemed to be a statem
ent (warranty) binding on both insurer and insured, that there were no other
insurance on the property. . . .
The annotation then, must be deemed
to be a warranty that  the property  was not insured by  any other policy.
Violation thereof entitled the insurer to rescind (Sec. 69, Insurance
Act). Such misrepresentation is fatal in the light of our views in Santa Ana vs.
Commercial Union Assurance Company, Ltd.,  55 Phil. 329.
The materiality of non-disclosure of other insurance policies is not open to
doubt.
xxx xxx xxx
The obvious purpose of the aforesaid requirement in the policy
is to prevent over-insurance and thus avert the perpetration of
fraud. The public, as well as the insurer, is  interested in preventing the
situation in which a fire  would  be profitable to the insured. According to
Justice Story: "The insured has no right to complain, for he assents to comply
with all the stipulations on his side,  in  order to  entitle himself to  the
benefit of the contract, which, upon reason or principle, he
has no right to ask the court to dispense with the
performance of his own part of the agreement, and yet to
bind the other party to obligations, which, but  for those stipulations, would
not have been entered into."
Subsequently, in the case of Pacific Banking Corporation vs. Court of Appeals, et
al., 18 we held:
It is not disputed that the insured failed to reveal before the
loss three other insurances.  As found by the Court
of Appeals, by reason  of  said unrevealed insurances, the insured had been
guilty of a false declaration; a clear misrepresentation and a vital one because
where the insured had  been asked to reveal
but did not, that was deception. Otherwise stated, had the
insurer known that there were many co-insurances, it could have hesitated or
plainly desisted from entering into  such  contract.
Hence, the insured was  guilty of clear fraud (Rollo, p. 25).
Petitioner's contention that  the allegation of fraud is but
a mere inference or suspicion is  untenable. In fact,
concrete evidence of fraud or false declaration by
the  insured was  furnished by the petitioner itself when the facts alleged in the
policy under clauses "Co-Insurances Declared" and
"Other Insurance Clause" are materially different from the actual number
of co-insurances taken over the subject property. Consequently, "the whole
foundation of the contract fails, the
risk does not attach and the policy never becomes a contract between the
parties." Representations of facts are the foundation of the contract and if
the  foundation does not exist, the superstructure does
not  arise. Falsehood in such representations is not shown to vary
or add to the contract, or to terminate a contract which has
once been made, but to show that no contract has ever
existed (Tolentino, Commercial Laws of the Philippines, p.
991, Vol. II, 8th Ed.,) A void or inexistent contract is one which has no
force and effect from the very beginning, as if it had never been entered into,
and which cannot be validated either by time or by ratification
(Tongoy vs. C.A., 123 SCRA 99 (1983); Avila v. C.A., 145 SCRA, 1986).
As the insurance policy against fire expressly required that notice should be
given by the insured  of other insurance upon the same property,
the  total absence of such notice nullifies the policy.
To further warrant and justify the forfeiture of the
benefits  under the insurance contracts involved, we need
merely to  turn to Policy Condition No. 15 thereof, which reads in part:
15. . . . if any false declaration be made or used
in support thereof, . . . all benefits under this Policy shall be forfeited . . . . 19
Additionally, insofar as the liability of respondent
Reliance is concerned, it is not denied that the complaint for recovery was
filed in court by petitioners only on
January 31, 1984, or  after more than one (1) year had
elapsed from petitioners' receipt of the insurers' letter of
denial on November 29, 1982. Policy Condition No. 27 of their insurance
contract with Reliance provides:
27. Action or suit
clause. — If a claim be made and rejected and an action or suit be not comme
nced
either in the Insurance Commission or any court of competent jurisdiction of 
notice of such rejection, or in case of arbitration taking place
as provided herein, within twelve (12) months after due
notice of the  award made by the arbitrator or arbitrators
or umpire, then the  claim shall for all purposes be
deemed to have been abandoned and shall  not thereafter be recoverable
hereunder.  20
On this point, the trial court ruled:
. . . However, because of the  peculiar circumstances of this  case, we hesitate
in concluding that plaintiff's right to ventilate his claim in court has  been barr
ed by reason of the time constraint provided  in  the insurance contract. It is
evident that after the plaintiff had received
the letter of denial, he still  found it necessary  to be informed of the specific  c
auses or reasons for the denial of his  claim, reason for which his lawyer, Atty.
Dator deemed it wise to send  a
letter of inquiry to the  defendant which was answered by
defendant's Executive  Vice-President in a letter
dated March 30, 1983, . . . .  Assuming, gratuitously, that the letter of Executiv
e Vice-President Mary Dee Co dated March 30, 1983, was received by plaintiff
on the same date, the period of limitation should start to run only from said
date in the spirit of fair play and equity. . . . 21
We have perforce to reject this theory  of  the court below for being contrary to
what we have heretofore declared:
It is important to note the  principle laid down
by this Court in the case of Ang vs. Fulton Fire Insurance Co. (2 SCRA 945
[1961]) to wit:
The condition contained in an insurance policy that claims must be presented
within one year
after rejection is not merely a procedural requirement but an  important  matt
er essential to a prompt settlement of claims against insurance companies as it
demands that insurance suits  be  brought by
the insured while the evidence  as to the
origin and cause of destruction have not yet disappeared.
In enunciating the above-cited principle, this Court had definitely
settled the rationale for the necessity  of  bringing suits  against the Insurer
within one year from the rejection of the claim. The contention
of the respondents that the one-year prescriptive period does
not start to run until the petition for reconsideration had been resolved by th
e insurer, runs counter  to the declared purpose for requiring that an
action or suit be filed in the Insurance Commission or in a  court of competent
jurisdiction from the denial of the  claim. To uphold respondents' contention
would contradict and defeat the very principle which this Court had
laid down. Moreover, it can easily be used by  insured persons as a scheme or
device to waste time
until any evidence  which may be considered against them is destroyed.
xxx xxx xxx
While in the Eagle Star case (96 Phil. 701),
this Court uses  the phrase "final rejection", the
same cannot be taken  to mean the rejection of a petition
for reconsideration as insisted by respondents.
Such was clearly not the meaning contemplated by this Court. The insurance 
policy  in said case provides that the insured should file his claim first, with
the  carrier  and then with the insurer.
The  "final rejection" being referred to in said case is the rejection by the
insurance company. 22
Furthermore, assuming arguendo that petitioners felt the
legitimate need to be clarified as to the policy condition violated, there was a
considerable lapse of time from their receipt of the insurer's clarificatory letter
dated March 30, 1983, up to the time the complaint was filed in court on
January 31, 1984. The one-year prescriptive period was yet
to expire on November 29, 1983, or about eight (8) months from the
receipt of the clarificatory letter, but petitioners let the
period lapse without bringing their action in court.
We accordingly find no "peculiar circumstances" sufficient to
relax the enforcement of the one-year prescriptive period and
we, therefore, hold that petitioners' claim was definitely filed out of time.
WHEREFORE, finding no cogent reason to disturb the judgment
of respondent Court  of Appeals, the same is hereby AFFIRMED.
SO ORDERED.
[G.R. No. 82978. November 22, 1990.]
THE MANILA REMNANT CO., INC., Petitioner, v. THE HONORABLE COURT
OF APPEALS and OSCAR VENTANILLA, JR. and CARMEN GLORIA
DIAZ, Respondents.
Bede S. Talingcos, for Petitioners.
Augusto Gatmaytan for Private Respondent.
SYLLABUS

