G.R. No.

L-11530             June 30, 1960

J. M. TUASON & CO., INC., petitioner, 

vs.
COLLECTOR OF INTERNAL REVENUE, respondent.

Tuason, Caluag and Sison for petitioner.

Solicitor General Ambrosio Padilla and Solicitor Camilo D. Quiason for respondent.

LABRADOR, J.:

On November 6, 1951 the Varsity Hills, Inc., owner of five parcels of residential land in Quezon City, entered into a contract with
petitioner J. M. Tuason & Co., Inc., a corporation engaged in the business of developing subdivisions and promoting sales therein
whereby it ceded to the latter its five parcels of residential land above described generally for the purpose of having it surveyed
platted, monumented and otherwise developed into a subdivision. The contract is Exhibit "A" and the principal terms and conditions
thereof are as follows:

That the ADMINISTRATOR, at the OWNER'S expense, shall undertake to laying out of parks, playgrounds, the construction
of streets, culverts, pavements, sewage systems, drainage, the installation of utilities which in the judgment of the
ADMINISTRATOR may be necessary or convenient and in general the physical preparation of the property for sale or lease
in lots, in accordance with the requirements of government regulations.

3. That the ADMINISTRATOR shall recommend to the OWNER the sales prices of the lots of the subdivision based upon the
desired ability of the location and other similar factors that enter into sales value, according to their location in the
subdivision plan, as well as the terms of payment of the purchase price of said lots, and upon the approval thereof by the
OWNER, the same shall immediately be put in force, provided, however, that the same shall be subject to change by the
OWNER at any time.

4. That the ADMINISTRATOR is hereby granted the authority to sign for and in the name of the OWNER, contracts of lease,
contracts of sale, as well as contracts to sell involving the lots into which the property which is the object of this contract is
subdivided, and releases of mortgage and such other documents as may be deemed necessary for the purpose of carrying
out and facilitating the administration of the OWNER'S property; and for that purpose the OWNER shall execute a power of
attorney in favor of the ADMINISTRATOR; provided, however, that deeds of donation to the government, province, city or
municipality of lots, destined for parks, playgrounds, roads, community counters, etc.

xxx     xxx     xxx

7. That the ADMINISTRATOR shall take charge of the collection of all accounts due to the OWNER either for the sale of lots
or otherwise, and the expenses in connection therewith shall be for the account of the ADMINISTRATOR, except attorney's
fees and judicial expenses which shall be decided and borne by the OWNER; subject to the ADMINISTRATOR'S right to
choose its counsel, after consultations with the OWNER.

8. That all administrative expenses incurred in the administration of the OWNER'S subdivision such as salaries for
permanent personnel, office, rent, telephone and light bills, commissions for sales agents or sub-agents, and other similar
expenses shall be borne by the ADMINISTRATOR, provided, however, that should the OWNER deem it necessary that the
ADMINISTRATOR employ checkers, inspectors, supervisors or technical men, their aggregate salaries in excess of P600.00
monthly shall be borne by the OWNER.

xxx     xxx     xxx

10. All extraordinary expenses of the ADMINISTRATOR shall first be approved by the OWNER before they are incurred.

11. That advertising the sales of lots of this property shall be undertaken by the ADMINISTRATOR upon arrival by the
OWNER, but the expenses for the same shall be for the account of the OWNER.

xxx     xxx     xxx
 13. That the OWNER shall pay the ADMINISTRATOR a selling commission of 10% on all sales of lots of the subdivision
whether or not affected by the ADMINISTRATOR, which shall be payable in full immediately and in preference to all other
obligations of the OWNER, from the collections on said dates, but if the down payment made be not sufficient to cover the
commission, subsequent payments shall be first utilized to complete said commission; and, if for any reason whatsoever the
sale of any lot be discontinued or cancelled the commission due to ADMINISTRATOR shall in no case exceed the total
amount collected at the time of such discontinuance or cancellation; provided, however, that the posterior cancellation or
rescission of such sales shall in no wise entitle the OWNER to ask for a proportionate refund of said commission and,
provided finally, that should any repossessed lots be subsequently sold, the ADMINISTRATOR shall be entitled to its
commission of 10% on the subsequent sales thereof as though they had been original sales. The same provisions shall apply
to contracts of lease.

14. That the OWNER shall pay the ADMINISTRATOR an administration fee of 8% on the gross sum collected and received by
the latter in connection with the discharged by the ADMINISTRATOR of its duties, it being understood that this
administration fee shall be in addition to the 10% commission above referred to . . . .

During the period from the fourth quarter of 1951 to the second quarter of 1953, inclusive, Tuason & Co., Inc. received as
compensation for its services the following amounts: P282, 862.70 as 10 per cent commission for sales and P116,331.21 as
"administration fee." On August 22, 1953, the respondent Collector of Internal Revenue assessed against the petitioner the broker's
tax on the 8 per cent received by the latter as" administration fee" in the amount of P8,724.84, representing the broker's percentage
tax and surcharge thereon. Petitioner contested this assessment, although it paid the respondent under protest P9,024.84 and
thereafter files a claim for its refund. As respondent refused to grant the refused to grant the refund, petitioner instituted an action
in the Court of Tax Appeals for the review of the assessment. After trial the Court of Tax Appeals sustained the assessment and
denied the refund prayed for. It is against this refusal to grant the refund that the appeal to this Court has been presented.

The ruling of the Court of Tax Appeals which is disputed is as follows:

This test of indivisibility of consideration giving rise to an indivisible contract applied equally to commercial contracts such
as sale, as well as to contracts involving services as the case at bar.

"The question of indivisibility is difficult, and this difficulty has resulted in a direct conflict of decisions. The contract may be
entire or severable, according to the circumstances of its particular case it has been said in speaking of contracts of sale,
and the criterion is to be found in the question whether the whole quantity—all of the things as a whole—is of the essence
of the contract. If it appears that the purpose was to take the whole or none, then the contract would be entire; otherwise,
it would be severable . . . Though this was said in reference to a contract of sale, the reason applies to other contracts as
well." (3rd. Ed. Clark on Contracts, p/ 596, citing:

Wooten vs. Walters, 110 M. C. 251, 14 SE. 734; Erouner vs. Raynar, 88 Md. 47, 11 Atl. 833) (Emphasis supplied.)

'In the present case, as we see it the consideration is single, entire and indivisible. As far as Varsity Hills, Inc. is concerned,
the property in question must be sold or leased as subdivided lots. Until and unless the sale or lease of the property in
question as subdivided lots is effected, the Varsity Hills, Inc., is not liable to pay any compensation to petitioner in any form
as the same is based on the proceed derived from the sale or lease thereof. Hence, the mere completion of the subdivision
of the property in question does not entitle the petitioner to the compensation agreed and the same does not attach unless
and until a sale or lease of a subdivided lot is first effected. Neither will compensation be due the petitioner for the sale or
lease of the whole or part of the property in question, unless the same be first subdivided into lots by petitioner. Stated
otherwise, in order that petitioner would be entitled to compensation under the terms of the contract Exhibit "A" there
must first be a subdivision of the property into lots, followed by a sale or lease of the same. Because of this "oneness' or
indivisibility of the consideration of the contract Exhibit "A", we are of the opinion that the activities of the petitioner of
subdividing the property or collecting accounts, which petitioner denominated "acts of administration" are not in fact
detached, distinct, or transcendental to the brokerage relationship created by aforesaid contract, but rather acts which are
merely incidental to the primary purpose for which the agreement was entered into."

In this Court petitioner claims that its duties as administrator under the contract are not acts of brokerage subject to the brokerage
tax. We cannot accept this contention. We will start showing the weakness of this contention by stating that the only duty imposed
on the petitioner which may be conceded to be distinct and separate from those of a broker is that of subdividing the lands into lots
and laying out the streets, parks, playgrounds, and constructing the streets, culverts, pavements, sewage systems, drainage
installation of utilities, all of which is set forth in Section 12 of the contract Exhibit "A". All the others, such as recommending sales
prices of lots (Sec. 3), signing contracts of sales or lease, or contracts to sell, release of mortgage (Sec. 4), collecting sales prices or
other accounts due the Owner (Sec. 7), organizing offices and personnel to attend to the work relating to all the above (Sec. 8),
although apparently paid for under the term "administration fee"—these are also necessary parts of the work of a broker as defined
by law, thus:

(s) "Real estate broker" includes any person, other than a real estate salesman as hereinafter defined, who for another, and
for a compensation or in the expectation or promise of receiving compensation, (1) sells or offers for sale, buys or offers to
buy, lists, or solicits for prospective purchasers, or negotiates the purchase, sale or exchange of real estate or interests
therein; (2) or negotiates loans on real estate; (3) or leases or offers to lease or negotiates the sale, purchase or exchange of
a lease, or rents or places for rent or collects rent from real estate or improvements thereon; (4) or shall be employed by or
on behalf of the owner or owners of lots or other parcels of real estate at a stated salary, on commission, or otherwise, to
sell such real estate or any parts thereof in lots or parcels. ... But the foregoing definitions do not include a person who shall
directly perform any of the acts aforesaid with reference to his own property, where such acts are performed in the regular
course of or as an incident to the management of such property; nor shall they apply to persons acting pursuant to a duly
executed power of attorney from the owner authorizing final consummation by performance of a contract conveying real
estate sale, mortgage or lease; . . . .

A broker engaged in the sale of real estate is not limited to bringing vendor and vendee together and arranging the terms and
conditions of a sale of a real estate. As sales of real estate must be in writing the preparation of the documents is part of the
functions of the broker. So the only function entrusted to petitioner under the contract Exhibit "A" which may not be embraced in
those of a broker, is that of constructing the subdivision, as above explained and detailed out. It follows, therefore, that the parties
have agreed on giving compensation denominated administration fees for services which may well be included in the duties of a
broker.

But the duty of developing the subdivision, with its lots, streets, playgrounds, sewage, etc. is also necessary incident to the duty of
selling the lands subject of the contract. The lands must be subdivided into residential lots, with streets laid out, before said lots can
be sold. And while this work may be entrusted to another, the parties have seen fit to have the same entrusted to the petitioner. It
would be reasonable that this work or duty be considered distinct and separate from the duties or incidents of the brokerage, and
not subject to the tax on brokers. But the parties have by their contract rendered it impossible to separate the amount due
petitioner for such duty and obligation (of developing a subdivision) from those due petitioner as "administration fees." Petitioner
may well be a contractor, in so far as the developing of the subdivision is concerned. But neither petitioner nor the owner has shown
which portion of the fee mentioned in the contract as "administration fee" is given petitioner as its compensation for developing the
subdivision. The reason for all this must be the fact that the parties have considered their contract as one whole, indivisible contract,
especially as the corresponding fees for the different prestations therein undertaken by petitioner are grouped into two,
"brokerage" and "administration", without it being possible to separate and identify what portion is due petitioner for developing
the subdivision and what portion for the supposed acts of administration, which may also be considered acts of brokerage. It is in
the above sense that the Court of Tax Appeals has held that the consideration for all the different prestations is simple, entire and
indivisible, for which reason the contract must be considered as one indivisible contract of brokerage, the developing of the
subdivision being considered as a necessary incident to, and preparatory for, the sales of the lots of the subdivision, and the
documentation and collection also an integral part of the sales or negotiations therefor.

Entrando ya en la otra cuestion, no puede perderse de vista que, procediendo, sobre todo en estas obligaciones, de un solo
acreedor y de un solo deudor, la indivisibilidad, mas que de la naturaleza misma de los actos o cosas, de la voluntad y de la
ley, sera muy frecuente el caso de una obligacion que abarque multiples objetos de posible division real, y aun entre si
distintos, pero que, afectados por la obligacion, forman para los fines y efectos de esta, un todo indivisible. (8 Manresa, p.
214).

Considering, therefore, that the parties to the contract evidently made a single, indivisible contract because of indivisibilty of
consideration, for the reason that the parties fixed a so-called administration fee for developing the subdivision and for executing all
necessary documentation and collection for the consummation of the sales of the lots in the subdivision, without possibility of
determining the fees for each of the distinct prestation, we are constrained to find that the court below committed no error in
confirming the assessment subject of the petition for review.

Wherefore the decision of the Court of Tax Appeals should be, as it hereby is, affirmed, with costs against petitioner.
G.R. No. 142950      March 26, 2001

EQUITABLE PCI BANK, formerly EQUITABLE BANKING CORPORATION, petitioner, 

vs.
ROSITA KU, respondent.

KAPUNAN, J.:

Can a person be evicted by virtue of a decision rendered in an ejectment case where she was not joined as a party? This was the
issue that confronted the Court of Appeals, which resolved the issue in the negative. To hold the contrary, it said, would violate due
process. Given the circumstances of the present case, petitioner Equitable PCI Bank begs to differ. Hence, this petition.

On February 4, 1982, respondent Rosita Ku, as treasurer of Noddy Dairy Products, Inc., and Ku Giok Heng, as Vice-President/General
Manager of the same corporation, mortgaged the subject property to the Equitable Banking Corporation, now known as Equitable
PCI Bank to secure Noddy Inc.’s loan to Equitable. The property, a residential house and lot located in La Vista, Quezon City, was
registered in respondent’s name.

Noddy, Inc. subsequently failed to pay the loan secured by the mortgage, prompting petitioner to foreclose the property
extrajudicially. As the winning bidder in the foreclosure sale, petitioner was issued a certificate of sale. Respondent failed to redeem
the property. Thus, on December 10, 1984, the Register of Deeds canceled the Transfer Certificate of Title in the name of
respondent and a new one was issued in petitioner’s name.

On May 10, 1989, petitioner instituted an action for ejectment before the Quezon City Metropolitan Trial Court (MeTC) against
respondent’s father Ku Giok Heng. Petitioner alleged that it allowed Ku Giok Heng to remain in the property on the condition that
the latter pay rent. Ku Giok Heng’s failure to pay rent prompted the MeTC to seek his ejectment. Ku Giok Heng denied that there was
any lease agreement over the property.1âwphi1.nêt

On December 8, 1994, the MeTC rendered a decision in favor of petitioner and ordered Ku Giok Heng to, among other things, vacate
the premises. It ruled:

x x x for his failure or refusal to pay rentals despite proper demands, the defendant had not established his right for his
continued possession of or stay in the premises acquired by the plaintiff thru foreclosure, the title of which had been duly
transferred in the name of the plaintiff. The absence of lease agreement or agreement for the payment of rentals is of no
moment in the light of the prevailing Supreme Court ruling on the matter. Thus: "It is settled that the buyer in foreclosure
sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one (1) year after the
registration of the sale is as such he is entitled to the possession of the property and the demand at any time following the
consolidation of ownership and the issuance to him of a new certificate of title. The buyer can, in fact, demand possession
of the land even during the redemption period except that he has to post a bond in accordance with Section 7 of Act No.
3155 as amended. Possession of the land then becomes an absolute right of the purchaser as confirmed owner. Upon
proper application and proof of title, the issuance of a writ of possession becomes a ministerial duty of the court. (David
Enterprises vs. IBAA[,] 191 SCRA 116).1

Ku Giok Heng did not appeal the decision of the MeTC. Instead, he and his daughter, respondent Rosita Ku, filed on December 20,
1994, an action before the Regional Trial Court (RTC) of Quezon City to nullify the decision of the MeTC. Finding no merit in the
complaint, the RTC on September 13, 1999 dismissed the same and ordered the execution of the MeTC decision.

Respondent filed in the Court of Appeals (CA) a special civil action for certiorari assailing the decision of the RTC. She contended that
she was not made a party to the ejectment suit and was, therefore, deprived of due process. The CA agreed and, on March 31, 2000,
rendered a decision enjoining the eviction of respondent from the premises.

On May 10, 2000, Equitable PCI Bank filed in this Court a motion for an extension of 30 days from May 10, 2000 or until June 9, 2000
to file its petition for review of the CA decision. The motion alleged that the Bank received the CA decision on April 25, 2000.2 The
Court granted the motion for a 30-day extension "counted from the expiration of the reglementary period" and "conditioned upon
the timeliness of the filing of [the] motion [for extension]."3

On June 13, 2000,4 Equitable Bank filed its petition, contending that there was no need to name respondent Rosita Ku as a party in
the action for ejectment since she was not a resident of the premises nor was she in possession of the property.
The petition is meritorious.

Generally, no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by judgment
rendered by the court.5 Nevertheless, a judgment in an ejectment suit is binding not only upon the defendants in the suit but also
against those not made parties thereto, if they are:

a) trespassers, squatters or agents of the defendant fraudulently occupying the property to frustrate the judgment;

b) guests or other occupants of the premises with the permission of the defendant;

c) transferees pendente lite;

d) sub-lessees;

e) co-lessees; or

f) members of the family, relatives and other privies of the defendant.6

Thus, even if respondent were a resident of the property, a point disputed by the parties, she is nevertheless bound by the judgment
of the MeTC in the action for ejectment despite her being a non-party thereto. Respondent is the daughter of Ku Giok Heng, the
defendant in the action for ejectment.

Respondent nevertheless claims that the petition is defective. The bank alleged in its petition that it received a copy of the CA
decision on April 25, 2000. A Certification dated June 6, 2000 issued by the Manila Central Post Office reveals, however, that the
copy "was duly delivered to and received by Joel Rosales (Authorized Representative) on April 24, 2000."7 Petitioner’s motion for
extension to file this petition was filed on May 10, 2000, sixteen (16) days from the petitioner’s receipt of the CA decision (April 24,
2000) and one (1) day beyond the reglementary period for filing the petition for review (May 9, 2000).

Petitioner however maintains "its honest representation of having received [a copy of the decision] on April 25, 2000."8 Appended as
Annex "A" to petitioner’s Reply is an Affidavit9 dated October 27, 2000 and executed by Joel Rosales, who was mentioned in the
Certification as having received the decision. The Affidavit states:

(1) I am an employee of Unique Industrial & Allied Services, Inc. (Unique) a corporation duly organized and existing under
Philippine laws with principal place of business at 1206 Vito Cruz St., Malate, Manila, and I am assigned with the Equitable
PCI Bank, Mail and Courier Department, Equitable PCI Bank Tower II, cor. Makati Avenue and H.V. dela Costa St., Makati
City, Metro Manila;

(2) Under the contract of services between the Bank and Unique, it is my official duty and responsibility to receive and pick-
up from the Manila Central Post Office (CPO) the various mails, letters, correspondence, and other mail matters intended
for the bank’s various departments and offices at Equitable Bank Building, 262 Juan Luna St., Binondo, Manila. This building,
however, also houses various other offices or tenants not related to the Bank.

(3) I am not the constituted agent of "Curato Divina Mabilog Niedo Magturo Pagaduan Law Office" whose former address is
at Rm. 405 4/F Equitable Bank Bldg., 262 Juan Luna St., Binondo, Manila, for purposes of receiving their incoming mail
matters; neither am I any such agent of the various other tenants of the said Building. On occasions when I receive mail
matters for said law office, it is only to help them receive their letters promptly.

(4) On April 24, 2000, I received the registered letter sent by the Court of Appeals, covered by Registry Receipt No. 125234
and Delivery No. 4880 (copy of envelope attached as Annex "A") together with other mail matters, and brought them to the
Mail and Courier Department;

(5) After sorting out these mail matters, on April 25, 2000, I erroneously recorded them on page 422 of my logbook as
having been received by me on said dated April 25, 2000 (copy of page 422 is attached as Annex "B").
 (6) On April 27, 2000, this letter was sent by the Mail and Courier Department to said Law Office whose receiving clerk
Darwin Bawar opened the letter and stamped on the "Notice of Judgment" their actual date of receipt: "April 27, 2000"
(copy of the said Notice with the date so stamped is attached as Annex "C").

(7) On May 8, 2000, Atty. Roland A. Niedo of said law office inquired from me as to my actual date of receipt of this letter,
and I informed him that based on my logbook, I received it on April 25, 2000.

(8) I discovered this error only on September 6, 2000, when I was informed by Atty. Niedo that Postmaster VI Alfredo C.
Mabanag, Jr. of the Central Post Office, Manila, issued a certification that I received the said mail on April 24, 2000.

(9) I hereby confirm that this error was caused by an honest mistake.

Petitioner argues that receipt on April 25, 2000 by Joel Rosales, who was not an agent of its counsel’s law office, did not constitute
notice to its counsel, as required by Sections 210 and 10,11 Rule 13 of the Rules of Court. To support this contention, petitioner
cites Philippine Long Distance Telephone Co. vs. NLRC.12 In said case, the bailiff served the decision of the National Labor Relations
Commission at the ground floor of the building of the petitioner therein, the Philippine Long Distance Telephone Co., rather than on
the office of its counsel, whose address, as indicated in the notice of the decision, was on the ninth floor of the building. We held
that:

x x x practical considerations and the realities of the situation dictate that the service made by the bailiff on March 23, 1981
at the ground floor of the petitioner’s building and not at the address of record of petitioner’s counsel on record at the
9th floor of the PLDT building cannot be considered a valid service. It was only when the Legal Services Division actually
received a copy of the decision on March 26, 1981 that a proper and valid service may be deemed to have been made. x x x.

Applying the foregoing provisions and jurisprudence, petitioner submits that actual receipt by its counsel was on April 27, 2000, not
April 25, 2000. Following the argument to its logical conclusion, the motion for extension to file the petition for review was even
filed two (2) days before the lapse of the 15-day reglementary period. That counsel treated April 25, 2000 and not April 27, 2000 as
the date of receipt was purportedly intended to obviate respondent’s possible argument that the 15-day period had to be counted
from April 25, 2000.

The Court is not wholly convinced by petitioner’s argument. The Affidavit of Joel Rosales states that he is "not the constituted agent
of ‘Curato Divina Mabilog Nedo Magturo Pagaduan Law Office.’" An agency may be express butit may also be implied from the acts
of the principal, from his silence, or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his
behalf without authority.13 Likewise, acceptance by the agent may also be express, although it may also be implied from his acts
which carry out the agency, or from his silence or inaction according to the circumstances.14 In this case, Joel Rosales averred that
"[o]n occasions when I receive mail matters for said law office, it is only to help them receive their letters promptly," implying that
counsel had allowed the practice of Rosales receiving mail in behalf of the former. There is no showing that counsel had objected to
this practice or took steps to put a stop to it. The facts are, therefore, inadequate for the Court to make a ruling in petitioner’s favor.

Assuming the motion for extension was indeed one day late, petitioner urges the Court, in any event, to suspend its rules and admit
the petition in the interest of justice. Petitioner invokes Philippine National Bank vs. Court of Appeals,15 where the petition was filed
three (3) days late. The Court held:

It has been said time and again that the perfection of an appeal within the period fixed by the rules is mandatory and
jurisdictional. But, it is always in the power of this Court to suspend its own rules, or to except a particular case from its
operation, whenever the purposes of justice require it. Strong compelling reasons such as serving the ends of justice and
preventing a grave miscarriage thereof warrant the suspension of the rules.

The Court proceeded to enumerate cases where the rules on reglementary periods were suspended. Republic vs. Court of
Appeals16 involved a delay of six days; Siguenza vs. Court of Appeals,17 thirteen days; Pacific Asia Overseas Shipping Corporation vs.
NLRC,18 one day; Cortes vs. Court of Appeals,19 seven days; Olacao vs. NLRC,20 two days; Legasto vs. Court of Appeals,21 two
days; and City Fair Corporation vs. NLRC,22 which also concerned a tardy appeal.1âwphi1.nêt

The Court finds these arguments to be persuasive, especially in light of the merits of the petition.

WHEREFORE, the petition is GIVEN DUE COURSE  and GRANTED. The decision of the Court of Appeals isREVERSED.
G.R. No. L-40242 December 15, 1982

DOMINGA CONDE, petitioner, 
vs.
THE HONORABLE COURT OF APPEALS, MANILA PACIENTE CORDERO, together with his wife, NICETAS ALTERA, RAMON CONDE,
together with his wife, CATALINA T. CONDE, respondents.

 MELENCIO-HERRERA, J.:

An appeal by certiorari from the Decision of respondent Court of Appeals 1 (CA-G.R. No. 48133- R) affirming the judgment of the
Court of First Instance of Leyte, Branch IX, Tacloban City (Civil Case No. B-110), which dismissed petitioner's Complaint for Quieting
of Title and ordered her to vacate the property in dispute and deliver its possession to private respondents Ramon Conde and
Catalina Conde.

The established facts, as found by the Court of Appeals, show that on 7 April 1938. Margarita Conde, Bernardo Conde and the
petitioner Dominga Conde, as heirs of Santiago Conde, sold with right of repurchase, within ten (10) years from said date, a parcel of
agricultural land located in Maghubas Burauen Leyte, (Lot 840), with an approximate area of one (1) hectare, to Casimira Pasagui,
married to Pio Altera (hereinafter referred to as the Alteras), for P165.00. The "Pacto de Retro Sale" further provided:

... (4) if at the end of 10 years the said land is not repurchased, a new agreement shall be made between the
parties and in no case title and ownership shall be vested in the hand of the party of the SECOND PART (the
Alteras).

xxx xxx xxx (Exhibit "B")

On 17 April 1941, the Cadastral Court of Leyte adjudicated Lot No. 840 to the Alteras "subject to the right of redemption by Dominga
Conde, within ten (10) years counting from April 7, 1983, after returning the amount of P165.00 and the amounts paid by the
spouses in concept of land tax ... " (Exhibit "1"). Original Certificate of Title No. N-534 in the name of the spouses Pio Altera and
Casimira Pasagui, subject to said right of repurchase, was transcribed in the "Registration Book" of the Registry of Deeds of Leyte on
14 November 1956 (Exhibit "2").

On 28 November 1945, private respondent Paciente Cordero, son-in-law of the Alteras, signed a document in the Visayan dialect,
the English translation of which reads:

MEMORANDUM OF REPURCHASE OVER A PARCEL OF LAND SOLD WITH REPURCHASE WHICH DOCUMENT GOT
LOST

WE, PIO ALTERA and PACIENTE CORDERO, both of legal age, and residents of Burauen Leyte, Philippines, after
having been duly sworn to in accordance with law free from threats and intimidation, do hereby depose and say:

1. That I, PIO ALTERA bought with the right of repurchase two parcels of land from DOMINGA
CONDE, BERNARDO CONDE AND MARGARITA CONDE, all brother and sisters.

2. That these two parcels of land were all inherited by the three.

3. That the document of SALE WITH THE RIGHT OF REPURCHASE got lost in spite of the diligent
efforts to locate the same which was lost during the war.

4. That these two parcels of land which was the subject matter of a Deed of Sale with the Right of
Repurchase consists only of one document which was lost.

5. Because it is about time to repurchase the land, I have allowed the representative of Dominga
Conde, Bernardo Conde and Margarita Conde in the name of EUSEBIO AMARILLE to repurchase
the same.
 6. Now, this very day November 28, 1945, 1 or We have received together with Paciente Cordero
who is my son-in-law the amount of ONE HUNDRED SIXTY-FIVE PESOS (P165. 00) Philippine
Currency of legal tender which was the consideration in that sale with the right of repurchase
with respect to the two parcels of land.

That we further covenant together with Paciente Cordero who is my son-in-law that from this day the said
Dominga Conde, Bernardo Conde and Margarita Conde will again take possession of the aforementioned parcel of
land because they repurchased the same from me. If and when their possession over the said parcel of land be
disturbed by other persons, I and Paciente Cordero who is my son-in-law will defend in behalf of the herein
brother and sisters mentioned above, because the same was already repurchased by them.

IN WITNESS WHEREOF, I or We have hereunto affixed our thumbmark or signature to our respective names below
this document or memorandum this 28th day of November 1945 at Burauen Leyte, Philippines, in the presence of
two witnesses.

PIO ALTERA (Sgd.) PACIENTE CORDERO

WITNESSES:

1. (SGD.) TEODORO C. AGUILLON

To be noted is the fact that neither of the vendees-a-retro, Pio Altera nor Casimira Pasagui, was a signatory to the deed. Petitioner
maintains that because Pio Altera was very ill at the time, Paciente Cordero executed the deed of resale for and on behalf of his
father-in-law. Petitioner further states that she redeemed the property with her own money as her co-heirs were bereft of funds for
the purpose.

The  pacto de retro document was eventually found.

On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. Conde, who are also private
respondents herein. Their relationship to petitioner does not appear from the records. Nor has the document of sale been exhibited.

Contending that she had validly repurchased the lot in question in 1945, petitioner filed, on 16 January 1969, in the Court of First
Instance of Leyte, Branch IX, Tacloban City, a Complaint (Civil Case No. B-110), against Paciente Cordero and his wife Nicetas Altera,
Ramon Conde and his wife Catalina T. Conde, and Casimira Pasagui Pio Altera having died in 1966), for quieting of title to real
property and declaration of ownership.

Petitioner's evidence is that Paciente Cordero signed the Memorandum of Repurchase in representation of his father-in-law Pio
Altera, who was seriously sick on that occasion, and of his mother-in-law who was in Manila at the time, and that Cordero received
the repurchase price of P65.00.

Private respondents, for their part, adduced evidence that Paciente Cordero signed the document of repurchase merely to show
that he had no objection to the repurchase; and that he did not receive the amount of P165.00 from petitioner inasmuch as he had
no authority from his parents-in-law who were the vendees-a-retro.

After trial, the lower Court rendered its Decision dismissing the Complaint and the counterclaim and ordering petitioner "to vacate
the property in dispute and deliver its peaceful possession to the defendants Ramon Conde and Catalina T. Conde".

On appeal, the Court of Appeals upheld the findings of the Court a quo that petitioner had failed to validly exercise her right of
repurchase in view of the fact that the Memorandum of Repurchase was signed by Paciente Cordero and not by Pio Altera, the
vendee-a-retro, and that there is nothing in said document to show that Cordero was specifically authorized to act for and on behalf
of the vendee a retro, Pio Altera.

Reconsideration having been denied by the Appellate Court, the case is before us on review.