1. CIVIL LAW; AGENCY; FAILURE OF THE PRINCIPAL TO CORRECT AN
IRREGULARITY DESPITE KOWLEDGE THEREOF, DEEMED A RATIFICATION OF
THE ACT OF THE AGENT. — In the case at bar, the Valencia realty firm had
clearly overstepped the bounds of its authority as agent — and for that matter,
even the law — when it undertook the double sale of the disputed lots. Such
being the case, the principal, Manila Remnant, would have been in the clear
pursuant to Article 1897 of the Civil Code which states that" (t)he agent who
acts as such is not personally liable to that party with whom he contracts, unless
he expressly binds himself or exceeds the limits of his authority without giving
such party sufficient notice of his powers." However, the unique relationship
existing between the principal and the agent at the time of the dual sale must be
underscored. Bear in mind that the president then of both firms was Artemio U.
Valencia, the individual directly responsible for the sale scam. Hence, despite
the fact that the double sale was beyond the power of the agent, Manila
Remnant as principal was chargeable with the knowledge or constructive notice
of that fact and not having done anything to correct such an irregularity was
deemed to have ratified the same. (See Art. 1910, Civil Code.)
2. ID.; ID.; PRINCIPLE OF ESTOPPEL; REASON AND EFFECT THEREOF; CASE AT
BAR. — More in point, we find that by the principle of estoppel, Manila Remnant
is deemed to have allowed its agent to act as though it had plenary powers.
Article 1911 of the Civil Code provides: "Even when the agent has exceeded his
authority, the principal is solidarily liable with the agent if the former allowed
the latter to act as though he had full powers." The above-quoted article is new.
It is intended to protect the rights of innocent persons. In such a situation, both
the principal and the agent may be considered as joint feasors whose liability is
joint and solidary (Verzosa v. Lim, 45 Phil. 416). Authority by estoppel has
arisen in the instant case because by its negligence, the principal, Manila
Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not
granted to it. That the principal might not have had actual knowledge of the
agent’s misdeed is of no moment.
DECISION
FERNAN, J.:
Like any other couple, Oscar Ventanilla and his wife Carmen, both faculty
members of the University of the Philippines and renting a faculty unit,
dreamed of someday owning a house and lot. Instead of attaining this dream,
they became innocent victims of deceit and found themselves in the midst of an
ensuing squabble between a subdivision owner and its real estate agent.
The facts as found by the trial court and adopted by the Appellate Court are as
follows:chanrob1es virtual 1aw library
Petitioner Manila Remnant Co., Inc. is the owner of the parcels of land situated
in Quezon City covered by Transfer Certificates of Title Nos. 26400, 26401,
30783 and 31986 and constituting the subdivision known as Capital Homes
Subdivision Nos. I and II. On July 25, 1972, Manila Remnant and A.U. Valencia &
Co. Inc. entered into a written agreement entitled "Confirmation of Land
Development and Sales Contract" to formalize an earlier verbal agreement
whereby for a consideration of 17 and 1/2% fee, including sales commission
and management fee, A.U. Valencia and Co., Inc. was to develop the aforesaid
subdivision with authority to manage the sales thereof, execute contracts to sell
to lot buyers and issue official receipts. 1
At that time the President of both A.U. Valencia and Co. Inc. and Manila Remnant
Co., Inc. was Artemio U. Valencia.cralawnad
On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed two
"contracts to sell" covering Lots 1 and 2 of Block 17 in favor of Oscar C.
Ventanilla and Carmen Gloria Diaz for the combined contract price of
P66,571.00 payable monthly for ten years. 2 As thus agreed in the contracts to
sell, the Ventanillas paid the down payments on the two lots even before the
formal contract was signed on March 3, 1970.
Ten (10) days after the signing of the contracts with the Ventanillas or on March
13, 1970, Artemio U. Valencia, as President of Manila Remnant, and without the
knowledge of the Ventanilla couple, sold Lots 1 and 2 of Block 17 again, this
time in favor of Carlos Crisostomo, one of his sales agents without any
consideration. 3 Artemio Valencia then transmitted the fictitious Crisostomo
contracts to Manila Remnant while he kept in his files the contracts to sell in
favor of the Ventanillas. All the amounts paid by the Ventanillas were deposited
in Valencia’s bank account.
Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly
payments of the Ventanillas were remitted to Manila Remnant as payments of
Crisostomo for which the former issued receipts in favor of Crisostomo. Since
Valencia kept the receipts in his files and never transmitted the same to
Crisostomo, the latter and the Ventanillas remained ignorant of Valencia’s
scheme. Thus, the Ventanillas continued paying their monthly
installments.chanrobles virtual lawlibrary
Subsequently, the harmonious business relationship between Artemio Valencia
and Manila Remnant ended. On May 30, 1973, Manila Remnant, through its
General Manager Karl Landahl, wrote Artemio Valencia informing him that
Manila Remnant was terminating its existing collection agreement with his firm
on account of the considerable amount of discrepancies and irregularities
discovered in its collections and remittances by virtue of confirmations received
from lot buyers. 4 As a consequence, on June 6, 1973, Artemio Valencia was
removed as President by the Board of Directors of Manila Remnant. Therefore,
from May of 1973, Valencia stopped transmitting Ventanilla’s monthly
installments which at that time had already amounted to P17,925.40 for Lot 1
and P18,141.95 for Lot 2, (which appeared in Manila Remnant’s record as
credited in the name of Crisostomo). 5
On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before Branch 19 of
the then Court of First Instance of Manila 6 to impugn the abrogation of their
agency agreement. On June 10 and July 10, 1973, said court ordered all lot
buyers to deposit their monthly amortizations with the court. 7 But on July 17,
1973, A.U. Valencia and Co. wrote the Ventanillas that it was still authorized by
the court to collect the monthly amortizations and requested them to continue
remitting their amortizations with the assurance that said payments would be
deposited later in court. 8 On May 22, 1974, the trial court issued an order
prohibiting A.U. Valencia and Co. from collecting the monthly installments. 9 On
July 22, 1974 and February 6, 1976 the same court ordered the Valencia firm to
furnish the court with a complete list of all lot buyers who had already made
down payments to Manila Remnant before December 1972. 10 Valencia
complied with the court’s order on August 6, 1974 by submitting a list which
excluded the name of the Ventanillas. 11
Since A.U. Valencia and Co. failed to forward its collections after May 1973,
Manila Remnant caused on August 20, 1976 the publication in the Times Journal
of a notice cancelling the contracts to sell of some lot buyers including that of
Carlos Crisostomo in whose name the payments of the Ventanillas had been
credited. 12
To prevent the effective cancellation of their contracts, Artemio Valencia
instigated on September 22, 1976 the filing by Carlos Crisostomo and seventeen
(17) other lot vendees of a complaint for specific performance with damages
against Manila Remnant before the Court of First Instance of Quezon City. The
complaint alleged that Crisostomo had already paid a total of P17,922.40 and
P18,136.85 on Lots 1 and 2, respectively. 13
It was not until March 1978 when the Ventanillas, after learning of the
termination of the agency agreement between Manila Remnant and A.U.
Valencia & Co., decided to stop paying their amortizations to the latter. The
Ventanillas, believing that they had already remitted P37,007.00 for Lot 1 and
P36,911.00 for Lot 2 or a grand total, inclusive of interest, of P73,122.35 for the
two lots, thereby leaving a balance of P13,531.58 for Lot 1 and P13,540.22 for
Lot 2, went directly to Manila Remnant and offered to pay the entire
outstanding balance of the purchase price. 14 To their shock and utter
consternation, they discovered from Gloria Caballes, an accountant of Manila
Remnant, that their names did not appear in the records of A.U. Valencia and Co.
as lot buyers. Caballes showed the Ventanillas copies of the contracts to sell in
favor of Carlos Crisostomo, duly signed by Artemio U. Valencia as President of
Manila Remnant. 15 Whereupon, Manila Remnant refused the offer of the
Ventanillas to pay for the remainder of the contract price because they did not
have the personality to do so. Furthermore, they were shown the published
Notice of Cancellation in the January 29, 1978 issue of the Times Journal
rescinding the contracts of delinquent buyers including Crisostomo.
Thus, on November 21, 1978, the Ventanillas commenced an action for specific
performance, annulment of deeds and damages against Manila Remnant, A.U.
Valencia and Co. and Carlos Crisostomo before the Court of First Instance of
Quezon City, Branch 17-B. 16 Crisostomo was declared in default for failure to
file an answer.chanrobles.com:cralaw:red
On November 17, 1980, the trial court rendered a decision 1) declaring the
contracts to sell issued in favor of the Ventanillas valid and subsisting and
annulling the contracts to sell in Crisostomo’s favor; 2) ordering Manila
Remnant to execute in favor of the Ventanillas an Absolute Deed of Sale free
from all liens and encumbrances; and 3) condemning defendants A.U. Valencia
and Co. Inc., Manila Remnant and Carlos Crisostomo jointly and severally to pay
the Ventanillas the amount of P100,000.00 as moral damages, P100,000.00 as
exemplary damages, and P100,000.00 as attorney’s fees. The lower court also
added that if, for any legal reason, the transfer of the lots could no longer be
effected, the defendants should reimburse jointly and severally to the
Ventanillas the total amount of P73,122.35 representing the total amount paid
for the two lots plus legal interest thereon from March 1970 plus damages as
aforestated. With regard to the cross claim of Manila Remnant against Valencia,
the court found that Manila Remnant could have not been dragged into this suit
without the fraudulent manipulations of Valencia. Hence, it adjudged A.U.
Valencia and Co. to pay the Manila Remnant P5,000.00 as moral damages and
exemplary damages and P5,000.00 as attorney’s fees. 17
Subsequently, Manila Remnant and A.U. Valencia and Co. elevated the lower
court’s decision to the Court of Appeals through separate appeals. On October
13, 1987, the Appellate Court affirmed in toto the decision of the lower court.
Reconsideration sought by petitioner Manila Remnant was denied, hence the
instant petition.
There is no question that the contracts to sell in favor of the Ventanilla spouses
are valid and subsisting. The only issue remaining is whether or not petitioner
Manila Remnant should be held solidarily liable together with A.U. Valencia and
Co. and Carlos Crisostomo for the payment of moral, exemplary damages and
attorney’s fees in favor of the Ventanillas. 18
While petitioner Manila Remnant has not refuted the legality of the award of
damages per se, it believes that it cannot be made jointly and severally liable
with its agent A.U. Valencia and Co. since it was not aware of the illegal acts
perpetrated nor did it consent or ratify said acts of its agent.
The argument is devoid of merit.
In the case at bar, the Valencia realty firm had clearly overstepped the bounds of
its authority as agent — and for that matter, even the law — when it undertook
the double sale of the disputed lots. Such being the case, the principal, Manila
Remnant, would have been in the clear pursuant to Article 1897 of the Civil
Code which states that" (t)he agent who acts as such is not personally liable to
that party with whom he contracts, unless he expressly binds himself or exceeds
the limits of his authority without giving such party sufficient notice of his
powers." chanrobles.com.ph : virtual law library
However, the unique relationship existing between the principal and the agent
at the time of the dual sale must be underscored. Bear in mind that the
president then of both firms was Artemio U. Valencia, the individual directly
responsible for the sale scam. Hence, despite the fact that the double sale was
beyond the power of the agent, Manila Remnant as principal was chargeable
with the knowledge or constructive notice of that fact and not having done
anything to correct such an irregularity was deemed to have ratified the same.
19
More in point, we find that by the principle of estoppel, Manila Remnant is
deemed to have allowed its agent to act as though it had plenary powers. Article
1911 of the Civil Code provides:jgc:chanrobles.com.ph
"Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full
powers." (Emphasis supplied)
The above-quoted article is new. It is intended to protect the rights of innocent
persons. In such a situation, both the principal and the agent may be considered
as joint feasors whose liability is joint and solidary. 20
Authority by estoppel has arisen in the instant case because by its negligence,
the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to
exercise powers not granted to it. That the principal might not have had actual
knowledge of the agent’s misdeed is of no moment. Consider the following
circumstances:chanrob1es virtual 1aw library
Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia
and Co. in the sale and disposition of the subdivision lots. As a disclosed
principal in the contracts to sell in favor of the Ventanilla couple, there was no
doubt that they were in fact contracting with the principal. Section 7 of the
Ventanillas’ contracts to sell states:jgc:chanrobles.com.ph
"7. That all payments whether deposits, down payment and monthly installment
agreed to be made by the vendee shall be payable to A.U. Valencia and Co., Inc. It
is hereby expressly understood that unauthorized payments made to real estate
brokers or agents shall be the sole and exclusive responsibility and at the risk of
the vendee and any and all such payments shall not be recognized by the
vendors unless the official receipts therefor shall have been duly signed by the
vendors’ duly authorized agent, A.U. Valencia and Co., Inc." (Emphasis supplied)
Indeed, once Manila Remnant had been furnished with the usual copies of the
contracts to sell, its only participation then was to accept the collections and pay
the commissions to the agent. The latter had complete control of the business
arrangement. 21
Secondly, it is evident from the records that Manila Remnant was less than
prudent in the conduct of its business as a subdivision owner. For instance,
Manila Remnant failed to take immediate steps to avert any damage that might
be incurred by the lot buyers as a result of its unilateral abrogation of the
agency contract. The publication of the cancelled contracts to sell in the Times
Journal came three years after Manila Remnant had revoked its agreement with
A.U. Valencia and Co.chanrobles virtual lawlibrary
Moreover, Manila Remnant also failed to check the records of its agent
immediately after the revocation of the agency contract despite the fact that
such revocation was due to reported anomalies in Valencia’s collections.
Altogether, as pointed out by the counsel for the Ventanillas, Manila Remnant
could and should have devised a system whereby it could monitor and require a
regular accounting from A.U. Valencia and Co., its agent. Not having done so,
Manila Remnant has made itself liable to those who have relied on its agent and
the representation that such agent was clothed with sufficient powers to act on
behalf of the principal.
Even assuming that Manila Remnant was as much a victim as the other innocent
lot buyers, it cannot be gainsaid that it was precisely its negligence and laxity in
the day to day operations of the real estate business which made it possible for
the agent to deceive unsuspecting vendees like the Ventanillas.
In essence, therefore, the basis for Manila Remnant’s solidary liability is
estoppel which, in turn, is rooted in the principal’s neglectfulness in failing to
properly supervise and control the affairs of its agent and to adopt the needed
measures to prevent further misrepresentation. As a consequence, Manila
Remnant is considered estopped from pleading the truth that it had no direct
hand in the deception employed by its agent. 22
A final word. The Court cannot help but be alarmed over the reported practice
of supposedly reputable real estate brokers of manipulating prices by allowing
their own agents to "buy" lots in their names in the hope of reselling the same at
a higher price to the prejudice of bona fide lot buyers, as precisely what the
agent had intended to happen in the present case. This is a serious matter that
must be looked into by the appropriate government housing
authority.chanrobles.com.ph : virtual law library
WHEREFORE, in view of the foregoing, the appealed decision of the Court of
Appeals dated October 13, 1987 sustaining the decision of the Quezon City trial
court dated November 17, 1980 is AFFIRMED. This judgment is immediately
executory. Costs against petitioner.
SO ORDERED.
G.R. No. L-55963 December 1, 1989
SPOUSES JOSE FONTANILLA AND VIRGINIA FONTANILLA, petitioners,
vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION
ADMINISTRATION, respondents.
G.R. No. L-61045 December 1, 1989
NATIONAL IRRIGATION ADMINISTRATION, appellant,
vs.
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.
Cecilio V. Suarez, Jr. for Spouses Fontanilla.
Felicisimo C. Villaflor for NIA.
PARAS, J.:
In G.R. No. L-55963, the petition for review on certiorari seeks the affirmance of
the decision dated March 20, 1980 of the then Court of First Instance of Nueva
Ecija, Branch VIII, at San Jose City and its modification with respect to the denial
of petitioner's claim for moral and exemplary damages and attorneys fees.
In G.R. No. 61045, respondent National Irrigation Administration seeks the
reversal of the aforesaid decision of the lower court. The original appeal of this
case before the Court of Appeals was certified to this Court and in the resolution
of July 7, 1982, it was docketed with the aforecited number. And in the
resolution of April 3, this case was consolidated with G.R. No. 55963.
It appears that on August 21, 1976 at about 6:30 P.M., a pickup owned and
operated by respondent National Irrigation Administration, a government
agency bearing Plate No. IN-651, then driven officially by Hugo Garcia, an
employee of said agency as its regular driver, bumped a bicycle ridden by
Francisco Fontanilla, son of herein petitioners, and Restituto Deligo, at Maasin,
San Jose City along the Maharlika Highway. As a result of the impact, Francisco
Fontanilla and Restituto Deligo were injured and brought to the San Jose City
Emergency Hospital for treatment. Fontanilla was later transferred to the
Cabanatuan Provincial Hospital where he died.
Garcia was then a regular driver of respondent National Irrigation
Administration who, at the time of the accident, was a licensed professional
driver and who qualified for employment as such regular driver of respondent
after having passed the written and oral examinations on traffic rules and