There is no question that neither of the vendees-a-retro signed the "Memorandum of Repurchase", and that there was no formal
authorization from the vendees for Paciente Cordero to act for and on their behalf.
Of significance, however, is the fact that from the execution of the repurchase document in 1945, possession, which heretofore had
been with the Alteras, has been in the hands of petitioner as stipulated therein. Land taxes have also been paid for by petitioner
yearly from 1947 to 1969 inclusive (Exhibits "D" to "D-15"; and "E"). If, as opined by both the Court a quo and the Appellate Court,
petitioner had done nothing to formalize her repurchase, by the same token, neither have the vendees-a-retro done anything to
clear their title of the encumbrance therein regarding petitioner's right to repurchase. No new agreement was entered into by the
parties as stipulated in the deed of pacto de retro, if the vendors a retro failed to exercise their right of redemption after ten years.
If, as alleged, petitioner exerted no effort to procure the signature of Pio Altera after he had recovered from his illness, neither did
the Alteras repudiate the deed that their son-in-law had signed. Thus, an implied agency must be held to have been created from
their silence or lack of action, or their failure to repudiate the agency. 2

Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from 1945 when the document of
repurchase was executed, to 1969, when she instituted this action, or for 24 years, the Alteras must be deemed to have incurred in
laches. 3 That petitioner merely took advantage of the abandonment of the land by the Alteras due to the separation of said spouses,
and that petitioner's possession was in the concept of a tenant, remain bare assertions without proof.

Private respondents Ramon Conde and Catalina Conde, to whom Pio Altera sold the disputed property in 1965, assuming that there
was, indeed, such a sale, cannot be said to be purchasers in good faith. OCT No. 534 in the name of the Alteras specifically contained
the condition that it was subject to the right of repurchase within 10 years from 1938. Although the ten-year period had lapsed in
1965 and there was no annotation of any repurchase by petitioner, neither had the title been cleared of that encumbrance. The
purchasers were put on notice that some other person could have a right to or interest in the property. It behooved Ramon Conde
and Catalina Conde to have looked into the right of redemption inscribed on the title, and particularly the matter of possession,
which, as also admitted by them at the pre-trial, had been with petitioner since 1945.

Private respondent must be held bound by the clear terms of the Memorandum of Repurchase that he had signed wherein he
acknowledged the receipt of P165.00 and assumed the obligation to maintain the repurchasers in peaceful possession should they
be "disturbed by other persons". It was executed in the Visayan dialect which he understood. He cannot now be allowed to dispute
the same. "... If the contract is plain and unequivocal in its terms he is ordinarily bound thereby. It is the duty of every contracting
party to learn and know its contents before he signs and delivers it." 4

There is nothing in the document of repurchase to show that Paciente Cordero had signed the same merely to indicate that he had
no objection to petitioner's right of repurchase. Besides, he would have had no personality to object. To uphold his oral testimony
on that point, would be a departure from the parol evidence rule 5 and would defeat the purpose for which the doctrine is intended.

... The purpose of the rule is to give stability to written agreements, and to remove the temptation and possibility
of perjury, which would be afforded if parol evidence was admissible. 6

In sum, although the contending parties were legally wanting in their respective actuations, the repurchase by petitioner is
supported by the admissions at the pre-trial that petitioner has been in possession since the year 1945, the date of the deed of
repurchase, and has been paying land taxes thereon since then. The imperatives of substantial justice, and the equitable principle of
laches brought about by private respondents' inaction and neglect for 24 years, loom in petitioner's favor.

WHEREFORE, the judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE, and petitioner is hereby declared
the owner of the disputed property. If the original of OCT No. N-534 of the Province of Leyte is still extant at the office of the
Register of Deeds, then said official is hereby ordered to cancel the same and, in lieu thereof, issue a new Transfer Certificate of Title
in the name of petitioner, Dominga Conde.
G.R. No. 6906           September 27, 1911

FLORENTINO RALLOS, ET AL., plaintiff-appellee, 

vs.
TEODORO R. YANGCO, defendant-appellant.

Mariano Escueta, for appellant.

Martin M. Levering, for appellees.

MORELAND, J.:

This is an appeal from a judgment of the Court of First Instance of the Province of Cebu, the Hon. Adolph Wislizenus presiding, in
favor of the plaintiffs, in the sum of P1,537.08, with interest at 6 per cent per annum from the month of July, 1909, with costs.

The defendant in this case on the 27th day of November, 1907, sent to the plaintiff Florentino Rallos, among others, the following
letter:

CIRCULAR NO. 1.

MANILA,   November 27, 1907           

MR. FLORENTINO RALLOS, Cebu.

DEAR SIR: I have the honor to inform you that I have on this date opened in my steamship office at No. 163 Muelle de la
Reina, Binondo, Manila, P. I., a shipping and commission department for buying and selling leaf tobacco and other native
products, under the following conditions:

1. When the consignment has been received, the consignor thereof will be credited with a sum not to exceed two-thirds of
the value of the goods shipped, which may be made available by acceptance of a draft or written order of the consignor on
five to ten day's sight, or by his ordering at his option a bill of goods. In the latter case he must pay a commission of 2 per
cent.

2. No draft or written order will be accepted without previous notice forwarding the consignment of goods to guarantee the
same.

3. Expenses of freight, hauling and everything necessary for duly executing the commission will be charged in the
commission.

4. All advances made under sections (1) and (3) shall bear interest at 10 per cent a year, counting by the sale of the goods
shipped or remittance of the amount thereof.

5. A commission of 2 ½ per cent will be collected on the amount realized from the sale of the goods shipped.

6. A Payment will be made immediately after collection of the price of the goods shipped.

7. Orders will be taken for the purchase of general merchandise, ship-stores, cloths, etc., upon remittance of the amount
with the commission of 2 per cent on the total value of the goods bought. Expenses of freight, hauling, and everything
necessary for properly executing the commission will be charged to the consignor.

8. The consignor of the good may not fix upon the consignee a longer period than four months, counting from the date of
receipt, for selling the same; with the understanding that after such period the consignee is authorized to make the sale, so
as to prevent the advance and cost of storage from amounting to more than the actual value of said goods, as has often
happened.
 9. The shipment to the consignors of the goods ordered on account of the amount realized from the sale of the goods
consigned and of the goods bought on remittance of the value thereof, under sections (1) and (3), will not be insured
against risk by sea and land except on written order of the interested parties.

10. On all consignments of goods not insured according to the next preceding section, the consignors will bear the risk.

11. All the foregoing conditions will take effect only after this office has acknowledged the consignor's previous notice.

12. All other conditions and details will be furnished at the office of the undersigned.

If you care to favor me with your patronage, my office is at No. 163 Muelle de la Reinna, Binondo, Manila, P. I., under the
name of "Teodoro R. Yangco." In this connection it gives me great pleasure to introduce to you Mr. Florentino Collantes,
upon whom I have conferred public power of attorney before the notary, Mr. Perfecto Salas Rodriguez, dated November
16, 1907, to perform in my name and on my behalf all acts necessary for carrying out my plans, in the belief that through
his knowledge and long experience in the business, along with my commercial connections with the merchants of this city
and of the provinces, I may hope to secure the most advantageous prices for my patrons. Mr. Collantes will sign by power
of attorney, so I beg that you make due note of his signature hereto affixed.

Very respectfully,

(Sgd.) T. R. YANGCO.

(Sgd.) F. COLLANTES.

Accepting this invitation, the plaintiffs proceeded to do a considerable business with the defendant through the said Collantes, as his
factor, sending to him as agent for the defendant a good deal of produce to be sold on commission. Later, and in the month of
February, 1909, the plaintiffs sent to the said Collantes, as agent for the defendant, 218 bundles of tobacco in the leaf to be sold on
commission, as had been other produce previously. The said Collantes received said tobacco and sold it for the sum of P1,744. The
charges for such sale were P206.96. leaving in the hands of said Collantes the sum of P1,537.08 belonging to the plaintiffs. This sum
was, apparently, converted to his own use by said agent.

It appears, however, that prior to the sending of said tobacco the defendant had severed his relations with Collantes and that the
latter was no longer acting as his factor. This fact was not known to the plaintiffs; and it is conceded in the case that no notice of any
kind was given by the defendant to the plaintiffs of the termination of the relations between the defendant and his agent. The
defendant refused to pay the said sum upon demand of the plaintiffs, placing such refusal upon the ground that at the time the said
tobacco was received and sold by Collantes he was acting personally and not as agent of the defendant. This action was brought to
recover said sum.

As is seen, the only question for our decision is whether or not the plaintiffs, acting in good faith and without knowledge, having sent
produce to sell on commission to the former agent of the defendant, can recover of the defendant under the circumstances above
set forth. We are of the opinion that the defendant is liable. Having advertised the fact that Collantes was his agent and having given
them a special invitation to deal with such agent, it was the duty of the defendant on the termination of the relationship of principal
and agent to give due and timely notice thereof to the plaintiffs. Failing to do so, he is responsible to them for whatever goods may
have been in good faith and without negligence sent to the agent without knowledge, actual or constructive, of the termination of
such relationship.

For these reasons the judgment appealed from is confirmed, without special finding as to costs.
G.R. No. L-2827             October 3, 1907

MARIA LOPEZ Y VILLANUEVA, plaintiff-appellant, 

vs.
TAN TIOCO, defendant-appellee.

Ruperto Montinola for appellant. 

Smith & Hargis for appellee.

CARSON, J.:

This is an action to recover 22,684.94 pesos, Mexican currency, balance due on account. The only item of the account in dispute is
the price at which 7,718.99 piculs of sugar should be charged to the defendant and appellee, and credited to the plaintiff and
appellant.

Maria Lopez, the plaintiff, alleges that she entered into a verbal contract which the defendant to deliver to him certain sugar, which
he obligated himself to store in Iloilo until he received instructions from her to sell, whereupon he was to credit her account with its
market value in Iloilo on the day upon which such instructions were communicated to him; that in accordance with the terms of the
agreement she delivered to the defendant 7,713.99 piculs of sugar; that she gave instructions to sell on the 29th of September,
1904; that on the 29th day of September, 1904, the market value of the sugar she thus delivered was as follows: 1,085.13 piculs of
No. 1, at 5.35 ½ pesos, Mexican currency; 1,741.56 piculs of No. 2, at 5.12 ½ pesos, Mexican currency; 4,823.67 piculs of No. 3. at
4.87 ½ pesos, Mexican currency; 16.23 piculs of la clase humeda, at 3.37 ½ at 3 pesos, Mexican currency; and 47.40 piculs
of coriente, at 3 pesos, Mexican currency; that had the sugar been sold on the 1st of December, 1904, the date on which the
complaint was filed, it would have brought a still higher price, and that crediting her with the market value of the sugar on the 1st
day of December, 1904, the balance due on account would be 22,638.94 pesos, Mexican currency.

The defendant, Tan Tioco, admits the truth of the foregoing, allegations, but insists that he received authority to sell the sugar on
the 26th of March, 1904, when the market price in Iloilo was much lower than on the 29th of September, 1904, or the 1st of
December, 1904, and that crediting the plaintiff with the market value of the sugar as of the 26th of March, 1904, the balance due
the plaintiff would amount to but 1,082.95 pesos, Mexican currency, which he admits he is indebted to her in accordance with the
terms of their agreement.

The trial court was of opinion that the evidence sustained the contention of the defendant, and gave judgment in favor of the
plaintiff for 1,082.95 which the defendant admitted to be due on account. From this judgment the plaintiff appeals and prays that
the judgment of the trial court be served and that judgment be rendered in her favor for the balance due, after crediting the plaintiff
with the market value of the sugar of the day of the filing of the complaint.

The plaintiff positively denies the defendant's allegation that she had given him authority to sell the sugar on the 26th of March,
1904. There is a direct conflict in the testimony as to this point. The defendant affirms, the plaintiff denies, and, other than their
contradictory, statements, there is no satisfactory evidence in the record upon which to base a finding.

The defendant, in corroboration of his statements, called a witness who declared that on the 26th day of March, 1904, he was an
employee of the firm of Smith, Bell & Co., in whose godown the sugar was stored; that he was sent by his employer to tell Tan Tioco
"to come to the office to fix up his account;" that Maria Lopez was in Tan Tioco's office when he arrived; that he hears Tan Tioco tell
her in Visayan that he, the witness, was an employee of Smith, Bell & Co., who had come to hurry the defendant in the settlement of
his accounts; that he waited for Tan Tioco, and in their conversation heard Maria Lopez say, "Very well, I leave it to you;" that
thereupon Tan Tioco said to the witness, "Go back and tell them that I will come up today;" that this was the only part of the
conversation which he overheard. It is somewhat remarkable that this witness was able to overhear or understand no more that half
a dozen words, which the defendant, who called him, appears to imagine were the vital words necessary to corroborate his
statement; but granting that he did, in fact, overhear the plaintiff say what he says she said, it is impossible for us to say that these
words were used in reference to the sugar in question, that they conveyed authority to the defendant to sell the sugar, unless we
believe the statement of the defendant, whose veracity is in question.
The defendant also called Silverio Hinojales, one of his employees, who stated that in the month of February, 1904, he "went to the
house of Maria Lopez by order of Tan Tioco, and told her that Tan Tioco was asking for an agreement of her accounts;" that late in
the month informed her "the sugar to the house of Maria Lopez and had been sold 5 to Smith, Bell & Co, at the rate of 4.375 pesos
per picul for No. 1, and 4.12 ½ pesos per picul for No. 2;" that when he informed her of that "she didn't say anything; she said she
would go down to the office of Tan Tioco." while it may be true, as claimed by the defendant, that he was anxious to have the sugar
sold on the 26th day of March, and that he requested the plaintiff on various occasions to authorize into to make such sale, and that
he pointed her that the sale had actually been made, these facts in no wise tend to prove that Maria Lopez did, in fact, grant him to
authorization which, as he alleges, he so urgently importuned.

The plaintiff, in support of her contention, produced the receipts issued by the defendant for the delivery of the sugar, and her
counsel insists that the mere fact that there receipt were in her hands at the time of the trial, and had not been delivered to the
defendant, was sufficient to establish her contention that she had never given the defendant authority to sell. Since the defendant
alleges that this authority was granted verbally, and that it was understood that after the sale had been made there was to be a
settlement of accounts which did not take place because the plaintiff refused to come to the office for that purpose, we do not think
that the possession of these receipts casts very much light upon the disputed point. lawphil.net

As stated before, the relevant testimony in this case substantially amounts to the unsupported statement of the defendant that
authority was granted him to sell the sugar on the 26th day of March, 1904, and the unsupported denial of the plaintiff. It becomes
important, therefore, to ascertain upon whom rests the burden of proof as to this point.

Section 297 of the Code of Civil Procedure is as follows:

Each party must prove his own affirmative allegations. Evidence need not be given in support of a negative allegation
except when such negative allegation is an essential part of the statement of the right or title on which the cause of action
or defense is founded, nor even in such case when the allegation is a denial of the existence of a document the custody of
which belongs to the opposite party.

This provision is partially the same as the rule embodied in the maximum semper necessitas probandi incumbit illi qui agit.

Under the terms of the agreement the plaintiff would be entitled to a judgment upon proof of the allegations in her complaint. The
defendant practically admits the truth of these allegations, but in his defense sets up new matter by way of an affirmative allegation,
and it is therefore his duty to support this allegations by a preponderance of evidence.

The reason that he who alleges to be the creditor of another is obliged to prove fact of agreement upon which his claims
founded, when it is contested; and that, on the other hand, when the obligation is proved, the debtor who alleges that he
has discharged it is obliged to prove the payment, is clearly one of those propositions in which every system of
jurisprudence must concur in general, whatever particular rules may be adopted, as to the mode and form of the
allegations by which the necessity of such proof is to be determined. (2 Evans' Pothier, 143, 144.)

We are of opinion that here is not a preponderance of proof in the record in support of the defendant's affirmative allegation, and
that the judgment of the trial court should be reversed.

Counsel for the plaintiff and appellant contend that the sugar in question should be credited, at its market value on the day when
the complaint in this action was filed, and not at this market value on the day when instructions to sell were first communicated to
the defendant.

This contention is not well founded. Article 1100 of the Civil Code, in which counsel appears to rely, prescribes that:

Person obliged to deliver or to do something are in default from the moment when the creditor demands the fulfillment of
their obligation, judicially or extrajudicially.

Under the terms of the contract, when is the basis of the plaintiff's cause of action, her account was to be credited with the market
value of the sugar on the day when the authority to sell was first communicated to the defendant. Neither the law for the contract
imposed the obligation upon the plaintiff to make judicial rather than extrajudicial demand for the sale of the sugar. She did, in fact,
make an extrajudicial demand, and it is the defendant's default in complying with this demand which entitles her to relief in this
action.
The market value of the 7,713.99 piculs of sugar in question on the 29th day of September, 1904, estimated upon the basis alleged
in the complaint and proven at the trial, was 38,470.43 pesos, Mexican currency, and this, together with the sum of 12,000 pesos,
Mexican currency, on the credit side of the plaintiff's account, which is not in controversy, amount to 50,470.43 pesos, Mexican
currency; deducting therefrom 41,757.90 pesos, Mexican currency; the amount of the advances made by the defendant to the
plaintiff, the balance in favor of the plaintiff and for which judgment should be given amounts to 8,712.53 pesos, Mexican currency.

After twenty days let judgment be entered reversing the judgment of the trial court, and ten days thereafter let the record be turned
to the trial court, where judgment will be entered in favor of the plaintiff for the equivalent in Philippine currency of 8,712.53 pesos,
Mexican currency, with interest at the legal rate from the date of the filing of the complaint as prayed therein, and without special
condemnation of costs in this instance. So ordered.
G.R. No. 39085           September 27, 1933

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appelle, 

vs.
ANTONIO YABUT, defendant-appellant.

Felipe S. Abeleda for appellant.

Office of the Solicitor-General Hilado for appellee.

BUTTE, J.:

This is an appeal from the judgment of the Court of First Instance of Manila, convicting the appellant of the crime of murder and
assessing the death penalty.

The appellant, Yabut, was charged in the Court of First Instance of Manila with the crime of murder upon the following information:

That on or about the 1st day of August, 1932, in the City of Manila, Philippine Islands, the accused Antonio Yabut, then a
prisoner serving sentence in the Bilibid Prison, in said city, did then and there, with intent to kill, wilfully, unlawfully,
feloniously and treacherously, assault, beat and use personal violence upon one Sabas Aseo, another prisoner also serving
sentence in Bilibid, by then and there hitting the said Sabas Aseo suddenly and unexpectedly from behind with a wooden
club, without any just cause, thereby fracturing the skull of said Sabas Aseo and inflicting upon him various other physical
injuries on different parts of the body which caused the death of the latter about twenty-four (24) hours thereafter.

That at the time of the commission of this offense, the said Antonio Yabut was a recidivist, he having previously been
convicted twice of the crime of homicide and once of serious physical injuries, by virtue of final sentences rendered by
competent tribunals.

Upon arraignment, the accused plead not guilty. The court below made the following findings of fact which, from an independent
examination of the entire testimony, we are convinced, are supported by the evidence beyond reasonable doubt:

La brigada de presos, conocida como Brigada 8-A Carcel, el 1.º de agosto de 1932, estaba compuesta de unos 150 o mas
penados, de largas condenas, al mando del preso Jose Villafuerte, como Chief Squad Leader, y del preso Vicente santos,
como su auxiliar. forman parte de esta brigada el occiso Sabas Aseo, o Asayo, el acusado Antonio Yabut y los presos
llamados Apolonio Saulo, Isaias Carreon, Melecio Castro, Mateo Bailon y los moros Taladie y Hasan.

Entre siete y media y ocho de la noche de la fecha de autos, estando ya cerrado el pabellon de la brigada, pues se
aproximaba la hora del descanso y silencio dentro de la prision, mientras el jefe bastonero Villafuerte se hallaba sentado
sobre su mesa dentro de la brigada, vio al preso Carreon cerca de el, y en aquel instante el acusado Yabut, dirigiendose a
Carreon, le dijo que, si no cobrada a uno que la debia, el (Yabut) le abofetearia. El jefe bastonero Villafuerte trato de
imponer silencio y dijo a los que hablaban que se apaciguaran; pero, entre tanto, el preso Carreon se encaro con el otro
preso Saulo cobrandole dos cajetillas de cigarillos de diez centimos cada una que le debia. Saulo contesto que ya le pagaria,
pero Carreon, por toda contestacion, pego en la cara a saulo y este quedo desvanecido. En vista de esto, el jefe bastonero
se dirigio a su cama para sacar la porra que estaba autorizado a llevar. Simultaneamente Villafuerte vio que el preso Yabut
pegaba con un palo (Exhibit C) al otro preso Sabas Aseo, o Asayo, primeramente en la nuca y despues en la cabeza,
mientras estaba de espaldas el agregido Sabas, quien, al recibir el golpe en la nuca, se inclino hacia delante, como si se
agachara, y en ese momento el acusado Yabut dio un paso hacia delante y con el palo de madera que portaba dio otro
golpe en la cabeza a Sabas Aseo, quien cayo al suelo.

El jefe bastonero Villafuerte se acerco al agresor Yabut para desarmarle, pero este le dijo: "No te acerques; de otro modo,
moriras." No obstante la actitud amenazadora de Yabut, Villafuerte se acerco y Yabut quiso darle un golpe que iba dirigido a
la cabeza, pero Villafuerte lo pudo desviar pcon la porra que Ilevaba. Los dos lucharon y Ilegaron a abrazarse hasta que se le
deslizo a Villafuerte la porra que llevaba. Continuaron luchando ambos y el acusado Yabut llego a soltar el palo Exhibit C con
que acometia a Villafuerte y habia malherido al preso Sabas Aseo. Despues de aquello, Yabut consiguio zafarse de
Villafuerte y se dirigio al otro extremo de la brigada, escondiendose dentro del baño y alli fue cogido inmediatamente
despues del suceso por el preso Proceso Carangdang, que desempenaba el cargo de sargento de los policias de la prision.
We reject, as unworthy of belief, the testimony of Yabut that it was Villafuerte, not he, who gave the fatal blow to the deceased
Aseo. The testimonies of Santiago Estrada, resident physician of the Bureau of Prisons and Dr. Pablo Anzures of the Medico Legal
Department of the University of the Philippines, clearly establish that the death of Aseo was caused by subdural and cerebral
hemorrhages following the fracture of the skull resulting from the blow on the head of Aseo. They further confirm the testimony of
the four eyewitnesses that the deceased was struck from behind.

On appeal to this court, the appellant advances the following assignments of error:

1. The lower court erred in applying article 160 of the Revised Penal Code.

2. The lower court erred in holding that the evidence of the defense are contradictory and not corroborated.

3. The lower court erred in holding that the crime of murder was established by appreciating the qualifying circumstance
of alevosia.

4. The lower court erred in finding the accused guilty of the crime of murder beyond reasonable doubt.

In connection with the first assignment of error, we quote article 160 of the Revised Penal Code, in the Spanish text, which is
decisive:

Comision de un nuevo delito durante el tiempo de la condena por otro anterior — Pena. — Los que comentieren algun delito
despues de haber sino condenados por sentencia firme no empezada a cumpir, o durante el tiempo de su condena, seran
castigados con la pena señalada por la ley para el nuevo delito, en su grado maximo, sin perjuicio de lo dispuesto en la regla
5.a del articulo 62.

El penado conprendidoen este articulo se no fuere un delincuente habitual sera indultado a los setenta años, si hubiere ya
cumplido la condena primitiva, o cuando llegare a cumplirla despues de la edad sobredicha, a no ser que por su conducta a
por otras circunstancias no fuere digno de la gracia.

The English translation of article 160 is as follows:

Commission of another crime during service of penalty imposed for another previous offense — Penalty. — Besides the
provisions of rule 5 of article 62, any person who shall commit a felony after having been convicted by final judgment,
before beginning to serve such sentence, or while serving the same, shall be punished by the maximum period of the
penalty prescribed by law for the new felony.

Any convict of the class referred to in this article, who is not a habitual criminal, shall be pardoned at the age of seventy
years if he shall have already served out his original sentence, or when he shall complete it after reaching said age, unless
by reason of his conduct or other circumstances he shall not be worthy of such clemency.

The appellant places much stress upon the word "another" appearing in the English translation of the headnote of article 160 and
would have us accept his deduction from the headnote that article 160 is applicable only when the new crime which is committed by
a person already serving sentence is different from the crime for which he is serving sentence. Inasmuch as the appellant was
serving sentence for the crime of homicide, the appellant contends the court below erred in applying article 160 in the present case
which was a prosecution for murder (involving homicide). While we do not concede that the appellant is warranted in drawing the
deduction mentioned from the English translation of the caption of article 160, it is clear that no such deduction could be drawn
from the caption. Apart from this, however, there is no warrant whatever for such a deduction (and we do not understand the
appellant to assert it) from the text itself of article 160. The language is plain and unambiguous. There is not the slightest intimation
in the text of article 160 that said article applies only in cases where the new offense is different in character from the former
offense for which the defendant is serving the penalty.

It is familiar law that when the text itself of a statute or a treaty is clear and unambiguous, there is neither necessity nor propriety in
resorting to the preamble or headings or epigraphs of a section of interpretation of the text, especially where such epigraphs or
headings of sections are mere catchwords or reference aids indicating the general nature of the text that follows. (Cf. In re Estate of
Johnson, 39 Phil., 156, 166.) A mere glance at the titles to the articles of the Revised Penal code will reveal that they were not
intended by the Legislature to be used as anything more than catchwords conveniently suggesting in a general way the subject
matter of each article. Being nothing more than a convenient index to the contents of the articles of the Code, they cannot, in any
event have the effect of modifying or limiting the unambiguous words of the text. Secondary aids may be consulted to remove, not
to create doubt.

The remaining assignments of error relate to the evidence. We have come to the conclusion, after a thorough examination of the
record, that the findings of the court below are amply sustained by the evidence, except upon the fact of the existence of treachery
(alevosia). As some members of the court entertain a reasonable doubt that the existence of treachery (alevosia) was established, it
results that the penalty assessed by the court below must be modified. We find the defendant guilty of homicide and, applying
article 249 of the Revised Penal Code in connection with article 160 of the same, we sentence the defendant- appellant to the
maximum degree ofreclusion temporal, that is to say, to twenty years of confinement and to indemnify the heirs of the deceased
Sabas Aseo (alias  Sabas Asayo), in the sum of P1,000. Costs de oficio.
G.R. No. L-19001             November 11, 1922

HARRY E. KEELER ELECTRIC CO., INC., plaintiff-appellant, 

vs.
DOMINGO RODRIGUEZ, defendant-appellee.

Hartford Beaumont for appellant.

Ross and Lawrence and Antonio T. Carrascoso, Jr., for appellee.

STATEMENT

The plaintiff is a domestic corporation with its principal office in the city of Manila and engaged in the electrical business, and among
other things in the sale of what is known as the "Matthews" electric plant, and the defendant is a resident of Talisay, Occidental
Negros, and A. C. Montelibano was a resident of Iloilo.

Having this information, Montelibano approached plaintiff at its Manila office, claiming that he was from Iloilo and lived with
Governor Yulo; that he could find purchaser for the "Matthews" plant, and was told by the plaintiff that for any plant that he could
sell or any customer that he could find he would be paid a commission of 10 per cent for his services, if the sale was consummated.
Among other persons. Montelibano interviews the defendant, and, through his efforts, one of the "Matthews" plants was sold by
the plaintiff to the defendant, and was shipped from Manila to Iloilo, and later installed on defendant's premises after which,
without the knowledge of the plaintiff, the defendant paid the purchase price to Montelibano. As a result, plaintiff commenced this
action against the defendant, alleging that about August 18, 1920, it sold and delivered to the defendant the electric plant at the
agreed price of P2,513.55 no part of which has been paid, the demands judgment for the amount with interest from October 20,
1920.

For answer, the defendant admits the corporation of the plaintiff, and denies all other material allegations of the complaint, and, as
an affirmative defense, alleges "that on or about the 18th of August, 1920, the plaintiff sold and delivered to the defendant a certain
electric plant and that the defendant paid the plaintiff the value of said electric plant, to wit: P2,513.55."

Upon such issues the testimony was taken, and the lower court rendered judgment for the defendant, from which the plaintiff
appeals, claiming that the court erred in holding that the payment to A. C. Montelibano would discharge the debt of defendant, and
in holding that the bill was given to Montelibano for collection purposes, and that the plaintiff had held out Montelibano to the
defendant as an agent authorized to collect, and in rendering judgment for the defendant, and in not rendering judgment for the
plaintiff.

JOHNS, J.:

The testimony is conclusive that the defendant paid the amount of plaintiff's claim to Montelibano, and that no part of the money
was ever paid to the plaintiff. The defendant, having alleged that the plaintiff sold and delivered the plant to him, and that he paid
the plaintiff the purchase price, it devolved upon the defendant to prove the payment to the plaintiff by a preponderance of the
evidence.

It appears from the testimony of H. E. Keeler that he was president of the plaintiff and that the plant in question was shipped from
Manila to Iloilo and consigned to the plaintiff itself, and that at the time of the shipment the plaintiff sent Juan Cenar, one of its
employees, with the shipment, for the purpose of installing the plant on defendant's premises. That plaintiff gave Cenar a statement
of the account, including some extras and the expenses of the mechanic, making a total of P2,563,95. That Montelibano had no
authority from the plaintiff to receive or receipt for money. That in truth and in fact his services were limited and confined to the
finding of purchasers for the "Matthews" plant to whom the plaintiff would later make and consummate the sale. That Montelibano
was not an electrician, could not install the plant and did not know anything about its mechanism.

Cenar, as a witness for the plaintiff, testified that he went with shipment of the plant from Manila to Iloilo, for the purpose of
installing, testing it, and to see that everything was satisfactory. That he was there about nine days, and that he installed the plant,
and that it was tested and approved by the defendant. He also says that he personally took with him the statement of account of the
plaintiff against the defendant, and that after he was there a few days, the defendant asked to see the statement, and that he gave it
to him, and the defendant said, "he was going to keep it." I said that was all right "if you want." "I made no effort at all to collect the
amount from him because Mr. Rodriguez told me he was going to pay for the plant here in Manila." That after the plant was
installed and approved, he delivered it to the defendant and returned to Manila.

The only testimony on the part of the defendant is that of himself in the form of a deposition in which he says that Montelibano sold
and delivered the plant to him, and "was the one who ordered the installation of that electrical plant," and he introduced in
evidence as part of his deposition a statement and receipt which Montelibano signed to whom he paid the money. When asked why
he paid the money to Montelibano, the witness says:

Because he was the one who sold, delivered, and installed the electrical plant, and he presented to me the account, Exhibits
A and A-I, and he assured me that he was duly authorized to collect the value of the electrical plant.

The receipt offered in evidence is headed:

STATEMENT           Folio No. 2494

Mr. DOMINGO RODRIGUEZ, 

Iloilo, Iloilo, P.I.

In account with 
HARRY E. KEELER ELECTRIC COMPANY, INC. 
221 Calle Echaque, Quiapo, Manila, P.I. 
MANILA, P.I., August 18, 1920.

The answer alleges and the receipt shows upon its face that the plaintiff sold the plant to the defendant, and that he bought it from
the plaintiff. The receipt is signed as follows:

Received payment 
HARRY E. KEELER ELECTRIC CO. Inc.,

Recibi
(Sgd.) A. C. MONTELIBANO.

There is nothing on the face of this receipt to show that Montelibano was the agent of, or that he was acting for, the plaintiff. It is his
own personal receipt and his own personal signature. Outside of the fact that Montelibano received the money and signed this
receipt, there is no evidence that he had any authority, real or apparent, to receive or receipt for the money. Neither is there any
evidence that the plaintiff ever delivered the statement to Montelibano, or authorized anyone to deliver it to him, and it is very
apparent that the statement in question is the one which was delivered by the plaintiff to Cenar, and is the one which Cenar
delivered to the defendant at the request of the defendant.

The evidence of the defendant that Montelibano was the one who sold him the plant is in direct conflict with his own pleadings and
the receipt statement which he offered in evidence. This statement also shows upon its face that P81.60 of the bill is for:

To Passage round trip, 1st Class @ 

P40.80 a trip ........................................... P81.60.

Plus Labor @ P5.00 per day — 

Machine's transportation ................. 9.85.

This claim must be for the expenses of Cenar in going to Iloilo from Manila and return, to install the plant, and is strong evidence
that it was Cenar and not Montelibano who installed the plant. If Montelibano installed the plant, as defendant claims, there would
not have been any necessity for Cenar to make this trip at the expense of the defendant. After Cenar's return to Manila, the plaintiff
wrote a letter to the defendant requesting the payment of its account, in answer to which the defendant on September 24 sent the
following telegram:

Electric plant accessories and installation are paid to Montelibano about three weeks Keeler Company did not present bill.
This is in direct conflict with the receipted statement, which the defendant offered in evidence, signed by Montelibano. That shows
upon its face that it was an itemized statement of the account of plaintiff with the defendant. Again, it will be noted that the receipt
which Montelibano signed is not dated, and it does not show when the money was paid: Speaking of Montelibano, the defendant
also testified: "and he assured me that he was duly authorized to collect the value of the electrical plant." This shows upon its face
that the question of Montelibano's authority to receive the money must have been discussed between them, and that, in making the
payment, defendant relied upon Montelibano's own statements and representation, as to his authority, to receipt for the money.

In the final analysis, the plant was sold by the plaintiff to the defendant, and was consigned by the plaintiff to the plaintiff at Iloilo
where it was installed by Cenar, acting for, and representing, the plaintiff, whose expense for the trip is included in, and made a part
of, the bill which was receipted by Montelibano.

There is no evidence that the plaintiff ever delivered any statements to Montelibano, or that he was authorized to receive or receipt
for the money, and defendant's own telegram shows that the plaintiff "did not present bill" to defendant. He now claims that at the
very time this telegram was sent, he had the receipt of Montelibano for the money upon the identical statement of account which it
is admitted the plaintiff did render to the defendant.

Article 1162 of the Civil Code provides:

Payment must be made to the persons in whose favor the obligation is constituted, or to another authorized to receive it in
his name.

And article 1727 provides:

The principal shall be liable as to matters with respect to which the agent has exceeded his authority only when he ratifies
the same expressly or by implication.

In the case of Ormachea Tin-Conco vs. Trillana (13 Phil., 194), this court held:

The repayment of a debt must be made to the person in whose favor the obligation is constituted, or to another expressly
authorized to receive the payment in his name.

Mechem on Agency, volume I, section 743, says:

In approaching the consideration of the inquiry whether an assumed authority exist in a given case, there are certain
fundamental principles which must not be overlooked. Among these are, as has been seen, (1) that the law indulges in no
bare presumptions that an agency exists: it must be proved or presumed from facts; (2) that the agent cannot establish his
own authority, either by his representations or by assuming to exercise it; (3) that an authority cannot be established by
mere rumor or general reputation; (4)that even a general authority is not an unlimited one; and (5) that every authority
must find its ultimate source in some act or omission of the principal. An assumption of authority to act as agent for
another of itself challenges inquiry. Like a railroad crossing, it should be in itself a sign of danger and suggest the duty to
"stop, look, and listen." It is therefore declared to be a fundamental rule, never to be lost sight of and not easily to be
overestimated, that persons dealing with an assumed agent, whether the assumed agency be a general or special one, are
bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but the nature and extent
of the authority, and in case either is controverted, the burden of proof is upon them to establish it.

. . . It is, moreover, in any case entirely within the power of the person dealing with the agent to satisfy himself that the
agent has the authority he assumes to exercise, or to decline to enter into relations with him. (Melchem on Agency, vol. I,
sec. 746.)

The person dealing with the agent must also act with ordinary prudence and reasonable diligence. Obviously, if he knows or
has good reason to believe that the agent is exceeding his authority, he cannot claim protection. So if the suggestions of
probable limitations be of such a clear and reasonable quality, or if the character assumed by the agent is of such a
suspicious or unreasonable nature, or if the authority which he seeks to exercise is of such an unusual or improbable
character, as would suffice to put an ordinarily prudent man upon his guard, the party dealing with him may not shut his
eyes to the real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the
principal the true condition of affairs. (Mechem on Agency, vol. I, sec 752.)
 And not only must the person dealing with the agent ascertain the existence of the conditions, but he must also, as in other
cases, be able to trace the source of his reliance to some word or act of the principal himself if the latter is to be held
responsible. As has often been pointed out, the agent alone cannot enlarge or extend his authority by his own acts or
statements, nor can he alone remove limitations or waive conditions imposed by his principal. To charge the principal in
such a case, the principal's consent or concurrence must be shown. (Mechem on Agency, vol. I, section 757.)

This was a single transaction between the plaintiff and the defendant.lawph!l.net

Applying the above rules, the testimony is conclusive that the plaintiff never authorized Montelibano to receive or receipt for money
in its behalf, and that the defendant had no right to assume by any act or deed of the plaintiff that Montelibano was authorized to
receive the money, and that the defendant made the payment at his own risk and on the sole representations of Montelibano that
he was authorized to receipt for the money.

The judgment of the lower court is reversed, and one will be entered here in favor of the plaintiff and against the defendant for the
sum of P2,513.55 with interest at the legal rate from January 10, 1921, with costs in favor of the appellant. So ordered.
G.R. No. L-27134 February 28, 1986

COMPANIA MARITIMA, plaintiff-appellant, 
vs.
JOSE C. LIMSON, defendant-appellant.

Jose  W.  Diokno and Sergio Guadiz for plaintiff-appellant.

Jose Gutierrez and Agustin Ferrer for defendant-appellant.

PATAJO, J.:

This an appeal from a decision of the Court of First Instance of Manila 1 holding plaintiff Compania Maritima liable to defendant in
the amount of P441,339.01 representing the difference between the claim of plaintiff for unpaid passage and freight charges for
shipments of hogs and cattle on plaintiff's vessels for the period from October 1957 to February 1961 and the claim of defendant for
the purchase price of foodstuffs sold by defendant to plaintiff, payments on account of freight not accounted for by plaintiff and
rebate to which defendant was entitled on the aforesaid freight charges.

On October 8, 1962, plaintiff Compania Maritima filed a complaint against defendant Jose C. Limson for collection of the sum of
P44,701.54 representing the balance of defendant's unpaid accounts for passage and freight on shipments of hogs, cattle and
carabaos abroad plaintiff's vessel from various ports of Visayas and Mindanao for the period from October 1957 to February 1961.
Attached to said complaint was the statement of account supporting plaintiff's claim for unpaid passage and freight. Defendant filed
a motion for bill of particulars asking that plaintiff attach to the complaint the bins of lading referred to in said statement of account
in order to enable defendant to answer plaintiff's complaint. Plaintiff opposed said motion. The Court however ordered plaintiff to
attach photostat copies of the bills of lading upon which the statement of account was based. Plaintiff's motion for reconsideration
of said order was denied by the Court but upon motion of plaintiff said order was modified to allow plaintiff to attach duplicate
originals of the bills of lading instead of photostat copies thereof.

On July 16, 1963, defendant filed his answer to the complaint denying any liability to plaintiff. Defendant alleged that he had already
fully paid for all the shipments he made and that a number of the bills of lading submitted by plaintiff as basis of its claim are not
properly chargeable to defendant since he was not the shipper nor had he authorized said shipments which were made by parties
other than those for whom defendant is liable or who had been duly authorized by defendant to make said shipments. Defendant
further set up a counterclaim for the refund of the rebate to which he was entitled to pursuant to an agreement that he had with
plaintiff for shipments made by him from Davao, Cotabato, Dadiangas, Iligan and Masbate and for cost of foodstuffs sold or
delivered to plaintiff in the total amount of P411,477.45.

Since the case involved primarily questions of accounting, upon motion of plaintiff, without the opposition of defendant, the Court
appointed a commissioner to examine the accounts involved before the Court proceed with the hearing of the case. Anselmo T. del
Rosario, a certified public accountant, was thus appointed by the Court.

On October 29, 1963, Mr. del Rosario submitted his report to the Court. The salient points in said report showed that with respect to
the claim of defendant against plaintiff, the same was in the total amount of P676,416.05 broken down as follows:

For purchases of foodstuffs................ P433,237.75

Freight adjustments.............................. 8,170.45
Cash payments made by defendant... P235,007.85
P676,416.05

On the other hand, the claim of the plaintiff totalled P545,394.24 based on 1,521 bills of lading examined by him of which 267 were
signed by defendant totaling P67,061.66; 3 bills signed by representative of defendant totaling Pl,148.10; 91 bills signed by a certain
"Perry" with Jose Limson, the defendant, as shipper and consignee totaling P61,981.00; 149 bills signed by said "Perry" for others as
shippers and consignee totaling P46,869.60; 16 bills signed by others totaling P5,180.70; 662 bills unsigned totaling P260,170.23 and
333 bills missing totaling P102,982.46. According to the Commissioner defendant can be held liable only for the 267 bills signed by
him and the 3 bills signed by his representative in the total amount of P68,209.79.
The bills examined by the Commissioner had been classified and regrouped by him into (1) original bills of lading signed by
defendant or his agent; (2) original bills of lading without signature of defendant or his agent; and (3) charges with no original bills of
lading, to wit:

(1) Original bills of lading duly signed by

defendant or his agent.................... P68,209.76
(2) Original bills of lading without
the signature of defendant............ 310,317.21
(3) No original bills of lading............... 166,867.28

Said Commissioner recommended that only the amount of P68,209.76 supported by original bills of lading signed by defendant or
his agent is properly chargeable to defendant.

After hearing the lower Court rendered judgment based principally on the report of the Commissioner. The Court, however, held
that defendant was liable for the bills of lading without originals involving a total of P166,867.26 but liable on the bills of lading
which had not been signed by him or his authorized representative. The Court sustained defendant's claim that "Perry" was not his
authorized representative. Thus the lower Court rendered judgment sentencing plaintiff to pay defendant the sum of P441,339.01
with interest thereon at the legal rate from the date of the filing of the counterclaim plus P5,000.00 as attorney's fees. The amount
of P441,339.01 is computed as follows:

Amount to defendant:
Freight adjustments.............. P 8,170.45
Cash payments.................... 235,007.85
Foodstuffs and supplies delivered 433,237.75

Total............. P676,416.05

Deduct amount to plaintiff on 

bills of lading signed by 
defendant or his authorized
representative.................... 68,209.76

Bills of lading without originals 

but supported by other copies of said bills of lading........ 166,867.28

Total.................. 235,077.04

Balance due defendant...............P441,339.01

From said decision both plaintiff and defendant appealed to this Court, plaintiff assigning six assignment of errors, to wit:

The Trial Court erred in finding that the report of the Commissioner is fully supported by the documentary
evidence presented in this case.

II

The Trial Court erred in concurring with the Commissioner that without the supporting original documents, the
customer's subsidiary ledger cards are not sufficient and reliable.

III

The Trial Court erred in holding that the Commissioner is right in disallowing bills of lading not signed either by
defendant or his authorized representatives, instead of holding that the corresponding freight charges for said bills
of lading were probably debited in defendant's charge account.
 IV

The Trial Court erred in finding that the fact that no periodic statements of account furnished, Limson was kept in
the dark as to the true status of his account with plaintiff.

The Trial Court erred in finding that there is a balance of P441,339.01 due the defendant, said sum with interest
thereon from the date of the filing of the counterclaim plus P5,000.00 as attorney's fees and costs.

VI

The Trial Court erred in dismissing the complaint and in not sentencing the defendant to pay the plaintiff the sum
of P44,701.54 representing the unpaid balance of defendant's charge account with plaintiff plus legal interest
thereon from the filing of the complaint, and the sum of P2,000.00 and Pl,000.00 as attomey's fees and expenses
of litigating respectively incurred by the plaintiff.

while defendant assigned one sole assignment of error:

The Trial Court erred in declaring appellant Limson liable in the amount of P166,867.28 for freighters and in
deducting the same from his claim against Maritima."

We find that the Court a quo erred in rejecting the bins of lading signed by "Perry" where defendant appeared shipper or consignee,
those signed by "Perry" where persons other than defendant-appellant as shipper and the bills of lading unsigned by defendant.

With regards to the 91 controverted bills of lading signed by "Perry" with Limson as shipper or consignee in the total amount of
P61,981.50, witness Cabling testified that the signatures therein are those of Cipriano Magtibay alias "Perry" who took delivery of
the cargoes stated therein after signing the delivery receipts. He testified thus:

These are all the signatures of Perry. I know it to be his because oftentimes he goes there to get the deliver y
orders and he signed as "Perry" in my presence. His real name is Cipriano Magtibay. I allowed delivery of the
Cargoes to him because he was the regular representative of Mr. Limson." (t.s.n., pp. 12-13, Nov. 19, 1964)

On the other hand, Nolasco Cruz Ilagan, delivery order clerk of Compania Maritima, testified to this wise:

In issuing these delivery orders, I get the data from the manifests or from the bills of lading. I know the defendant
Limson in this case. He is now in the Court room. I knew him since the middle of 1956 up to 1961 when I was
assigned in the Terminal Office of Maritima. I came to know him because Mr. Cabling introduced to us that he is a
regular shipper of hogs, cattles, carabaos coming from the southern ports. As a clerk, I prepared the delivery orders
for these cargoes to be delivered to Mr. Limson or his authorized representatives. I will mention some of his
representatives: For hog the authorized representative is Cipriano Magtibay or Perry; and for cattles, carabaos and
cows, is Eye, Mario, Mr. Marcelino Tinoco and others whom I don't remember the names. When these
representatives of Mr. Limson take delivery of the shipments, I let them sign the delivery orders. I prepared the
delivery orders as soon as Mr. Limson himself or his authorized representative go to our office and present the bills
of lading. In case where there is no original bill of lading, delivery order is effected also only when authorized by
Mr. Cabling, basing on the manifests. The boat gives us the manifest as soon as it arrives. (t.s.n. 255-256, Mar.
10/65 & 256-260, Mar. 10/65. Even though the name of the shipper is not Mr. Limson or the consignee is not Mr.
Limson, I prepared delivery orders by authorization of Mr. Cabling. (pp. 260-261 Id). The authorized representative
to receive for hogs was Mr. Cipriano Magtibay alias "Perry". He signs the delivery orders by the name of "Perry".
(p. 261 Id.)

We were also the ones who put on the delivery orders the statement "account Limson". We put that to indicate
the cargo is chargeable to Mr. Limson, so that the accounting department would know that the shipment is
chargeable to Mr. Limson." (pp. 263-265 Id.)
 I am familiar with the signature of Perry, In these two bunches of delivery orders, I find that the signature
appearing therein is that of Perry, the authorized representative of Limson. These delivery orders were signed by
Perry in my presence. I know that Mr. Perry or Magtibay is the authorized representative of Mr. Limson because he
was introduced to us by Limson himself that he is the one authorized by him to get his cargoes. He was authorized
only to sign delivery orders for hogs. I also knew that Tinoco, Eye, Mario and other were also authorized by Limson
to receive shipment for him (pp. 265-270 Id). These other persons who were authorized representatives to receive
big cattles signed delivery orders in my presence. The delivery orders were requested by Eye, Mario, and Tinoco,
the authorized representatives. I know personally that these men are the authorized representatives for Limson.
(pp. 270-275, Id.) (Plaintiff's brief, pp. 35-37).

Regarding the 16 controverted bills of lading signed by persons other than "Perry" with freight charges totalling P5,180.70, Ilagan
testified that the representatives that signed the delivery receipts and took delivery of the cargoes thereof were Limson's agents.
Ilagan testified thus:

As clerk, I prepared the delivery orders for those cargoes to be delivered to Mr. Limson or his authorized
representatives. For hogs the authorized representative was Cipriano Magtibay; and for cattle, carabaos and cows
the authorized representatives were Eye, Mario, Tinoco and others who I cannot recall the names. (t.s.n. pp. 260-
261, Nov. 1/65).

These other persons who were authorized representatives to receive cattle signed delivery receipts in my
presence. The delivery orders were requested by Eye, Mario and Tinoco, the authorized representatives. I know
personally that these men are the authorized representative for Limson. (pp,27-275,  Id.). (Emphasis supplied).

With respect to the 662 unsigned bills of lading with freight charges totaling P260,170.23, delivery receipts were issued upon
delivery of the shipments. Cabling and Ilagan who were presented the plaintiff as witnesses testified that the ordinary procedure at
plaintiff's terminal office was to require the surrender of the original bill of lading, but when the bill of lading cannot be surrendered
because it had not arrived or received by the consignee or assignee, the delivery of the cargo was authorized just the same, and the
delivery receipt was prepared based on the ship's cargo manifests or ship's copy of the bill of lading. This accommodation was
specially given Limson, because defendant was a regular shipper and ship chandler of plaintiff, and was a compadre of Cabling.
Besides, said hogs and cattle had to be unloaded and released from the pier for they cannot be kept there long, after having been on
board for several days because they might die. (t.s.n. pp. 320323, March 10, 1965).

Regarding the 149 controverted bills of lading in the name of other persons as shippers or consignees and signed by Perry in the
total amount of P46,869.60, it was established that said bills of lading were for cattle and hogs-purchased by the defendant from his
"viajeros" in Manila which were delivered to and received by defendant, and for which he had to pay the freight charges, where in
turn, he deducted from the purchase price the corresponding cost of freight; or were for cattle or hogs that belonged to Marcelino
Tinoco from whom defendant had made arrangements for paying the purchase price of said Tinoco's cargo partly with the freight
costs for which defendant agreed to be debited in his charge account with Maritima. These facts were admitted by the defendant
himself when he testified on direct and cross-examination,  supra. This was also confirmed by the testimony of Cabling. And now,
corroborating the above facts as testified, Pagkalinawan, another witness for the plaintiff, testified thus:

I know Mr. Limson, He is also a meat dealer. As ship's chandler he supplies foodstuffs, meat, to Maritima ships. I
came to know Mr. Limson when Mr. Tinoco introduced me to him. Mr. Limson was getting meat from Mr. Tinoco
at that time. It was cow and carabao meat. These cow and carabao meat which Mr. Limson used to get from
Tinoco came from the Visayas to Manila. They were brought by the Maritima ships and those were the cows and
carabaos that I took delivery at that time. I do not pay the freight for the delivery of these cows and carabaos. I
was allowed by the Compania Maritima to take delivery of these cows and carabaos of Mr. Tinoco without paying
the freight because the freights win be charged to Mr. Limson. These freight charges that I did not pay for the
shipment of cows and carabaos of Mr. Tinoco were charged against Mr. Limson. These freight charges that were
charged against Mr. Limson in his account in the Maritima were credited as payment of Mr. Limson to the meat
that he gets from Mr. Tinoco. (t.s.n. pp. 6-14, April 20, 1966). I am not the only one who received the cows and
carabaos of Mr. Tinoco at the Maritima. There were many more, Mario Valencia, Remy and one whom I know only
as Ben Negro. (t.s.n. pp. 14-15, April 30, 1966). Sometimes Marcelino Tinoco himself takes the cargo, I used to
accompany him, and I am the one signing the delivery permit. Sometimes he does too. He does not pay the freight
because it is charged against the account of Mr. Limson. (t.s.n. pp. 15-20, April 20, 1966). I have occasions taking
delivery of the cows and carabaos of Mr. Tinoco even if there was no original bill of lading and the freight of which
were charged against Mr. Limson. The office makes true copies of the bills of lading for the originals which could
not be produced. Just the same I could take delivery of the said cows and carabaos. (t.s.n. pp. 20-21, Id).
 In all occasions that I withdrew the cows and carabaos of Mr. Tinoco for which I signed the delivery receipts there
were corresponding original bills of lading or copies of the bills of lading which were made even if the original bills
could not be produced (t.s.n. pp. 2-3, May 6, 1966). Mr. Limson signed these bills of lading that I have presented to
him. Those that were not, I was the one who signed it, When the unloading takes place at nights I just call him up
by telephone. (t.s.n., p. 3, Id).

For the shipments of Mr. Marcelino Tinoco, I was the one who gets the delivery order. But if I am not around, my
companions get them. However, if he is there at the pier, he himself receives his shipments. (t.s.n. pp. 9-11, Id.) All
shipments of Mr. Tinoco are vales of Mr. Limson. If I do not have the bills of lading, that were signed by Mr.
Limson, I can still get the delivery in this manner. If the shipments takes place at night and I could not get the
signature of Mr. Limson, I simply call him up thru the telephone who in turn directs me to call on Mr. Cabling and
Mr. Cabling used to tell me to sign the bills of lading because he and Mr. Limson had already an arrangement. "
(t.s.n. pp. 17-18, Id.)

Plaintiff also presented Exhibits B-276 to 1018 in the total amount of P81,462.92, bills of lading not in the name of defendant
Limson, but which Limson himself signed, thereby proving that defendant took delivery of shipments in the names of others, shipper
or consignee, and which the corresponding charges were debited to his account.

The simpler way to determine how much is the total claim of plaintiff against defendant is to compute the amount of the freight on
the face of the bills of lading supporting the statement of account attached to the complaint and deducting therefrom the rebates to
which defendant is entitled to under the special arrangement made between defendant and Mr. F.J. Garay of Compania Maritima
dated March 27, 1957. According to the statement of account submitted by plaintiff and attached to the complaint, the total of
freight charges due from defendant is P698,159.14 (Annex "A" Complaint).

This is the amount due based on what is charged in the bills of lading. It did not reflect the rebates because said bills of lading were
prepared in the field offices of plaintiff where the special arrangement entitling defendant to rebate had not been transmitted.

According to the report of the Commissioner, the total rebate to which defendant will be entitled to is P127,418.89 (Supplementary
Report dated January 27, 1964, Exhibit 7-B). According to said Commissioner, he arrived at such amount in the following manner:

I selected the freightage from Davao comprised of 340 shipments from October 15, 1957, up to February 11, 1961.
340 shipments, and I used P4.50 as the freightage from Davao to Manila. Now I used the P5.00 as you requested,
and that is the difference.

In other words, the Commissioner summed up the total number of hogs involved in the 340 shipments from Davao which must be
some 50,692 hogs. The difference was arrived at, thus-

50,692 hogs multiplied by P5.00 per head = P253,460.00 

less: 50,692 hogs multiplied by P4.50 per head = P228,114.00 P25,346.00

The difference, (P25,346.00) subtracted from the original computation of P152,764.89 resulted to the reduced rebate of
P127,418.89 (Supplementary Report, supra).

However, instead of merely verifying the accuracy of the above-stated computation, the special rates, supra,
accorded Limson was individually applied in computing the freightage due from Limson's shipments, as itemized in
the "Spread of Charges made to Limson's account" (Commissioner's report, Exh. " 7 "), and arrived at the following:

Total freight charges (special

rates used for shipments from
ports as provided for in the
Agreement)............................................ P517,842.30
Total freight charges (Limson's
shipments (rates used as com-
puted in port of origin) from
ports other than those stated
in the Agreement...................................... 69,025.66
 Total charges to Limson's
Account............................................... P586,867.96

In other words, the total freight over-charges which may be due Limson is (P698,159.14 less P586,867.96) P111,291.18 and not
P127,418.91 as reported by the Commissioner.

To be added to said rebate of P111,291.18 are the cash payment made by defendant of P235,007.85, freight adjustment of Pl,138.45
and cost of foodstuffs purchased by plaintiff from defendant of P411,982.35 (from the total of P433,237.75 representing the amount
of said purchase deduct P21,255.40 which had been billed twice), all of which would total P759,419.83. Deducting from said amount,
the total of freight charges in favor of plaintiff as per the statement of account attached as Annex "A" to the complaint of
P698,159.14 would give a balance of P61,260.69 in favor of defendant.

It may be noted that in his answer to the complaint defendant stated that the total of his claim against plaintiff for the cost of
foodstuffs delivered is P411,477.45 (par. 22, Answer of Defendant, page 68, Record on Appeal).

Now, turning to defendant's sole assignment of error, namely, that the Trial Court erred in declaring defendant liable in the amount
of P166,867.20 representing the amount covered by bills of lading where the originals had been presented.

With respect to defendant's sole assignment of errors, namely, that Court a quo erred in declaring defendant liable in the amount of
P166,867.28 which represents charges for freight where the originals of the bills of lading were not submitted, We find merit in the
contention of plaintiff that the respondent Court correctly held defendant liable for said amount because the same actually
represented freight charges based on the carbon originals of the ship's copy of the bills of lading where Limson appeared as
consignee in the amount of P84,529.42 and those based on the ship's cargo manifests, where defendant appeared as consignee in
the amount of P81,874.10. Respondent Court admitted in evidence said copies of the bills of lading which were not considered by
the Commissioner because they are not actually the original copy of the bill of lading. The Commissioner accepted only the originals
of the bills of lading because he did not consider even duplicate originals duly signed as originals. The ship's copies of the bills of
lading and the cargo manifests were substantiated by other supporting documents which were found after the report of the
Commissioner from among the records salvaged from the San Nicolas bodega fire or which were found among the records kept on
plaintiff's terminal office. Said documents were presented in lieu of corresponding original of the consignee's copy of bill of lading
which could not be submitted to the Commissioner nor presented as plaintiff's evidence to the Court because they were lost or
destroyed during the remodelling of plaintiff's office building or during the fire at plaintiff's bodega at San Nicolas where they were
brought for safekeeping. All said documents were presented as evidence to prove that all the freight charges for the shipments
evidence thereby were duly earned by plaintiff and were properly debited in defendant's charge account. Apparently, the
Commissioner rejected plaintiff's claims which were not actually supported by the original of the bills of lading notwithstanding the
fact that duplicate original of the said documents and other secondary evidence such as the ship cargo manifests have been
presented as evidence. As stated above, witnesses Cabling and Ilagan testified that the practice was that when the originals of the
bins of lading could not be surrendered because they have not yet been received by the consignee, the delivery of the cargo was
nevertheless authorized and a delivery receipt was prepared on the basis of the ship's cargo manifests or the ship's copy of the bills
of lading. This only shows that the ship's cargo manifests or the ship's copy of the bills of lading can be accepted as evidence of
shipments made by defendant since he was allowed to accept delivery of said shipments even without presented his copy of the bill
of lading.

By way of recapitulation, the total of freight charges due plaintiff based on the freight charges appearing on the
face of the bills of lading supporting the statement of account attached to the complaint is P698,159.14. Deduct
from said
amount the following:

(1) Rebate................................................................... P111,291.18

(2) Cash payments made by defendant................. 235,007.85
(3) Freight adjustment.............................................. 1,138.45
(4) Cost of foodstuffs purchased from defendant..411,982.35 Total.......................... P759,419.83

would show a balance in favor of defendant of P61,260.69.

Presented otherwise, the total freight charges due plaintiff after deducting the rebate to which defendant is entitled to is
P586,867.96. (.698,159.14 minus P111,291.18).
Against said freight charges of P586,867.96 defendant should be credited:

(1) Cash payment............................... P235,007.85

(2) Freight adjustment........................ 1,138.45
(3) Cost of foodstuffs........................ P411,982.35
Total............................. P648,128.65

giving a balance in favor of defendant of P61,260.69.

WHEREFORE, the decision of the Court a quo is hereby MODIFIED and judgment rendered against plaintiff on defendant's
counterclaim for the amount of P61,260.69. In an other respects, the appealed decision is hereby AFFIRMED. No pronouncement as
to cost.
G.R. No. L-5486            August 17, 1910

JOSE DE LA PEA Y DE RAMON, plaintiff-appellant, 

vs.
FEDERICO HIDALGO, defendant-appellant.

O'Brien and DeWitt, for plaintiff and appellant.

E. Gutierrez Repilde, for defendant and appellant.

TORRES, J.:

On May 23, 1906, Jose dela Peña y de Ramon, and Vicenta de Ramon, in her own behalf and as the legal guardian of her son Roberto
de la Peña, filed in the Court of First Instance of Manila a written complaint against of Federico Hidalgo, Antonio Hidalgo, and
Francisco Hidalgo, and, after the said complaint, already amended, had been answered by the defendants Antonio and Francisco
Hidalgo, and the other defendant, Federico Hidalgo, had moved for the dismissal of this complaint, the plaintiff, Jose de la Peña y de
Ramon, as the judicial administrator of the estate of the deceased Jose de la Peña y Gomiz, with the consent of the court filed a
second amended complaint  prosecuting his action solely against Federico Hidalgo, who answered the same in writing on the 21st of
may and at the same time filed a counterclaim, which was also answered by the defendant.

On October 22, 1907, the case was brought up for hearing and oral testimony was adduced by both parties, the exhibits introduced
being attached to the record. In view of such testimony and of documentary evidence, the court, on March 24, 1908, rendered
judgment in favor of the plaintiff-administrator for the sum of P13,606.19 and legal interest from the date of the filing of the
complaint on May 24, 1906, and the costs of the trial.

Both the plaintiff and the defendant filed notice of appeal from this judgment and also asked for the annulment of the same and for
a new trial, on the ground that the evidence did not justify the said judgment and that the latter was contrary to law. The defendant,
on April 1, 1908, presented a written motion for new hearing, alleging the discovery of new evidence favorable to him and which
would necessarily influence the decision such evidence or to introduce it at the trial of the case, notwithstanding the fact that he had
used all due diligence. His petition was accompanied by affidavits from Attorney Eduardo Gutierrez Repilde and Federico Hidalgo,
and was granted by order of the court of the 4th of April.