maintenance of vehicles given by National Irrigation Administration authorities.
The within petition is thus an off-shot of the action (Civil Case No. SJC-56)
instituted by petitioners-spouses on April 17, 1978 against respondent NIA
before the then Court of First Instance of Nueva Ecija, Branch VIII at San Jose
City, for damages in connection with the death of their son resulting from the
aforestated accident.
After trial, the trial court rendered judgment on March 20, 1980 which directed
respondent National Irrigation Administration to pay damages (death benefits)
and actual expenses to petitioners. The dispositive portion of the decision reads
thus:
. . . . . Judgment is here rendered ordering the defendant National Irrigation
Administration to pay to the heirs of the deceased P12,000.00 for the death of
Francisco Fontanilla; P3,389.00 which the parents of the deceased had spent for
the hospitalization and burial of the deceased Francisco Fontanilla; and to pay
the costs. (Brief for the petitioners spouses Fontanilla, p. 4; Rollo, p. 132)
Respondent National Irrigation Administration filed on April 21, 1980, its
motion for reconsideration of the aforesaid decision which respondent trial
court denied in its Order of June 13, 1980. Respondent National Irrigation
Administration thus appealed said decision to the Court of Appeals (C.A.-G.R.
No. 67237- R) where it filed its brief for appellant in support of its position.
Instead of filing the required brief in the aforecited Court of Appeals case,
petitioners filed the instant petition with this Court.
The sole issue for the resolution of the Court is: Whether or not the award of
moral damages, exemplary damages and attorney's fees is legally proper in a
complaint for damages based on quasi-delict which resulted in the death of the
son of herein petitioners.
Petitioners allege:
1. The award of moral damages is specifically allowable. under paragraph 3 of
Article 2206 of the New Civil Code which provides that the spouse, legitimate
and illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the deceased.
Should moral damages be granted, the award should be made to each of
petitioners-spouses individually and in varying amounts depending upon proof
of mental and depth of intensity of the same, which should not be less than
P50,000.00 for each of them.
2. The decision of the trial court had made an impression that respondent
National Irrigation Administration acted with gross negligence because of the
accident and the subsequent failure of the National Irrigation Administration
personnel including the driver to stop in order to give assistance to the, victims.
Thus, by reason of the gross negligence of respondent, petitioners become
entitled to exemplary damages under Arts. 2231 and 2229 of the New Civil
Code.
3. Petitioners are entitled to an award of attorney's fees, the amount of which
(20%) had been sufficiently established in the hearing of May 23, 1979.
4. This petition has been filed only for the purpose of reviewing the findings of
the lower court upon which the disallowance of moral damages, exemplary
damages and attorney's fees was based and not for the purpose of disturbing
the other findings of fact and conclusions of law.
The Solicitor General, taking up the cudgels for public respondent National
Irrigation Administration, contends thus:
1. The filing of the instant petition is rot proper in view of the appeal taken by
respondent National Irrigation Administration to the Court of Appeals against
the judgment sought to be reviewed. The focal issue raised in respondent's
appeal to the Court of Appeals involves the question as to whether or not the
driver of the vehicle that bumped the victims was negligent in his operation of
said vehicle. It thus becomes necessary that before petitioners' claim for moral
and exemplary damages could be resolved, there should first be a finding of
negligence on the part of respondent's employee-driver. In this regard, the
Solicitor General alleges that the trial court decision does not categorically
contain such finding.
2. The filing of the "Appearance and Urgent Motion For Leave to File Plaintiff-
Appellee's Brief" dated December 28, 1981 by petitioners in the appeal (CA-G.R.
No. 67237-R; and G. R. No.61045) of the respondent National Irrigation
Administration before the Court of Appeals, is an explicit admission of said
petitioners that the herein petition, is not proper. Inconsistent procedures are
manifest because while petitioners question the findings of fact in the Court of
Appeals, they present only the questions of law before this Court which posture
confirms their admission of the facts.
3. The fact that the parties failed to agree on whether or not negligence caused
the vehicular accident involves a question of fact which petitioners should have
brought to the Court of Appeals within the reglementary period. Hence, the
decision of the trial court has become final as to the petitioners and for this
reason alone, the petition should be dismissed.
4. Respondent Judge acted within his jurisdiction, sound discretion and in
conformity with the law.
5. Respondents do not assail petitioners' claim to moral and exemplary damages
by reason of the shock and subsequent illness they suffered because of the
death of their son. Respondent National Irrigation Administration, however,
avers that it cannot be held liable for the damages because it is an agency of the
State performing governmental functions and driver Hugo Garcia was a regular
driver of the vehicle, not a special agent who was performing a job or act foreign
to his usual duties. Hence, the liability for the tortious act should. not be borne
by respondent government agency but by driver Garcia who should answer for
the consequences of his act.
6. Even as the trial court touched on the failure or laxity of respondent National
Irrigation Administration in exercising due diligence in the selection and
supervision of its employee, the matter of due diligence is not an issue in this
case since driver Garcia was not its special agent but a regular driver of the
vehicle.
The sole legal question on whether or not petitioners may be entitled to an
award of moral and exemplary damages and attorney's fees can very well be
answered with the application of Arts. 2176 and 2180 of theNew Civil Code.
Art. 2176 thus provides:
Whoever by act omission causes damage to another, there being fault or
negligence, is obliged to pay for damage done. Such fault or negligence, if there
is no pre-existing cotractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter
Paragraphs 5 and 6 of Art. 21 80 read as follows:
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even the
though the former are not engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent.; but
not when the damage has been caused by the official to whom the task done
properly pertains, in which case what is provided in Art. 2176 shall be
applicable.
The liability of the State has two aspects. namely:
1. Its public or governmental aspects where it is liable for the tortious acts of
special agents only.
2. Its private or business aspects (as when it engages in private enterprises)
where it becomes liable as an ordinary employer. (p. 961, Civil Code of the
Philippines; Annotated, Paras; 1986 Ed. ).
In this jurisdiction, the State assumes a limited liability for the damage caused
by the tortious acts or conduct of its special agent.
Under the aforequoted paragrah 6 of Art. 2180, the State has voluntarily
assumed liability for acts done through special agents. The State's agent, if a
public official, must not only be specially commissioned to do a particular task
but that such task must be foreign to said official's usual governmental
functions. If the State's agent is not a public official, and is commissioned to
perform non-governmental functions, then the State assumes the role of an
ordinary employer and will be held liable as such for its agent's tort. Where the
government commissions a private individual for a special governmental task, it
is acting through a special agent within the meaning of the provision. (Torts and
Damages, Sangco, p. 347, 1984 Ed.)
Certain functions and activities, which can be performed only by the
government, are more or less generally agreed to be "governmental" in
character, and so the State is immune from tort liability. On the other hand, a
service which might as well be provided by a private corporation, and
particularly when it collects revenues from it, the function is considered a
"proprietary" one, as to which there may be liability for the torts of agents
within the scope of their employment.
The National Irrigation Administration is an agency of the government
exercising proprietary functions, by express provision of Rep. Act No. 3601.
Section 1 of said Act provides:
Section 1. Name and domicile.-A body corporate is hereby created which shall be
known as the National Irrigation Administration, hereinafter called the NIA for
short, which shall be organized immediately after the approval of this Act. It
shall have its principal seat of business in the City of Manila and shall have
representatives in all provinces for the proper conduct of its business.
Section 2 of said law spells out some of the NIA's proprietary functions. Thus-
Sec. 2. Powers and objectives.-The NIA shall have the following powers and
objectives:
(a) x x x x x x x x x x x x x x x x x x
(b) x x x x x x x x x x x x x x x x x x
(c) To collect from the users of each irrigation system constructed by it such
fees as may be necessary to finance the continuous operation of the system and
reimburse within a certain period not less than twenty-five years cost of
construction thereof; and
(d) To do all such other tthings and to transact all such business as are directly
or indirectly necessary, incidental or conducive to the attainment of the above
objectives.
Indubitably, the NIA is a government corporation with juridical personality and
not a mere agency of the government. Since it is a corporate body performing
non-governmental functions, it now becomes liable for the damage caused by
the accident resulting from the tortious act of its driver-employee. In this
particular case, the NIA assumes the responsibility of an ordinary employer and
as such, it becomes answerable for damages.
This assumption of liability, however, is predicated upon the existence of
negligence on the part of respondent NIA. The negligence referred to here is the
negligence of supervision.
At this juncture, the matter of due diligence on the part of respondent NIA
becomes a crucial issue in determining its liability since it has been established
that respondent is a government agency performing proprietary functions and
as such, it assumes the posture of an ordinary employer which, under Par. 5 of
Art. 2180, is responsible for the damages caused by its employees provided that
it has failed to observe or exercise due diligence in the selection and supervision
of the driver.
It will be noted from the assailed decision of the trial court that "as a result of
the impact, Francisco Fontanilla was thrown to a distance 50 meters away from
the point of impact while Restituto Deligo was thrown a little bit further away.
The impact took place almost at the edge of the cemented portion of the road."
(Emphasis supplied,) [page 26, Rollo]
The lower court further declared that "a speeding vehicle coming in contact
with a person causes force and impact upon the vehicle that anyone in the
vehicle cannot fail to notice. As a matter of fact, the impact was so strong as
shown by the fact that the vehicle suffered dents on the right side of the radiator
guard, the hood, the fender and a crack on the radiator as shown by the
investigation report (Exhibit "E"). (Emphasis supplied) [page 29, Rollo]
It should be emphasized that the accident happened along the Maharlika
National Road within the city limits of San Jose City, an urban area. Considering
the fact that the victim was thrown 50 meters away from the point of impact,
there is a strong indication that driver Garcia was driving at a high speed. This is
confirmed by the fact that the pick-up suffered substantial and heavy damage as
above-described and the fact that the NIA group was then "in a hurry to reach
the campsite as early as possible", as shown by their not stopping to find out
what they bumped as would have been their normal and initial reaction.
Evidently, there was negligence in the supervision of the driver for the reason
that they were travelling at a high speed within the city limits and yet the
supervisor of the group, Ely Salonga, failed to caution and make the driver
observe the proper and allowed speed limit within the city. Under the situation,
such negligence is further aggravated by their desire to reach their destination
without even checking whether or not the vehicle suffered damage from the
object it bumped, thus showing imprudence and reckelessness on the part of
both the driver and the supervisor in the group.
Significantly, this Court has ruled that even if the employer can prove the
diligence in the selection and supervision (the latter aspect has not been
established herein) of the employee, still if he ratifies the wrongful acts, or take
no step to avert further damage, the employer would still be liable. (Maxion vs.
Manila Railroad Co., 44 Phil. 597).
Thus, too, in the case of Vda. de Bonifacio vs. B.L.T. Bus Co. (L-26810, August 31,
1970, 34 SCRA 618), this Court held that a driver should be especially watchful
in anticipation of others who may be using the highway, and his failure to keep a
proper look out for reasons and objects in the line to be traversed constitutes
negligence.
Considering the foregoing, respondent NIA is hereby directed to pay herein
petitioners-spouses the amounts of P12,000.00 for the death of Francisco
Fontanilla; P3,389.00 for hospitalization and burial expenses of the aforenamed
deceased; P30,000.00 as moral damages; P8,000.00 as exemplary damages and
attorney's fees of 20% of the total award.
SO ORDERED.
G.R. No. 129577-80           February 15, 2000
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
BULU CHOWDURY, accused-appellant.
PUNO, J.:
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.5
Trial 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.nêt
SO ORDERED.
G.R. No. 115849             January 24, 1996
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of
the Philippines) and MERCURIO RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO
DEMETRIA, and JOSE JANOLO, respondents.
DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers
in an exchange of letters and/or in a meeting with the buyers constitute a
perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa,
Laguna? Does the doctrine of "apparent authority" apply in this case? If so, may
the Central Bank-appointed conservator of Producers Bank (now First
Philippine International Bank) repudiate such "apparent authority" after said
contract has been deemed perfected? During the pendency of a suit for specific
performance, does the filing of a "derivative suit" by the majority shareholders
and directors of the distressed bank to prevent the enforcement or
implementation of the sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the
instant Petition for review on certiorari under Rule 45 of the Rules of Court, to
set aside the Decision promulgated January 14, 1994 of the respondent Court of
Appeals1 in CA-G.R CV No. 35756 and the Resolution promulgated June 14, 1994
denying the motion for reconsideration. The dispositive portion of the said
Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of
the damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and
the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed
against defendant bank. In all other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion
are deemed, herein and hereafter, to legally refer to the plaintiff-appellee Carlos
C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's2 decision dated July 10, 1991, on the
other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against the defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6)
parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101
hectares, more or less, covered by and embraced in Transfer Certificates of Title
Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between
the plaintiffs as buyers and the defendant Producers Bank for an agreed price of
Five and One Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this
decision and receipt from the plaintiffs the amount of P5.5 Million, to execute in
favor of said plaintiffs a deed of absolute sale over the aforementioned six (6)
parcels of land, and to immediately deliver to the plaintiffs the owner's copies of
T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the
same deed and transfer of the six (6) titles in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo
and Demetrio Demetria the sums of P200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of
P100,000.00 as exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the
amount of P400,000.00 for and by way of attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and
moderate damages in the amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to
sur-rejoinder, the petition was given due course in a Resolution dated January
18, 1995. Thence, the parties filed their respective memoranda and reply
memoranda. The First Division transferred this case to the Third Division per
resolution dated October 23, 1995. After carefully deliberating on the aforesaid
submissions, the Court assigned the case to the undersigned ponente for the
writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the
Philippines; petitioner Bank, for brevity) is a banking institution organized and
existing under the laws of the Republic of the Philippines. Petitioner Mercurio
Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times
material to this case, Head-Manager of the Property Management Department of
the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and
is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose
Janolo.
Respondent Court of Appeals is the court which issued the Decision and
Resolution sought to be set aside through this petition.
The Facts
The facts of this case are summarized in the respondent Court's Decision3 as
follows:
(1) In the course of its banking operations, the defendant Producer Bank of the
Philippines acquired six parcels of land with a total area of 101 hectares located
at Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos.
T-106932 to T-106937. The property used to be owned by BYME Investment
and Development Corporation which had them mortgaged with the bank as
collateral for a loan. The original plaintiffs, Demetrio Demetria and Jose O.
Janolo, wanted to purchase the property and thus initiated negotiations for that
purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME JP M-P GUTIERREZ ENTERPRISES
investment's legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, 142 Charisma St., Doñ a Andres II
Manager of the Property Management Department of the defendant bank. The Rosario, Pasig, Metro Manila
meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan.
16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of Attention: JOSE O. JANOLO
defendant Rivera, made a formal purchase offer to the bank through a letter
dated August 30, 1987 (Exh. "B"), as follows: Dear Sir:

August 30, 1987 Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta.
Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please be informed
The Producers Bank of the Philippines however that the bank's counter-offer is at P5.5 million for more than 101
Makati, Metro Manila hectares on lot basis.

Attn. Mr. Mercurio Q. Rivera We shall be very glad to hear your position on the on the matter.
Manager, Property Management Dept.
Best regards.
Gentleman:
(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted
I have the honor to submit my formal offer to purchase your properties covered reply, wrote (Exh. "D"):
by titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101
hectares, more or less. September 17, 1987

TCT NO. AREA Producers Bank

T-106932 113,580 sq. m. Paseo de Roxas
Makati, Metro Manila
T-106933 70,899 sq. m.
T-106934 52,246 sq. m. Attention: Mr. Mercurio Rivera
T-106935 96,768 sq. m.
T-106936 187,114 sq. m. Gentlemen:

T-106937 481,481 sq. m.

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND
(P3,500,000.00) PESOS, in cash.
Kindly contact me at Telephone Number 921-1344.
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a
formal reply by letter which is hereunder quoted (Exh. "C"):
September 1, 1987
In reply to your letter regarding my proposal to purchase your 101-hectare lot
located at Sta. Rosa, Laguna, I would like to amend my previous offer and I now
propose to buy the said lot at P4.250 million in CASH..
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What
took place was a meeting on September 28, 1987 between the plaintiffs and
Luis Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo,
the BYME lawyer, attended the meeting. Two days later, or on September 30,
1987, plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh.
"E"):
The Producers Bank of the Philippines
Paseo de Roxas, Makati
Metro Manila
Attention: Mr. Mercurio Rivera
Re: 101 Hectares of Land
in Sta. Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform
you that we are accepting your offer for us to purchase the property at Sta. Rosa,
Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE
MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which has been placed
under conservatorship by the Central Bank since 1984) was replaced by an
Acting Conservator in the person of defendant Leonida T. Encarnacion. On
November 4, 1987, defendant Rivera wrote plaintiff Demetria the following
letter (Exh. "F"):
Attention: Atty. Demetrio Demetria
Dear Sir:
Your proposal to buy the properties the bank foreclosed from Byme investment
Corp. located at Sta. Rosa, Laguna is under study yet as of this time by the newly
created committee for submission to the newly designated Acting Conservator
of the bank.
For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for
compliance by the bank with what plaintiff considered as a perfected contract of
sale, which demands were in one form or another refused by the bank. As
detailed by the trial court in its decision, on November 17, 1987, plaintiffs
through a letter to defendant Rivera (Exhibit "G") tendered payment of the
amount of P5.5 million "pursuant to (our) perfected sale agreement."
Defendants refused to receive both the payment and the letter. Instead, the
parcels of land involved in the transaction were advertised by the bank for sale
to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the execution
by the bank of the documents on what was considered as a "perfected
agreement." Thus:
Mr. Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase
your 101-hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT
No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer dated
September 1, 1987 of this same lot in the amount of P5.5 million was accepted
by our client thru a letter dated September 30, 1987 and was received by you on
October 5, 1987.
In view of the above circumstances, we believe that an agreement has been
perfected. We were also informed that despite repeated follow-up to
consummate the purchase, you now refuse to honor your commitment. Instead,
you have advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you to
consummate and execute the necessary actions/documentation within three (3)
days from your receipt hereof. We are ready to remit the agreed amount of P5.5
million at your advice. Otherwise, we shall be constrained to file the necessary
court action to protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the
foregoing letter and stated, in its communication of December 2, 1987 (Exh. "I"),
that said letter has been "referred . . . to the office of our Conservator for proper
disposition" However, no response came from the Acting Conservator. On
December 14, 1987, the plaintiffs made a second tender of payment (Exh. "L"
and "L-1"), this time through the Acting Conservator, defendant Encarnacion.
Plaintiffs' letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator
We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO,
MBTC Check No. 258387 in the amount of P5.5 million as our agreed purchase
price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934,
106935, 106936 and 106937 and registered under Producers Bank.
This is in connection with the perfected agreement consequent from your offer
of P5.5 Million as the purchase price of the said lots. Please inform us of the date
of documentation of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then, on
May 3, 1988, plaintiff, through counsel, made a final demand for compliance by
the bank with its obligations under the considered perfected contract of sale
(Exhibit "N"). As recounted by the trial court (Original Record, p. 656), in a reply
letter dated May 12, 1988 (Annex "4" of defendant's answer to amended
complaint), the defendants through Acting Conservator Encarnacion repudiated
the authority of defendant Rivera and claimed that his dealings with the
plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or
illegal. On that basis, the defendants justified the refusal of the tenders of
payment and the non-compliance with the obligations under what the plaintiffs
considered to be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with
damages against the bank, its Manager Rivers and Acting Conservator
Encarnacion. The basis of the suit was that the transaction had with the bank
resulted in a perfected contract of sale, The defendants took the position that
there was no such perfected sale because the defendant Rivera is not authorized
to sell the property, and that there was no meeting of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip
Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court,
alleging that as owner of 80% of the Bank's outstanding shares of stock, he had
a substantial interest in resisting the complaint. On July 8, 1991, the trial court
issued an order denying the motion to intervene on the ground that it was filed
after trial had already been concluded. It also denied a motion for
reconsideration filed thereafter. From the trial court's decision, the Bank,
petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals
which subsequently affirmed with modification the said judgment. Henry Co did
not appeal the denial of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was
substituted in place of Demetria and Janolo, in view of the assignment of the
latters' rights in the matter in litigation to said private respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of
Appeals, Henry Co and several other stockholders of the Bank, through counsel
Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the
"Second Case") — purportedly a "derivative suit" — with the Regional Trial
Court of Makati, Branch 134, docketed as Civil Case No. 92-1606, against
Encarnacion, Demetria and Janolo "to declare any perfected sale of the property
as unenforceable and to stop Ejercito from enforcing or implementing the
sale"4 In his answer, Janolo argued that the Second Case was barred by litis
pendentia by virtue of the case then pending in the Court of Appeals. During the
pre-trial conference in the Second Case, plaintiffs filed a Motion for Leave of
Court to Dismiss the Case Without Prejudice. "Private respondent opposed this
motion on the ground, among others, that plaintiff's act of forum shopping
justifies the dismissal of both cases, with prejudice."5 Private respondent, in his
memorandum, averred that this motion is still pending in the Makati RTC.
In their Petition6 and Memorandum7 , petitioners summarized their position as
follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected
between Ejercito (in substitution of Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract
of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the
power to overrule or revoke acts of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the
evidence on record.
On the other hand, petitioners prayed for dismissal of the instant suit on the
ground8 that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by
the evidence on record and may no longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between
Demetria and Janolo (substituted by; respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being
estopped from repudiating the agency and the contract, has no authority to
revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be
summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of
frauds?
4) Did the bank conservator have the unilateral power to repudiate the
authority of the bank officers and/or to revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme
Court promulgated Revised Circular No. 28-91 requiring that a party "must
certify under oath . . . [that] (a) he has not (t)heretofore commenced any other
action or proceeding involving the same issues in the Supreme Court, the Court
of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no
such action or proceeding is pending" in said courts or agencies. A violation of
the said circular entails sanctions that include the summary dismissal of the
multiple petitions or complaints. To be sure, petitioners have included a
VERIFICATION/CERTIFICATION in their Petition stating "for the record(,) the
pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati,
Branch 134, involving a derivative suit filed by stockholders of petitioner Bank
against the conservator and other defendants but which is the subject of a
pending Motion to Dismiss Without Prejudice.9
Private respondent Ejercito vigorously argues that in spite of this verification,
petitioners are guilty of actual forum shopping because the instant petition
pending before this Court involves "identical parties or interests represented,
rights asserted and reliefs sought (as that) currently pending before the
Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues in
the two cases are so interwined that a judgement or resolution in either case
will constitute res judicata in the other." 10
On the other hand, petitioners explain 11 that there is no forum-shopping
because:
1) In the earlier or "First Case" from which this proceeding arose, the Bank was
impleaded as a defendant, whereas in the "Second Case" (assuming the Bank is
the real party in interest in a derivative suit), it was plaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the corporation
under the circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank
president and attached to the Petition identifies the action as a "derivative suit,"
it "does not mean that it is one" and "(t)hat is a legal question for the courts to
decide";
4) Petitioners did not hide the Second Case at they mentioned it in the said
VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international
law.12 , where non-resident litigants are given the option to choose the forum or
place wherein to bring their suit for various reasons or excuses, including to
secure procedural advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. To combat these less
than honorable excuses, the principle of forum non conveniens was developed
whereby a court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most "convenient" or available forum and the
parties are not precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a
party attempts to have his action tried in a particular court or jurisdiction
where he feels he will receive the most favorable judgment or verdict." Hence,
according to Words and Phrases14 , "a litigant is open to the charge of "forum
shopping" whenever he chooses a forum with slight connection to factual
circumstances surrounding his suit, and litigants should be encouraged to
attempt to settle their differences without imposing undue expenses and
vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing
not only a choice of venues, as it was originally understood in conflicts of laws,
but also to a choice of remedies. As to the first (choice of venues), the Rules of
Court, for example, allow a plaintiff to commence personal actions "where the
defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff" (Rule 4,
Sec, 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of
pursuing civil liabilities independently of the criminal, arising from the same set
of facts. A passenger of a public utility vehicle involved in a vehicular accident
may sue on culpa contractual, culpa aquiliana or culpa criminal — each remedy
being available independently of the others — although he cannot recover more
than once.
In either of these situations (choice of venue or choice of remedy), the litigant
actually shops for a forum of his action, This was the original concept of the term
forum shopping.
Eventually, however, instead of actually making a choice of the forum of their
actions, litigants, through the encouragement of their lawyers, file their actions
in all available courts, or invoke all relevant remedies simultaneously. This
practice had not only resulted to (sic) conflicting adjudications among different
courts and consequent confusion enimical (sic) to an orderly administration of
justice. It had created extreme inconvenience to some of the parties to the
action.
Thus, "forum shopping" had acquired a different concept — which is unethical
professional legal practice. And this necessitated or had given rise to the
formulation of rules and canons discouraging or altogether prohibiting the
practice. 15
What therefore originally started both in conflicts of laws and in our domestic
law as a legitimate device for solving problems has been abused and mis-used
to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme
Court, as already mentioned, promulgated Circular 28-91. And even before that,
the Court had prescribed it in the Interim Rules and Guidelines issued on
January 11, 1983 and had struck down in several cases 16 the inveterate use of
this insidious malpractice. Forum shopping as "the filing of repetitious suits in
different courts" has been condemned by Justice Andres R. Narvasa (now Chief
Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes, et al., "as
a reprehensible manipulation of court processes and proceedings . . ." 17 when
does forum shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one
forum, a party seeks a favorable opinion (other than by appeal or certiorari) in
another. The principle applies not only with respect to suits filed in the courts
but also in connection with litigations commenced in the courts while an
administrative proceeding is pending, as in this case, in order to defeat
administrative processes and in anticipation of an unfavorable administrative
ruling and a favorable court ruling. This is specially so, as in this case, where the
court in which the second suit was brought, has no jurisdiction.18
The test for determining whether a party violated the rule against forum
shopping has been laid dawn in the 1986 case of Buan vs. Lopez 19 , also by Chief
Justice Narvasa, and that is, forum shopping exists where the elements of litis
pendentia are present or where a final judgment in one case will amount to res
judicata in the other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-
36563 identity of parties, or at least such parties as represent the same
interests in both actions, as well as identity of rights asserted and relief prayed
for, the relief being founded on the same facts, and the identity on the two
preceding particulars is such that any judgment rendered in the other action,
will, regardless of which party is successful, amount to res adjudicata in the
action under consideration: all the requisites, in fine, of auter action pendant.
xxx       xxx       xxx
As already observed, there is between the action at bar and RTC Case No. 86-
36563, an identity as regards parties, or interests represented, rights asserted
and relief sought, as well as basis thereof, to a degree sufficient to give rise to
the ground for dismissal known as auter action pendant or lis pendens. That
same identity puts into operation the sanction of twin dismissals just
mentioned. The application of this sanction will prevent any further delay in the
settlement of the controversy which might ensue from attempts to seek
reconsideration of or to appeal from the Order of the Regional Trial Court in
Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the
petition upon grounds which appear persuasive.
Consequently, where a litigant (or one representing the same interest or
person) sues the same party against whom another action or actions for the
alleged violation of the same right and the enforcement of the same relief is/are
still pending, the defense of litis pendencia in one case is bar to the others; and, a
final judgment in one would constitute res judicata and thus would cause the
dismissal of the rest. In either case, forum shopping could be cited by the other
party as a ground to ask for summary dismissal of the two 20 (or more)
complaints or petitions, and for imposition of the other sanctions, which are
direct contempt of court, criminal prosecution, and disciplinary action against
the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with
the Second Case, it is obvious that there exist identity of parties or interests
represented, identity of rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to
the instant petition was filed by the buyer (herein private respondent and his
predecessors-in-interest) against the seller (herein petitioners) to enforce the
alleged perfected sale of real estate. On the other hand, the complaint 21 in the
Second Case seeks to declare such purported sale involving the same real
property "as unenforceable as against the Bank", which is the petitioner herein.
In other words, in the Second Case, the majority stockholders, in representation
of the Bank, are seeking to accomplish what the Bank itself failed to do in the
original case in the trial court. In brief, the objective or the relief being sought,
though worded differently, is the same, namely, to enable the petitioner Bank to
escape from the obligation to sell the property to respondent. In Danville
Maritime, Inc. vs. Commission on Audit. 22 , this Court ruled that the filing by a
party of two apparently different actions, but with the same
objective, constituted forum shopping:
In the attempt to make the two actions appear to be different, petitioner
impleaded different respondents therein — PNOC in the case before the lower
court and the COA in the case before this Court and sought what seems to be
different reliefs. Petitioner asks this Court to set aside the questioned letter-
directive of the COA dated October 10, 1988 and to direct said body to approve
the Memorandum of Agreement entered into by and between the PNOC and
petitioner, while in the complaint before the lower court petitioner seeks to
enjoin the PNOC from conducting a rebidding and from selling to other parties
the vessel "T/T Andres Bonifacio", and for an extension of time for it to comply
with the paragraph 1 of the memorandum of agreement and damages. One can
see that although the relief prayed for in the two (2) actions are ostensibly
different, the ultimate objective in both actions is the same, that is, approval of the
sale of vessel in favor of petitioner and to overturn the letter-directive of the COA
of October 10, 1988 disapproving the sale. (emphasis supplied).
In an earlier case 23 but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action
for certiorari and prohibition in this Court despite the pendency of their action
in the Makati Regional Trial Court, is a species of forum-shopping. Both actions
unquestionably involve the same transactions, the same essential facts and
circumstances. The petitioners' claim of absence of identity simply because the
PCGG had not been impleaded in the RTC suit, and the suit did not involve
certain acts which transpired after its commencement, is specious. In the RTC
action, as in the action before this Court, the validity of the contract to purchase
and sell of September 1, 1986, i.e., whether or not it had been efficaciously
rescinded, and the propriety of implementing the same (by paying the pledgee
banks the amount of their loans, obtaining the release of the pledged shares,
etc.) were the basic issues. So, too, the relief was the same: the prevention of
such implementation and/or the restoration of the status quo ante. When the
acts sought to be restrained took place anyway despite the issuance by the Trial
Court of a temporary restraining order, the RTC suit did not become functus
oficio. It remained an effective vehicle for obtention of relief; and petitioners'
remedy in the premises was plain and patent: the filing of an amended and
supplemental pleading in the RTC suit, so as to include the PCGG as defendant
and seek nullification of the acts sought to be enjoined but nonetheless done.
The remedy was certainly not the institution of another action in another forum
based on essentially the same facts, The adoption of this latter recourse renders
the petitioners amenable to disciplinary action and both their actions, in this
Court as well as in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of
interests represented. Although the plaintiffs in the Second Case (Henry L. Co. et
al.) are not name parties in the First Case, they represent the same interest and
entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct
personal interest in the matter in controversy. They are not principally or even
subsidiarily liable; much less are they direct parties in the assailed contract of
sale; and
Secondly, the allegations of the complaint in the Second Case show that the
stockholders are bringing a "derivative suit". In the caption itself, petitioners
claim to have brought suit "for and in behalf of the Producers Bank of the
Philippines" 24 . Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of
the corporation wherein he holdsstock in order to protect or vindicate
corporate rights, whenever the officials of the corporation refuse to sue, or are the
ones to be sued or hold the control of the corporation. In such actions, the suing
stockholder is regarded as a nominal party, with the corporation as the real
party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; emphasis
supplied).
In the face of the damaging admissions taken from the complaint in the Second
Case, petitioners, quite strangely, sought to deny that the Second Case was a
derivative suit, reasoning that it was brought, not by the minority shareholders,
but by Henry Co et al., who not only own, hold or control over 80% of the