At this stage of the proceedings and on August 10, 1908, the plaintiff Peña y De Ramon filed a third amended complaint, with the
permission of the court, alleging, among other things, as a first cause of action, that during the period of time from November 12,
1887, to January 7, 1904, when Federico Hidalgo had possession of and administered the following properties, to wit; one house and
lot at No. 48 Calle San Luis; another house and lot at No. 6 Calle Cortada; another house and lot at 56 Calle San Luis, and a fenced lot
on the same street, all of the district of Ermita, and another house and lot at No. 81 Calle Looban de Paco, belonging to his principal,
Jose de la Peña y Gomiz, according to the power of attorney executed in his favor and exhibited with the complaint under letter A,
the defendant, as such agent, collected the rents and income from the said properties, amounting to P50,244, which sum, collected
in partial amounts and on different dates, he should have deposited, in accordance with the verbal agreement between the
deceased and himself, the defendant, in the general treasury of the Spanish Government at an interest of 5 per cent per annum,
which interest on accrual was likewise to be deposited in order that it also might bear interest; that the defendant did not remit or
pay to Jose de la Peña y Gomiz, during the latter's lifetime, nor to nay representative of the said De la Peña y Gomiz, the sum
aforestated nor any part thereof, with the sole exception of P1,289.03, nor has he deposited the unpaid balance of the said sum in
the treasury, according to agreement, wherefore he has become liable to his principal and to the defendant-administrator for the
said sum, together with its interest, which amounts to P72,548.24 and that, whereas the defendant has not paid over all nor any
part of the last mentioned sum, he is liable for the same, as well as for the interest thereon at 6 per cent per annum from the time of
the filing of the complaint, and for the costs of the suit.

In the said amended complaint, the plaintiff alleged as a second cause of action: That on December 9, 1887, Gonzalo Tuason
deposited in the general treasury of the Spanish Government, to the credit of Peña y Gomiz, the sum of 6,360 pesos, at 5 per cent
interest per annum, and on December 20, 1888, the defendant, as the agent of Peña y Gomiz, withdrew the said amount with its
interest, that is, 6,751.60 pesos, and disposed of the same for his own use and benefit, without having paid all or any part of the said
sum to Peña y Gomiz, or to the plaintiff after the latter's death, notwithstanding the demands made upon him: wherefore the
defendant now owes the said sum of 6,751.60 pesos, with interest at the rate of 5 per cent per annum, compounded annually, from
the 20th of December, 1888, to the time of the filing of this complaint, and from the latter date at 6 per cent, in accordance with
law.
The complaint recites as a third cause of action: that, on or about November 25, 1887, defendant's principal, Peña y Gomiz, on his
voyage to Spain, remitted from Singapore, one of the ports to call, to Father Ramon Caviedas, a Franciscan friar residing in this city,
the sum of 6,000 pesos with the request to deliver the same, which he did, to defendant, who, on receiving this money,
appropriated it to himself and converted it to his own use and benefit, since he only remitted to Peña y Gomiz in Sapin, by draft,
737.24 pesos, on December 20, 1888; and, later, on December 21, 1889, he likewise remitted by another draft 860 pesos, without
having returned or paid the balance of the said sum, notwithstanding the demands made upon him so to do: wherefore the
defendant owes to the plaintiff, for the third cause of action, the sum of P4,402.76, with interest at the rate of 5 per cent per annum,
compounded yearly, to the time of the filing of the complaint and with interest at 6 per cent from that date, as provided by law.

As a fourth cause of action the plaintiff alleges that, on or about January 23, 1904, on his arrival from Spain and without having any
knowledge or information of the true condition of affairs relative to the property of the deceased Peña y Gomiz and its
administration, he delivered and paid to the defendant at his request the sum of P2,000, derived from the property of the deceased,
which sum the defendant has not returned notwithstanding the demands made upon him so to do.

Wherefore the plaintiff petitions the court to render judgment sentencing the defendant to pay, as first cause of action, the sum of
P72,548.24, with interest thereon at the rate of 6 per cent per annum from May 24, 1906, the date of the filing of the complaint, and
the costs; as a second cause of action, the sum of P15,774.19, with interest at the rate of 6 per cent per annum from the said date of
the filing of the complaint, and costs; as a third cause of action, P9,811.13, with interest from the aforesaid date, and costs; and,
finally, as a fourth cause of action, he prays that the defendant be sentenced to refund the sum of P2,000, with interest thereon at
the rate of 6 per cent per annum from the 23d of January, 1904, and to pay the costs of trial.

The defendant, Federico Hidalgo, in his answer to the third amended complaint, sets forth: That he admits the second, third, and
fourth allegations contained in the first, second, third, and fourth causes of action, and denies generally and specifically each one
and all of the allegations contained in the complaint, with the exception of those expressly admitted in his answer; that, as a special
defense against the first cause of action, he, the defendant, alleges that on November 18, 1887, by virtue of the powers conferred
upon him by Peña y Gomiz, he took charge of the administration of the latter's property and administered the same until December
31, 1893, when for reasons of health he ceased to discharge the duties of said position; that during the years 1889, 1890, 1891, and
1892, the defendant continually by letter requested Peña y Gomiz, his principal, to appoint a person to substitute him in the
administration of the latter's property, inasmuch as the defendant, for reasons of health, was unable to continue in his trust; that, on
March 22, 1894, the defendant Federico Hidalgo, because of serious illness, was absolutely obliged to leave these Islands and
embarked on the steamer Isla de Luzon  for Sapin, on which date the defendant notified his principal that, for the reason aforestated,
he had renounced his powers and turned over the administration of his property to Antonio Hidalgo, to whom he should transmit a
power of attorney for the fulfillment, in due form, of the trust that the defendant had been discharging since January 1, 1894, or else
execute a power of attorney in favor of such other person as he might deem proper;

That prior to the said date of March 22, the defendant came, rendered accounts to his principal, and on the date when he embarked
for Spain rendered the accounts pertaining to the years 1892 and 1893, which were those that yet remained to be forwarded, and
transmitted to him a general statement of accounts embracing the period from November 18, 1887, to December 31, 1893, with a
balance of 6,774.50 pesos in favor of Peña y Gomiz, which remained in the control of the acting administrator, Antonio Hidalgo; that
from the 22nd of March, 1894, when the defendant left these Islands, to the date of his answer to the said complaint, he has not
again intervened nor taken any part directly or indirectly in the administration of the property of Peña y Gomiz, the latter's
administrator by express authorization having been Antonio Hidalgo, from January 1, 1894, to October, 1902, who, on this latter
date, delegated his powers to Francisco Hidalgo, who in turn administered the said property until January 7, 1904; that the
defendant, notwithstanding his having rendered, in 1894, all his accounts to Jose Peña y Gomiz, again rendered to the plaintiff in
1904 those pertaining to the period from 1887 to December 31, 1893, which accounts the plaintiff approved without any protest
whatever and received to his entire satisfaction the balance due and the vouchers and documents and documents relating to the
property of the deceased Peña y Gomiz and issued to the defendant the proper acquaintance therefor.

As a special defense to the second cause of action, the defendant alleged that, on December 9, 1886, Jose de la Peña y Gomiz
himself deposited in the caja general de depositos  (General Deposit Bank) the sum of 6,000 pesos, at 6 per cent interest for the term
of one year, in two deposit receipts of 3,000 pesos each, which two deposit receipts, with the interest accrued thereon, amounted
to 6,360 pesos, ad were collected by Gonzalo Tuason, through indorsement by Peña y Gomiz, on December 9, 1887, and on this
same date Tuason, in the name of Peña y Gomiz, again deposited the said sum of 6,360 pesos in the General Deposit Bank, at the
same rate of interest, for the term of one year and in two deposit receipts of 3,180 pesos each, registered under Nos. 1336 and
1337; that, on December 20, 1888, father Ramon Caviedas, a Franciscan friar, delivered to the defendant, Federico Hidalgo, by order
of De la Peña y Gomiz, the said two deposit receipts with the request to collect the interest due thereon viz., 741.60 pesos an to
remit it by draft on London, drawn in favor of De la Peña y Gomiz, to deposit again the 6,000 pesos in the said General Deposit Bank,
for one year, in a single deposit, and in the latter's name, and to deliver to him, the said Father Caviedas, the corresponding deposit
receipt and the draft on London for their transmittal to Peña y Gomiz: all of which was performed by the defendant who acquired
the said draft in favor of De la Peña y Gomiz from the Chartered Bank of India, Australia and China, on December 20, 1888, and
delivered the draft, together with the receipt from the General Deposit Bank, to Father Caviedas, and on the same date, by letter,
notified Peña y Gomiz of the transactions executed; that on December 20, 1889, the said Father Hidalgo, by order of Peña y Gomiz,
the aforesaid deposit receipt from the General Deposit Bank, with the request to remit, in favor of his constituent, the interest
thereon, amounting to 360 pesos, besides 500 pesos of the capital, that is 860 pesos in all, and to again deposit the rest, 5,500
pesos, in the General Deposit Bank for another year in Peña y Gomiz's own name, and to deliver to Father Caviedas the deposit
receipt and the draft on London, for their transmittal to his constituent; all of which the defendant did; he again deposited the rest
of the capital, 5,500 pesos, in the General Deposit Bank, in the name of Peña y Gomiz, for one year at 5 per cent interest, under
registry number 3,320, and obtained from the house of J. M. Tuason and Co. a draft on London for 860 pesos in favor of Peña y
Gomiz, on December 21, 1889, and thereupon delivered the said receipt and draft to Father Caviedas, of which acts, when
performed, the defendant advised Peña y Gomiz by letter of December 24, 1889' and that, on December 20, 1890, the said Father
Ramon Caviedas delivered to the defendant, by order of Peña y Gomiz, the said deposit receipt for 5,500 pesos with the request that
he withdraw from the General Deposit Bank the capital and accrued interest, which amounted all together to 5,775 pesos, and that
he deliver this amount to Father Caviedas, which he did, in order that it might be remitted to Peña y Gomiz.

The defendant denied each of the allegations contained in the third cause of action, and avers that they are all false and calumnious.

He likewise makes a general and specific denial of all the allegations of the fourth cause of action.

As a counterclaim the defendant alleges that Jose Peña y Gomiz owed and had not paid the defendant, up to the date of his death,
the sum of 4,000 pesos with interest at 6 per cent per annum, and 3,600 pesos, and on the plaintiff's being presented with the
receipt subscribed by his father, Peña y Gomiz, on the said date of January 15th, and evidencing his debt, plaintiff freely and
voluntarily offered to exchange for the said receipt another document executed by him, and transcribed in the complaint. Defendant
further alleges that, up to the date of his counterclaim, the plaintiff has not paid him the said sum, with the exception of 2,000
pesos. Wherefore the defendant prays the court to render judgment absolving him from the complaint with the costs against the
plaintiff, and to adjudge that the latter shall pay to the defendant the sum 9,000 pesos, which he still owes defendant, with legal
interest thereon from the date of the counterclaim, to wit, May 21, 1907, and to grant such other and further relief as may be just
and equitable.

On the 25th of September, 1908, and subsequent dates, the new trial was held; oral testimony was adduced by both parties, and the
documentary evidence was attached to the record of the proceedings, which show that the defendant objected and took exception
to the introduction of certain oral and documentary evidence produced by the plaintiff. On February 26, 1909, the court in deciding
the case found that the defendant, Federico Hidalgo, as administrator of the estate of the deceased Peña y Gomiz, actually owed by
the plaintiff, on the date of the filing of the complaint, the sum of P37,084.93; that the plaintiff was not entitled to recover any sum
whatever from the defendant for the alleged second, third, and fourth causes of action; that the plaintiff actually owed the
defendant, on the filing of the complaint, the sum of P10,155, which the defendant was entitled to deduct from the sum owing by
him to the plaintiff. Judgment was therefore entered against the defendant, Federico Hidalgo, for the payment of P26,629.93, with
interest thereon at the rate of 6 per cent per annum from May 23, 1906, and the costs of the trial.

Both parties filed written exceptions to this judgment and asked, separately, for its annulment and that a new trial be ordered, on
the grounds that the findings of fact contained in the judgment were not supported nor justified by the evidence produced, and
because the said judgment was contrary to law, the defendant stating in writing that his exception and motion for a new trial
referred exclusively to that part of the judgment that was condemnatory to him. By order of the 10th of April, 1909, the motions
made by both parties were denied, to which they excepted and announced their intention to file their respective bills of exceptions.

By written motions of the 24th of March, 1909, the plaintiff prayed for the execution of the said judgment, and the defendant being
informed thereof solicited a suspension of the issuance of the corresponding writ of execution until his motion for a new trial should
be decided or his bill of exceptions for the appeal be approved, binding himself to give such bond as the court might fix. The court,
therefore, by order of the 25th of the same month, granted the suspension asked for, conditioned upon the defendants giving a
bond, fixed at P34,000 by another order of the same date, to guarantee compliance with the judgment rendered should it be
affirmed, or with any other decision that might be rendered in the case by the Supreme Court. This bond was furnished by the
defendant on the 26th of the same month.

On April 16 and May 4, 1909, the defendant and the plaintiff filed their respective bills of exceptions, which were certified to and
approved by order of May 8th and forwarded to the clerk of this court.
Before proceeding to examine the disputed facts to make such legal findings as follows from a consideration of the same and of the
questions of law to which such facts give rise, and for the purpose of avoiding confusion and obtaining the greatest clearness and an
easy comprehension of this decision, it is indispensable to premise: First, that as before related, the original and first complaint filed
by the plaintiff was drawn against Federico Hidalgo, Antonio Hidalgo, and Francisco Hidalgo, the three persons who had successively
administered the property of Jose de la Peña y Gomiz, now deceased; but afterwards the action was directed solely against Federico
Hidalgo, to the exclusion of the other defendants, Antonio and Francisco Hidalgo, in the second and third amended complaints, the
latter of the date of August 10, 1908, after the issuance by the court of the order of April 4th of the same year, granting the new trial
solicited by the defendant on his being notified of the ruling of the 24th of the previous month of March; second, that the
administration of the property mentioned, from the time its owner left these Islands and returned to Spain, lasted from November
18, 1887, to January 7, 1904; and third that, the administration of the said Federico, Antonio, and Francisco Hidalgo, having lasted so
long, it is necessary to divide it into three periods in order to fix the time during which they respectively administered De la Peña's
property: During the first period, from November 18, 1887, to December 31, 1893, the property of the absent Jose de la Peña y
Gomiz was administered by his agent, Federico Hidalgo, under power of attorney; during the second period, from January 1, 1894, to
September, 1902, Antonio Hidalgo administered the said property, and during the third period, from October, 1902, to January 7,
1904, Francisco Hidalgo was its administrator.

Before Jose de la Peña y Gomiz embarked for Spain, on November 12, 1887, he executed before a notary a power of attorney in
favor of Federico Hidalgo, Antonio L. Rocha, Francisco Roxas and Isidro Llado, so that, as his agents, they might represent him and
administer, in the order in which they were appointed, various properties he owned and possessed in Manila. The first agent,
Federico Hidalgo, took charge of the administration of the said property on the 18th of November, 1887.

After Federico Hidalgo had occupied the position of agent and administrator of De la Peña's property for several years, the former
wrote to the latter requesting him to designate a person who might substitute him in his said position in the event of his being
obliged to absent himself from these Islands, as one of those appointed in the said power of attorney had died and the others did
not wish to take charge of the administration of their principal's property. The defendant, Hidalgo, stated that his constituent, Peña
y Gomiz, did not even answer his letters, to approve or object to the former's accounts, and did not appoint or designate another
person who might substitute the defendant in his administration of his constituent's property. These statements were neither
denied nor proven to be the record show any evidence tending to disapprove them, while it does show, attached to the record and
exhibited by the defendant himself, several letters written by Hidalgo and addressed to Peña y Gomiz, which prove the said
statements, and also a letter from the priest Pedro Gomiz, a relative of the deceased Jose de la Peña y Gomiz, addressed to Federico
Hidalgo, telling the latter that the writer had seen among the papers of the deceased several letters from the agent, Federico
Hidalgo, in which the latter requested the designation of a substitute, because he had to leave this country for Spain, and also asked
for the approval or disapproval of the accounts of his administration which had been transmitted to his constituent, Peña y Gomiz.

For reasons of health and by order of his physician, Federico Hidalgo was obliged, on March 22, 1894, to embark for Spain, and, on
preparing for his departure, he rendered the accounts of his administration corresponding to the last quarters, up to December 31,
1893, not as yet transmitted, and forwarded them to his constituent with a general statement of all the partial balances, which
amounted to the sum total of 6,774.50 pesos, by letter of the date of March 22, 1894, addressed to his principal, Peña y Gomiz. In
this letter the defendant informed the latter of the writer's intended departure from this country and of his having provisionally
turned over the administration of the said property to his cousin, Antonio Hidalgo, upon whom the writer had conferred a general
power of attorney, but asking, in case that this was not sufficient, that Peña send to Antonio Hidalgo a new power of attorney.

This notifications is of the greatest importance in the decision of this case. The plaintiff avers that he found no such letter among his
father's papers after the latter's death, for which reason he did not have it in his possession, but on the introduction of a copy
thereof by the defendant at the trial, it was admitted without objection by the plaintiff (p. 81 of the record); wherefore, in spite of
the denial of the plaintiff and of his averment of his not having found that said original among his father's papers, justice demands
that it be concluded that this letter of the 22d of March, 1894, was sent to, and was received by Jose de la Peña y Gomiz, during his
lifetime, for its transmittal, with inclosure of the last partial accounts of Federico Hidalgo's administration and of the general resume
of balances, being affirmed by the defendant, the fact of the plaintiff's having found among his deceased father's paper's the said
resume which he exhibited at the trial, shows conclusively that it was received by the deceased, as well as the letter of transmittal of
the 22nd of March, 1894, one of the several letters written by Hidalgo, which the said priest, Father Gomiz, affirms that he saw
among the papers of the deceased Peña, the dates of which ran from 1890 to 1894; and it is also shown by the record that the
defendant Hidalgo positively asserted that the said letter of March was the only one that he wrote to Peña during the year 1894;
From all of which it is deduced that the constituent, Peña y Gomiz, was informed of the departure of his agent from these Islands for
reasons of health and because of the physician's advice, of the latter's having turned over the administration of the property to
Antonio Hidalgo, and of his agent's the defendant's petition that he send a new power of attorney to the substitute.
The existence, amount the papers of the deceased, of the aforementioned statement of all accounts rendered, which comprise the
whole period of the administration of the property of the constituent by the defendant, Federico Hidalgo, from November 18, 1887,
to December 31, 1893 — a statement transmitted with the last partial accounts which were a continuation of those already
previously received — and the said letter of March 22, 1894, fully prove that Jose de la Peña y Gomiz also received the said letter,
informed himself of its contents, and had full knowledge that Antonio Hidalgo commenced to administer his property from January
of that year. They likewise prove that he did no see fit to execute a new power of attorney in the letter's favor, nor to appoint or
designate a new agent to take charge of the administration of his property that had been abandoned by the defendant, Federico
Hidalgo.

From the procedure followed by the agent, Federico Hidalgo, it is logically inferred that he had definitely renounced his agency was
duly terminated, according to the provisions of article 1732 of the Civil Code, because, although in the said letter of March 22, 1894,
the word "renounce" was not employed in connection with the agency or power of attorney executed in his favor, yet when the
agent informs his principal that for reasons of health and by medical advice he is about to depart from the place where he is
exercising his trust and where the property subject to his administration is situated, abandons the property, turns it over a third
party, without stating when he may return to take charge of the administration, renders accounts of its revenues up to a certain
date, December 31, 1893, and transmits to his principal a general statement which summarizes and embraces all the balances of his
accounts since he began to exercise his agency to the date when he ceased to hold his trust, and asks that a power of attorney in
due form in due form be executed and transmitted to another person who substituted him and took charge of the administration of
the principal's property, it is then reasonable and just to conclude that the said agent expressly and definitely renounced his agency,
and it may not be alleged that the designation of Antonio Hidalgo to take charge of the said administration was that of a mere
proceed lasted for more than fifteen years, for such an allegation would be in conflict with the nature of the agency.

This renouncement was confirmed by the subsequent procedure, as well as of the agent as of the principal, until the latter died, on
August 2, 1902, since the principal Peña did not disapprove the designation of Antonio Hidalgo, nor did he appoint another, nor send
a new power of attorney to the same, as he was requested to by the previous administrator who abandoned his charge; and the trial
record certainly contains no proof that the defendant, since he left these Islands in March, 1894, until January, 1904, when he
returned to this city, took any part whatever, directly or even indirectly, in the said administration of the principal's property, while
Antonio Hidalgo was the only person who was in charge of the aforementioned administration of De la Peña y Gomiz's property and
the one who was to represent the latter in his business affairs, with his tacit consent. From all of which it is perfectly concluded
(unless here be proof to the contrary, and none appears in the record), that Antonio Hidalgo acted in the matter of the
administration of the property of Jose de la Peña y Gomiz by virtue of an implied agency derived from the latter, in accordance with
the provisions of article 1710 of the Civil Code.

The proof of the tacit consent of the principal, Jose de la Peña y Gomiz, the owner of the property administered — a consent
embracing the essential element of a legitimate agency, article 1710 before cited — consists in that Peña, knowing that on account
of the departure of Federico Hidalgo from the Philippines for reasons of health, Antonio Hidalgo took charge of the administration of
his property, for which Federico Hidalgo, his agent, who was giving up his trust, requested him to send a new power of attorney in
favor of the said Antonio Hidalgo, nevertheless he, Jose de la Peña y Gomiz, saw fit not to execute nor transmit any power of
attorney whatever to the new administrator of his property and remained silent for nearly nine years; and, in that the said principal,
being able to prohibit the party designated, Antonio Hidalgo, from continuing in the exercise of his position as administrator, and
being able to appoint another agent, did neither the one nor the other. Wherefore, in permitting Antonio Hidalgo to administer his
property in this city during such a number of years, it is inferred, from the procedure and silence of the owner thereof, that he
consented to have Antonio Hidalgo administer his property, and in fact created in his favor an implied agency, as the true and
legitimate administrator.

Antonio Hidalgo administered the aforementioned property of De la Peña y Gomiz, not in the character of business manager, but as
agent by virtue of an implied agency vested in him by its owner who was not unaware of the fact, who knew perfectly well that the
said Antonio Hidalgo took charge of the administration of that property on account of the obligatory absence of his previous agent
for whom it was an impossibility to continue in the discharge of his duties.

It is improper to compare the case where the owner of the property is ignorant of the officious management of the third party, with
the case where he had perfect knowledge of the management and administration of the same, which administration and
management, far from being opposed by him was indeed consented to by him for nearly nine years, as was done by Peña y Gomiz.
The administration and management, by virtue of an implied agency, is essentially distinguished from that management of another's
business, in this respect, that while the former originated from a contract, the latter is derived only from a qausi-contract.
The implied agency is founded on the lack of contradiction or opposition, which constitutes simultaneous agreement on the part of
the presumed principal to the execution of the contract, while in the management of another's business there is no simultaneous
consent, either express or implied, but a fiction or presumption of consent because of the benefit received.

The distinction between an agency and a business management has been established by the jurisprudence of the supreme court (of
Spain) in its noteworthy decision of the 7th of July, 1881, setting up the following doctrine:

That laws 28 and 32, title 12 Partida  3, refer to the expenses incurred in things not one's own and without power of
attorney from those to whom they belong, and therefore the said laws are not applicable to this suit where the petition of
the plaintiff is founded on the verbal request made to him by the defendant or the latter's employees to do some hauling,
and where, consequently, questions that arise from a contract that produces reciprocal rights and duties can not be
governed by the said laws.

It being absolutely necessary for Federico Hidalgo to leave this city and abandon the administration of the property of his principal,
Peña y Gomiz, for reasons of health, he made delivery of the property and of his administration to Antonio Hidalgo and gave notice
of what he had done to his constituent, Peña, in order that the latter might send a new power of attorney to Antonio Hidalgo, the
person charged with the administration of the property. Peña y Gomiz did not send the power of attorney requested, did not oppose
or prohibit Antonio Hidalgo's containing to administer his property, and consented to his doing so for nearly nine years.
Consequently the second administrator must be considered as a legitimate agent of the said principal, as a result of the tacit
agreement on the latter's part, and the previous agent, who necessarily abandoned and ceased to hold his position, as completely
free and clear from the consequences and results of the second administration, continued by a third party and accepted by his
principal; for it is a fact, undenied nor even doubted, that the said first administrator had to abandon this country and the
administration of Peña's property for reasons of health, which made it possible for him to continue in the discharge of his duties
without serious detriment to himself, his conduct being in accordance with the provisions of article 1736 of the Civil Code.

In the power of attorney executed by Peña y Gomiz in this city on November 12, 1887, in favor of, among others, Federico Hidalgo,
no authority was conferred upon the latter by his principal to substitute the power or agency in favor of another person; wherefore
the agent could not, by virtue of the said power of attorney, appoint any person to substitute or relieve him in the administration of
the principal's property, for the lack of a clause of substitution in the said instrument authorizing him so to do.

The designation of Antonio Hidalgo was not made as a result of substitution of the power of attorney executed by Peña in favor of
the defendant, but in order that the principal's property should not be abandoned, inasmuch as, for the purposes of the discharge of
the duties of administrator of the same, the agent, who was about to absent himself from this city, requested his principal to send to
the party, provisionally designated by the former, a new power of attorney, for the reason that the general power of attorney which
Federico Hidalgo had left, executed in favor of his cousin Antonio Hidalgo, was so executed in his own name and for his own affairs,
and not in the name of Peña y Gomiz, as the latter had not authorized him to take such action.

If the owner of the property provisionally administered at the time by Antonio Hidalgo, saw fit to keep silent, even after having
received the aforesaid letter of March 22, 1894, and during the lapse of nearly ten years, without counter commanding or
disapproving the designation of the person who took charge of the administration of his property, knowing perfectly well that his
previous agent was obliged, by sickness and medical advice to leave this city where such property was situated, he is not entitled
afterwards to hold amenable the agent who had to abandon this country for good and valid reasons, inasmuch as the latter
immediately reported to his principal the action taken by himself and informed him of the person who had taken charge of the
administration of his property, which otherwise would have been left abandoned. From the time of that notification the agent who,
for legitimate cause, ceased to exercise his trust, was free and clear from the results and consequences of the management of the
person who substituted him with the consent, even only a tacit one, of the principal, inasmuch as the said owner of the property
could have objected to could have prohibited the continuance in the administration thereof, of the party designated by his agent,
and could have opportunely appointed another agent or mandatory of his own confidence to look after his property and if he did not
do so, he is obliged to abide by the consequences of his negligence and abandonment and has no right to claim damages against his
previous agent, who complied with his duty and did all that he could and ought to have done, in accordance with the law.

The defendant Federico Hidalgo, having ceased in his administration of the property belonging to Peña y Gomiz, on account of
physical impossibility, which cessation he duly reported to his principal and also informed him of the person who relieved him as
such administrator, and for whom he had requested a new power of attorney, is only liable for the results and consequences of his
administration during the period when the said property was in his charge, and therefore his liability can not extend beyond the
period of his management, as his agency terminated by the tacit or implied approval of his principal, judging from the latter's silence
in neither objecting to nor in anywise prohibiting Antonio Hidalgo's continuing to administer his property, notwithstanding the lapse
of the many years since he learned by letter of the action taken by his previous agent, Federico Hidalgo.

Moreover, this latter, in announcing the termination of his agency, transmitted the last partial accounts that he had not rendered, up
to December 31, 1893, together with a general statement of all the resulting balances covering the period of his administration, and
Jose de la Peña y Gomiz remained silent and offered no objection whatever to the said accounts and did not manifest his disapproval
of the same nor of the general statement, which he must have received in April or may, 1894, to the time he died, in August, 1902;
and when his son, the plaintiff, came to this city in company with the defendant, Federico Hidalgo, they traveled together from Spain
and arrived in Manila during one of the early days of January, 1904, the former, for the purpose of taking charge of the estate left by
his father, and after the plaintiff had examined the accounts kept by Federico Hidalgo, his deceased father's first agent, he approved
them and therefore issued in favor of the defendant the document, Exhibit 5, found on page 936 of the second record of trial, dated
January 15, 1904, in which Jose de la Peña y de Ramon acknowledged having received from his deceased father's old agent the
accounts, balances, and vouchers to his entire satisfaction, and gave an acquittance in full settlement of the administration that had
been commended to the defendant Hidalgo.

This document, written in the handwriting of the plaintiff, Peña y de Ramon, appears to be executed in a form considered to be
sufficient by its author, and, notwithstanding the allegations of the said plaintiff, the record contains no proof of any kind of Federico
Hidalgo's having obtained it by coercion, intimidation, deceit, or fraud; neither is its shown to have been duly impugned as false,
criminally or civilly, for the statements therein made by the plaintiff are too explicit and definite to allow, without proof of some vice
or defect leading to nullification, of its being considered as void and without value or legal effect.

With respect to the responsibility contracted by the defendant, as regards the payment of the balance shown by the accounts
rendered by him, it is not enough that the agent should have satisfactorily rendered the accounts pertaining to his trust, but it is also
indispensable that it be proved that he had paid to his principal, or to the owner of the property administered, the balance resulting
from his accounts. This balance, which was allowed in the judgment appealed from, notwithstanding the allegations of the plaintiff,
which were not deemed as established, amounts to P6,774.50, according to the proofs adduced at the trial. It was the imperative
duty of the administrator, Federico Hidalgo, to transmit this sum to his principal, Jose de la Peña y Gomiz, as the final balance of the
accounts of his administration, struck on December 31, 1893, and by his failure so to do and delivery of the said sum to his
successor, Antonio Hidalgo, he acted improperly, and must pay the same to the plaintiff.

Antonio Hidalgo took charge of the administration of Peña y Gomiz's property from January, 1894, to September, 1902, that is,
during the second period of administration of the several properties that belonged to the deceased Peña.

Although the plaintiff, in his original complaint, had included the said Antonio Hidalgo as one of the responsible defendants, yet he
afterwards excluded him, as well from the second as from the third amended complaint, and consequently the liability that might
attach to Antonio Hidalgo was not discussed, nor was it considered in the judgment of the lower court; neither can it be in the
decision, for the reason that the said Antonio Hidalgo is not a party to this suit. However, the said liability of Antonio Hidalgo is
imputed to Federico Hidalgo, and so it is that, in the complain t, the claim is made solely against Federico Hidalgo, in order that the
latter might be adjudged to pay the amounts which constitute the balance owing from him who might be responsible, Antonio
Hidalgo, during the period of this latter's administration.