outstanding capital stock, but also constitute the majority in the Board of
Directors of petitioner Bank. That being so, then they really represent the Bank.
So, whether they sued "derivatively" or directly, there is undeniably an identity
of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality
Of the Bank is separate and distinct from its shareholders. But the rulings of this
Court are consistent: "When the fiction is urged as a means of perpetrating a
fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, the achievement or perfection of a monopoly or
generally the perpetration of knavery or crime, the veil with which the law
covers and isolates the corporation from the members or stockholders who
compose it will be lifted to allow for its consideration merely as an aggregation
of individuals." 25
In addition to the many cases 26 where the corporate fiction has been
disregarded, we now add the instant case, and declare herewith that the
corporate veil cannot be used to shield an otherwise blatant violation of the
prohibition against forum-shopping. Shareholders, whether suing as the
majority in direct actions or as the minority in a derivative suit, cannot be
allowed to trifle with court processes, particularly where, as in this case, the
corporation itself has not been remiss in vigorously prosecuting or defending
corporate causes and in using and applying remedies available to it. To rule
otherwise would be to encourage corporate litigants to use their shareholders
as fronts to circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even
assuming arguendo that there is identity of parties, causes of action and reliefs
sought, "because it (the Bank) was the defendant in the (first) case while it was
the plaintiff in the other (Second Case)",citing as authority Victronics Computers,
Inc., vs. Regional Trial Court, Branch 63, Makati, etc. et al., 27 where Court held:
The rule has not been extended to a defendant who, for reasons known only to
him, commences a new action against the plaintiff — instead of filing a
responsive pleading in the other case — setting forth therein, as causes of action,
specific denials, special and affirmative defenses or even counterclaims, Thus,
Velhagen's and King's motion to dismiss Civil Case No. 91-2069 by no means
negates the charge of forum-shopping as such did not exist in the first place.
(emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the original
case, it could not have chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual
setting between Victronics and the present suit. In the former, as underscored in
the above-quoted Court ruling, the defendants did not file any responsive
pleading in the first case. In other words, they did not make any denial or raise
any defense or counter-claim therein In the case before us however, petitioners
filed a responsive pleading to the complaint — as a result of which, the issues
were joined.
Indeed, by praying for affirmative reliefs and interposing counter–claims in
their responsive pleadings, the petitioners became plaintiffs themselves in the
original case, giving unto themselves the very remedies they repeated in the
Second Case.
Ultimately, what is truly important to consider in determining whether forum-
shopping exists or not is the vexation caused the courts and parties-litigant by a
party who asks different courts and/or administrative agencies to rule on the
same or related causes and/or to grant the same or substantially the same
reliefs, in the process creating the possibility of conflicting decisions being
rendered by the different fora upon the same issue. In this case, this is exactly
the problem: a decision recognizing the perfection and directing the
enforcement of the contract of sale will directly conflict with a possible decision
in the Second Case barring the parties front enforcing or implementing the said
sale. Indeed, a final decision in one would constitute res judicata in the other 28 .
The foregoing conclusion finding the existence of forum-shopping
notwithstanding, the only sanction possible now is the dismissal of both cases
with prejudice, as the other sanctions cannot be imposed because petitioners'
present counsel entered their appearance only during the proceedings in this
Court, and the Petition's VERIFICATION/CERTIFICATION contained sufficient
allegations as to the pendency of the Second Case to show good faith in
observing Circular 28-91. The Lawyers who filed the Second Case are not before
us; thus the rudiments of due process prevent us from motu propio imposing
disciplinary measures against them in this Decision. However, petitioners
themselves (and particularly Henry Co, et al.) as litigants are admonished to
strictly follow the rules against forum-shopping and not to trifle with court
proceedings and processes They are warned that a repetition of the same will
be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not
merely because of forum-shopping but also because of the substantive issues
raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there
was, on the basis of the facts established, a perfected contract of sale as the
ultimate issue. Holding that a valid contract has been established, respondent
Court stated:
There is no dispute that the object of the transaction is that property owned by
the defendant bank as acquired assets consisting of six (6) parcels of land
specifically identified under Transfer Certificates of Title Nos. T-106932 to T-
106937. It is likewise beyond cavil that the bank intended to sell the property.
As testified to by the Bank's Deputy Conservator, Jose Entereso, the bank was
looking for buyers of the property. It is definite that the plaintiffs wanted to
purchase the property and it was precisely for this purpose that they met with
defendant Rivera, Manager of the Property Management Department of the
defendant bank, in early August 1987. The procedure in the sale of acquired
assets as well as the nature and scope of the authority of Rivera on the matter is
clearly delineated in the testimony of Rivera himself, which testimony was
relied upon by both the bank and by Rivera in their appeal briefs. Thus (TSN of
July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me and
then I published it in the form of an inter-office memorandum distributed to all
branches that these are acquired assets for sale. I was instructed to advertise
acquired assets for sale so on that basis, I have to entertain offer; to accept offer,
formal offer and upon having been offered, I present it to the Committee. I
provide the Committee with necessary information about the property such as
original loan of the borrower, bid price during the foreclosure, total claim of the
bank, the appraised value at the time the property is being offered for sale and
then the information which are relative to the evaluation of the bank to buy
which the Committee considers and it is the Committee that evaluate as against
the exposure of the bank and it is also the Committee that submit to the
Conservator for final approval and once approved, we have to execute the deed
of sale and it is the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose
of buying the property, dealt with and talked to the right person. Necessarily,
the agenda was the price of the property, and plaintiffs were dealing with the
bank official authorized to entertain offers, to accept offers and to present the
offer to the Committee before which the said official is authorized to discuss
information relative to price determination. Necessarily, too, it being inherent in
his authority, Rivera is the officer from whom official information regarding the
price, as determined by the Committee and approved by the Conservator, can be
had. And Rivera confirmed his authority when he talked with the plaintiff in
August 1987. The testimony of plaintiff Demetria is clear on this point (TSN of
May 31,1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera,
did you ask him point-blank his authority to sell any property?
A: No, sir. Not point blank although it came from him, (W)hen I asked him how
long it would take because he was saying that the matter of pricing will be
passed upon by the committee. And when I asked him how long it will take for
the committee to decide and he said the committee meets every week. If I am
not mistaken Wednesday and in about two week's (sic) time, in effect what he
was saying he was not the one who was to decide. But he would refer it to the
committee and he would relay the decision of the committee to me.
Q — Please answer the question.
A — He did not say that he had the authority (.) But he said he would refer the
matter to the committee and he would relay the decision to me and he did just
like that.
"Parenthetically, the Committee referred to was the Past Due Committee of
which Luis Co was the Head, with Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the
authority and the duties of Rivera and the bank's internal procedure in the
matter of the sale of bank's assets. As advised by Rivera, the plaintiffs made a
formal offer by a letter dated August 20, 1987 stating that they would buy at the
price of P3.5 Million in cash. The letter was for the attention of Mercurio Rivera
who was tasked to convey and accept such offers. Considering an aspect of the
official duty of Rivera as some sort of intermediary between the plaintiffs-
buyers with their proposed buying price on one hand, and the bank Committee,
the Conservator and ultimately the bank itself with the set price on the other,
and considering further the discussion of price at the meeting of August
resulting in a formal offer of P3.5 Million in cash, there can be no other logical
conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by
letter that "the bank's counter-offer is at P5.5 Million for more than 101
hectares on lot basis," such counter-offer price had been determined by the Past
Due Committee and approved by the Conservator after Rivera had duly
presented plaintiffs' offer for discussion by the Committee of such matters as
original loan of borrower, bid price during foreclosure, total claim of the bank,
and market value. Tersely put, under the established facts, the price of P5.5
Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and
definitive price at which the bank was selling the property.
There were averments by defendants below, as well as before this Court, that
the P5.5 Million price was not discussed by the Committee and that price. As
correctly characterized by the trial court, this is not credible. The testimonies of
Luis Co and Jose Entereso on this point are at best equivocal and considering
the gratuitous and self-serving character of these declarations, the bank's
submission on this point does not inspire belief. Both Co ad Entereso, as
members of the Past Due Committee of the bank, claim that the offer of the
plaintiff was never discussed by the Committee. In the same vein, both Co and
Entereso openly admit that they seldom attend the meetings of the Committee.
It is important to note that negotiations on the price had started in early August
and the plaintiffs had already offered an amount as purchase price, having been
made to understand by Rivera, the official in charge of the negotiation, that the
price will be submitted for approval by the bank and that the bank's decision
will be relayed to plaintiffs. From the facts, the official bank price. At any rate,
the bank placed its official, Rivera, in a position of authority to accept offers to
buy and negotiate the sale by having the offer officially acted upon by the bank.
The bank cannot turn around and later say, as it now does, that what Rivera
states as the bank's action on the matter is not in fact so. It is a familiar doctrine,
the doctrine of ostensible authority, that if a corporation knowingly permits one
of its officers, or any other agent, to do acts within the scope of an apparent
authority, and thus holds him out to the public as possessing power to do those
acts, the corporation will, as against any one who has in good faith dealt with
the corporation through such agent, he estopped from denying his authority
(Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357,
369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June 14,
1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected
contract as follows: "(1) Consent of the contracting parties; (2) Object certain
which is the subject matter of the contract; (3) Cause of the obligation which is
established."
There is no dispute on requisite no. 2. The object of the questioned contract
consists of the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate area
of about 101 hectares, more or less, and covered by Transfer Certificates of Title
Nos. T-106932 to T-106937. There is, however, a dispute on the first and third
requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and any
supposed counter-offer which Rivera (or Co) may have made is unauthorized.
Since there was no counter-offer by the Bank, there was nothing for Ejercito (in
substitution of Demetria and Janolo) to accept." 30 They disputed the factual
basis of the respondent Court's findings that there was an offer made by Janolo
for P3.5 million, to which the Bank counter-offered P5.5 million. We have
perused the evidence but cannot find fault with the said Court's findings of fact.
Verily, in a petition under Rule 45 such as this, errors of fact — if there be any -
are, as a rule, not reviewable. The mere fact that respondent Court (and the trial
court as well) chose to believe the evidence presented by respondent more than
that presented by petitioners is not by itself a reversible error. In fact, such
findings merit serious consideration by this Court, particularly where, as in this
case, said courts carefully and meticulously discussed their findings. This is
basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of
Appeals, let us review the question of Rivera's authority to act and petitioner's
allegations that the P5.5 million counter-offer was extinguished by the P4.25
million revised offer of Janolo. Here, there are questions of law which could be
drawn from the factual findings of the respondent Court. They also delve into
the contractual elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual
or apparent. The doctrine of "apparent authority", with special reference to
banks, was laid out in Prudential Bank vs. Court of Appeals31 , where it was held
that:
Conformably, we have declared in countless decisions that the principal is liable
for obligations contracted by the agent. The agent's apparent representation
yields to the principal's true representation and the contract is considered as
entered into between the principal and the third person (citing National Food
Authority vs. Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank
or in the course of dealings of the officers in their representative capacity but
not for acts outside the scape of their authority (9 C.J.S., p. 417). A bank holding
out its officers and agents as worthy of confidence will not be permitted to
profit by the frauds they may thus be enabled to perpetrate in the apparent
scope of their employment; nor will it be permitted to shirk its responsibility for
such frauds even though no benefit may accrue to the bank therefrom (10 Am
Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third
persons where the representation is made in the course of its business by an
agent acting within the general scope of his authority even though, in the
particular case, the agent is secretly abusing his authority and attempting to
perpetrate a fraud upon his principal or some other person, for his own
ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR
1021).
Application of these principles is especially necessary because banks have a
fiduciary relationship with the public and their stability depends on the
confidence of the people in their honesty and efficiency. Such faith will be
eroded where banks do not exercise strict care in the selection and supervision
of its employees, resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner
Rivera has apparent or implied authority to act for the Bank in the matter of
selling its acquired assets. This evidence includes the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times
material to this case, Manager of the Property Management Department of the
Bank". By his own admission, Rivera was already the person in charge of the
Bank's acquired assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the
Bank. And during the initial meeting between the buyers and Rivera, the latter
suggested that the buyers' offer should be no less than P3.3 million (TSN, April
26, 1990, pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5
million (TSN, 30 July 1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the
property for P5.5 million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers'
proposal to buy the property for P4.25 million (TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the
final price of the Bank (TSN, January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on September
28, 1994, during which the Bank's offer of P5.5 million was confirmed by Rivera
(TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major shareholder and
officer of the Bank, confirmed Rivera's statement as to the finality of the Bank's
counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990,
p. 35);
(h) In its newspaper advertisements and announcements, the Bank referred to
Rivera as the officer acting for the Bank in relation to parties interested in
buying assets owned/acquired by the Bank. In fact, Rivera was the officer
mentioned in the Bank's advertisements offering for sale the property in
question (cf. Exhs. "S" and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals,
et. al.32 , the Court, through Justice Jose A. R. Melo, affirmed the doctrine of
apparent authority as it held that the apparent authority of the officer of the
Bank of P.I. in charge of acquired assets is borne out by similar circumstances
surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority
through documents and testimony which seek to establish
Rivera's actual authority. These pieces of evidence, however, are inherently
weak as they consist of Rivera's self-serving testimony and various inter-office
memoranda that purport to show his limited actual authority, of which private
respondent cannot be charged with knowledge. In any event, since the issue is
apparent authority, the existence of which is borne out by the respondent
Court's findings, the evidence of actual authority is immaterial insofar as the
liability of a corporation is concerned 33 .
Petitioners also argued that since Demetria and Janolo were experienced
lawyers and their "law firm" had once acted for the Bank in three criminal cases,
they should be charged with actual knowledge of Rivera's limited authority. But
the Court of Appeals in its Decision (p. 12) had already made a factual finding
that the buyers had no notice of Rivera's actual authority prior to the sale. In
fact, the Bank has not shown that they acted as its counsel in respect to any
acquired assets; on the other hand, respondent has proven that Demetria and
Janolo merely associated with a loose aggrupation of lawyers (not a
professional partnership), one of whose members (Atty. Susana Parker) acted in
said criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer
in the letter dated September 17, 1987 extinguished the Bank's offer of P5.5
million 34 .They disputed the respondent Court's finding that "there was a
meeting of minds when on 30 September 1987 Demetria and Janolo through
Annex "L" (letter dated September 30, 1987) "accepted" Rivera's counter offer
of P5.5 million under Annex "J" (letter dated September 17, 1987)", citing the
late Justice Paras35 , Art. 1319 of the Civil Code 36 and related Supreme Court
rulings starting with Beaumont vs. Prieto 37 .
However, the above-cited authorities and precedents cannot apply in the instant
case because, as found by the respondent Court which reviewed the testimonies
on this point, what was "accepted" by Janolo in his letter dated September 30,
1987 was the Bank's offer of P5.5 million as confirmed and reiterated to
Demetria and Atty. Jose Fajardo by Rivera and Co during their meeting on
September 28, 1987. Note that the said letter of September 30, 1987 begins
with"(p)ursuant to our discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the
testimonies of Rivera and Co that the September 28, 1987 meeting "was meant
to have the offerors improve on their position of P5.5. million."38 However, both
the trial court and the Court of Appeals found petitioners' testimonial evidence
"not credible", and we find no basis for changing this finding of fact.
Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA)
common finding that private respondents' evidence is more in keeping with
truth and logic — that during the meeting on September 28, 1987, Luis Co and
Rivera "confirmed that the P5.5 million price has been passed upon by the
Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-
35)"39 . Hence, assuming arguendo that the counter-offer of P4.25 million
extinguished the offer of P5.5 million, Luis Co's reiteration of the said P5.5
million price during the September 28, 1987 meeting revived the said offer. And
by virtue of the September 30, 1987 letter accepting this revived offer, there
was a meeting of the minds, as the acceptance in said letter was absolute and
unqualified.
We note that the Bank's repudiation, through Conservator Encarnacion, of
Rivera's authority and action, particularly the latter's counter-offer of P5.5
million, as being "unauthorized and illegal" came only on May 12, 1988 or more
than seven (7) months after Janolo' acceptance. Such delay, and the absence of
any circumstance which might have justifiably prevented the Bank from acting
earlier, clearly characterizes the repudiation as nothing more than a last-minute
attempt on the Bank's part to get out of a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied
admission on the part of the petitioners that the written offer made on
September 1, 1987 was carried through during the meeting of September 28,
1987. This is the conclusion consistent with human experience, truth and good
faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5
million was raised for the first time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that
points of law, theories, issues of fact and arguments not adequately brought to
the attention of the trial court need not be, and ordinarily will not be,
considered by a reviewing court, as they cannot be raised for the first time on
appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145 SCRA 592).40
. . . It is settled jurisprudence that an issue which was neither averred in the
complaint nor raised during the trial in the court below cannot be raised for the
first time on appeal as it would be offensive to the basic rules of fair play, justice
and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147
SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425
[1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August
30, 1990).41
Since the issue was not raised in the pleadings as an affirmative defense, private
respondent was not given an opportunity in the trial court to controvert the
same through opposing evidence. Indeed, this is a matter of due process. But we