Federico Hidalgo, in our opinion, could not and can not be responsible for the administration of the property that belonged to the
deceased Peña y Gomiz, which was administered by Antonio Hidalgo during eight years and some months, that is, during the second
period, because of the sole fact of his having turned over to the latter the administration of the said property on his departure from
this city of Spain. Neither law nor reason obliged Federico Hidalgo to remain in this country at the cost of his health and perhaps of
his life, even though he were the administrator of certain property belonged to Peña y Gomiz, since the care of the property and
interests of another does not require sacrifice on the part of the agent of his own life and interests. Federico Hidalgo was obliged to
deliver the said property belonging to Peña y Gomiz to Antonio Hidalgo for good and valid reasons, and reasons, and in proceeding
in the manner aforesaid he complied with the duty required of him by law and justice and acted as a diligent agent. If the principal,
Jose de la Peña Gomiz, the owner of the property mentioned, although informed opportunely of what had occurred saw fit to keep
silent, not to object to the arrangements made, not to send the power of attorney requested by Federico Hidalgo in favor of Antonio
Hidalgo, and took no action nor made any inquiry whatever to ascertain how his property was being administered by the second
agent, although to the time of his death more than eight years had elapsed, the previous agent, who ceased in the discharge of his
duties, can in nowise be held liable for the consequences of such abandonment, nor for the results of the administration of property
by Antonio Hidalgo, for the reason that, since his departure from this country, he has not had the least intervention nor even
indirect participation in the aforementioned administration of the said Antonio Hidalgo who, under the law, was the agent or
administrator by virtue of an implied agency, which is equivalent in its results to an express agency, executed by the owner of the
property. Consequently, Federico Hidalgo is not required to render accounts of the administration corresponding to the second
period mentioned, nor to pay the balance that such accounts may show to be owing.

At the first trial of this cause, Federico Hidalgo, testified under oath that his principal, Jose Peña y Gomiz, did not agree to the
appointment of Antonio Hidalgo, chosen by the witness, not to such appointee's taking charge of the administration of his property.
Aside from the fact that the trial record does not show honor on what date Peña expressed such disagreement it is certain that, in
view of the theory of defense maintained by the defendant Hidalgo could have said, by means of a no, that his principal did not
agree to the appointment of the said Antonio Hidalgo, and the intercalation of the word no in the statement quoted is more
inexplicable in that the attorney for the adverse party moved that the said answer be stricken from the record, as he objected to its
appearing therein.

Were it true that the principal Jose de la Peña by Gomiz, had neither agreed to the designation of Antonio Hidalgo, nor to the latter's
administering his property, he would immediately have appointed another agent and administrator, since he knew that Federico
Hidalgo had left the place where his property was situated and that it would be abandoned, had he not wished that Antonio Hidalgo
should continue to administer it. If the latter continued in the administration of the property for so long a time, nearly nine years, it
was because the said Peña agreed and gave his consent to the acts performed by his outgoing agent, and for this reason the answer
given by Federico Hidalgo mistakenly, or not, that his principal, Peña, did not agree to the appointment of Antonio Hidalgo, is
immaterial and does not affect the terms of this decision.

If the defendant is not responsible for the results of the administration of said property administered by Antonio Hidalgo during the
second period before referred to, neither is he responsible for that performed during the third period by Francisco Hidalgo,
inasmuch as the latter was not even chosen by the defendant who, on October 1, 1902, when Francisco Hidalgo took charge of
Peñas' property that had been turned over to him by Antonio Hidalgo, was in Spain and had no knowledge of nor intervention in
such delivery; wherefore the defendant can in no manner be obliged to pay to the plaintiff any sum that may be found owing by
Francisco Hidalgo.

The trial judge — taking into consideration that, by the evidence adduced at the hearing, it was proved that Francisco Hidalgo
rendered accounts to the plaintiff of the administration of the property in question during the said third period, that is, for one year,
three months, and someday, and that he delivered to the plaintiff the balance of 1,280.03 pesos, for which the latter issued to the
said third administrator the document Exhibit 2, written in his own handwriting under date of January 7, 1904, and the signature
which, affixed by himself, he admitted in his testimony was authentic, on its being exhibited to him — found that the plaintiff, Peña y
de Ramon, was not entitled to recover any sum whatever for the rents pertaining to the administration of his property by the said
Francisco Hidalgo.

All the reasons hereinbefore given relate to the first cause of action, whereby claim is made against Federico Hidalgo for the
payment of the sum of P72,548.24 and interest at the rate of 6 per cent per centum, and they have decided some of the errors
assigned by the appellants in their briefs to the judgment appealed from.

Two amounts are have claimed which have one and the same origin, yet are based on two causes of action, the second and the third
alleged by the plaintiff; and although the latter, afterwards convinced by the truth and of the impropriety of his claim, had to waive
the said third cause of action during the second hearing of this cause (pp. 57 and 42 of the record of the evidence), the trial judge, on
the grounds that the said second and third causes of action refer to the same certificates of deposit of the treasury of the Spanish
Government, found, in the judgment appealed from, that the plaintiff was not entitled to recover anything for the aforesaid second
and third causes of action — a finding that is proper and just, although qualified as erroneous by the plaintiff in his brief.

It appears, from the evidence taken in this cause, that Jose de la Peña y Gomiz, according to the certificates issued by the chief of the
division his lifetime, after having in 1882 withdrawn from the General Deposit Bank of the Spanish Government a deposit of 17,000
pesos and its interest deposit any sum therein until December 9, 1886, when he deposited two amounts of 3,000 pesos each, that is,
6,000 pesos in all, the two deposit receipts for the same being afterwards endorsed in favor of Gonzalo Tuason. The latter, on
December 9, 1887, withdrew the deposit and took out the said two amounts, together with the interest due thereon, and on the
same date redeposited them in the sum of 6,360 pesos at 5 per cent per annum in the name of Jose de la Peña y Gomiz. On the 20th
of December of the following year, 1888, the defendant Hidalgo received from his principal, Peña y Gomiz, through Father Ramon
Caviedas, the two said letters of credit, in order that he might withdraw from the General Deposit Bank the two amounts deposited,
together with the interest due thereon, amounting to 741 pesos, and with this interest purchase a draft on London in favor of its
owner and then redeposit the original capital of 6,000 pesos. This, the defendant Hidalgo did and then delivered the draft and the
deposit receipt to Father Caviedas, of all of which transactions he informed his principal by letter of the same date, transcribed on
page 947 of the second trial record.
In the following year, 1889, Father Ramon Caviedas again delivered to the defendant Hidalgo the aforementioned deposit receipt
with the request to withdraw from the General Deposit bank the sum deposited and to purchase a draft of 860 pesos on London in
favor of their owner, Jose de la Peña y Gomiz, and, after deducting the cost of the said draft from the capital and interest withdrawn
from deposit, amounting to 6,360 pesos, to redeposit the remainder, 5,500 pesos, in the bank mentioned, in accordance with the
instructions from Peña y Gomiz: All of which was done by the defendant Hidalgo, who delivered to Father Caviedas the receipt for
the new deposit of 5,500 pesos as accredited by the reply-letter, transcribed on page 169 of the record, and by the letter addressed
by Hidalgo to Peña, of the date of December 20 of that year and shown as an original exhibit by the plaintiff himself on page 29 of
the record of the evidence.

Lastly, in December, 1890, Father Caviedas, aforementioned, delivered to the defendant Hidalgo the said deposit receipt for 5,500
pesos in order that he might withdraw this amount from deposit and deliver it with the interest thereon to the former for the
purpose of remitting it by draft to Jose de la Peña; this Hidalgo did, according to a reply-letter from Father Caviedas, the original of
which appears on page 979 of the file of exhibits and is copied on page 171 of the trial record, and is apparently confirmed by the
latter in his sworn testimony.

So that the two amounts of 3,000 pesos each, expressed in two deposit receipts received from De la Peña y Gomiz by Father Ramon
Caviedas and afterwards delivered to Francisco Hidalgo for the successive operations of remittance and redeposit in the bank before
mentioned, are the same and only ones that were on deposit in the said bank in the name of their owner, Peña y Gomiz. The
defendant Hidalgo made two remittances by drafts of London, one in 1888 for 741.60 pesos, through a draft purchased from the
Chartered Bank, and another in 1889 for 860 pesos, through a draft purchased from the house of Tuason & Co., and both in favor of
Peña y Gomiz, who received through Father Ramon Caviedas the remainder, 5,500 pesos, of the sums deposited. For these reasons,
the trial judge was of the opinion that the certificates of deposit sent by Peña y Gomiz to Father Ramon Caviedas and those received
from the latter by the defendant Hidalgo were identicals, as were likewise the total amounts expressed by the said receipts or
certificates of deposit, from the sum of which were deducted the amounts remitted to Peña y Gomiz and the remainder deposited
after each anual operation until, finally, the sum of 5,500 pesos was remitted to its owner, Peña y Gomiz, according to his
instructions, through the said Father Caviedas. The lower court, in concluding its judgment, found that the plaintiff was entitled to
recover any sum whatever for the said second and third causes of action, notwithstanding that, as hereinbefore stated, the said
plaintiff withdrew the third cause of action. This finding of the court, with respect to the collection of the amounts of the
aforementioned deposit receipts, is perfectly legal and in accordance with justice, inasmuch as it is a sustained by abundant and
conclusive documentary evidence, which proves in an incontrovertible manner the unrighteousness of the claim made by the
plaintiff in twice seeking payment, by means of the said second and third causes of action, of the said sum which, after various
operations of deposit and remittance during three years, was finally returned with its interest to the possession of its owner, Peña y
Gomiz.

From the trial had in this case, it also appears conclusively proved that Jose de la Peña y Gomiz owed, during his lifetime, to Federico
Hidalgo, 7,600 pesos, 4,000 pesos of which were to bear interest at the rate of 6 per cent per annum, and the remainder without any
interest, and that, notwithstanding the lapse of the period of three years, from November, 1887, within which he bound himself to
repay the amount borrowed, and in spite of his creditor's demand of payment, made by registered letter, the original copy of which
is on page 38 of the file of exhibits and a transcription thereof on page 930 of the first and second record of the evidence, the debt
was not paid up to the time of the debtor's death. For such reasons, the trial court, in the judgment appealed from, found that there
was a preponderance of evidence to prove that this loan had been made and that the plaintiff actually owed the defendant the sum
loaned, as well as the interest thereon, after deducting therefrom the 2,000 pesos which the defendant received from the plaintiff
on account of the credit, and that the former was entitled to recover.

It appears from the pleadings and evidence at the trial that in January, 1904, on the arrival in this city of Federico de la Peña de
Ramon, and on the occasion of the latter's proceeding to examine the accounts previously rendered, up to December 31, 1893, by
the defendant Hidalgo to the plaintiff's father, then deceased, Hidalgo made demand upon the plaintiff, Peña y de Ramon, for the
payment of the said debt of his father, although the creditor Hidalgo acceded to the requests of the plaintiff to grant the latter an
extension of time until he should be able to sell one of the properties of the estate. It was at that time, according to the defendant,
that the plaintiff Peña took up the instrument of indebtedness, executed by his deceased father during his lifetime, and delivered to
the defendant in exchange therefor the document of the date of January 15, 1904, found on page 924 of the second record of
evidence, whereby the plaintiff, Jose de la Peña, bound himself to pay his father's debt of 11,000 pesos, owing to the defendant
Hidalgo, out of the proceeds of the sale of some of the properties specified in the said document, which was written and signed by
the plaintiff in his own handwriting.

The plaintiff not only executed the said document acknowledging his father's debt and binding himself to settle it, but also, several
days after the sale of a lot belonging to the estate, paid to the creditor on account the sum of 2,000 pesos, according to the receipt
issued by the latter and exhibited on page 108 of the first record of evidence.
The said document, expressive of the obligation contracted by the plaintiff Peña y de Ramon that he would pay to the defendant the
debt of plaintiff's deceased father, amounting to 11,000 pesos, out of the proceeds from some of the properties of the estate, has
not been denied nor impugned as false; and not withstanding the averment made by the plaintiff that when he signed he lacked
information and knowledge of the true condition of the affairs concerning Hidalgo's connection with the property that be absolutely
no proof whatever is shown in the trial record of the creditor's having obtained the said document through deceit or fraud —
circumstances in a certain manner incompatible with the explicit statements contained therein. For these reasons, the trial court,
weighing the whole of the evidence furnished by the record, found that the loan of the said 7,600 pesos was truly and positively
made, and that the plaintiff must pay the same to the defendant, with the interest thereon, and that he was not entitled to recover
the 2,000 pesos, as an undue payment made by him to the defendant creditor. For the foregoing reason the others errors assigned
by the plaintiff to the judgment appealed from are dismissed.

With respect to the obligation to pay the interest due on the amounts concerned in this decision, it must be borne in mind that, as
provided by article 1755 of the Civil Code, interest shall only be owed when it has been expressly stipulated, and that should the
debtor, who is obliged to pay a certain sum of money, be in default and fail to fulfill the agreement made with his creditor, he must
pay, as indemnity for losses and damages, the interest agreed upon, and should there be no express stipulation, the legal interest
(art. 1108 of the Civil Code); but, in order that the debtor may be considered to be in default and obliged to pay the indemnity, it is
required, as a general rule, that his creditor shall demand of such debtor the fulfillment of his obligation, judicially or extrajudicially,
except in such cases as are limitedly specified in article 1100 of the Civil Code.

It was not expressly stipulated that either the balance of the last account rendered by the defendant Federico Hidalgo in 1893, or
the sum which the plaintiff bound himself to pay to the defendant, in the instrument of the 15th of January, 1904, should bear
interest; nor is there proof that a judicial or extrajudicial demand was made, on the part of the respective creditors concerned, until
the date of complaint, on the part of the plaintiff, and that of the counterclaim, on the part of the defendant. Therefore no legal
interest is owing for the time prior to the respectives dates of the complaint and counterclaim.

By virtue, then, of the reasons herein before set forth, it is proper, in our opinion, to adjudge, as we do hereby adjudge, that the
defendant, Federico Hidalgo, shall pay to the plaintiff, Jose de la Peña y de Ramon, as administrator of the estate of the deceased
Jose de la Peña y Gomiz, the sum of P6,774.50, and the legal interest thereon at the rate of 6 per cent per annum from 23rd of May,
1906, the date of the filing of the original complaint in this case; that we should and hereby do declare that the said defendant
Federico Hidalgo, is not bound to gibe nor render accounts of the administration of the property of the said deceased Jose de la
Peña y Gomiz administered, respectively, by Antonio Hidalgo, from January, 1894, to September 30, 1902, and by Francisco Hidalgo,
from October 1, 1902, to January 7, 1904, and therefore the defendant, Federico Hidalgo, not being responsible for the results of the
administration of the said property administered by the said Antonio and Francisco Hidalgo, we do absolve the said defendant from
the complaint filed by the plaintiff, in so far as it concerns the accounts pertaining to the aforesaid two periods of administration and
relates to the payment of the balances resulting from such accounts; and that we should and hereby do absolve the defendant
Hidalgo from the complaint with respect to the demand for the payment of the sums of P15,774.19 and P2,000, with their respective
interests, on account of the second and the fourth cause of action, respectively, and because the plaintiff renounced and withdrew
his complaint, with respect to the third cause of action; and that we should and do likewise adjudge, that the plaintiff, Jose de la
Peña y de Ramon, shall pay to Federico Hidalgo, by reason of the counterclaim, the sum of P9,000 with legal interest thereon at the
rate of 6 per cent per annum from 21st of may, 1907, the date of the counterclaim.

The judgment appealed from, together with that part thereof relative to the statement it contains concerning the equivalence
between the Philippine peso and the Mexican peso, is affirmed in so far as it is in agreement with the findings of this decision, and
the said judgment is reversed in so far as it is not in accordance herewith. No special finding is made as to costs assessed in either
instance, and to the plaintiff is reserved any right that he may be entitled to enforce against Antonio Hidalgo.
G.R. No. L-28633 March 30, 1971

CENTRAL SURETY and INSURANCE COMPANY, petitioner, 

vs.
C. N. HODGES and THE COURT OF APPEALS, respondents.

Pelaez, Jalandoni and Jamir for petitioner.

Leon P. Gellada for respondent C. N. Hodges.

CONCEPCION, C.J.:

Appeal by certiorari  from a decision of the Court of Appeals, the dispositive part of which reads as follows:

WHEREFORE, in view of the foregoing considerations, the decision appealed from is modified and judgment is hereby rendered
against Central Surety & Insurance Company:

(a) To pay plaintiff C. N. Hodges the sum of P17,826.08 with interest thereon at the rate of 12% per annum from October 24, 1955
until fully paid;

(b) To pay plaintiff C. N. Hodges the sum of P1,551.60 as attorney's fees; and

(c) To pay the costs.

The main facts are not disputed. Prior to January 15, 1954, lots Nos. 1226 and 1182 of the Cadastral Survey of Talisay, Negros
Occidental, had been sold by C. N. Hodges to Vicente M. Layson, for the sum of P43,000.90, payable on installments. As of January
15, 1954, the outstanding balance of Layson's debt, after deducting the installments paid by him prior thereto, amounted to
P15,516.00. In order that he could use said lots as security for a loan he intended to apply from a bank, Layson persuaded Hodges to
execute in his (Layson's) favor a deed of absolute sale over the properties, with the understanding that he would put up a surety
bond to guarantee the payment of said balance. Accordingly, on the date above-mentioned, Layson executed, in favor of Hodges, a
promissory note for P15,516.00, with interest thereon at the rate of 1% per month, and the sum of P1,551.60, for attorney's fees
and costs, in case of default in the payment of the principal or interest of said note. To guarantee the same, on January 23, 1954, the
Central Surety and Insurance Company — hereinafter referred to as petitioner — through the manager of its branch office in Iloilo,
Mrs. Rosita Mesa, executed in favor of Hodges the surety bond Annex B, which was good for twelve (12) months from the date
thereof.

When Layson defaulted in the discharge of his aforesaid obligation, Hodges demanded payment from the petitioner, which, despite
repeated extensions of time granted thereto, at its request, failed to honor its commitments under the surety bond. On October 24,
1955, Hodges commenced, therefore. the present action, in the Court of First Instance of Iloilo, against Layson and petitioner herein,
to recover from them, jointly and severally, the sums of P17,826.08, representing the principal and interest due up to said date, and
P1,551.60, as attorney's fees. In his answer to the complaint, Layson admitted the formal allegations and denied the other
allegations thereof.

Having failed to file its answer within the reglementary period, the petitioner was, on January 18, 1956, declared in default. When
the case was called for trial, insofar as Layson was concerned, the latter did not appear, and Hodges was allowed to introduce his
evidence. Then the trial court rendered a partial decision against Layson, petitioner having, in the meantime, filed a motion to set
aside the order of default, which motion was still pending resolution.lâwphî1.ñèt Thereafter, said motion was denied, and upon
presentation of the evidence of Hodges against herein petitioner, judgment was rendered against the latter as prayed for in the
complaint. Thereupon, petitioner filled a motion for reconsideration and a motion for relief under Rule 38. Acting thereon, His
Honor, the trial Judge, later set aside its decision against the petitioner and admitted its answer, attached to the motion to set aside
the order of default.
In its answer, petitioner disclaimed liability under the surety bond in question, upon the ground (a) that the same is null and void, it
having been issued by Mrs. Rosita Mesa after her authority therefor had been withdrawn on March 15, 1952; (b) that even under
her original authority Mrs. Mesa could not issue surety bonds in excess of P8,000.00 without the approval of petitioner's main office
which was not given to the surety bond in favor of Hodges; and (c) that the present action is barred by the provision in the surety
bond to the effect that all claims and actions thereon should be filed within three (3) months from the date of its expiration on
January 23, 1955. Petitioner, moreover, set up a counterclaim for damages.

In due course, thereafter, the trial court rendered a decision:

a) Condenando a la demandada Central Surety & Insurance Co. que pague al demandante la desde la P8,000.00 con intereses legales
a contar desde la fecha de la demanda — 24 de Octubre de 1955;

b) Condenando a la misma demandada que pague al de mindante la suma de P600.00 en concepto de honorarios de abogado; y

c) Condenindo ademas a la misma demandada que pague las costas del juicio.

Hodges appealed to the Court of Appeals (CA-G.R. No. L-24684-R) from this decision, insofar as it limited petitioners liability to
P8,000.00. Petitioner, also, appealed to said Court upon the ground that the trial court had erred: (a) in holding petitioner liable
under a contract entered into by its agent in excess of her authority; (b) in sentencing petitioner to pay Hodges the sum of P8,000.00
with interest thereon, in addition to attorney's fees and the costs; and (c) in "not awarding" petitioner's counterclaim.

After appropriate proceedings, the Court of Appeals rendered the decision above referred to, from which petitioner has appealed to
this Court, alleging that the Court of Appeals has erred: (1) in finding that petitioner "was liable on a bond issued by an agent whose
authority ... had already been withdrawn and revoked"; (2) "in applying the rule on implied admission by reason of failure to deny
under oath the authenticity of a pleaded document"; and (3) "in not considering the legal effect of the waiver contained in the
disputed bond and in not disposing of this case under the light of such waiver."

The first assignment of error is predicated upon the fact that prior to January 23, 1954, when the surety bond involved in this case
was executed, or on March 15, 1952, petitioner herein had withdrawn the authority of its branch manager in the City of Iloilo, Mrs.
Rosita Mesa, to issue, inter alia, surety bonds and that, accordingly, the surety bond, copy of which was attached to the complaint as
Annex B, is null and void. On this point, the Court of Appeals had the following to say:

... we are of the opinion that said surety bond is valid. In the first place, there appears to be no showing that the
revocation of authority was made known to the public in general by publication, nor was Hodges notified of such
revocation despite the fact that he was a regular client of the firm. And even if Hodges would have inquired from
Mrs. Mesa as to her authority to issue said bond, we doubt if she would disclose the contents of the letter of
March 15, 1952 in view of Central Surety's claim that she was committing irregularities in her remittances to the
main office. Secondly, some surety bonds issued by Mrs. Mesa in favor of Hodges after her authority had allegedly
been curtailed, were honored by the Central Surety despite the fact that these were not reported to the main
office at the time of their issuance. These accounts were paid on January 31, 1957, to wit: Felicito and Libertad
Parra issued on August 16, 1952; Estrella Auayan issued on November 16, 1953; Dominador Jordan issued on
August 26, 1953; and Ladislao Lachica issued on February 28, 1953. (Exhs. F, G, H, I and J). By these acts Central
Surety ratified Mrs. Mesa's unauthorized acts and as such it is now estopped from setting forth Mrs. Mesa's lack of
authority to issue surety bonds after March 15, 1952. It has been held that although the agent may have acted
beyond the scope of his authority, or may have acted without authority at all, the principal may yet subsequently
see fit to recognize and adopt the act as his own. Ratification being a matter of assent to and approval of the act as
done on account of the person ratifying any words or acts which show such assent and approval are ordinarily
sufficient. (Sta. Catalina vs. Espitero, CA-G.R. No. 27075-R, April 28, 1964, citing IV Padilla, CIVIL CODE. 1959 ed.,
pp. 478-479; Roxas vs. Villanueva, CA-G.R. No. 18928-R, June 20, 1958). Moreover, the relocation of agency does
not prejudice third persons who acted in good faith without knowledge of the revocation. (Joson vs. Garcia, CA-
G.R. No. 29336-R. Nov. 19, 1962).

Indeed, Article 1922 of our Civil Code provides:

If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith
and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a
sufficient warning to third persons.
It is not disputed that petitioner has not caused to be published any notice of the revocation of Mrs. Mesa's authority to issue surety
bonds on its behalf, notwithstanding the fact that the powers of Mrs. Mesa, as its branch manager in Iloilo, were of a general nature,
for she had exclusive authority, in the City of Iloilo, to represent petitioner herein, not with a particular person, but with the public in
general, "in all the negotiations, transactions, and business in wherein the Company may lawfully transact or engage on subject only
to the restrictions specified in their agreement, copy of which was attached to petitioner's answer as Annex 3. 1 Contrary to
petitioner's claim, Article 1922 applies whenever an agent has general powers, not merely when the principal has published the
same, apart from the fact that the opening of petitioner's branch office amounted to a publication of the grant of powers to the
manager of said office. Then, again, by honoring several surety bonds issued in its behalf by Mrs. Mesa subsequently to March 15,
1952, petitioner induced the public to believe that she had authority to issue such bonds. As a consequence, petitioner is now
estopped from pleading, particularly against a regular customer thereof, like Hodges, the absence of said authority.

Let us now take up the third assignment of error and defer, until after the same has been disposed of, the consideration of the
second assignment of error. Under the third assignment of error, petitioner maintains that, having been instituted on October 24,
1955 — or nine (9) months after the expiration of petitioner's surety bond on January 23, 1955 — the present action is barred by the
provision in said bond to the effect that it:

...will not be liable for any claim not discovered and presented to the Company within three (3) months from the
expiration of this bond and that the obligee hereby waives his right to file any court action against the surety after
the termination of the period of three months above-mentioned.

Interpreting an identical provision, 2 court has, however, held "that the three-month period" prescribed therein "established only a
condition precedent, — not a limitation of action," and that, when a claim has been presented within said period, the action to
enforce the claim may be "filed within the statutory time of prescription." This view was clarified in a subsequent case, 3 in the sense
that the above-quoted provision was "... merely interpreted to mean that presentation of the claim within three months was a
condition precedent to the filing of a court action. Since the obligee in said case presented his claim seasonably although it did not
file the action within the same period, this Court ruled that the stipulation in the bond concerning the limitation being ambiguous,
the ambiguity should be resolved against the surety, which drafted the agreement, and that the action could be filed within the
statutory period of prescription." 4

In the case at bar, it is not contended that Hodges had not presented his claim within three (3) months from January 23, 1955. In
fact, he had repeatedly demanded from petitioner herein compliance with its obligations under the surety bond in question, and, in
reply to such demands, petitioner asked extensions of time, on January 29, February 16, March 15, May 3, June 16, July 1 and 15,
and October 15, 1955. 5 After thus securing extensions of time, even beyond three (3) months from January 23, 1955, petitioner
cannot plead the lapse of said period to bar the present action.

The second assignment of error assails the finding of the Court of Appeals to the effect that the petitioner is liable for the full
amount of surety bond — despite the fact that it exceeded the sum of P8,000.00 and hence, required, for its validity and binding
effect as against petitioner herein, the express approval and confirmation of its Manila office, which were not secured — in view of
petitioner's failure to deny under oath the genuineness and due execution of said bond, copy of which was attached to the
complaint. It is true that, pursuant to section 8 of Rule 8 of the Rules of Court:

When an action or defense is founded upon a written instrument, copied in or attached to the corresponding
pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be
deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to
be the facts; but this provision does not apply when the adverse party does not appear to be a party to the
instrument or when compliance with an order for an inspection of the original instrument is refused.

We have however, held that:

... where a case has been tried in complete disregard of the rule and the plaintiff having pleaded a document by
copy, presents oral evidence to prove the due execution of the document as well as the agent's authority and no
objections are made to the defendant's evidence in refutation, the rule will be considered waived. 6

The reason for such view was explained by this Court as follows:

Before entering upon a discussion of the questions raised by the assignments of error, we may draw attention to a
matter which has not been mentioned either by counsel or by the court below, but which, to prevent
 misunderstanding, should be briefly explained: It is averred in the complaint that it is accompanied by a copy of the
contract between the parties (Exhibit A) which copy, by the terms of the complaint, is made a part thereof. The
copy is not set forth in the bill of exceptions and aside from said averment, there is no indication that the copy
actually accompanied the complaint, but an examination of the record of the case in the Court of First Instance
shows that a translation of the contract was attached to the complaint and served upon the defendant. As this
translation may be considered a copy and as the defendant failed to deny its authenticity under oath, it will
perhaps be said that under section 103 of the Code of Civil Procedure the omission to so deny it constitutes an
admission of the genuineness and due execution of the document as well as of the agent's authority to bind the
defendant. (Merchant vs. International Banking Corporation, 6 Phil. 314.)

In ordinary circumstances that would be true. But this case appears to have been tried upon the theory that the
rule did not apply; at least, it was wholly overlooked or disregarded by both parties.lâwphî1.ñètThe plaintiffs at the
beginning of the trial presented a number of witnesses to prove the due execution of the document as well as the
agent's authority; no objection were made to the defendant's evidence in refutation; all no exceptions taken; and
the matter is not mentioned in the decision of the trial court.

The object of the rule is 'to relieve a party of the trouble and expense of proving in the first instance an alleged
fact, the existence or nonexistence of which is necessarily within the knowledge of the adverse party, and of the
necessity (to his opponent's case) of establishing which such adverse party is notified by his opponent's pleading.'
(Nery Lim-Chingco vs. Terariray, 5 Phil., at p. 124.)

The plaintiff may, of course, waive the rule and that is what he must be considered to have done in the present
case by introducing evidence as to the execution of the document and failing to object to the defendant's evidence
in refutation; all this evidence is now competent and the case must be decided thereupon. .... Nothing of what has
here been said is in conflict with former decisions of this court; it will be found upon examination that in all cases
where the applicability of the rule has been sustained the party invoking it has relied on it in the court below and
conducted his case accordingly."7

In the case at bar, the parties acted in complete disregard of or wholly overlooked the rule above-quoted. Hodges had neither
objected to the evidence introduced by petitioner herein in order to prove that Mrs. Mesa had no authority to issue a surety bond,
much less one in excess of P8,000.00, and took no exception to the admission of said evidence. Hence, Hodges must be deemed to
have waived the benefits of said rule and petitioner herein cannot be held liable in excess of the sum of P8,000.00.

WHEREFORE, with the modification that petitioner's liability to Hodges is limited to said sum of P8,000.00 the period, the petitioner
was, on January 18, 1956, declared it is hereby affirmed in all other respects, without costs. It is so ordered
G.R. No. 118375             October 3, 2003

CELESTINA T. NAGUIAT, petitioner, 
vs.
COURT OF APPEALS and AURORA QUEAÑO, respondents.