passed upon the issue anyway, if only to avoid deciding the case on purely
procedural grounds, and we repeat that, on the basis of the evidence already in
the record and as appreciated by the lower courts, the inevitable conclusion is
simply that there was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?
The petition alleged42 :
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5
million during the meeting of 28 September 1987, and it was this verbal offer
that Demetria and Janolo accepted with their letter of 30 September 1987, the
contract produced thereby would be unenforceable by action — there being no
note, memorandum or writing subscribed by the Bank to evidence such
contract. (Please see article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
. . . Of course, the bank's letter of September 1, 1987 on the official price and the
plaintiffs' acceptance of the price on September 30, 1987, are not, in themselves,
formal contracts of sale. They are however clear embodiments of the fact that a
contract of sale was perfected between the parties, such contract being binding
in whatever form it may have been entered into (case citations omitted). Stated
simply, the banks' letter of September 1, 1987, taken together with plaintiffs'
letter dated September 30, 1987, constitute in law a sufficient memorandum of
a perfected contract of sale.
The respondent Court could have added that the written communications
commenced not only from September 1, 1987 but from Janolo's August 20, 1987
letter. We agree that, taken together, these letters constitute sufficient
memoranda — since they include the names of the parties, the terms and
conditions of the contract, the price and a description of the property as the
object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on
September 28, 1987 did constitute a "new" offer which was accepted by Janolo
on September 30, 1987. Still, the statute of frauds will not apply by reason of the
failure of petitioners to object to oral testimony proving petitioner Bank's
counter-offer of P5.5 million. Hence, petitioners — by such utter failure to
object — are deemed to have waived any defects of the contract under the
statute of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of
article 1403, are ratified by the failure to object to the presentation of oral
evidence to prove the same, or by the acceptance of benefits under them.
As private respondent pointed out in his Memorandum, oral testimony on the
reaffirmation of the counter-offer of P5.5 million is a plenty — and the silence of
petitioners all throughout the presentation makes the evidence binding on them
thus;
A Yes, sir, I think it was September 28, 1987 and I was again present because
Atty. Demetria told me to accompany him we were able to meet Luis Co at the
Bank.
xxx       xxx       xxx
Q Now, what transpired during this meeting with Luis Co of the Producers
Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q What price?
A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr.
Mercurio Rivera is the final price and that is the price they intends (sic) to have,
sir.
Q What do you mean?.
A That is the amount they want, sir.
Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that
the defendant Rivera's counter-offer of 5.5 million was the defendant's bank
(sic) final offer?
A He said in a day or two, he will make final acceptance, sir.
Q What is the response of Mr. Luis Co?.
A He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
Q What transpired during that meeting between you and Mr. Luis Co of the
defendant Bank?
A We went straight to the point because he being a busy person, I told him if the
amount of P5.5 million could still be reduced and he said that was already
passed upon by the committee. What the bank expects which was contrary to
what Mr. Rivera stated. And he told me that is the final offer of the bank P5.5
million and we should indicate our position as soon as possible.
Q What was your response to the answer of Mr. Luis Co?
A I said that we are going to give him our answer in a few days and he said that
was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at
his office.
Q For the record, your Honor please, will you tell this Court who was with Mr.
Co in his Office in Producers Bank Building during this meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q By Mr. Co you are referring to?
A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic)
the counter offer by the bank?
A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank
which offer we accepted, the offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Q According to Atty. Demetrio Demetria, the amount of P5.5 million was
reached by the Committee and it is not within his power to reduce this amount.
What can you say to that statement that the amount of P5.5 million was reached
by the Committee?
A It was not discussed by the Committee but it was discussed initially by Luis Co
and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic) in that
September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract.
It is not disputed that the petitioner Bank was under a conservator placed by
the Central Bank of the Philippines during the time that the negotiation and
perfection of the contract of sale took place. Petitioners energetically contended
that the conservator has the power to revoke or overrule actions of the
management or the board of directors of a bank, under Section 28-A of Republic
Act No. 265 (otherwise known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or
examining department, the Monetary Board finds that a bank or a non-bank
financial intermediary performing quasi-banking functions is in a state of
continuing inability or unwillingness to maintain a state of liquidity deemed
adequate to protect the interest of depositors and creditors, the Monetary
Board may appoint a conservator to take charge of the assets, liabilities, and the
management of that institution, collect all monies and debts due said institution
and exercise all powers necessary to preserve the assets of the institution,
reorganize the management thereof, and restore its viability. He shall have the
power to overrule or revoke the actions of the previous management and board
of directors of the bank or non-bank financial intermediary performing quasi-
banking functions, any provision of law to the contrary notwithstanding, and
such other powers as the Monetary Board shall deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or
repudiate the perfected contract of sale was raised for the first time in this
Petition — as this was not litigated in the trial court or Court of Appeals. As
already stated earlier, issues not raised and/or ventilated in the trial court, let
alone in the Court of Appeals, "cannot be raised for the first time on appeal as it
would be offensive to the basic rules of fair play, justice and due process."43
In the second place, there is absolutely no evidence that the Conservator, at the
time the contract was perfected, actually repudiated or overruled said contract
of sale. The Bank's acting conservator at the time, Rodolfo Romey, never
objected to the sale of the property to Demetria and Janolo. What petitioners are
really referring to is the letter of Conservator Encarnacion, who took over from
Romey after the sale was perfected on September 30, 1987 (Annex V, petition)
which unilaterally repudiated — not the contract — but the authority of Rivera
to make a binding offer — and which unarguably came months after the
perfection of the contract. Said letter dated May 12, 1988 is reproduced
hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and
Demetria regarding the six (6) parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your
clients nor perfected a "contract to sell and buy" with any of them for the
following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and
approved by former Acting Conservator Mr. Andres I. Rustia, Producers Bank
Senior Manager Perfecto M. Pascua detailed the functions of Property
Management Department (PMD) staff and officers (Annex A.), you will
immediately read that Manager Mr. Mercurio Rivera or any of his subordinates
has no authority, power or right to make any alleged counter-offer. In short,
your lawyer-clients did not deal with the authorized officers of the bank.
Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines
(Bates Pambansa Blg. 68.) and Sec. 28-A of the Central Bank Act (Rep. Act No.
265, as amended), only the Board of Directors/Conservator may authorize the
sale of any property of the corportion/bank..
Our records do not show that Mr. Rivera was authorized by the old board or by
any of the bank conservators (starting January, 1984) to sell the aforesaid
property to any of your clients. Apparently, what took place were just
preliminary discussions/consultations between him and your clients, which
everyone knows cannot bind the Bank's Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients,
as the same is patently violative of corporate and banking laws. We believe that
this is more than sufficient legal justification for refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are
official, legal and in accordance with law. We also have no personal interest in
any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. EDCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-
reaching powers to the conservator of a bank, it must be pointed out that such
powers must be related to the "(preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the restoration of) its
viability." Such powers, enormous and extensive as they are, cannot extend to
the post-facto repudiation of perfected transactions, otherwise they would
infringe against the non-impairment clause of the Constitution 44 . If the
legislature itself cannot revoke an existing valid contract, how can it delegate
such non-existent powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to
revoke contracts that are, under existing law, deemed to be defective — i.e.,
void, voidable, unenforceable or rescissible. Hence, the conservator merely
takes the place of a bank's board of directors. What the said board cannot do —
such as repudiating a contract validly entered into under the doctrine of implied
authority — the conservator cannot do either. Ineluctably, his power is not
unilateral and he cannot simply repudiate valid obligations of the Bank. His
authority would be only to bring court actions to assail such contracts — as he
has already done so in the instant case. A contrary understanding of the law
would simply not be permitted by the Constitution. Neither by common sense.
To rule otherwise would be to enable a failing bank to become solvent, at the
expense of third parties, by simply getting the conservator to unilaterally
revoke all previous dealings which had one way or another or come to be
considered unfavorable to the Bank, yielding nothing to perfected contractual
rights nor vested interests of the third parties who had dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of
Court, findings of fact by the Court of Appeals are not reviewable by the
Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation, 45 , we
held:
. . . The rule regarding questions of fact being raised with this Court in a petition
for certiorari under Rule 45 of the Revised Rules of Court has been stated in
Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a
petition for certiorari under Rule 45 of the Revised Rules of Court. "The
jurisdiction of the Supreme Court in cases brought to it from the Court of
Appeals is limited to reviewing and revising the errors of law imputed to it, its
findings of the fact being conclusive " [Chan vs. Court of Appeals, G.R. No. L-
27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This
Court has emphatically declared that "it is not the function of the Supreme Court
to analyze or weigh such evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been committed by the lower court"
(Tiongco v. De la Merced, G. R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona
vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued
vs. Court of Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596).
"Barring, therefore, a showing that the findings complained of are totally devoid
of support in the record, or that they are so glaringly erroneous as to constitute
serious abuse of discretion, such findings must stand, for this Court is not
expected or required to examine or contrast the oral and documentary evidence
submitted by the parties" [Santa Ana, Jr. vs. Hernandez, G. R. No. L-16394,
December 17, 1966, 18 SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals 46 , we held:
The resolution of this petition invites us to closely scrutinize the facts of the
case, relating to the sufficiency of evidence and the credibility of witnesses
presented. This Court so held that it is not the function of the Supreme Court to
analyze or weigh such evidence all over again. The Supreme Court's jurisdiction
is limited to reviewing errors of law that may have been committed by the
lower court. The Supreme Court is not a trier of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock
Construction and Development Corp. 47 :
The Court has consistently held that the factual findings of the trial court, as
well as the Court of Appeals, are final and conclusive and may not be reviewed
on appeal. Among the exceptional circumstances where a reassessment of facts
found by the lower courts is allowed are when the conclusion is a finding
grounded entirely on speculation, surmises or conjectures; when the inference
made is manifestly absurd, mistaken or impossible; when there is grave abuse
of discretion in the appreciation of facts; when the judgment is premised on a
misapprehension of facts; when the findings went beyond the issues of the case
and the same are contrary to the admissions of both appellant and appellee.
After a careful study of the case at bench, we find none of the above grounds
present to justify the re-evaluation of the findings of fact made by the courts
below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety
and Insurance Company Inc. vs. Hon. Court of Appeals, et al. 48 is equally
applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court, .
. . (I)t is not the function of this Court to assess and evaluate all over again the
evidence, testimonial and documentary, adduced by the parties, particularly
where, such as here, the findings of both the trial court and the appellate court
on the matter coincide. (emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught with
findings and conclusions which were not only contrary to the evidence on
record but have no bases at all," specifically the findings that (1) the "Bank's
counter-offer price of P5.5 million had been determined by the past due
committee and approved by conservator Romey, after Rivera presented the
same for discussion" and (2) "the meeting with Co was not to scale down the
price and start negotiations anew, but a meeting on the already determined
price of P5.5 million" Hence, citing Philippine National Bank vs. Court of
Appeals 49 , petitioners are asking us to review and reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals 50 , thus:
There can be no other logical conclusion than that when, on September 1, 1987,
Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5
Million for more than 101 hectares on lot basis, "such counter-offer price had
been determined by the Past Due Committee and approved by the Conservator
after Rivera had duly presented plaintiffs' offer for discussion by the
Committee . . . Tersely put, under the established fact, the price of P5.5 Million
was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive
price at which the bank was selling the property. (p. 11, CA Decision)
xxx       xxx       xxx
. . . The argument deserves scant consideration. As pointed out by plaintiff,
during the meeting of September 28, 1987 between the plaintiffs, Rivera and
Luis Co, the senior vice-president of the bank, where the topic was the possible
lowering of the price, the bank official refused it and confirmed that the P5.5
Million price had been passed upon by the Committee and could no longer be
lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this
point, characterizing it as "not credible" and "at best equivocal and considering
the gratuitous and self-serving character of these declarations, the bank's
submissions on this point do not inspire belief."
To become credible and unequivocal, petitioners should have presented then
Conservator Rodolfo Romey to testify on their behalf, as he would have been in
the best position to establish their thesis. Under the rules on evidence 51 , such
suppression gives rise to the presumption that his testimony would have been
adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners'
evidence was deemed insufficient by both the trial court and the respondent
Court, and instead, it was respondent's submissions that were believed and
became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings
of fact by the lower courts are valid and correct. But the petitioners are now
asking this Court to disturb these findings to fit the conclusion they are
espousing, This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may
disregard findings of fact by the Court of Appeals 52 . We have studied both the
records and the CA Decision and we find no such exceptions in this case. On the
contrary, the findings of the said Court are supported by a preponderance of
competent and credible evidence. The inferences and conclusions are
seasonably based on evidence duly identified in the Decision. Indeed, the
appellate court patiently traversed and dissected the issues presented before it,
lending credibility and dependability to its findings. The best that can be said in
favor of petitioners on this point is that the factual findings of respondent Court
did not correspond to petitioners' claims, but were closer to the evidence as
presented in the trial court by private respondent. But this alone is no reason to
reverse or ignore such factual findings, particularly where, as in this case, the
trial court and the appellate court were in common agreement thereon. Indeed,
conclusions of fact of a trial judge — as affirmed by the Court of Appeals — are
conclusive upon this Court, absent any serious abuse or evident lack of basis or
capriciousness of any kind, because the trial court is in a better position to
observe the demeanor of the witnesses and their courtroom manner as well as WHEREFORE, finding no reversible error in the questioned Decision and
to examine the real evidence presented. Resolution, the Court hereby DENIES the petition. The assailed Decision is
AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in forum-
Epilogue. shopping and WARNED that a repetition of the same or similar acts will be dealt
with more severely. Costs against petitioners.
In summary, there are two procedural issues involved forum-shopping and the
raising of issues for the first time on appeal [viz., the extinguishment of the SO ORDERED.
Bank's offer of P5.5 million and the conservator's powers to repudiate contracts
entered into by the Bank's officers] — which per se could justify the dismissal of G.R. No. 167812             December 19, 2006
the present case. We did not limit ourselves thereto, but delved as well into the
substantive issues — the perfection of the contract of sale and its enforceability, JESUS M. GOZUN, petitioner,
which required the determination of questions of fact. While the Supreme Court vs.
is not a trier of facts and as a rule we are not required to look into the factual JOSE TEOFILO T. MERCADO a.k.a. ‘DON PEPITO MERCADO, respondent.
bases of respondent Court's decisions and resolutions, we did so just the same,
if only to find out whether there is reason to disturb any of its factual findings,
for we are only too aware of the depth, magnitude and vigor by which the
parties through their respective eloquent counsel, argued their positions before
this Court.
DECISION
We are not unmindful of the tenacious plea that the petitioner Bank is operating
abnormally under a government-appointed conservator and "there is need to
rehabilitate the Bank in order to get it back on its feet . . . as many people
depend on (it) for investments, deposits and well as employment. As of June
1987, the Bank's overdraft with the Central Bank had already reached P1.023 CARPIO MORALES, J.:
billion . . . and there were (other) offers to buy the subject properties for a
substantial amount of money." 53 On challenge via petition for review on certiorari is the Court of Appeals’
Decision of December 8, 2004 and Resolution of April 14, 2005 in CA-G.R. CV No.
While we do not deny our sympathy for this distressed bank, at the same time, 763091 reversing the trial court’s decision2 against Jose Teofilo T. Mercado a.k.a.
the Court cannot emotionally close its eyes to overriding considerations of Don Pepito Mercado (respondent) and accordingly dismissing the complaint of
substantive and procedural law, like respect for perfected contracts, non- Jesus M. Gozun (petitioner).
impairment of obligations and sanctions against forum-shopping, which must
be upheld under the rule of law and blind justice. In the local elections of 1995, respondent vied for the gubernatorial post in
Pampanga. Upon respondent’s request, petitioner, owner of JMG Publishing
This Court cannot just gloss over private respondent's submission that, while House, a printing shop located in San Fernando, Pampanga, submitted to
the subject properties may currently command a much higher price, it is equally respondent draft samples and price quotation of campaign materials.
true that at the time of the transaction in 1987, the price agreed upon of P5.5
million was reasonable, considering that the Bank acquired these properties at By petitioner’s claim, respondent’s wife had told him that respondent already
a foreclosure sale for no more than P3.5 million 54 . That the Bank procrastinated approved his price quotation and that he could start printing the campaign
and refused to honor its commitment to sell cannot now be used by it to materials, hence, he did print campaign materials like posters bearing
promote its own advantage, to enable it to escape its binding obligation and to respondent’s photograph,3 leaflets containing the slate of party
reap the benefits of the increase in land values. To rule in favor of the Bank candidates,4 sample ballots,5 poll watcher identification cards,6 and stickers.
simply because the property in question has algebraically accelerated in price
during the long period of litigation is to reward lawlessness and delays in the
Given the urgency and limited time to do the job order, petitioner availed of the
fulfillment of binding contracts. Certainly, the Court cannot stamp its
services and facilities of Metro Angeles Printing and of St. Joseph Printing Press,
imprimatur on such outrageous proposition.
owned by his daughter Jennifer Gozun and mother Epifania Macalino Gozun,
respectively.7
Petitioner delivered the campaign materials to respondent’s headquarters along
Gapan-Olongapo Road in San Fernando, Pampanga.8
Meanwhile, on March 31, 1995, respondent’s sister-in-law, Lilian Soriano
(Lilian) obtained from petitioner "cash advance" of P253,000 allegedly for the
allowances of poll watchers who were attending a seminar and for other related
expenses. Lilian acknowledged on petitioner’s 1995 diary9 receipt of the
amount.10
Petitioner later sent respondent a Statement of Account11 in the total amount
of P2,177,906 itemized as follows: P640,310 for JMG Publishing
House; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph Printing
Press; and P253,000, the "cash advance" obtained by Lilian.
On August 11, 1995, respondent’s wife partially paid P1,000,000 to petitioner
who issued a receipt12 therefor.
Despite repeated demands and respondent’s promise to pay, respondent failed
to settle the balance of his account to petitioner.
Petitioner and respondent being compadres, they having been principal
sponsors at the weddings of their respective daughters, waited for more than
three (3) years for respondent to honor his promise but to no avail, compelling
petitioner to endorse the matter to his counsel who sent respondent a demand
letter.13 Respondent, however, failed to heed the demand.14
Petitioner thus filed with the Regional Trial Court of Angeles City on November
25, 1998 a complaint15 against respondent to collect the remaining amount
of P1,177,906 plus "inflationary adjustment" and attorney’s fees.
In his Answer with Compulsory Counterclaim,16 respondent denied having
transacted with petitioner or entering into any contract for the printing of
campaign materials. He alleged that the various campaign materials delivered to
him were represented as donations from his family, friends and political
supporters. He added that all contracts involving his personal expenses were
coursed through and signed by him to ensure compliance with pertinent
election laws.
On petitioner’s claim that Lilian, on his (respondent’s) behalf, had obtained from
him a cash advance of P253,000, respondent denied having given her authority
to do so and having received the same.
At the witness stand, respondent, reiterating his allegations in his Answer,
claimed that petitioner was his over-all coordinator in charge of the conduct of
seminars for volunteers and the monitoring of other matters bearing on his
candidacy; and that while his campaign manager, Juanito "Johnny" Cabalu
(Cabalu), who was authorized to approve details with regard to printing
materials, presented him some campaign materials, those were partly
donated.17
When confronted with the official receipt issued to his wife acknowledging her
payment to JMG Publishing House of the amount of P1,000,000, respondent
claimed that it was his first time to see the receipt, albeit he belatedly came to
know from his wife and Cabalu that the P1,000,000 represented "compensation
[to petitioner] who helped a lot in the campaign as a gesture of goodwill."18
Acknowledging that petitioner is engaged in the printing business, respondent
explained that he sometimes discussed with petitioner strategies relating to his
candidacy, he (petitioner) having actively volunteered to help in his campaign;
that his wife was not authorized to enter into a contract with petitioner
regarding campaign materials as she knew her limitations; that he no longer
questioned the P1,000,000 his wife gave petitioner as he thought that it was just
proper to compensate him for a job well done; and that he came to know about
petitioner’s claim against him only after receiving a copy of the complaint,
which surprised him because he knew fully well that the campaign materials
were donations.19
Upon questioning by the trial court, respondent could not, however, confirm if it
was his understanding that the campaign materials delivered by petitioner were
donations from third parties.20
Finally, respondent, disclaiming knowledge of the Comelec rule that if a
campaign material is donated, it must be so stated on its face, acknowledged
that nothing of that sort was written on all the materials made by petitioner.21
As adverted to earlier, the trial court rendered judgment in favor of petitioner,
the dispositive portion of which reads:
WHEREFORE, the plaintiff having proven its (sic) cause of action by
preponderance of evidence, the Court hereby renders a decision in favor of the
plaintiff ordering the defendant as follows:
1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum
from the filing of this complaint until fully paid;
2. To pay the sum of P50,000.00 as attorney’s fees and the costs of suit.
SO ORDERED.22
Also as earlier adverted to, the Court of Appeals reversed the trial court’s
decision and dismissed the complaint for lack of cause of action.
In reversing the trial court’s decision, the Court of Appeals held that other than
petitioner’s testimony, there was no evidence to support his claim that Lilian
was authorized by respondent to borrow money on his behalf. It noted that the
acknowledgment receipt23 signed by Lilian did not specify in what capacity she
received the money. Thus, applying Article 131724 of the Civil Code, it held that
petitioner’s claim for P253,000 is unenforceable.
On the accounts claimed to be due JMG Publishing House – P640,310, Metro
Angeles Printing – P837,696, and St. Joseph Printing Press – P446,900, the
appellate court, noting that since the owners of the last two printing presses
were not impleaded as parties to the case and it was not shown that petitioner
was authorized to prosecute the same in their behalf, held that petitioner could
not collect the amounts due them.
Finally, the appellate court, noting that respondent’s wife had paid P1,000,000
to petitioner, the latter’s claim of P640,310 (after excluding the P253,000) had
already been settled.
Hence, the present petition, faulting the appellate court to have erred:
1. . . . when it dismissed the complaint on the ground that there is no evidence,
other than petitioner’s own testimony, to prove that Lilian R. Soriano was
authorized by the respondent to receive the cash advance from the petitioner in
the amount of P253,000.00.
xxxx
2. . . . when it dismissed the complaint, with respect to the amounts due to the
Metro Angeles Press and St. Joseph Printing Press on the ground that the
complaint was not brought by the real party in interest.
x x x x25
By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or
authority of the latter.26 Contracts entered into in the name of another person by
one who has been given no authority or legal representation or who has acted
beyond his powers are classified as unauthorized contracts and are declared
unenforceable, unless they are ratified.27
Generally, the agency may be oral, unless the law requires a specific
form.28 However, a special power of attorney is necessary for an agent to, as in
this case, borrow money, unless it be urgent and indispensable for the
preservation of the things which are under administration.29 Since nothing in
this case involves the preservation of things under administration, a
determination of whether Soriano had the special authority to borrow money
on behalf of respondent is in order.
Lim Pin v. Liao Tian, et al.30 held that the requirement of a special power of
attorney refers to the nature of the authorization and not to its form.
. . . The requirements are met if there is a clear mandate from the principal
specifically authorizing the performance of the act. As early as 1906, this Court
in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be
either oral or written. The one thing vital being that it shall be express. And
more recently, We stated that, if the special authority is not written, then it must
be duly established by evidence:
"…the Rules require, for attorneys to compromise the litigation of their clients, a
special authority. And while the same does not state that the special authority
be in writing the Court has every reason to expect that, if not in writing, the
same be duly established by evidence other than the self-serving assertion of
counsel himself that such authority was verbally given him."31 (Emphasis and
underscoring supplied)
Petitioner submits that his following testimony suffices to establish that
respondent had authorized Lilian to obtain a loan from him, viz:
Q : Another caption appearing on Exhibit "A" is cash advance, it states given on
3-31-95 received by Mrs. Lilian Soriano in behalf of Mrs. Annie Mercado,
amount P253,000.00, will you kindly tell the Court and explain what does that
caption means?
A : It is the amount representing the money borrowed from me by the
defendant when one morning they came very early and talked to me and
told me that they were not able to go to the bank to get money for the
allowances of Poll Watchers who were having a seminar at the headquarters
plus other election related expenses during that day, sir.
Q : Considering that this is a substantial amount which according to you was
taken by Lilian Soriano, did you happen to make her acknowledge the amount at
that time?
A : Yes, sir.32 (Emphasis supplied)
Petitioner’s testimony failed to categorically state, however, whether the loan
was made on behalf of respondent or of his wife. While petitioner claims that
Lilian was authorized by respondent, the statement of account marked as
Exhibit "A" states that the amount was received by Lilian "in behalf of Mrs.
Annie Mercado."
Invoking Article 187333 of the Civil Code, petitioner submits that respondent
informed him that he had authorized Lilian to obtain the loan, hence,
following Macke v. Camps34 which holds that one who clothes another with
apparent authority as his agent, and holds him out to the public as such,
respondent cannot be permitted to deny the authority.
Petitioner’s submission does not persuade. As the appellate court observed:
. . . Exhibit "B" [the receipt issued by petitioner] presented by plaintiff-appellee
to support his claim unfortunately only indicates the Two Hundred Fifty Three
Thousand Pesos (P253,0000.00) was received by one Lilian R. Soriano on 31
March 1995, but without specifying for what reason the said amount was
delivered and in what capacity did Lilian R. Soriano received [sic] the money.
The note reads:
"3-31-95
261,120 ADVANCE MONEY FOR TRAINEE –
RECEIVED BY
RECEIVED FROM JMG THE AMOUNT OF 253,000 TWO HUNDRED FIFTY THREE
THOUSAND PESOS
(SIGNED)
LILIAN R. SORIANO
3-31-95"
Nowhere in the note can it be inferred that defendant-appellant was connected
with the said transaction. Under Article 1317 of the New Civil Code, a person
cannot be bound by contracts he did not authorize to be entered into his
behalf.35 (Underscoring supplied)
It bears noting that Lilian signed in the receipt in her name alone, without
indicating therein that she was acting for and in behalf of respondent. She thus
bound herself in her personal capacity and not as an agent of respondent or
anyone for that matter.
It is a general rule in the law of agency that, in order to bind the principal by a
mortgage on real property executed by an agent, it must upon its face purport to
be made, signed and sealed in the name of the principal, otherwise, it will bind
the agent only. It is not enough merely that the agent was in fact authorized to
make the mortgage, if he has not acted in the name of the principal. x x
x36 (Emphasis and underscoring supplied)
On the amount due him and the other two printing presses, petitioner explains
that he was the one who personally and directly contracted with respondent
and he merely sub-contracted the two printing establishments in order to
deliver on time the campaign materials ordered by respondent.
Respondent counters that the claim of sub-contracting is a change in
petitioner’s theory of the case which is not allowed on appeal.
In Oco v. Limbaring,37 this Court ruled:
The parties to a contract are the real parties in interest in an action upon it, as
consistently held by the Court. Only the contracting parties are bound by the
stipulations in the contract; they are the ones who would benefit from and could
violate it. Thus, one who is not a party to a contract, and for whose benefit it was
not expressly made, cannot maintain an action on it. One cannot do so, even if
the contract performed by the contracting parties would incidentally inure to
one's benefit.38 (Underscoring supplied)
In light thereof, petitioner is the real party in interest in this case. The trial
court’s findings on the matter were affirmed by the appellate court.39 It erred,
however, in not declaring petitioner as a real party in interest insofar as
recovery of the cost of campaign materials made by petitioner’s mother and
sister are concerned, upon the wrong notion that they should have been, but
were not, impleaded as plaintiffs.
In sum, respondent has the obligation to pay the total cost of printing his
campaign materials delivered by petitioner in the total of P1,924,906, less the
partial payment of P1,000,000, or P924,906.
WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004
and the Resolution dated April 14, 2005 of the Court of Appeals are
hereby REVERSED and SET ASIDE.
The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch
57, is REINSTATED mutatis mutandis, in light of the foregoing discussions. The
trial court’s decision is modified in that the amount payable by respondent to
petitioner is reduced to P924,906.
SO ORDERED.
G.R. No. 156015. August 11, 2005
REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M.
CALIMLIM, in his capacity as former Chief of the Intelligence Service,
Armed Forces of the Philippines (ISAFP), and former Commanding
General, Presidential Security Group (PSG), and MAJ. DAVID B. DICIANO, in
his capacity as an Officer of ISAFP and former member of the
PSG, Petitioners,
vs.
HON. VICTORINO EVANGELISTA, in his capacity as Presiding Judge,
Regional Trial Court, Branch 223, Quezon City, and DANTE LEGASPI,
represented by his attorney-in-fact, Paul Gutierrez, Respondent.
DECISION
PUNO, J.:
The case at bar stems from a complaint for damages, with prayer for the
issuance of a writ of preliminary injunction, filed by private respondent Dante
Legaspi, through his attorney-in-fact Paul Gutierrez, against petitioners Gen.
Jose M. Calimlim, Ciriaco Reyes and Maj. David Diciano before the Regional Trial
Court (RTC) of Quezon City.1
The Complaint alleged that private respondent Legaspi is the owner of a land
located in Bigte, Norzagaray, Bulacan. In November 1999, petitioner Calimlim,
representing the Republic of the Philippines, and as then head of the
Intelligence Service of the Armed Forces of the Philippines and the Presidential
Security Group, entered into a Memorandum of Agreement (MOA) with one
Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in a land in
Bigte, Norzagaray, Bulacan. Petitioner Diciano signed the MOA as a witness.2 It
was further alleged that thereafter, Reyes, together with petitioners, started,
digging, tunneling and blasting works on the said land of Legaspi. The complaint
also alleged that petitioner Calimlim assigned about 80 military personnel to
guard the area and encamp thereon to intimidate Legaspi and other occupants
of the area from going near the subject land.
On February 15, 2000, Legaspi executed a special power of attorney (SPA)
appointing his nephew, private respondent Gutierrez, as his attorney-in-fact.
Gutierrez was given the power to deal with the treasure hunting activities on
Legaspi’s land and to file charges against those who may enter it without the
latter’s authority.3 Legaspi agreed to give Gutierrez 40% of the treasure that
may be found in the land.
On February 29, 2000, Gutierrez filed a case for damages and injunction against
petitioners for illegally entering Legaspi’s land. He hired the legal services of
Atty. Homobono Adaza. Their contract provided that as legal fees, Atty. Adaza
shall be entitled to 30% of Legaspi’s share in whatever treasure may be found in
the land. In addition, Gutierrez agreed to pay Atty. Adaza ₱5,000.00 as
appearance fee per court hearing and defray all expenses for the cost of the
litigation.4 Upon the filing of the complaint, then Executive Judge Perlita J. Tria
Tirona issued a 72-hour temporary restraining order (TRO) against petitioners.
The case5 was subsequently raffled to the RTC of Quezon City, Branch 223, then
presided by public respondent Judge Victorino P. Evangelista. On March 2, 2000,
respondent judge issued another 72-hour TRO and a summary hearing for its
extension was set on March 7, 2000.
On March 14, 2000, petitioners filed a Motion to Dismiss6 contending: first, there
is no real party-in-interest as the SPA of Gutierrez to bring the suit was already
revoked by Legaspi on March 7, 2000, as evidenced by a Deed of
Revocation,7 and, second, Gutierrez failed to establish that the alleged armed
men guarding the area were acting on orders of petitioners. On March 17, 2000,
petitioners also filed a Motion for Inhibition8 of the respondent judge on the
ground of alleged partiality in favor of private respondent.
On March 23, 2000, the trial court granted private respondent’s application for
a writ of preliminary injunction on the following grounds: (1) the diggings and
blastings appear to have been made on the land of Legaspi, hence, there is an
urgent need to maintain the status quo to prevent serious damage to Legaspi’s
land; and, (2) the SPA granted to Gutierrez continues to be valid.9 The trial court
ordered thus:
WHEREFORE, in view of all the foregoing, the Court hereby resolves to GRANT
plaintiff’s application for a writ of preliminary injunction. Upon plaintiff’s filing
of an injunction bond in the amount of ONE HUNDRED THOUSAND PESOS
(₱100,000.00), let a Writ of Preliminary Injunction issue enjoining the
defendants as well as their associates, agents or representatives from
continuing to occupy and encamp on the land of the plaintiff LEGASPI as well as
the vicinity thereof; from digging, tunneling and blasting the said land of
plaintiff LEGASPI; from removing whatever treasure may be found on the said
land; from preventing and threatening the plaintiffs and their representatives
from entering the said land and performing acts of ownership; from threatening
the plaintiffs and their representatives as well as plaintiffs’ lawyer.
On even date, the trial court issued another Order10 denying petitioners’ motion
to dismiss and requiring petitioners to answer the complaint. On April 4, 2000,
it likewise denied petitioners’ motion for inhibition.11
On appeal, the Court of Appeals affirmed the decision of the trial court.12
Hence this petition, with the following assigned errors:
I the agency granted by Legaspi to Gutierrez is coupled with interest as a bilateral
WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE
RESPONDENT GUTIERREZ HAS BEEN EFFECTIVELY REVOKED BY LEGASPI.
II
WHETHER THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED.
III
WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM
FURTHER PROCEEDING WITH THE CASE.
We find no merit in the petition.
On the first issue, petitioners claim that the special power of attorney of
Gutierrez to represent Legaspi has already been revoked by the latter. Private
respondent Gutierrez, however, contends that the unilateral revocation is
invalid as his agency is coupled with interest.
We agree with private respondent.
Art. 1868 of the Civil Code provides that by the contract of agency, an agent
binds himself to render some service or do something in representation or on
behalf of another, known as the principal, with the consent or authority of the
latter.13
A contract of agency is generally revocable as it is a personal contract of
representation based on trust and confidence reposed by the principal on his
agent. As the power of the agent to act depends on the will and license of the
principal he represents, the power of the agent ceases when the will or
permission is withdrawn by the principal. Thus, generally, the agency may be
revoked by the principal at will.14
However, an exception to the revocability of a contract of agency is when it is
coupled with interest, i.e., if a bilateral contract depends upon the agency.15 The
reason for its irrevocability is because the agency becomes part of another
obligation or agreement. It is not solely the rights of the principal but also that
of the agent and third persons which are affected. Hence, the law provides that
in such cases, the agency cannot be revoked at the sole will of the principal.
In the case at bar, we agree with the finding of the trial and appellate courts that
contract depends on it. It is clear from the records that Gutierrez was given by
Legaspi, inter alia, the power to manage the treasure hunting activities in
the subject land; to file any case against anyone who enters the land
without authority from Legaspi; to engage the services of lawyers to carry
out the agency; and, to dig for any treasure within the land and enter into
agreements relative thereto. It was likewise agreed upon that Gutierrez shall
be entitled to 40% of whatever treasure may be found in the land.
Pursuant to this authority and to protect Legaspi’s land from the alleged illegal
entry of petitioners, agent Gutierrez hired the services of Atty. Adaza to
prosecute the case for damages and injunction against petitioners. As payment
for legal services, Gutierrez agreed to assign to Atty. Adaza 30% of
Legaspi’s share in whatever treasure may be recovered in the subject land.
It is clear that the treasure that may be found in the land is the subject matter of
the agency; that under the SPA, Gutierrez can enter into contract for the legal
services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza have an interest in
the subject matter of the agency, i.e., in the treasures that may be found in the
land. This bilateral contract depends on the agency and thus renders it as one
coupled with interest, irrevocable at the sole will of the principal
Legaspi.16 When an agency is constituted as a clause in a bilateral contract, that
is, when the agency is inserted in another agreement, the agency ceases to be
revocable at the pleasure of the principal as the agency shall now follow the
condition of the bilateral agreement.17 Consequently, the Deed of Revocation
executed by Legaspi has no effect. The authority of Gutierrez to file and continue
with the prosecution of the case at bar is unaffected.
On the second issue, we hold that the issuance of the writ of preliminary
injunction is justified. A writ of preliminary injunction is an ancilliary or
preventive remedy that is resorted to by a litigant to protect or preserve his
rights or interests and for no other purpose during the pendency of the
principal action.18 It is issued by the court to prevent threatened or continuous
irremediable injury to the applicant before his claim can be thoroughly studied
and adjudicated.19 Its aim is to preserve the status quo ante until the merits of
the case can be heard fully, upon the applicant’s showing of two important
conditions, viz.: (1) the right to be protected prima facie exists; and, (2) the acts
sought to be enjoined are violative of that right.20
Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of
preliminary injunction may be issued when it is established:
(a) that the applicant is entitled to the relief demanded, the whole or part of
such relief consists in restraining the commission or continuance of the act or
acts complained of, or in requiring the performance of an act or acts, either for a
limited period or perpetually;
(b) that the commission, continuance or non-performance of the act or acts
complained of during the litigation would probably work injustice to the