DECISION

TINGA, J.:

Before us is a Petition for Review on Certiorari under Rule 45, assailing the decision of the Sixteenth Division of the respondent Court
of Appeals promulgated on 21 December 19941, which affirmed in toto the decision handed down by the Regional Trial Court (RTC)
of Pasay City.2

The case arose when on 11 August 1981, private respondent Aurora Queaño (Queaño) filed a complaint before the Pasay City RTC
for cancellation of a Real Estate Mortgage she had entered into with petitioner Celestina Naguiat (Naguiat). The RTC rendered a
decision, declaring the questioned Real Estate Mortgage void, which Naguiat appealed to the Court of Appeals. After the Court of
Appeals upheld the RTC decision, Naguiat instituted the present petition.1ªvvphi1.nét

The operative facts follow:

Queaño applied with Naguiat for a loan in the amount of Two Hundred Thousand Pesos (P200,000.00), which Naguiat granted. On
11 August 1980, Naguiat indorsed to Queaño Associated Bank Check No. 090990 (dated 11 August 1980) for the amount of Ninety
Five Thousand Pesos (P95,000.00), which was earlier issued to Naguiat by the Corporate Resources Financing Corporation. She also
issued her own Filmanbank Check No. 065314, to the order of Queaño, also dated 11 August 1980 and for the amount of Ninety Five
Thousand Pesos (P95,000.00). The proceeds of these checks were to constitute the loan granted by Naguiat to Queaño.3

To secure the loan, Queaño executed a Deed of Real Estate Mortgage dated 11 August 1980 in favor of Naguiat, and surrendered to
the latter the owner’s duplicates of the titles covering the mortgaged properties.4 On the same day, the mortgage deed was
notarized, and Queaño issued to Naguiat a promissory note for the amount of TWO HUNDRED THOUSAND PESOS (P200,000.00),
with interest at 12% per annum, payable on 11 September 1980.5 Queaño also issued a Security Bank and Trust Company check,
postdated 11 September 1980, for the amount of TWO HUNDRED THOUSAND PESOS (P200,000.00) and payable to the order of
Naguiat.

Upon presentment on its maturity date, the Security Bank check was dishonored for insufficiency of funds. On the following day, 12
September 1980, Queaño requested Security Bank to stop payment of her postdated check, but the bank rejected the request
pursuant to its policy not to honor such requests if the check is drawn against insufficient funds.6

On 16 October 1980, Queaño received a letter from Naguiat’s lawyer, demanding settlement of the loan. Shortly thereafter, Queaño
and one Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, Queaño told Naguiat that she did not receive the
proceeds of the loan, adding that the checks were retained by Ruebenfeldt, who purportedly was Naguiat’s agent.7

Naguiat applied for the extrajudicial foreclosure of the mortgage with the Sheriff of Rizal Province, who then scheduled the
foreclosure sale on 14 August 1981. Three days before the scheduled sale, Queaño filed the case before the Pasay City RTC,8 seeking
the annulment of the mortgage deed. The trial court eventually stopped the auction sale.9

On 8 March 1991, the RTC rendered judgment, declaring the Deed of Real Estate Mortgage null and void, and ordering Naguiat to
return to Queaño the owner’s duplicates of her titles to the mortgaged lots.10 Naguiat appealed the decision before the Court of
Appeals, making no less than eleven assignments of error. The Court of Appeals promulgated the decision now assailed before us
that affirmed in toto the RTC decision. Hence, the present petition.

Naguiat questions the findings of facts made by the Court of Appeals, especially on the issue of whether Queaño had actually
received the loan proceeds which were supposed to be covered by the two checks Naguiat had issued or indorsed. Naguiat claims
that being a notarial instrument or public document, the mortgage deed enjoys the presumption that the recitals therein are true.
Naguiat also questions the admissibility of various representations and pronouncements of Ruebenfeldt, invoking the rule on the
non-binding effect of the admissions of third persons.11

The resolution of the issues presented before this Court by Naguiat involves the determination of facts, a function which this Court
does not exercise in an appeal by certiorari. Under Rule 45 which governs appeal by certiorari, only questions of law may be
raised12 as the Supreme Court is not a trier of facts.13 The resolution of factual issues is the function of lower courts, whose findings
on these matters are received with respect and are in fact generally binding on the Supreme Court.14 A question of law which the
Court may pass upon must not involve an examination of the probative value of the evidence presented by the litigants.15 There is a
question of law in a given case when the doubt or difference arises as to what the law is on a certain state of facts; there is a
question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts.16

Surely, there are established exceptions to the rule on the conclusiveness of the findings of facts of the lower courts.17 But Naguiat’s
case does not fall under any of the exceptions. In any event, both the decisions of the appellate and trial courts are supported by the
evidence on record and the applicable laws.

Against the common finding of the courts below, Naguiat vigorously insists that Queaño received the loan proceeds. Capitalizing on
the status of the mortgage deed as a public document, she cites the rule that a public document enjoys the presumption of validity
and truthfulness of its contents. The Court of Appeals, however, is correct in ruling that the presumption of truthfulness of the
recitals in a public document was defeated by the clear and convincing evidence in this case that pointed to the absence of
consideration.18 This Court has held that the presumption of truthfulness engendered by notarized documents is rebuttable, yielding
as it does to clear and convincing evidence to the contrary, as in this case.19

On the other hand, absolutely no evidence was submitted by Naguiat that the checks she issued or endorsed were actually encashed
or deposited. The mere issuance of the checks did not result in the perfection of the contract of loan. For the Civil Code provides that
the delivery of bills of exchange and mercantile documents such as checks shall produce the effect of payment only when they have
been cashed.20 It is only after the checks have produced the effect of payment that the contract of loan may be deemed perfected.
Art. 1934 of the Civil Code provides:

"An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the
commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract."

A loan contract is a real contract, not consensual, and, as such, is perfected only upon the delivery of the object of the contract.21 In
this case, the objects of the contract are the loan proceeds which Queaño would enjoy only upon the encashment of the checks
signed or indorsed by Naguiat. If indeed the checks were encashed or deposited, Naguiat would have certainly presented the
corresponding documentary evidence, such as the returned checks and the pertinent bank records. Since Naguiat presented no such
proof, it follows that the checks were not encashed or credited to Queaño’s account.1awphi1.nét

Naguiat questions the admissibility of the various written representations made by Ruebenfeldt on the ground that they could not
bind her following the res inter alia acta alteri nocere non debet rule. The Court of Appeals rejected the argument, holding that since
Ruebenfeldt was an authorized representative or agent of Naguiat the situation falls under a recognized exception to the rule.22 Still,
Naguiat insists that Ruebenfeldt was not her agent.

Suffice to say, however, the existence of an agency relationship between Naguiat and Ruebenfeldt is supported by ample evidence.
As correctly pointed out by the Court of Appeals, Ruebenfeldt was not a stranger or an unauthorized person. Naguiat instructed
Ruebenfeldt to withhold from Queaño the checks she issued or indorsed to Queaño, pending delivery by the latter of additional
collateral. Ruebenfeldt served as agent of Naguiat on the loan application of Queaño’s friend, Marilou Farralese, and it was in
connection with that transaction that Queaño came to know Naguiat.23 It was also Ruebenfeldt who accompanied Queaño in her
meeting with Naguiat and on that occasion, on her own and without Queaño asking for it, Reubenfeldt actually drew a check for the
sum ofP220,000.00 payable to Naguiat, to cover for Queaño’s alleged liability to Naguiat under the loan agreement.24

The Court of Appeals recognized the existence of an "agency by estoppel25 citing Article 1873 of the Civil Code.26 Apparently, it
considered that at the very least, as a consequence of the interaction between Naguiat and Ruebenfeldt, Queaño got the impression
that Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to correct Queaño’s impression. In that situation, the rule is
clear. One who clothes another with apparent authority as his agent, and holds him out to the public as such, cannot be permitted to
deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good
faith, and in the honest belief that he is what he appears to be.27 The Court of Appeals is correct in invoking the said rule on agency
by estoppel.1awphi1.nét
More fundamentally, whatever was the true relationship between Naguiat and Ruebenfeldt is irrelevant in the face of the fact that
the checks issued or indorsed to Queaño were never encashed or deposited to her account of Naguiat.

All told, we find no compelling reason to disturb the finding of the courts a quo that the lender did not remit and the borrower did
not receive the proceeds of the loan. That being the case, it follows that the mortgage which is supposed to secure the loan is null
and void. The consideration of the mortgage contract is the same as that of the principal contract from which it receives life, and
without which it cannot exist as an independent contract.28 A mortgage contract being a mere accessory contract, its validity would
depend on the validity of the loan secured by it.29

WHEREFORE, the petition is denied and the assailed decision is affirmed. Costs against petitioner.
G.R. No. L-439          November 11, 1901

GERMANN & CO., plaintiff-appellees, 

vs.
DONALDSON, SIM & CO., defendants-appellants.

LADD, J.:

This is an incident of want of personality of the plaintiff's attorney. The action is to recover a sum claimed to be due for freight under
a charter party. It was brought by virtue of a general power for suits, executed in Manila October 27, 1900, by Fernando Kammerzell,
and purporting to be a substitution in favor of several attorneys of powers conferred upon Kammerzell in an instrument executed in
Berlin, Germany, February 5, 1900, by Max Leonard Tornow, the sole owner of the business carried on in Berlin and Manila under
the name of Gemann & Co. The first-named instrument was authenticated by a notary with the formalities required by the domestic
laws. The other was not so authenticated. Both Tornow and Kammerzell are citizens of Germany. Tornow is a resident of Berlin and
Kammerzell of Manila.

The defendants claim that the original power is invalid under article 1280, No. 5, of the Civil Code, which provides that powers for
suits must be contained in a public instrument. No claim is made that the document was not executed with the formalities required
by the German law in the case of such an instrument. We see no reason why the general principle that the formal validity of
contracts is to be tested by the laws of the country where they are executed should not apply. (Civil Code, art. 11.)

The defendants also claim that the original power can not be construed as conferring upon Kammerzell authority to institute or
defend suits, from which contention, if correct, it would of course follow that the delegated power is invalid. In support of this
contention reliance is placed upon article 1713 of the Civil Code, by which it is provided that "an agency stated in general terms only
includes acts of administration," and that "in order to compromise, alienate, mortgage, or to execute any other act of strict
ownership an express commission is required."

It has been argued by counsel for the plaintiff that these provisions of the domestic law are not applicable to the case of an agency
conferred, as was that in question, by one foreigner upon another in an instrument executed in the country of which both were
citizens. We shall not pass upon this question, since we are clearly of opinion that the instrument contains an explicit grant of a
power broad enough to authorize the bringing of the present action, even assuming the applicability of the domestic law as claimed
by the defendants.lawphil.net

By this instrument Tornow constitutes Kammerzell his "true and lawful attorney with full power to enter the firm name of Germann
& Co. in the Commercial Registry of the city of Manila as a branch of the house of Germann & Co. in Berlin, it being the purpose of
this power to invest said attorney will full legal powers and authorization to direct and administer in the city of Manila for us and in
our name a branch of our general commercial business of important and exportation, for which purpose he may make contracts of
lease and employ suitable assistants, as well as sign every kind of documents, accounts, and obligations connected with the business
which may be necessary, take charge in general of the receipt and delivery of merchandise connected with the business, sign all
receipts for sums of money and collect them and exact their payment by legal means, and in general execute all the acts and things
necessary for the perfect carrying on of the business committed to his charge in the same manner as we could do ourselves if we
were present in the same place."

We should not be inclined to regard in institution of a suit like the present, which appears to be brought to collect a claim accruing in
the ordinary course of the plaintiff's business, as properly belonging to the class of acts described in article 1713 of the Civil Code as
acts "of strict ownership." It seems rather to be something which is necessarily a part of the mere administration of such a business
as that described in the instrument in question and only incidentally, if at all, involving a power to dispose of the title to property.

But whether regarded as an act of strict ownership or not, it appears to be expressly and specially authorized by the clause
conferring the power to "exact the payment" of sums of money "by legal means." This must mean the power to exact the payment
of debts due the concern by means of the institution of suits for their recovery. If there could be any doubt as to the meaning of this
language taken by itself, it would be removed by a consideration of the general scope and purpose of the instrument in which it
occurs. (See Civil Code, art. 1286.) The main object of the instrument is clearly to make Kammerzell the manager of the Manila
branch of the plaintiff's business, with the same general authority with reference to its conduct which his principal would himself
possess if he were personally directing it. It can not be reasonably supposed, in the absence of very clear language to that effect,
that it was the intention of the principal to withhold from his agent a power so essential to the efficient management of the business
entrusted to his control as that to sue for the collection of debts.

G.R. No. L-22450        December 3, 1924

YU CHUCK, MACK YUENG, and DING MOON, plaintiffs-appellees, 

vs.
"KONG LI PO," defendant-appellant.

J. W. Ferrier for appellant.

G. E. Campbell for appellees.

OSTRAND, J.:

The defendant is a domestic corporation organized in accordance with the laws of the Philippine Islands and engaged in the
publication of a Chinese newspaper styled Kong Li Po. Its articles of incorporation and by-laws are in the usual form and provide for a
board of directors and for other officers among them a president whose duty it is to "sign all contracts and other instruments of
writing." No special provision is made for a business or general manager.

Some time during the year 1919 one C. C. Chen or T. C. Chen was appointed general business manager of the newspaper. During the
month of December of that year he entered into an agreement with the plaintiffs by which the latter bound themselves to do the
necessary printing for the newspaper for the sum of P580 per month as alleged in the complaint. Under this agreement the plaintiffs
worked for the defendant from January 1, 1920, until January 31, 1921, when they were discharged by the new manager, Tan Tian
Hong, who had been appointed in the meantime, C. C. Chen having left for China. The letter of dismissal stated no special reasons for
the discharge of the plaintiffs.

The plaintiffs thereupon brought the present action alleging, among other things, in the complaint that their contract of employment
was for a term of three years from the first day of January, 1920; that in the case of their discharge by the defendant without just
cause before the expiration of the term of the contract, they were to receive full pay for the remaining portion of the term; that they
had been so discharged without just cause and therefore asked judgment for damages in the sum of P20,880.

In its amended answer the defendant denies generally and specifically the allegations of the complaint and sets up five special
defenses and counterclaims. The first of these is to the effect that C. C. Chen, the person whose name appears to have been signed
to the contract of employment was not authorized by the defendant to execute such a contract in its behalf. The second special
defense and counterclaim is to the effect that during the month of January, 1921, the plaintiffs purposely delayed the issuance of
defendant's newspaper on three separate and distinct occasions causing damage and injury to the defendant in the amount of P300.
Under the third special defense and counterclaim it is alleged that the plaintiffs failed, neglected, and refused to prepare extra pages
for the January 1, 1921, issue of the defendant's newspaper and thus compelled the defendant to secure the preparation of said
extra pages by other persons at a cost of P110. In the fourth special defense and counterclaim the defendant alleged that the
plaintiffs neglected and failed to correct errors in advertisements appearing in defendant's newspaper, although their attention was
specifically called to such errors and they were requested to make the corrections, as a result of which certain advertisers withdrew
their patronage from the paper and refused to pay for the advertisements, thus causing a loss to the defendant of P160.50. For its
fifth special defense and counterclaim the defendant alleged that the plaintiffs neglected and refused to do certain job printing such
neglect and refusal causing injury and damage to the defendant in the sum of P150.

At the trial of the case the plaintiffs presented in evidence Exhibit A which purports to be a contract between Chen and the plaintiffs
and which provides that in the event the plaintiffs should be discharged without cause before the expirations of the term of three
years from January 1, 1920, they would be given full pay for the unexpired portion of the term "even if the said paper has to fall into
bankruptcy." The contract is signed by the plaintiffs and also bears the signature "C. C. Chen, manager of Kong Li Po." The
authenticity of the latter signature is questioned by the defendant, but the court below found that the evidence upon this point
preponderate in favor of the plaintiffs and there appears to be no sufficient reason to disturb this finding.

The trial court further found that the contract had been impliedly ratified by the defendant and rendered judgment in favor of the
plaintiffs for the sum of P13,340, with interest from the date of the filing of the complaint and the costs. From this judgment the
defendant appeals to this court and makes eighteen assignments of error. The fourth and seventeenth assignments relate to
defendant's special defense and counterclaims; the sum and substance of the other assignments is that the contract on which the
action is based was not signed by C. C. Chen; that, in any event, C. C. Chen had no power or authority to bind the defendant
corporation by such contract; and that there was no ratification of the contract by the corporation.

Before entering upon a discussion of the questions raised by the assignments of error, we may draw attention to a matter which as
not been mentioned either by counsel or by the court below, but which, to prevent misunderstanding, should be briefly explained: It
is averred in the complaint that it is accompanied by a copy of the contract between the parties (Exhibit A) which copy, by the terms
of the complaint, is made a part thereof. The copy is not set forth in the bill of exceptions and aside from said avernment, there is no
indication that the copy actually accompanied the complaint, but an examination of the record of the case in the Court of First
Instance shows that a translation of the contract was attached to the complaint and served upon the defendant. As this translation
may be considered a copy and as the defendant failed to deny its authenticity under oath, it will perhaps be said that under section
103 of the Code of Civil Procedure the omission to so deny it constitutes an admission of the genuineness and due execution of the
document as well as of the agent's authority to bind the defendant. (Merchant vs. International Banking Corporation, 6 Phil., 314.)

In ordinary circumstances that would be true. But this case appears to have been tried upon the theory that the rule did not apply;
at least, it was wholly overlooked or disregarded by both parties. The plaintiffs at the beginning of the trial presented a number of
witnesses to prove the due execution of the document as well as the agent's authority; no objections were made to the defendant's
evidence in refutation and no exceptions taken; and the matter is not mentioned in the decision of the trial court.

The object of the rule is "to relieve a party of the trouble and expense of proving in the first instance an alleged fact, the existence or
nonexistence of which is necessarily within the knowledge of the adverse party, and of the necessity (to his opponent's case) of
establishing which such adverse party is notified by his opponent's pleading." (Nery Lim-Chingco vs. Terariray, 5 Phil., at p.
124.)lawphi1.net

The plaintiff may, of course, waive the rule and that is what he must be considered to have done in the present case by introducing
evidence as to the execution of the document and failing to object to the defendant's evidence in refutation; all this evidence is now
competent and the case must be decided thereupon. Moreover, the question as to the applicability of the rule is not even suggested
in the briefs and is not properly this court. In these circumstances it would, indeed, be grossly unfair to the defendant if this court
should take up the question on its own motion and make it decisive of the case, and such is not the law. Nothing of what has here
been said is in conflict with former decisions of this court; it will be found upon examination that in all cases where the applicability
of the rule has been sustained the party invoking it has relied on it in the court below and conducted his case accordingly.

The principal question presented by the assignments of error is whether Chen had the power to bind the corporation by a contract
of the character indicated. It is conceded that he had no express authority to do so, but the evidence is conclusive that he, at the
time the contract was entered into, was in effect the general business manager of the newspaper Kong Li Po and that he, as such,
had charge of the printing of the paper, and the plaintiff maintain that he, as such general business manager, had implied authority
to employ them on the terms stated and that the defendant corporation is bound by his action. The general rule is that the power to
bind a corporation by contract lies with its board of directors or trustees, but this power may either expressly or impliedly be
delegated to other officers or agents of the corporation, and it is well settled that except where the authority of employing servants
and agent is expressly vested in the board of directors or trustees, an officer or agent who has general control and management of
the corporation's business, or a specific part thereof, may bind the corporation by the employment of such agent and employees as
are usual and necessary in the conduct of such business. But the contracts of employment must be reasonable. (14a C. J., 431.)

In regard to the length of the term of employment, Corpus Juris says:

In the absence of express limitations, a manager has authority to hire an employee for such a period as is customary or
proper under the circumstances, such as for a year, for the season, or for two season. But unless he is either expressly
authorized, or held out as having such authority, he cannot make a contract of employment for a long future period, such as
for three years, although the contract is not rendered invalid by the mere fact that the employment extends beyond the
term of the manager's own employment. . . . (14a C. J., 431.)

From what has been said, there can be no doubt that Chen, as general manager of the Kong Li Po, had implied authority to bind the
defendant corporation by a reasonable and usual contract of employment with the plaintiffs, but we do not think that the contract
here in question can be so considered. Not only is the term of employment unusually long, but the conditions are otherwise so
onerous to the defendant that the possibility of the corporation being thrown into insolvency thereby is expressly contemplated in
the same contract. This fact in itself was, in our opinion, sufficient to put the plaintiffs upon inquiry as to the extent of the business
manager's authority; they had not the rights to presume that he or any other single officer or employee of the corporation had
implied authority to enter into a contract of employment which might bring about its ruin.

Neither do we think that the contention that the corporation impliedly ratified the contract is supported by the evidence. The
contention is based principally on the fact that Te Kim Hua, the president of the corporation for the year 1920, admitted on the
witness stand that he saw the plaintiffs work as printers in the office of the newspaper. He denied, however, any knowledge of the
existence of the contract and asserted that it was never presented neither to him nor to the board of directors. Before a contract
can be ratified knowledge of its existence must, of course, be brought home to the parties who have authority to ratify it or
circumstances must be shown from which such knowledge may be presumed. No such knowledge or circumstances have been
shown here. That the president of the corporation saw the plaintiffs working in its office is of little significance; there were other
printers working there at that time and as the president had nothing to do with their employment, it was hardly to be expected that
be would inquire into the terms of their contracts. Moreover, a ratification by him would have been of no avail; in order to validate a
contract, a ratification by the board of directors was necessary. The fact that the president was required by the by-laws to sign the
documents evidencing contracts of the corporation, does not mean that he had power to make the contracts.

In his decision his Honor, the learned judge of the court below appears to have placed some weight on a notice inserted in the
January 14th issue of the Kong Li Po by T. C. Chen and which, in translation, reads as follows:

To Whom It May Concern: Announcement is hereby given that thereafter all contracts, agreements and receipts are
considered to be null and void unless duly signed by T. C. Chen, General Manager of this paper.

(Sgd.) CHEN YOU MAN

General Manager of this paper

(The evidence shows that Chen You Man and T. C. Chen is one and the same person.)

His Honor evidently overestimated the importance of this notice. It was published nearly a month after the contract in question is
alleged to have been entered into and can therefore not have been one of the circumstances which led the plaintiffs to think that
Chen had authority to make the contract. It may further be observed that the notice confers no special powers, but is, in effect, only
an assertion by Chen that he would recognize no contracts, agreements, and receipts not duty signed by him. It may be presumed
that the contracts, agreements, and receipts were such as were ordinarily made in the course of the business of managing the
newspaper. There is no evidence to show that the notice was ever brought to the attention of the officers of the defendant
corporation.

The defendant's counterclaims have not been sufficiently established by the evidence.

The judgment appealed from is reversed and the defendant corporation is absolved from the complaint. No costs will be allowed. So
ordered.
G.R. No. L-25593      November 15, 1967

HOME INSURANCE COMPANY, plaintiff-appellant, vs.

UNITED STATES LINES CO., ET AL., defendants-appellees.BENGZON, J.P., J.:

Sometime in 1964, SS "Pioneer Moon" arrived in Manila and discharged unto the custody of the Bureau of Customs, as arrastre
operator, two hundred (200) cartons of carbonized adding machine rolls consigned to Burroughs, Limited. When the cargo was
delivered to the consignee, however, several cartons were damaged. The consignee claimed the P2,605.64 worth of damage from
the Bureau of Customs, the United Lines Company owner of the vessel, and the Home Insurance Company which had insured the
cargo. The latter paid the claim and demanded reimbursement from either arrastre operator or the carrier. When both rejected the
claim, the Home Insurance Company, as subrogee, filed on June 11, 1965 an action against the Republic of the Philippines, the
Bureau of Customs and the United States Lines, in the alternative, for the recovery of P2,605.64, with interest plus costs.

Both defendants answered. The United States Lines disclaimed liability on the ground that the damage was incurred while the cargo
was in the possession of its co-defendants. The Republic of the Philippines and the Bureau of Customs, after denial of their motion to
dismiss, answered and alleged among others, non-suability and non-compliance with Act 3083, as amended by Commonwealth Act
327 which requires money claims to be filed with the Auditor General.

On December 7, 1965, the date set for pre-trial, only the counsel for the plaintiff appeared, who upon being asked for written
authority to compromise, assured the court that though he had no written authority, he had such authority verbally given by the
plaintiff. On the same day, the court dismissed the case for failure of the plaintiff to appear at the pre-trial conference.

Its motion for reconsideration having been denied, plaintiff appealed to Us, claiming that the lower court erred in dismissing the
case for failure of the plaintiff to appear.

As against the Republic of the Philippines and the Bureau of Customs, the dismissal must be sustained in the light of our decision
in Mobil Philippines Exploration v. Customs Arrastre Service and Bureau of Customs, L-23139, December 17, 1966 and subsequent
rulings,1 where We held that on grounds of public policy, the Republic of the Philippines or its agencies, may not be sued for the
performance of arrastre operations as a function necessarily incidental to the governmental function of taxation.

As regards the other defendants, Section 1, Rule 20 of the Revised Rules of Court, making pre-trial mandatory partly provides: ". . . in
any action, after the last pleading has been filed, the court shall direct the parties and their attorneys to appear before it for a
conference" (emphasis supplied). This is different from Section 1 of Rule 25 of the old Rules of Court which provided that "the court
may in its discretion direct the attorneys for the parties to appear before it for a conference . . . " (emphasis supplied). Section 2, Rule
20 of the new Rules of Court says that "a party who fails to appear at a pre-trial conference may be non-suited or considered as in
default." This shows the purpose of the Rules to compel the parties to appear personally before the court to reach, if possible, a
compromise. Accordingly, the court is given the discretion to dismiss the case should plaintiff not appear at the pre-trial.

Taking into consideration said purpose and spirit of the new Rules as well as the facts in the present case, We find no reversible error
committed by the court a quo in dismissing the action for the reason that only plaintiff's counsel appeared at the pre-trial (and not
plaintiff's official representative also). True, said counsel asserted that he had verbal authority to compromise the case. The Rules,
however, require, for attorneys to compromise the litigation of their clients, a "special authority" (Section 23, Rule 138, Rules of
Court). 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. The court below, therefore did not act erroneously in proceeding to dismiss the case in spite of such
manifestation of plaintiffs counsel. For, authority to compromise cannot lightly be presumed. And if, with good reason, the judge is
not satisfied that said authority exists, as in this case, dismissal of the suit for non-appearance of plaintiff in pre-trial is sanctioned by
the Rules. The dismissal should therefore be sustained in toto, with respect to all the defendants.

WHEREFORE, the appealed order of dismissal is affirmed, without costs. So ordered.

G.R. No. 102737 August 21, 1996

FRANCISCO A. VELOSO, petitioner, 
vs.
COURT OF APPEALS, AGLALOMA B. ESCARIO, assisted by her husband GREGORIO L. ESCARIO, the REGISTER OF DEEDS FOR THE
CITY OF MANILA, respondents.

TORRES, JR., J.:p

This petition for review assails the decision of the Court of Appeals, dated July 29, 1991, the dispositive portion of which
reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED IN TOTO. Costs against appellant. 1

The following are the antecedent facts:

Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo, Manila, with an area of one
hundred seventy seven (177) square meters and covered by Transfer Certificate of Title No. 49138 issued by the Registry of
Deeds of Manila. 2 The title was registered in the name of Francisco A. Veloso, single, 3 on October 4, 1957. 4 The said title
was subsequently cancelled and a new one, Transfer Certificate of Title No. 180685, was issued in the name of Aglaloma B.
Escario, married to Gregorio L. Escario, on May 24, 1988. 5

On August 24, 1988, petitioner Veloso filed an action for annulment of documents, reconveyance of property with damages
and preliminary injunction and/or restraining order. The complaint, docketed as Civil Case No. 88-45926, was raffled to the
Regional Trial Court, Branch 45, Manila. Petitioner alleged therein that he was the absolute owner of the subject property
and he never authorized anybody, not even his wife, to sell it. He alleged that he was in possession of the title but when his
wife, Irma, left for abroad, he found out that his copy was missing. He then verified with the Registry of Deeds of Manila
and there he discovered that his title was already cancelled in favor of defendant Aglaloma Escario. The transfer of property
was supported by a General Power of Attorney 6 dated November 29, 1985 and Deed of Absolute Sale, dated November 2,
1987, executed by Irma Veloso, wife of the petitioner and appearing as his attorney-in-fact, and defendant Aglaloma
Escario. 7 Petitioner Veloso, however, denied having executed the power of attorney and alleged that his signature was
falsified. He also denied having seen or even known Rosemarie Reyes and Imelda Santos, the supposed witnesses in the
execution of the power of attorney. He vehemently denied having met or transacted with the defendant. Thus, he
contended that the sale of the property, and the subsequent transfer thereof, were null and void. Petitioner Veloso,
therefore, prayed that a temporary restraining order be issued to prevent the transfer of the subject property; that the
General Power of Attorney, the Deed of Absolute Sale and the Transfer Certificate of Title No. 180685 be annulled; and the
subject property be reconveyed to him.

Defendant Aglaloma Escario in her answer alleged that she was a buyer in good faith and denied any knowledge of the
alleged irregularity. She allegedly relied on the general power of attorney of Irma Veloso which was sufficient in form and
substance and was duly notarized. She contended that plaintiff (herein petitioner), had no cause of action against her. In
seeking for the declaration of nullity of the documents, the real party in interest was Irma Veloso, the wife of the plaintiff.
She should have been impleaded in the case. In fact, Plaintiff's cause of action should have been against his wife, Irma.
Consequently, defendant Escario prayed for the dismissal of the complaint and the payment to her of damages. 8

Pre-trial was conducted. The sole issue to be resolved by the trial court was whether or not there was a valid sale of the
subject property. 9

During the trial, plaintiff (herein petitioner) Francisco Veloso testified that he acquired the subject property from the
Philippine Building Corporation, as evidenced by a Deed of Sale dated October 1, 1957. 10 He married Irma Lazatin on
January 20, 1962. 11 Hence, the property did not belong to their conjugal partnership. Plaintiff further asserted that he did
not sign the power of attorney and as proof that his signature was falsified, he presented Allied Bank Checks Nos.
16634640, 16634641 and 16634643, which allegedly bore his genuine signature.

Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the execution of the general power of attorney. He
attested that he did not sign thereon, and the same was never entered in his Notarial Register on November 29, 1985.

In the decision of the trial court dated March 9, 1990, 12 defendant Aglaloma Escario was adjudged the lawful owner of the
property as she was deemed an innocent purchaser for value. The assailed general power of attorney was held to be valid
and sufficient for the purpose. The trial court ruled that there was no need for a special power of attorney when the special
power was already mentioned in the general one. It also declared that plaintiff failed to substantiate his allegation of fraud.
The court also stressed that plaintiff was not entirely blameless for although he admitted to be the only person who had
access to the title and other important documents, his wife was still able to possess the copy. Citing Section 55 of Act 496,
the court held that Irma's possession and production of the certificate of title was deemed a conclusive authority from the
plaintiff to the Register of Deeds to enter a new certificate. Then applying the principle of equitable estoppel, plaintiff was
held to bear the loss for it was he who made the wrong possible. Thus:

WHEREFORE, the Court finds for the defendants and against plaintiff —

a. declaring that there was a valid sale of the subject property in favor of the defendant;

b. denying all other claims of the parties for want of legal and factual basis.

Without pronouncement as to costs.

SO ORDERED.

Not satisfied with the decision, petitioner Veloso filed his appeal with the Court of Appeals. The respondent court affirmed
in toto the findings of the trial court.

Hence, this petition for review before Us.

This petition for review was initially dismissed for failure to submit an affidavit of service of a copy of the petition on the
counsel for private respondent. 13 A motion for reconsideration of the resolution was filed but it was denied in are
resolution dated March 30, 1992. 14 A second motion for reconsideration was filed and in a resolution dated Aug. 3, 1992,
the motion was granted and the petition for review was reinstated. 15

A supplemental petition was filed on October 9, 1992 with the following assignment of errors:

The Court of Appeals committed a grave error in not finding that the forgery of the power of attorney (Exh . "C")
had been adequately proven, despite the preponderant evidence, and in doing so, it has so far departed from the
applicable provisions of law and the decisions of this Honorable Court, as to warrant the grant of this petition for
review on certiorari.

II

There are principles of justice and equity that warrant a review of the decision.

III

The Court of Appeals erred in affirming the decision of the trial court which misapplied the principle of equitable
estoppel since the petitioner did not fail in his duty of observing due diligence in the safekeeping of the title to the
property.

We find petitioner's contentions not meritorious.

An examination of the records showed that the assailed power of attorney was valid and regular on its face. It was
notarized and as such, it carries the evidentiary weight conferred upon it with respect to its due execution. While it is true
that it was denominated as a general power of attorney, a perusal thereof revealed that it stated an authority to sell, to wit:

2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and hereditaments or other
forms of real property, more specifically TCT No. 49138, upon such terms and conditions and under such covenants
as my said attorney shall deem fit and proper. 16
Thus, there was no need to execute a separate and special power of attorney since the general power of attorney had
expressly authorized the agent or attorney in fact the power to sell the subject property. The special power of attorney can
be included in the general power when it is specified therein the act or transaction for which the special power is required.

The general power of attorney was accepted by the Register of Deeds when the title to the subject property was cancelled
and transferred in the name of private respondent. In LRC Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it
stated that:

Whether the instrument be denominated as "general power of attorney" or "special power of attorney", what
matters is the extent of the power or powers contemplated upon the agent or attorney in fact. If the power is
couched in general terms, then such power cannot go beyond acts of administration. However, where the power
to sell is specific, it not being merely implied, much less couched in general terms, there can not be any doubt that
the attorney in fact may execute a valid sale. An instrument may be captioned as "special power of attorney" but if
the powers granted are couched in general terms without mentioning any specific power to sell or mortgage or to
do other specific acts of strict dominion, then in that case only acts of administration may be deemed conferred.

Petitioner contends that his signature on the power of attorney was falsified. He also alleges that the same was not duly
notarized for as testified by Atty. Tubig himself, he did not sign thereon nor was it ever recorded in his notarial register. To
bolster his argument, petitioner had presented checks, marriage certificate and his residence certificate to prove his alleged
genuine signature which when compared to the signature in the power of attorney, showed some difference.

We found, however, that the basis presented by the petitioner was inadequate to sustain his allegation of forgery. Mere
variance of the signatures cannot be considered as conclusive proof that the same were forged. Forgery cannot be
presumed 17 Petitioner, however, failed to prove his allegation and simply relied on the apparent difference of the
signatures. His denial had not established that the signature on the power of attorney was not his.

We agree with the conclusion of the lower court that private respondent was an innocent purchaser for value. Respondent
Aglaloma relied on the power of attorney presented by petitioner's wife, Irma. Being the wife of the owner and having with
her the title of the property, there was no reason for the private respondent not to believe in her authority. Moreover, the
power of attorney was notarized and as such, carried with it the presumption of its due execution. Thus, having had no
inkling on any irregularity and having no participation thereof, private respondent was a buyer in good faith. It has been
consistently held that a purchaser in good faith is one who buys property of another, without notice that some other
person has a right to, or interest in such property and pays a full and fair price for the same, at the time of such purchase, or
before he has notice of the claim or interest of some other person in the property. 18

Documents acknowledged before a notary public have the evidentiary weight with respect to their due execution. The
questioned power of attorney and deed of sale, were notarized and therefore, presumed to be valid and duly executed.
Atty. Tubig denied having notarized the said documents and alleged that his signature had also been falsified. He presented
samples of his signature to prove his contention. Forgery should be proved by clear and convincing evidence and whoever
alleges it has the burden of proving the same. Just like the petitioner, witness Atty. Tubig merely pointed out that his
signature was different from that in the power of attorney and deed of sale. There had never been an accurate examination
of the signature, even that of the petitioner. To determine forgery, it was held in Cesar vs. Sandiganbayan 19(quoting
Osborn, The Problem of Proof) that:

The process of identification, therefore, must include the determination of the extent, kind, and significance of this
resemblance as well as of the variation. It then becomes necessary to determine whether the variation is due to
the operation of a different personality, or is only the expected and inevitable variation found in the genuine
writing of the same writer. It is also necessary to decide whether the resemblance is the result of a more or less
skillful imitation, or is the habitual and characteristic resemblance which naturally appears in a genuine writing.
When these two questions are correctly answered the whole problem of identification is solved.

Even granting for the sake of argument, that the petitioner's signature was falsified and consequently, the power of
attorney and the deed of sale were null and void, such fact would not revoke the title subsequently issued in favor of
private respondent Aglaloma. In Tenio-Obsequio vs. Court of Appeals, 20 it was held, viz:

The right of an innocent purchaser for value must be respected and protected, even if the seller obtained his title
through fraud. The remedy of the person prejudiced is to bring an action for damages against those who caused or
 employed the fraud, and if the latter are insolvent, an action against the Treasurer of the Philippines may be filed
for recovery of damages against the Assurance Fund.

Finally; the trial court did not err in applying equitable estoppel in this case. The principle of equitable estoppel states that
where one or two innocent persons must suffer a loss, he who by his conduct made the loss possible must bear it. From the
evidence adduced, it should be the petitioner who should bear the loss. As the court a quo found:

Besides, the records of this case disclosed that the plaintiff is not entirely free from blame. He admitted that he is
the sole person who has access to TCT No. 49138 and other documents appertaining thereto (TSN, May 23, 1989,
pp. 7-12) However, the fact remains that the Certificate of Title, as well as other documents necessary for the
transfer of title were in the possession of plaintiff's wife, Irma L. Veloso, consequently leaving no doubt or any
suspicion on the part of the defendant as to her authority. Under Section 55 of Act 496, as amended, Irma's
possession and production of the Certificate of Title to defendant operated as "conclusive authority from the
plaintiff to the Register of Deeds to enter a new certificate." 21

Considering the foregoing premises, we found no error in the appreciation of facts and application of law by the lower court
which will warrant the reversal or modification of the appealed decision.

ACCORDINGLY, the petition for review is hereby DENIED for lack of merit.
G.R. No. L-9608             August 7, 1915

DIEGO LIÑAN, plaintiff-appellee, 
vs.
MARCOS P. PUNO, ET AL., defendants-appellants.

Mariano Escueta for appellants.

S. Lopez for appellee.

JOHNSON, J.:

The facts upon which the decision in this case depends are as follows:

(1) The the plaintiff, in the month of May, 1908, and for a long time prior thereto, was the owner of a certain parcel of land
particularly described in paragraph 2 of the complaint.

(2) That on the 16th day of May, 1908, the plaintiff executed the following document, which conferred upon the defendant Marcos
P. Puno the power, duties and obligations therein contained:

I, Diego Liñan, of age, married, a resident of Daet, Province of Ambos Camarines, Philippine Islands, and at the present time
temporarily residing in this city of Tarlac, capital of the Province of Tarlac, P.I., set forth that I hereby confer sufficient
power, such as the law requires, upon Mr. Marcos P. Puno, likewise a resident of this city of Tarlac, capital of the Province
of Tarlac, in order that in my name and representation he may administer the interest I possess within this municipality of
Tarlac, purchase, sell, collect and pay, as well as sue and be sued before any authority, appear before the courts of justice
and administrative officers in any proceeding or business concerning the good administration and advancement of my said
interests, and may, in necessary cases, appoint attorneys at law or attorneys in fact to represent him.

The meaning, purport, and power conferred by this document constitute the very gist of the present action.

(3) That in June, 1911, the defendant Puno, for the sum of P800, sold and delivered said parcel of land to the other defendants.

The plaintiff alleges that the said document (Exhibit A) did not confer upon the defendant Puno the power to sell the land and
prayed that the sale be set aside; that the land be returned to him, together with damages.

The defendants at first presented a demurrer to the complaint, which was overruled. To the order overruling the demurrer the
defendants duly excepted. They later answered. In their answer they first denied generally and specially all of the important facts
stated in the complaint. In their special answer or defense they admitted the sale of the land by Puno to the other defendants and
alleged that the same was a valid sale and prayed to be relieved from the liability under the complaint, with their costs.

Upon the issue thus presented the lower court decided: (1) That the document Exhibit A did not give Puno authority to sell the land;
(2) that the sale was illegal and void; (3) That defendants should return to the land to the plaintiff; and (4) That the defendants
should pay to the plaintiff the sum of P1,000 as damages, P400 of which the defendant Puno should alone be responsible for, and to
pay the costs.

From that decision the defendants appealed to this court and made the following assignments of error:

I. The lower court erred in overruling the demurrer filed by the appellants to the complaints.

II. The lower court erred in holding that the appellant Marcos P. Puno was not authorized to sell the land in question and
that the sale executed by the said Marcos P. Puno to the other appellants, Enrique, Vicente, Aquilina and Remedios,
surnamed Maglanok, is null and void.

III. The lower court erred in ordering the appellee, Diego Liñan, to return to the appellants, Enrique, Vicente, Aquilina, and
Remedios Maglanok the sum of P800, the selling price of the land question.
 III. And, finally, the lower court erred in sentencing the appellants to pay to the appellee the sum of P1,000, the value of the
products collected, and to pay the costs.

IV. And, finally, the lower court erred in sentencing the appellant to pay to the appellee the sum of P1,000, the value of the
products collected, and to pay the costs.

With reference to the first assignment of error, we are of the opinion that the facts stated in the opinion are sufficient to constitute
a cause of action.

With reference to the second assignment of error, the plaintiff alleges that the power of attorney, as contained in Exhibit A, did not
authorize the defendant Puno had full and complete power and authority to do what he did. The lower court held that Exhibit A only
gave Puno power and authority to administer the land; that he was not authorized to sell it. Omitting the purely explanatory parts of
Exhibit A, it reads as follows: "I, Diego Liñan, ... set forth that I ... confer sufficient power, such as the law requires, upon Mr. Marcos
P. Puno ... in order that in my name and representation he may administer ... purchase, sell, collect and pay ... in any proceeding or
business concerning the good administration and advancement of my said interests, and may, in necessary cases, appoint at law or
attorneys in fact to represent him."

Contracts of agency as well as general powers of attorney must be interpreted in accordance with the language used by the parties.
the real intention of the parties is primarily to be determined from the language used. The intention is to be gathered from the
whole instrument. In case of doubt resort must be had to the situation, surroundings and relations of the parties. Whenever it is
possible, effect is to be given to every word and clause used by the parties. It is to be presumed that the parties said what they
intended to say and that they used each word or clause with some purpose and that purpose is, if possible, to be ascertained and
enforced. The intention of the parties must be sustained rather than defeated. If the contract be open to two constructions, one of
which would uphold while the other would overthrow it, the former is to be chosen. So, if by one construction the contract would be
illegal, and by another equally permissible construction it would be lawful, the latter must be adopted. The acts of the parties in
carrying out the contract will be presumed to be done in good faith. The acts of the parties will be presumed to have been done in
conformity with and not contrary to the intent of the contract. The meaning of generals words must be construed with reference to
the specific object to be accomplished and limited by the recitals made in reference to such object.

With these general observations in mind, ,let us examine the terms of the power conferred upon the defendant Puno (Exhibit A) and
ascertain, if possible, what was the real intent of the plaintiff. The lower court held that the "only power conferred was the power to
administer." Reading the contract we find it says that the plaintiff "I confer ... power ... that ... he may administer ... purchase, sell,
collect and pay ... in any proceeding or business concerning the good administration and advancement of my said interests." The
words "administer, purchase, sell," etc., seem to be used coordinately. Each has equal force with the other. There seems to be no
good reason for saying that Puno had authority to administer and not to sell when "to sell" was as advantageous to the plaintiff in
the administration of his affairs as "to administer." To hold that the power was "to administer" only when the power "to sell" was
equally conferred would be to give to special words of the contract a special and limited meaning to the exclusion of other general
words of equal import.

The record contains no allegation on proof that Puno acted in bad faith or fraudulently in selling the land. It will be presumed that he
acted in good faith and in accordance with his power as he understood it. That his interpretation of his power, as gathered from the
contract (Exhibit A), is tenable cannot, we believe, be successfully denied. In view of that fact and view of the fact that, so far as the
record shows, the other defendants acted in good faith, we are of the opinion that the contract, liberally construed, as we think it
should be, justifies the interpretation given it by Puno. In reaching this conclusion, we have taken into account the fact that the
plaintiff delayed his action to annul said sale from the month of June, 1911, until the 15th of February, 1913. Neither have we
overlooked the fact in the brief of the appellants that the plaintiff has not returned, nor offered to return, nor indicated a willingness
to return, the purchase price. (Art. 1308 of the Civil Code; Manikis vs. Blas, No. 7585.1).

In view of all the foregoing, we are of the opinion that the lower court committed the error complained of in the second assignment,
and, without discussing the other assignments of error, we are of the opinion, and so hold, that the judgment of the lower court
should be and is hereby revoked and that the appellants should be relieved from all liability under the complaint. Without any
finding as to costs, it is so ordered.

Arellano, C.J., Torres, Carson, and Araullo, JJ., concur.

Separate Opinions

TRENT, J., dissenting:

The power of attorney, the identity of the land sold, the fact of sale, and the identity of the parties are admitted.

I agree with the majority that "the meaning, purport, and power conferred by this document (Exhibit A, the power of attorney)
constitute the very gist of the present action," and that the acted in good faith. But I cannot see how "the fact that the plaintiff
delayed his action to annul said sale from the month of June, 1911, to February, 15, 1913," and the fact that the appellants have
charged in their brief that the "plaintiff has not returned, nor offered, to return, ,nor indicated a willingness to return the purchase
price," can affect in any way the issues involved in this case. the record shows that the land is situated in the Province of Tarlac and
the plaintiff lives in the Province of Ambos Camarines. The record fails to show whether or not the plaintiff has returned, or offered
to return, or is willing to return to the vendees the purchase price of the land. The charge in appellant's brief that the plaintiff has
not done these things is not proof and should not be taken as establishing a fact or facts.

The controlling question is, Was Puno authorized under the power of attorney, which is set out in full in the majority opinion, to sell
the real estate of his principal? The solution of this question must depend solely and exclusively upon the language used in that
power of attorney Exhibit A. There is no claim that the plaintiff enlarged the powers of his agent Puno after the execution of Exhibit
A or that he ratified the sale in question after it had been made.

Article 1713 of the Civil Code reads:

An agency in general only includes acts of administration.

In order to compromise, alienate, mortgage, or to execute any other act of a strict ownership an express commission is
required.

The power to compromise does not give authority to place the matter in the hands of arbitrators or amicable
compromisers.

The Director General de los Registros, in its resolution of November 20, 1900 (90 Juris. Civ.,  677), construed a power of attorney
given by a father to his son, authorizing the latter to administer the property of his principal, "to lease and to rent his principal's
reality to the persons and for the time, price and conditions he deems best, and also to make ejectments, to sign documents, to
make collections, to make changes in anything belonging to his principal, and to compromise any questions that may arise." Under
color of this authority, the son leased for a period of twelve years several parcels of land and charged several other parcels
with pensiones de censos in favor of a third person. I quote from the syllabus: "In the present case, the lessor was authorized by his
principal to lease and to rent the latter's realty to the persons and for the price, time and conditions that seemed best to him, and
such authorization must be understood to have been granted for the simple contract of lease, which produces only personal
obligations, and consequently cannot be regarded as extended, without express command, to the stipulation of such conditions as
might alter the nature of the contract by transforming it into a partial conveyance of ownership in the things leased, as happened in
said case, wherein the agent has thereby exceeded the limits of his agency."

A quite similar power of attorney was disposed of in the same manner in the resolution of October 26, 1904 (99Juris. Civ., 245)
where an agent leased property for thirty years under color of authority to lease the property "for the time, price, and conditions"
which he might think desirable.

In the Resolution of April 5, 1907 (Juris. Civ., 68), the facts were as follows: A power of attorney executed by a wife authorized her
husband to administer a vineyard belonging to her as might be necessary for its preservation, improvement, and increase. Under this
power the husband entered into an agreement with several other adjoining owners with reference to the irrigation of their
respective properties by means of an aqueduct. To insure the accomplishment of various stipulations inserted in this contract, the
various parties thereto hypothecated their respective properties and sought to have the same inscribed in the property registry.
Registration was denied on the ground, among others, that the power of attorney in question did not authorize the husband to
perform any act of strict ownership, but only those of administration.

In commenting upon article 1713, Manresa quotes approvingly from Goyena as follows: "As Garcia Goyena says, 'The law, which
must look after the interests of all, cannot permit a man to express himself in vague and general way with reference to the right he
confers upon another for the purposes of alienation or hypothecation, whereby he might easily be despoiled of all he possessed and
be brought to ruin; such excessive authority must be set down in the most formal and explicit terms; and when this is not done, the
law reasonably presumes that the principal did not mean to confer it.' " (Vol. 11, p. 460.)

Bonel, in commenting upon the same article, says: "Our code, in looking after the interests of all and thereby furnishing a proof of
common sense, does not permit a vague expression in a general and indefinite manner of the right one confers upon another to
make alienations and hypothecations, for in this way a man could with good faith on his part be despoiled of all he possessed and be
brought to ruin; hence it provides that such excessive authority must be set down in the most favorable and explicit terms; and
when this is not done, reason and common sense induce the presumption that the principal did not mean to confer it." (Vol. 4, p.
728.)

The supreme court of Louisiana, which also interprets the civil law, was considering the following power of attorney in Lafourche
Transportation Co. vs. Pugh (52 La. Ann., 1517); "We ... have appointed, ... (defendant) our true and lawful agent and attorney in
fact, for us, and in our name, place and stead, to manage, control, take charge of, compromise and do any and all things, necessary
and requisite, touching and concerning our interests in the succession of the late Robert Lawrence Pugh, and to make any and all
settlements for us, and in our behalf, with the legatees under the last will and testament of the said R. L. Pugh, vesting our said
attorney and agent with full power and authority, to do any and all acts that we might do if personally present . . .."

The remarks of the court are brief and instructive; "It further appears that, neither at the date of the execution of the note and act of
mortgage sued on, nor any at any other time, has W.W. Pugh held any other procuration, the attempt the prove the contrary having
failed. there is no doubt that, at the time that the note and act or mortgage were executed, he supposed that the power of attorney
held by him conferred the authority which he undertook to exercise, but the bare reading of it shows that it did not."

In Lord vs. Sherman (2 Cal., 498), a power of attorney authorized an agent to "attend to all business affairs appertaining to real or
personal estate, bank business, or business at the customhouse, or insurance or law business, or the commencement, settlement, or
defending any suit or suits in law or equity. Also for me and in my name, place, and stead, to sign, seal, execute, and deliver all and
any instrument under seal that he may think proper in and about my said business, either individually or as a member of the firm of
Shermans & Stork. Also to settle, compromise, and adjust, pay and discharge all claims and demands, accounts due or owing to me,
or from me, or in which I am interested, and give all proper receipts or discharges therefor, whether under seal or not; and to attend
to all my business for me of any name or nature, whether real or personal, that may arise during my absence, and whether to use
my name in and about the same, the same as I could do if personally present. Also to make, indorse, or accept any drafts, bills of
exchange, or promissory notes. Also to settle and adjust all claims, etc." The court said: "The power of attorney contains no authority
to convey real estate, eo nomine. The power given `to attend to all business affairs appertaining to real or personal estate' is too
indefinite to sustain a transfer or real estate, more particularly that acquired long subsequent to its execution."

In Billings vs. Morrow (7 Cal., 171), a power of attorney was in question which authorized the agent "for me and in my name to
superintend my real and personal estate, to make contracts, to settle outstanding debts, and generally to do all things that concern
my interest in any way, real or personal whatsoever, giving my said attorney full power to use my name to release others or bind
myself, as he may deem proper and expedient; ..." The court said: "It requires but a glance at this instrument to perceive that no
authority is contained in it to convey real estate. The power is limited and special, and cannot be extended by implication to other
acts more important in their character than those expressly provided in the body of the instrument. The rule may be thus stated;
that where the authority to perform specific acts is given in the power, and general words are also employed, such words are limited
to the particular acts authorized."

In Clark & Skyles on Agency, section 213, it is said: All powers conferrred upon an agent by a formal instrument are to receive a strict
interpretation, and the authority is never extended by intendment or construction beyond that which is given in terms or is
necessary for carrying the authority into effect, and that authority must be strictly pursued."

Upon the same point Story says in his work on Agency, section 68: "Indeed formal instruments of this sort are ordinarily subjected to
a strict interpretation, and the authority is never extended beyond that which is given in terms, or which is necessary and proper for
carrying the authority so given into full effect."

In Reynolds vs. Rowley (4 La. Ann., 396), it was said: "We take it for granted that, under the common law as with us, powers of
attorneys are subjected to a strict interpretation, and that the authority is never extended beyond that which is given in terms, or
which is necessary and proper for carrying the authority so given into full effect; that language, however general in its form, when
used in connection with a particular subject matter, will be presumed to be used in subordination to that matter, and therefore is to
be construed and limited accordingly; that a general power to buy property for the constituent, or to make any contracts, and do
any other acts whatever, which he could if personally present, must be construed to apply only to buying or contracting connected
with his ordinary business, and would not authorize any contracts of an extraordinary character to be made."

In Clark & Skyles on Agency, section 227, it is said: "In order that an agent may have authority to sell real estate it is necessary that
such authority should be clearly and distinctly given to him, in such a manner that a reasonably prudent person would have no
hesitancy in seeing that such a power was given. We have herefore seen that all written powers will be strictly construed and will
not be extended beyond their obvious purpose; and unless power to sell real estate is clearly given to him, the agent cannot sell it."

In sections 261 to 265 of the same work, the general scope of powers delegated by the authority to manage the business of the
principal is discussed. It is there stated that aside from the particular facts and circumstances surrounding the parties, it is a general
rule that an agency to  manage  implies authority to with the property or in the business what has previously been done by the
principals, or by others with their express or implied consent; or further to do what is necessary or usual and customary to do with
the property, or in business of the same kind in the same locality. But the power to dispose of the business or embark on some
unusual enterprise with the principal's capital is not included in such an agency.

The rule that formal powers of attorney must be strictly construed and limited in their scope to what is expressly stated and to such
incidental powers as may be necessary in the fulfillment of the powers expressly given is well settled, both in Anglo-American and in
the civil law. The authorities supporting this doctrine are legion. So, general expressions conferring power an agent, such as "to do
any and every act," "do and transact all manner of business," to lease real property "for the time, price and with the conditions
which he deems desirable," "attend to all business affairs appertaining to real or personal estate," "to my real and personal estate,"
"to superintend my real and personal estate" are to be construed in subordination to the express powers granted, and not to refer
to other unusual or extraordinary powers of which no mention is made in the instrument. In addition to the cases given above which
illustrate the rule, many others may be found in the books of the same character. Likewise, it is a rule uniformly stated that the
power to sell real estate must necessarily be express, and cannot be implied from any general language used.

Let us now examine the power of attorney executed by the plaintiff and see if, according to the rules stated, it can be held to include
the power to sell real estate. There is no description of the plaintiff's property in Tarlac. The document simply designates his
property as "interests." This, of course, would ordinarily be taken to include every species of property, real or personal, owned by
him in that municipality. That the power to administer  these "interests" is expressly delegated admits of no denial, as well as to the
power to appear in court, the power to engage counsel, and to appoint sub-agents. But we are interested in determining if the
power is expresslydelegated (for that is the only manner in which it could have been given) to sell real estate. The grammatical
construction of the instrument admits of its division into two portions, as follows: "(a) He may administer such interests as I possess
within this municipality of Tarlac; (b) And may buy, sell, collect, and pay, ... in any way whatsoever for the good administration and
furtherance of my said interests."

Certainly, the power to sell real estate is not expressly delegated in the first division. True, in the second section are the words
"buy," "sell," "in any way whatsoever," and which, standing alone, might easily refer to either real or personal property or both. But
these powers are restricted by the stated purpose for which the grant is given; that is, "for the good administration and furtherance
of my said interests." This qualifying phrase brings these general words "buy" and "sell" "in any way whatsoever" down to the level
of administrative acts. The agent may buy or sell for the good administration and furtherance of the principal's interests, but he may
not sell those interests themselves. As a matter of fact, the second division is but little more than a repetition of the first, with the
added feature that it enumerates a number of those powers customarily incident to the management  of a principal's business by his
agent.

It develops that the plaintiff owned a parcel of agricultural land in the municipality of Tarlac. This was one of the "interests" which
the defendant Puno was to "administer." Manifestly, the power to "buy" seed, farming implements, and material for the repair and
preservation of that land, and the power to "sell" its products were incidental powers of a general power of management of such an
"interest." The full extent of the plaintiff's business "interests" in the municipality of Tarlac is not disclosed by the record. But it is
clear that he was not engaged in the business of buying and selling real estate. Assuming that his "interests" in the said municipality
were of almost any other description, it is evident that the sale of real estate by the defendant agent was an extraordinary act, not
capable of being classified as an act of administration. I am unable to discover any express delegation of power to sell "real estate" in
the document in question. Not only is "real estate" not expressly mentioned, but the words "buy" and "sell," which, it is argued,
delegate that power, are, by the grammatical construction of the document, subordinated to the "good administration and
furtherance" of the plaintiff's "interests."

For the foregoing reasons I do not agree to the disposition of this case.
G.R. No. L-26291             February 3, 1927

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellant, 

vs.
J. O. WAGNER and CATHERINE CLELAND WAGNER, defendants-appellants.

Attorney-General Jaranilla for plaintiff-appellant.

William F. Mueller for defendants-appellants.

MALCOLM, J.:

This is an action instituted by the Government of the Philippine Islands to obtain the recission of the contract had with J. O. Wagner
and Catherine Cleland Wagner for failure to comply with a condition of the contract, to the effect that they, as purchasers of a lot
situated in the Baguio townsite, would construct improvements thereon of the value of not less than P15,000 within two years from
date of sale, and to obtain the cancellation of the townsite patent for the lot, and of the certificate of title issued by the register of
deeds for the City of Baguio. The importance of the decision with reference to the future of the City of Baguio is readily apparent.

The pleadings in this case are varied. The nature of the complaint has been mentioned. Subsequent to its presentation, one J. J.
Murphy filed a complaint in intervention, and was thereafter interposed an answer containing what was denominated by them as a
special defense, counterclaim, and cross-complaint. After a demurrer to the pleading was sustained by the trial judge, the answer
was considered as merely setting up a special defense. The contents of this special defense need not be described, since it fails to do
justice to defendants' theory of the case. Defendants also presented two motions for dismissal. — The first, predicated on the main
thesis that the condition of the sale was imposed without authority of law; and, the second, that there was laches on the part of the
Government and other adequate remedies available to it. On these pleadings, the decision of the trial court was with the
defendants, while, also, apparently granting the motion to dismiss relating to laches, since the memorandum of counsel for the
defendants on this motion was incorporated in His Honor's decision. Neither party was satisfied with the decision of the trial court.

The pleadings in relation with the assignment of errors make the following the main for defendants-appellants: (1) That the
condition set forth in Exhibit A and B, requiring the defendants to construct improvements, is void and unconstitutional; (2) that the
copy of the Philippine Commission Resolution, Exhibit A, should not have been admitted over the objections of the defendants; and
(3) that the facts were not as found by the trial judge with reference to the improvements on the land. As to plaintiff-appellant, the
main issues are: (1) That the action of the Bureau of Lands in issuing the patent, instead of cancelling the sale, was erroneous and
authorized; (2) that the present action has not prescribed; (3) that the Government is not guilty of laches; (4) that alienation,
conveyance, and grants under the Public Lands Act are not decrees of registration; and (5) that sections 101 and 103 of the Land
Registration Act are not applicable to the present case. Considering the impression which the case has made on the court, we deem
it necessary to dispose of all errors assigned by the defendants-appellants, but not necessary to dispose of all the errors assigned by
the plaintiff-appellant.

Now as to the facts. On April 8, 1913, the Philippine Commission adopted Resolution No. 19, the pertinent portions of which are the
following:

Whereas a survey of certain additional lots in Baguio townsite subdivision has been made;

xxx     xxx     xxx

Whereas lot 29, residence section F, is to be used as place for public entertainment's and amusements: Now, therefore, be
it

xxx     xxx     xxx

Resolved further, That the Director of Lands be and hereby is directed to place restrictions upon the sale of lots as follows:

xxx     xxx     xxx

Lot 29, residence section F, shall not be used for any purpose other than a place for public entertainment's or amusements,
without the written approval of the Secretary of the Interior."
 xxx     xxx     xxx

* * * Provided further, That the purchaser of lot 29, residence section F, shall, within two years from date of sale by the
Government, construct thereon improvements of the value of not less than fifteen thousand pesos. (Exhibit A.)