applicant; or
(c) that a party, court, agency or a person is doing, threatening, or is attempting
to do, or is procuring or suffering to be done, some act or acts probably in
violation of the rights of the applicant respecting the subject of the action or
proceeding, and tending to render the judgment ineffectual.
It is crystal clear that at the hearing for the issuance of a writ of preliminary
injunction, mere prima facie evidence is needed to establish the applicant’s
rights or interests in the subject matter of the main action.21 It is not required
that the applicant should conclusively show that there was a violation of his
rights as this issue will still be fully litigated in the main case.22 Thus, an
applicant for a writ is required only to show that he has an ostensible right
to the final relief prayed for in his complaint. 23
In the case at bar, we find that respondent judge had sufficient basis to issue the
writ of preliminary injunction. It was established, prima facie, that Legaspi
has a right to peaceful possession of his land, pendente lite. Legaspi had title
to the subject land. It was likewise established that the diggings were conducted
by petitioners in the enclosed area of Legaspi’s land. Whether the land fenced
by Gutierrez and claimed to be included in the land of Legaspi covered an
area beyond that which is included in the title of Legaspi is a factual issue
still subject to litigation and proof by the parties in the main case for
damages. It was necessary for the trial court to issue the writ of preliminary
injunction during the pendency of the main case in order to preserve the rights
and interests of private respondents Legaspi and Gutierrez.
On the third issue, petitioners charge that the respondent judge lacked the
neutrality of an impartial judge. They fault the respondent judge for not giving
credence to the testimony of their surveyor that the diggings were conducted
outside the land of Legaspi. They also claim that respondent judge’s rulings on
objections raised by the parties were biased against them.
We have carefully examined the records and we find no sufficient basis to hold
that respondent judge should have recused himself from hearing the case. There
is no discernible pattern of bias on the rulings of the respondent judge. Bias and
partiality can never be presumed. Bare allegations of partiality will not suffice in
an absence of a clear showing that will overcome the presumption that the
judge dispensed justice without fear or favor.24 It bears to stress again that a
judge’s appreciation or misappreciation of the sufficiency of evidence adduced
by the parties, or the correctness of a judge’s orders or rulings on the objections
of counsels during the hearing, without proof of malice on the part of
respondent judge, is not sufficient to show bias or partiality. As we held in the
case of Webb vs. People,25 the adverse and erroneous rulings of a judge on the
various motions of a party do not sufficiently prove bias and prejudice to
disqualify him. To be disqualifying, it must be shown that the bias and prejudice
stemmed from an extrajudicial source and result in an opinion on the merits on
some basis other than what the judge learned from his participation in the case.
Opinions formed in the course of judicial proceedings, although erroneous, as
long as based on the evidence adduced, do not prove bias or prejudice. We also
emphasized that repeated rulings against a litigant, no matter how erroneously,
vigorously and consistently expressed, do not amount to bias and prejudice
which can be a bases for the disqualification of a judge.
Finally, the inhibition of respondent judge in hearing the case for damages has
become moot and academic in view of the latter’s death during the pendency of
the case. The main case for damages shall now be heard and tried before
another judge.
IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q-
00-40115, dated March 23 and April 4, 2000, are AFFIRMED. The presiding
judge of the Regional Trial Court of Quezon City to whom Civil Case No. Q-00-
40115 was assigned is directed to proceed with dispatch in hearing the main
case for damages. No pronouncement as to costs.
SO ORDERED.
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO
S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in
this appeal by certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the
appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc., represented by
Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as
appellants, the Tourist World Service, Inc. leased the premises belonging to the
party of the first part at Mabini St., Manila for the former-s use as a branch
office. In the said contract the party of the third part held herself solidarily liable
with the party of the part for the prompt payment of the monthly rental agreed
on. When the branch office was opened, the same was run by the herein
appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for
any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina
Sevilla and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc.
appears to have been informed that Lina Sevilla was connected with a rival firm,
the Philippine Travel Bureau, and, since the branch office was anyhow losing,
the Tourist World Service considered closing down its office. This was firmed
up by two resolutions of the board of directors of Tourist World Service, Inc.
dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the
manager and vice-president of the Tourist World Service, Inc., Ermita Branch,
and the second,authorizing the corporate secretary to receive the properties of
the Tourist World Service then located at the said branch office. It further
appears that on Jan. 3, 1962, the contract with the appellees for the use of the
Branch Office premises was terminated and while the effectivity thereof was
Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used
it since Nov. 1961. Because of this, and to comply with the mandate of the
Tourist World Service, the corporate secretary Gabino Canilao went over to the
branch office, and, finding the premises locked, and, being unable to contact
Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the interests
of the Tourist World Service. When neither the appellant Lina Sevilla nor any of
her employees could enter the locked premises, a complaint wall filed by the
herein appellants against the appellees with a prayer for the issuance of
mandatory preliminary injunction. Both appellees answered with
counterclaims. For apparent lack of interest of the parties therein, the trial court
ordered the dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order dismissing
her counterclaim which the court a quo, in an order dated June 8, 1963, granted
permitting her to present evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein
appellees and after the issues were joined, the reinstated counterclaim of
Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly
heard following which the court a quo ordered both cases dismiss for lack of
merit, on the basis of which was elevated the instant appeal on the following
assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF
PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0.
SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.)
WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO
HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS
VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS.
LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE
EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN
AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO
RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI
OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE
NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE
DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT
MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be
resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the telephone
line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service was
actionable or not; and
3. Whether or not the lessee to the office premises belonging to the appellee
Noguera was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was
entered into by and between her and appellee TWS with offices at the Ermita
branch office and that she was not an employee of the TWS to the end that her
relationship with TWS was one of a joint business venture appellant made
declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye,
ear and nose specialist as well as a imediately columnist had been in the travel
business prior to the establishment of the joint business venture with appellee
Tourist World Service, Inc. and appellee Eliseo Canilao, her compadre, she being
the godmother of one of his children, with her own clientele, coming mostly
from her own social circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October
1960 (Exh. 'A') covering the premises at A. Mabini St., she expressly warranting
and holding [sic] herself 'solidarily' liable with appellee Tourist World Service,
Inc. for the prompt payment of the monthly rentals thereof to other appellee
Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World
Service, Inc., which had its own, separate office located at the Trade &
Commerce Building; nor was she an employee thereof, having no participation
in nor connection with said business at the Trade & Commerce Building (pp. 16-
18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own
bookings her own business (and not for any of the business of appellee Tourist
World Service, Inc.) obtained from the airline companies. She shared the 7%
commissions given by the airline companies giving appellee Tourist World
Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn.  Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A.
Mabini St. office, paying for the salary of an office secretary, Miss Obieta, and
other sundry expenses, aside from desicion the office furniture and supplying
some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World
Service, Inc. shouldering the rental and other expenses in consideration for the
3% split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that appellant Mrs. Sevilla would be
given the title of branch manager for appearance's sake only (p. 31 tsn. Id.),
appellee Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June
18, 1965- testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-
testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply
Brief)
Upon the other hand, appellee TWS contend that the appellant was an employee
of the appellee Tourist World Service, Inc. and as such was designated
manager.1
xxx xxx xxx
The trial court2 held for the private respondent on the premise that the private
respondent, Tourist World Service, Inc., being the true lessee, it was within its
prerogative to terminate the lease and padlock the premises. 3 It likewise found
the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service,
Inc. and as such, she was bound by the acts of her employer. 4 The respondent
Court of Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower
court, erred. Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE
PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE
AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING
MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY
BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE
CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE
PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY
SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE
TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF
OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST
DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE
SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS
AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN."
(ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND
RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES
19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF
YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH
TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN
INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY
BY TOURIST WORLD SERVICE INC.6
As a preliminary inquiry, the Court is asked to declare the true nature of the
relation between Lina Sevilla and Tourist World Service, Inc. The respondent
Court of see fit to rule on the question, the crucial issue, in its opinion being
"whether or not the padlocking of the premises by the Tourist World Service,
Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the
latter to the relief of damages prayed for and whether or not the evidence for
the said appellant supports the contention that the appellee Tourist World
Service, Inc. unilaterally and without the consent of the appellant disconnected
the telephone lines of the Ermita branch office of the appellee Tourist World
Service, Inc.7 Tourist World Service, Inc., insists, on the other hand, that Lina
SEVILLA was a mere employee, being "branch manager" of its Ermita "branch"
office and that inferentially, she had no say on the lease executed with the
private respondent, Segundina Noguera. The petitioners contend, however, that
relation between the between parties was one of joint venture, but concede
that "whatever might have been the true relationship between Sevilla and Tourist
World Service," the Rule of Law enjoined Tourist World Service and Canilao
from taking the law into their own hands, 8 in reference to the padlocking now
questioned.
The Court finds the resolution of the issue material, for if, as the private
respondent, Tourist World Service, Inc., maintains, that the relation between the
parties was in the character of employer and employee, the courts would have
been without jurisdiction to try the case, labor disputes being the exclusive
domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations,
pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of
an employer-employee relation. In general, we have relied on the so-called right
of control test, "where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the means to
be used in reaching such end." 10 Subsequently, however, we have considered, in
addition to the standard of right-of control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the
payrolls, in determining the existence of an employer-employee relationship.11
The records will show that the petitioner, Lina Sevilla, was not subject to
control by the private respondent Tourist World Service, Inc., either as to the
result of the enterprise or as to the means used in connection therewith. In the
first place, under the contract of lease covering the Tourist Worlds Ermita office,
she had bound herself in solidum as and for rental payments, an arrangement
that would be like claims of a master-servant relationship. True the respondent
Court would later minimize her participation in the lease as one of mere
guaranty, 12 that does not make her an employee of Tourist World, since in any
case, a true employee cannot be made to part with his own money in pursuance
of his employer's business, or otherwise, assume any liability thereof. In that
event, the parties must be bound by some other relation, but certainly not
employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch
office was opened, the same was run by the herein appellant Lina O. Sevilla
payable to Tourist World Service, Inc. by any airline for any fare brought in on
the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said
that Sevilla was under the control of Tourist World Service, Inc. "as to the means
used." Sevilla in pursuing the business, obviously relied on her own gifts and
capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her
efforts, she retained 4% in commissions from airline bookings, the remaining
3% going to Tourist World. Unlike an employee then, who earns a fixed salary
usually, she earned compensation in fluctuating amounts depending on her
booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her,
ergo, Tourist World's employee. As we said, employment is determined by the
right-of-control test and certain economic parameters. But titles are weak
indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a
consequence, accepting Lina Sevilla's own, that is, that the parties had
embarked on a joint venture or otherwise, a partnership. And apparently,
Sevilla herself did not recognize the existence of such a relation. In her letter of
November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s]
right to stop the operation of your branch office 14 in effect, accepting Tourist
World Service, Inc.'s control over the manner in which the business was run. A
joint venture, including a partnership, presupposes generally a of standing
between the joint co-venturers or partners, in which each party has an equal
proprietary interest in the capital or property contributed 15 and where each
party exercises equal rights in the conduct of the business.16 furthermore, the
parties did not hold themselves out as partners, and the building itself was
embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a
distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla,
agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita
office, she must have done so pursuant to a contract of agency. It is the essence
of this contract that the agent renders services "in representation or on behalf
of another.18 In the case at bar, Sevilla solicited airline fares, but she did so for
and on behalf of her principal, Tourist World Service, Inc. As compensation, she
received 4% of the proceeds in the concept of commissions. And as we said,
Sevilla herself based on her letter of November 28, 1961, pre-assumed her
principal's authority as owner of the business undertaking. We are convinced,
considering the circumstances and from the respondent Court's recital of facts,
that the ties had contemplated a principal agent relationship, rather than a joint
managament or a partnership..
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 mutual interest, of the agent and the principal. 19 It appears that Lina
Sevilla is a bona fide travel agent herself, and as such, she had acquired an
interest in the business entrusted to her. Moreover, she had assumed a personal
obligation for the operation thereof, holding herself solidarily liable for the
payment of rentals. She continued the business, using her own name, after
Tourist World had stopped further operations. Her interest, obviously, is not 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, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself to
the telephone disconnection and padlocking incidents. Anent the disconnection
issue, it is the holding of the Court of Appeals that there is 'no evidence showing
that the Tourist World Service, Inc. disconnected the telephone lines at the
branch office. 20 Yet, what cannot be denied is the fact that Tourist World
Service, Inc. did not take pains to have them reconnected. Assuming, therefore,
that it had no hand in the disconnection now complained of, it had clearly
condoned it, and as owner of the telephone lines, it must shoulder responsibility
therefor.
The Court of Appeals must likewise be held to be in error with respect to the
padlocking incident. For the fact that Tourist World Service, Inc. was the lessee
named in the lease con-tract did not accord it any authority to terminate that
contract without notice to its actual occupant, and to padlock the premises in
such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a
personal stake in the business itself, and necessarily, in the equipment
pertaining thereto. Furthermore, Sevilla was not a stranger to that contract
having been explicitly named therein as a third party in charge of rental
payments (solidarily with Tourist World, Inc.). She could not be ousted from
possession as summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed some
malevolent design to put the petitioner, Lina Sevilla, in a bad light following
disclosures that she had worked for a rival firm. To be sure, the respondent
court speaks of alleged business losses to justify the closure '21 but there is no
clear showing that Tourist World Ermita Branch had in fact sustained such
reverses, let alone, the fact that Sevilla had moonlit for another company. What
the evidence discloses, on the other hand, is that following such an information
(that Sevilla was working for another company), Tourist World's board of
directors adopted two resolutions abolishing the office of 'manager" and
authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the
takeover of its branch office properties. On January 3, 1962, the private
respondents ended the lease over the branch office premises, incidentally,
without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita
office was padlocked, personally by the respondent Canilao, on the pretext that
it was necessary to Protect the interests of the Tourist World Service. " 22 It is
strange indeed that Tourist World Service, Inc. did not find such a need when it
cancelled the lease five months earlier. While Tourist World Service, Inc. would
not pretend that it sought to locate Sevilla to inform her of the closure, but
surely, it was aware that after office hours, she could not have been anywhere
near the premises. Capping these series of "offensives," it cut the office's
telephone lines, paralyzing completely its business operations, and in the
process, depriving Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort
to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in
any event, to elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of agency,
the private respondent, Tourist World Service, Inc., should be sentenced to pay
damages. Under the Civil Code, moral damages may be awarded for "breaches of
contract where the defendant acted ... in bad faith. 23

We likewise condemn Tourist World Service, Inc. to pay further damages for the
moral injury done to Lina Sevilla from its brazen conduct subsequent to the
cancellation of the power of attorney granted to her on the authority of Article
21 of the Civil Code, in relation to Article 2219 (10) thereof —

ART. 21. Any person who wilfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the
latter for the damage.24

ART. 2219. Moral damages25 may be recovered in the following and analogous

cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered

to respond for the same damages in a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is concerned,

no evidence has been shown that she had connived with Tourist World Service,
Inc. in the disconnection and padlocking incidents. She cannot therefore be held
liable as a cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24
P10,000.00 as exemplary damages, 25 and P5,000.00 as nominal 26 and/or
temperate27 damages, to be just, fair, and reasonable under the circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the

Resolution issued on July 31, 1975, by the respondent Court of Appeals is
hereby REVERSED and SET ASIDE. The private respondent, Tourist World
Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to
indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral
damages, the sum of P10,000.00, as and for exemplary damages, and the sum of
P5,000.00, as and for nominal and/or temperate damages.

Costs against said private respondents.

SO ORDERED.