In accordance with this resolution, the sale of lot 29, residence section F, Baguio townsite, was advertised. The advertisement
recited:

SALE OF BAGUIO LOTS

Notice is hereby given that at ten o'clock a. m. on Wednesday, April 30, 1913, at the office of the Bureau of Lands, Baguio,
P. I., there will be sold at public auction, subject to the conditions hereinafter stated, the following lots situated in Baguio
townsite:

* * * Lots 28, 29, and 30, residence section F.

xxx     xxx     xxx

SPECIAL CONDITIONS

* * * Lot 29, residence section F, shall not be used for any purpose other as a place for public entertainment, without the
written approval of the Secretary of the Interior; and the purchaser must construct improvements of the value of not less
than P15,000 within two years of the date of the sale.

PAYMENT

Ten per cent at time of sale 10 per cent within five days thereafter; the balance within one year, with interest at 6 per cent
per annum. (Exhibit B.)

The auction sale was held on the date and place fixed in the advertisement, and Catherine Cleland Wagner was the successful
bidder. Ten per cent of the purchase price was paid on April 30, 1913, and the rest was paid on May 3d of the same year. (Exhibit E.)

On April 25, 1923, townsite patent No. 164 was issue, under the hand of the Governor-General, in the name of J. O. Wagner, the
husband of Catherine Cleland Wagner, subject further to the following conditions and stipulations:

1. That this lot shall not be used other than as a place for public entertainment, without the written approval of the
Secretary of the Interior;

2. That the purchaser must construct improvements thereon of the value of not less than P15,000 within two years from
the date of sale;

3. That this lot shall not be subdivided without the written approval of the Secretary of the Interior; and

4. That no building shall be erected on this lot until the plan thereof and the location of the building shall have been
approved by the consulting architect to the Philippine Commission. (Exhibit C.)

On May 12, 1923, original certificate of title No. 463 was issued by the register of deeds for the City of Baguio making the same
conditions and stipulations found in the townsite patent integral parts thereof. The title now contains a memorandum of
encumbrances affecting the property concerning the notice of lis pendens of date May 14, 1925, having to do with the present case.
(Exhibit D.)

It appears further that on June 17, 1913, J. J. Murphy purchased from Catherine Cleland Wagner, with the consent of her husband, J.
O. Wagne, an undivided half interest in lot NO. 29. He took over the parcel of land in the year 1913, and has since been in possession
of it. His interest is not noted on the certificate of title.
It was the finding of the trial judge, and this finding finds support in the record, that the defendants, as well as the intervenor, had
failed to construct improvements on the land of the value of P15,000. All of the improvements noted by the witnesses consisted of
roads and grading of an uncertain value. This expression of opinion disposes of defendants-appellants' third assignment of error.

Defendants-appellants' second assignment of error relating to the admission of Exhibit A, which is a copy of Commission Resolution
No. 19, need not give us pause, since it is a copy certified as correct by the Acting Secretary to the Governor-General. It is a matter of
public knowledge, of which this court my take judicial notice, that the Philippine Commission is no longer in existence, and that its
records are now on file in the Government archives. No measure of doubt can exist as to the authenticity of Commission Resolution
No. 19.

We have left for decision on defendants-appellants' first assignment of error, that the condition set forth in Exhibits A and B,
requiring them to construct improvements, is void and unconstitutional. This is a topic which invites discussion and reflection.

Philippine Organic Law, as found in the Philippine Bill, the Act of Congress of July 1, 1902, includes provisions dealing with the public
domain. Section 13 of the Philippine Bill refers to homestead entries. Section 14 to persons who were in possession thereof at the
time American sovereignty was established in the Philippines. Section 15 of the law embraces sales of lands to private persons and
corporations. It provides:

That the Government of the Philippine Islands is hereby authorized and empowered, on such terms as it may prescribed, by
general legislation, to provide for the granting or sale and conveyance to actual occupants and settlers and other citizens of
said Islands such parts and portions of the public domain, other timber and mineral lands, of the United States in said
Islands as it may deem wise, not exceeding sixteen hectares of any one person and for the sale and conveyance of not more
than one thousand and twenty-four hectares to any corporation or association of persons: Provided, That the grant or sale
of such lands, whether the purchase price be paid at once or in partial payments, shall be conditioned upon actual and
continued occupancy, improvement, and cultivation of the premises sold for a period of not less than five years, during
which time and purchaser or grantee cannot alienate or encumber said land or the title thereto; but such restriction shall
not apply to transfers of rights and title of inheritance under the laws for the distribution of the estate of descendants.

Acting under the authority thus conferred by the Congress of the United State, the Government of the Philippine Islands, first,
through the Philippine Commission, and, subsequently, through the Philippine Legislature, has provided the necessary legislation for
the disposition of public lands. Act No. 926, the Public Land Act, in force when Commission Resolution No. 19 was adopted, included
Chapter V entitled "Town Sites." It was provided therein for resolutions of the Commission reserving surveyed lands and for the
accomplishment of the projects by the Director of Lands. This action was taken by the Philippine Commission in its legislative
capacity. The resolutions authorized by general legislation, including Commission Resolution No. 19, were then approved by the
Commission in its executive capacity.

So we have this chain of title: An Act of Congress authorizing general legislation and authorizing resolutions; a particular resolution
of the Commission specifying the restrictions which the Director of Lands shall place upon the sale of lots, and specifying the express
conditions with reference to the sale of lot 29, residence section F, Baguio townsite; and advertisement and sale in conformity with
the Commission Resolution to defendants. Consequently, as to defendant-appellants' appeal, we must hold against them on all
points, including their argument relative to the condition prescribed in Commission Resolution No. 19 and in the advertisement of
sale requiring defendants to construct improvements, a condition, by the way, which the defendants accepted by bidding at the
auction, by paying the purchase price, and by acts indicative of ownership.

The Government's appeal is found to be meritorious. The action is not barred by the statute of limitations, since it was brought
within the ten-year period provided in the Code of Civil Procedure. Laches which the trial judge dwelt on at great length constitutes
no good defense, since, not specially pleaded, and since the doctrine of laches does not apply to the Government. The issuance of
the townsite patents of the certificate of title are not insurmountable bars, since both the patent and the title contain the conditions
and stipulations which the Government claims have been infringed. As to Murphy, the purchaser of land from another, prior to the
issuance of a Government patent, is not entitled to protection against the Government as a bona fide purchaser, but acquires only
such interest as his vendor had, and takes, subject to all equities as exist at the time of his purchase. (There can be noted the
following authorities: Schlesinger vs. Kansas City & S. R. Co. [1893], 152 U. S., 444; Hawley vs. Diller [1899], 178 U. S., 476; Oregon &
C. R. Co. vs. United States [1914], 283 U. S., 393; Utah Power & Light Company vs. United States [1916], 243 U. S., 389; Oregon & C.
R. Co. vs. United States [1916], 243 U. S.; 549; De los Reyes vs. Razon [1918], 38 Phil., 480; 22 R. C. L., pp. 270 et seq.)

Whether the condition in the contract be called a condition precedent or subsequent is of no great importance except as it
determines the passing of title. The principles governing the question are to be found in the authorities and particularly in II Williston
on Contracts, pp. 1285 et seq., and in the learned concurring opinion of Mr. Justice Johnson in the case of Compañia General de
Tabacos vs. Topino  ([1904], 4 Phil., 33). The facts disclose a conditional obligation and a reciprocal obligation, as these terms are
used in the civil law, carrying with them the right of the aggrieved party to ask for the rescission of the contract. (Civil Code, art.
1124.)

The condition here is in the nature of a consideration for the contract. The condition in the contract constitutes a valid and
enforceable covenant. The contract must be fulfilled according to its stipulations. There is a breach of the condition upon which the
grant was made. The party of the first part to the contract is entitled to rescission because of the non-performance by the other
party to the contract. That, in our opinion, is all there is to the case.

The Government, having asked for rescission, must restore to the defendants whatever it has received under the contract. It will
only be just if, as a condition to rescission, the Government be required to refund to the defendants an amount equal to the
purchase price, plus the sums expended by them in improving the land. (Civil Code, art. 1295.)

The apparent result is to hold with the Government in this particular case. The ultimate result will be to lend power to the arm of the
Government in its laudable purpose to provide an effective means to put an end to speculation in land values in the City of Baguio,
and to force the steady improvement of the summer capital.

It is but fair to state that this opinion more nearly reflects the consensus of views of a majority of the court than it does the
individual opinion of the writer. He was greatly impressed with the arguments for the defendants, especially with that portion which
deals with laches, but had finally been persuaded to yield on this point, as it seems to be an untenable position.

In accordance with the foregoing, the judgment appealed from will be set aside, and the record remanded to the lower court for the
taking of testimony to determine the amount which the Government should refund to the defendants as a prerequisite to the
rescission of the of the contract, and the cancellation of the patent and the title. Without special finding as to costs in either
instance, it is so ordered.
G.R. No. L-32977             November 17, 1930

THE MUNICIPAL COUNCIL OF ILOILO, plaintiff-appellee, 

vs.
JOSE EVANGELISTA, ET AL., defendants-appellees. 
TAN ONG SZE VDA. DE TAN TOCO, appellant.

Trenas & Laserna for defendant-appellant.

Provincial Fiscal Blanco of Iloilo for plaintiff-appellees.
Felipe Ysmael for appellee Mauricio Cruz & Co. 
No appearance for other appellees.

VILLA-REAL, J.:

This is an appeal taken by the defendant Tan Ong Sze Vda. de Tan Toco from the judgment of the Court of First Instance of Iloilo,
providing as follows:

Wherefore, judgment is hereby rendered, declaring valid and binding the deed of assignment of the credit executed by Tan
Toco's widow, through her attorney-in-fact Tan Buntiong, in favor of late Antero Soriano; likewise the assignment executed
by the latter during his lifetime in favor of the defendant Mauricio Cruz & Co., Inc., and the plaintiff is hereby ordered to pay
the said Mauricio Cruz & Co., Inc., the balance of P30,966.40; the plaintiff is also ordered to deposit said sum in a local bank
within the period of ninety days from the time this judgment shall become final, at the disposal of the aforesaid Mauricio
Cruz & Co. Inc., and in case that the plaintiff shall not make such deposit in the manner indicated, said amount shall bear
the legal interest of six percent per annum from the date when the plaintiff shall fail to make the deposit within the period
herein set forth, until fully paid.

Without special pronouncement of costs.

In support of its appeal, the appellant assigns the following alleged errors as committed by the trial court in its decision, to wit:

1. The lower court erred in rejecting as evidence Exhibit 4-A, Tan Toco, and Exhibit 4-B, Tan Toco.

2. The lower court erred in sustaining the validity of the deed of assignment of the credit, Exhibit 2-Cruz, instead of finding
that said assignment made by Tan Buntiong to Attorney Antero Soriano was null and void.

3. The lower court erred in upholding the assignment of that credit by Antero Soriano to Mauricio Cruz & Co., Inc., instead
of declaring it null and void.

4. The court below erred in holding that the balance of the credit against the municipality of Iloilo should be adjudicated to
the appellant herein, Tan Toco's widow.

5. The lower court erred in denying the motion for a new trial filed by the defendant-appellant.

The facts of the case are as follows:

On March 20, 1924, the Court of First Instance of Iloilo rendered judgment in civil case No. 3514 thereof, wherein the appellant
herein, Tan Ong Sze Vda. de Tan Toco was the plaintiff, and the municipality of Iloilo the defendant, and the former sought to
recover of the latter the value of a strip of land belonging to said plaintiff taken by the defendant to widen a public street; the
judgment entitled the plaintiff to recover P42,966.40, representing the value of said strip of land, from the defendant (Exhibit A). On
appeal to this court (G. R. No .22617) 1 the judgment was affirmed on November 28, 1924 (Exhibit B).

After the case was remanded to the court of origin, and the judgment rendered therein had become final and executory, Attorney
Jose Evangelista, in his own behalf and as counsel for the administratrix of Jose Ma .Arroyo's intestate estate, filed a claim in the
same case for professional services rendered by him, which the court, acting with the consent of the appellant widow, fixed at 15
per cent of the amount of the judgment (Exhibit 22 — Soriano).

At the hearing on said claim, the claimants appeared, as did also the Philippine National Bank, which prayed that the amount of the
judgment be turned over to it because the land taken over had been mortgaged to it. Antero Soriano also appeared claiming the
amount of the judgment as it had been assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc.

After hearing all the adverse claims on the amount of the judgment the court ordered that the attorney's lien in the amount of 15
per cent of the judgment, be recorded in favor of Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix
of the deceased Jose Ma .Arroyo, and directed the municipality of Iloilo to file an action of interpleading against the adverse
claimants, the Philippine National Bank, Antero Soriano, Mauricio Cruz & Co., Jose Evangelista and Jose Arroyo, as was done, the
case being filed in the Court of First Instance of Iloilo as civil case No. 7702.

After due hearing, the court rendered the decision quoted from at the beginning.

On March 29, 1928, the municipal treasurer of Iloilo, with the approval of the auditor of the provincial treasurer of Iloilo and of the
Executive Bureau, paid the late Antero Soriano the amount of P6,000 in part payment of the judgment mentioned above, assigned
to him by Tan Boon Tiong, acting as attorney-in-fact of the appellant herein, Tan Ong Sze Vda. de Tan Toco.

On December 18, 1928, the municipal treasurer of Iloilo deposited with the clerk of the Court of First Instance of Iloilo the amount of
P6,000 on account of the judgment rendered in said civil case No. 3514. In pursuance of the resolution of the court below ordering
that the attorney's lien in the amount of 15 per cent of the judgment be recorded in favor of Attorney Jose Evangelista, in his own
behalf and as counsel for the late Jose Ma. Arroyo, the said clerk of court delivered on the same date to said Attorney Jose
Evangelista the said amount of P6,000. At the hearing of the instant case, the codefendants of Attorney Jose Evangelista agreed not
to discuss the payment made to the latter by the clerk of the Court of First Instance of Iloilo of the amount of P6,000 mentioned
above in consideration of said lawyer's waiver of the remainder of the 15 per cent of said judgment amounting to P444.69.

With these two payments of P6,000 each making a total of P12,000, the judgment for P42,966.44 against the municipality of Iloilo
was reduced to P30,966.40, which was adjudicated by said court to Mauricio Cruz & Co.

This appeal, then, is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the rights of the late Attorney Antero Soriano
by virtue of the said judgment in payment of professional services rendered by him to the said widow and her coheirs.

The only question to be decided in this appeal is the legality of the assignment made by Tan Boon Tiong as attorney-in-fact of the
appellant Tan Ong Sze Viuda de Tan Toco, to Attorney Antero Soriano, of all the credits, rights and interests belonging to said
appellant Tan Ong Sze Viuda de Tan Toco by virtue of the judgment rendered in civil case No .3514 of the Court of First Instance of
Iloilo, entitled Viuda de Tan Toco vs. The Municipal Council of Iloilo, adjudicating to said widow the amount of P42,966.40, plus the
costs of court, against said municipal council of Iloilo, in consideration of the professional services rendered by said attorney to said
widow of Tan Toco and her coheirs, by virtue of the deed Exhibit 2.

The appellant contends, in the first place, that said assignments was not made in consideration of professional services by Attorney
Antero Soriano, for they had already been satisfied before the execution of said deed of assignment, but in order to facilitate the
collection of the amount of said judgment in favor of the appellant, for the reason that, being Chinese, she had encountered many
difficulties in trying to collect.lawphil.net

In support of her contention on this point, the appellant alleges that the payments admitted by the court in its judgment, as made by
Tan Toco's widow to Attorney Antero Soriano for professional services rendered to her and to her coheirs, amounting to P2,900,
must be added to the P700 evidenced by Exhibits 4-A, Tan Toco, and 4-B Tan Toco, respectively, which exhibits the court below
rejected as evidence, on the ground that they were considered as payments made for professional services rendered, not by Antero
Soriano personally, by the firm of Soriano & Arroyo.

A glance at these receipts shows that those amounts were received by Attorney Antero Soriano for the firm of Soriano & Arroyo,
which is borne out by the stamp on said receipts reading, "Befete Soriano & Arroyo," and the manner in which said attorney
receipted for them, "Soriano & Arroyo, by  A. Soriano."
Therefore, the appellant's contention that the amounts of P200 and P500 evidence by said receipts should be considered as
payments made to Attorney Antero Soriano for professional services rendered by him personally to the interests of the widow of
Tan Toco, is untenable.

Besides, if at the time of the assignments to the late Antero Soriano his professional services to the appellant widow of Tan Toco had
already been paid for, no reason can be given why it was necessary to write him money in payment of professional services on
March 14, 1928 (Exhibit 5-G Tan Toco) and December 15, of the same year (Exhibit 5-H Tan Toco) after the deed of assignment,
(Exhibit 2-Cruz) dated September 27, 1927, had been executed. In view of the fact that the amounts involved in the cases
prosecuted by Attorney Antero Soriano as counsel for Tan Toco's widow, some of which cases have been appealed to this court, run
into the hundreds of thousands of pesos, and considering that said attorney had won several of those cases for his clients, the sum
of P10,000 to date paid to him for professional services is wholly inadequate, and shows, even if indirectly, that the assignments of
the appellant's rights and interests made to the late Antero Soriano and determined in the judgment aforementioned, was made in
consideration of the professional services rendered by the latter to the aforesaid widow and her coheirs.

The defendant-appellant also contends that the deed of assignment Exhibit 2-Cruz was drawn up in contravention of the prohibition
contained in article 1459, case 5, of the Civil Code, which reads as follows:

ART. 1459. The following persons cannot take by purchase, even at a public or judicial auction, either in person or through
the mediation of another:

xxx     xxx     xxx

5. Justices, judges, members of the department of public prosecution, clerks of superior and inferior courts, and other
officers of such courts, the property and rights in litigation before the court within whose jurisdiction or territory they
perform their respective duties .This prohibition shall include the acquisition of such property by assignment.

Actions between co-heirs concerning the hereditary property, assignments in payment of debts, or to secure the property
of such persons, shall be excluded from this rule.

The prohibition contained in this paragraph shall include lawyers and solicitors with respect to any property or rights
involved in any litigation in which they may take part by virtue of their profession and office.

It does not appear that the Attorney Antero Soriano was counsel for the herein appellant in civil case No. 3514 of the Court of First
Instance of Iloilo, which she instituted against the municipality of Iloilo, Iloilo, for the recovery of the value of a strip of land
expropriated by said municipality for the widening of a certain public street. The only lawyers who appear to have represented her
in that case were Arroyo and Evangelista, who filed a claim for their professional fees .When the appellant's credit, right, and
interests in that case were assigned by her attorney-in-fact Tan Boon Tiong, to Attorney Antero Soriano in payment of professional
services rendered by the latter to the appellant and her coheirs in connection with other cases, that particular case had been
decided, and the only thing left to do was to collect the judgment. There was no relation of attorney and client, then, between
Antero Soriano and the appellant, in the case where that judgment was rendered; and therefore the assignment of her credit, right
and interests to said lawyer did not violate the prohibition cited above.

As to whether Tan Boon Tiong as attorney-in-fact of the appellant, was empowered by his principal to make as assignment of credits,
rights and interests, in payment of debts for professional services rendered by lawyers, in paragraph VI of the power of attorney,
Exhibit 5-Cruz, Tan Boon Tiong is authorized to employ and contract for the services of lawyers upon such conditions as he may
deem convenient, to take charge of any actions necessary or expedient for the interests of his principal, and to defend suits brought
against her. This power necessarily implies the authority to pay for the professional services thus engaged. In the present case, the
assignment made by Tan Boon Tiong, as Attorney-in-fact for the appellant, in favor of Attorney Antero Soriano for professional
services rendered in other cases in the interests of the appellant and her coheirs, was that credit which she had against the
municipality of Iloilo, and such assignment was equivalent to the payment of the amount of said credit to Antero Soriano for
professional services.

With regard to the failure of the other attorney-in-fact of the appellant, Tan Montano, authorized by Exhibit 1 — Tan Toco, to
consent to the deed of assignment, the latter being also authorized to pay, in the name and behalf of the principal, all her debts and
the liens and encumbrances her property, the very fact that different letters of attorney were given to each of these two
representatives shows that it was not the principal's intention that they should act jointly in order to make their acts valid.
Furthermore, the appellant was aware of that assignment and she not only did not repudiate it, but she continued employing
Attorney Antero Soriano to represent her in court.

For the foregoing considerations, the court is of opinion and so holds: (1) That an agent of attorney-in -fact empowered to pay the
debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for
services rendered in the interests of said principal, and may satisfy them by an assignment of a judgment rendered in favor of said
principal; (2) that when a person appoints two attorneys-in-fact independently, the consent of the one will not be required to
validate the acts of the other unless that appears positively to have been the principal's attention; and (3) that the assignment of the
amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said judgment was
rendered, made in payment of professional services in other cases, does not contravene the prohibition of article 1459, case 5, of
the Civil Code.

By virtue whereof, and finding no error in the judgment appealed from, the same is affirmed in its entirety, with costs against the
appellant. So ordered.
G.R. No. L-24904             March 25, 1926

ROBINSON, FLEMING AND CO., plaintiff-appellant, 

vs.
CRUZ & TAN CHONG SAY, defendant-appellee.

J. F. Boomer and C. de G. Alvear for appellant.

J. Perez Cardenas and Jose P. Osorio for appellee.

STATEMENT

Plaintiff is a partnership organized and existing under the laws of Great Britain, with a resident attorney-in-fact in the Philippine
Islands.

The defendant is a domestic partnership doing business in the City of Manila, and it is alleged that it is represented in London,
England, by a duly appointed agent and attorney-in-fact.

Plaintiff claims that under a written contract executed about April 1, 1921, known in the record as Exhibit A, it bought from the
defendant 500 bales of Manila hemp grade J at 40 pounds less 1 per cent, equivalent, in Philippine currency, to P364.66, per ton of
20 cwt. net landed weight. That pursuant to the contract, on May 31, 1921, the defendant shipped in two parcels from Manila to
London, for delivery to plaintiff, the 500 bales of Manila hemp grade JDC/J, freight and f. p. a. insurance for the account of the
defendant, which hemp upon being weighed in London, and deducting the tare, as provided the contract, amounted to 1182 cwt. —
2 qtrs. — 10 pounds equivalent to 59.13 tons of 20 cwt. net weight, and after deducting freight, commission, and insurance, as the
contract provides, it had an invoice value of 1872 pounds — 6s — 4d, equivalent to P17,241.48, Philippine currency. That at the time
of the shipment, defendant drew upon plaintiff for P18,417.27, which draft the plaintiff paid by means of a letter of credit, thus
leaving a balance due and owing the plaintiff of P1,175.79. That upon the arrival of the hemp in London. it was found it was not in
merchantable condition, and was not so when it was shipped from Manila. Therefore, arbitration was had under the provisions of
clause 9 of the contract at a cost of P218.17 for the account of the defendant, which arbitration resulted in an allowance to plaintiff
of a reduction in the price of P13,150.04, which arbitration and its findings were approved and accepted by the defendant. That after
the shipment, defendant did not, without undue delay, provided plaintiff with Government graders' certificates for the hemp, and by
reason thereof, plaintiff was obliged to lighter and store 250 bales of it pending the arrival of the Government graders' certificates at
a cost of P135.37. That by reason of such acts, the defendant became indebted to the plaintiff in the sum of P14,461.20, no part of
which has been paid, except the sum of P11,687.87, which was the net value of 450 bales of Manila hemp grade J. shipped by
defendant to plaintiff during July, 1921, leaving a balance then due and owing from defendant to plaintiff, on its first cause of action,
of P2,539.09, for which demand has been made and payment refused.

Like allegations are made in a second cause of section, in which plaintiff claims P722.53, and in the third cause of action, for which it
claims P3,526.71, and in the fourth cause of action P3,673.09.

For answer the defendant made a general and specific denial of all of the material allegations made in the complaint.

After the evidence was taken upon such issues, the lower court rendered judgment for the defendant, to which the plaintiff duly
excepted and filed a motion for a new trial, which was overruled.

The plaintiff appeals and assigns the following errors:

I. The trial court erred in that, after finding that Messrs. H. E. Marchant and Francis Adams, during all the times material to
the issues in this case, had been agents of the defendant in London for the purpose of selling and disposing of its hemp, the
nature, character, and scope of such agency not appearing to have been limited, the trial court held that plaintiff was
obliged to show such agency to have included within scope matters necessary and incidental to the selling and disposing of
defendant's hemp in London.

II. The trial court erred in holding that the plaintiff was bound to show before the court what evidence was before the
arbitrators when they made up the award; that the action of the arbitrators was not binding upon the court and that the
court was not bound to assume that such action was legal and just.
 III. The trial court erred in finding, in its final decision, that plaintiff was a British Corporation.

IV. The trial court erred in finding in its final decision that it had sustained objections to certain portions of the deposition of
the witness William Ernest Sibley, offered by plaintiff and couched in the following words:

When the said 500 bales arrived in London, the plaintiffs, found that the hemp was not in sound, dry condition in
accordance with the clause 9 of the said contract (Exhibit W. E. S. 1). The arbitration which was duly held, resulted in an
award being made by the arbitrators appointed by the plaintiffs and defendants, respectively in the plaintiffs' favor,
whereby an allowance was made to the plaintiffs on the price of the said 500 bales, &c.' B. E. 49.

V. The trial court erred in finding that there was not sufficient evidence before the court to sustain the allegations of
plaintiff.

IV. The trial court erred in deciding the issues in the case in favor of the defendant and against the plaintiff.

JOHNS, J.:

This action is founded upon alleged written contract which the plaintiff claims was executed in London on April 1, 1921, by and
between it and the defendant, acting by and through its authorized agent, and an alleged copy of which is in the record, and
purports to have been executed by H. Marchant, now deceased, who was then in London, and who, the defendant admits in its own
testimony, was at that time the London agent of the defendant in the selling of its hemp.

In the very nature of things, an agent cannot sell hemp in a foreign country without making some kind of a contract, and if he had
power to sell, it would carry with it the authority to make and enter into the usual and customary contract for its sale.

As we analyze the evidence, Marchant was the London agent of the defendant, and in the ordinary course of business, executed the
contract known in the record as Exhibit A, and on behalf of the defendant, as its agent, and as its act and deed, and, for such reason,
the defendants is bound by the contract. This is confirmed by the further fact that the defendant undertook to carry out and
perform the terms and provisions of the contract, and, by and under its terms, to ship and deliver the hemp, drew the draft, and
took and accepted the money for its payment.

We are clearly of the opinion that the contract in question is valid and binding upon the defendant, and that Marchant, as the agent
of the defendant, not only had the authority to make and enter into it for and on behalf of the defendant, but as a matter of fact
that contract was legally ratified and approved by the subsequent acts and conduct of the defendant. It is very apparent that the
contract was executed in the ordinary course of business, and that in executing it, Marchant was acting within the scope of his
authority as the agent of the defendant. It will also be noted that under its terms and provisions, the defendant was to deliver the
hemp in London.

Clause 18 of the contract provides:

Arbitration. — Any dispute arising out of this Contract, or in any way relating to it or to its construction or fulfillment, shall
be referred to Arbitration in accordance with the By-Laws of the Manila Hemp Association endorsed hereon, which shall be
deemed to form part of this Contract.

Clause 4 of the By-Laws of the Manila Hemp Association provides:

All questions and matters referred to arbitration pursuant to the annexed contract shall be referred to the arbitration of
Two Members or qualified Nominees or Associate Members of the Manila Hemp Association, buyer and seller each
nominating one, and in case such arbitrators are unable to agree, then to umpire who shall be appointed by the said
arbitrators; but in the event of their not appointing an umpire before proceeding with the reference and within one week of
the date of their own appointment, then to an umpire who shall be appointed, at the request of either of the parties to the
dispute, by the Chairman, Vice-Chairman or acting Chairman for the time being of the Manila Hemp Association.
Provisions is then made for the manner of proceeding should either party fail to appoint an arbitrator, and for an appeal on certain
specified conditions.

Clause 5 of the By-Laws provides:

Awards by Arbitrators shall be made out on the official form issued by the Association, and shall be valid, notwithstanding both
arbitrators have no signed the same at the same time and in the presence of each other.

And clause 8 provides that:

Appeals to the Committee of the Association may be heard before a meeting of all or any four or more of the Members of
such Committee.

Clause 11 provides:

The evidence and proceedings upon arbitrations or appeals may be taken in a mercantile way, without regarding legal
technicalities respecting evidence.

Clause 12 provides:

Awards of the Committee on appeals shall be signed either by the Chairman, Vice-Chairman, or acting Chairman of the
Association for the time being.

Plaintiff alleges that on the arrival in London of the hemp in question, it was not in sound merchantable condition, and that it was
not of the grade specified in the contract. For such reason, it demanded an arbitration under the provisions of the contract. That an
arbitration was had, and that it made findings as alleged in the complaint, and that the defendant, through its London agent,
accepted and ratified the award of the arbitrators, and in legal effect, plaintiff seeks to recover from the defendant on the findings
and the award made by the arbitrators.

It is clear that under the contract, and upon the proof in the record, plaintiff was legally entitled to an arbitration. It is equally clear
that, if an arbitration was had and held in the manner and form provided by the contract, and that the arbitrators made findings,
and based thereon made the award, as plaintiff alleges, plaintiff in this action would be entitled to recover from the defendant the
amount found due and owing by the arbitrators, subject only to the legal right, and under a proper plea, of the defendant to defend
upon the ground of fraud or mistake in the arbitration. But in an action to recover founded upon the award of the arbitrators, the
plaintiff must both allege and prove, by competent evidence, that the defendant had notice of the motion of the plaintiff to
arbitrate; that the arbitrators were selected in the manner and form as provided for in the By-Laws of the Manila Hemp Association;
that the arbitrators met and performed their duties, and made and presented their findings, based upon which, they made and
signed their award; and that the defendant was either legally a party to the arbitration or that it ratified and approved the
arbitration after it was made. Upon all of such questions, there is a failure of proof. There is no competent evidence that arbitrators
were ever selected, as the By-Laws provides, who they were, or that they ever met in the discharge of their duties, or of the time
and place of their meeting, or who was present. Neither is there any competent evidence that the arbitrators ever made or signed
any findings. Neither is there any competent evidence that the defendant was ever notified of the proposed arbitration, or that it
book part in it, or that it ever ratified or approved the alleged findings. The proof of an arbitration should conform to the spirit and
intent of the By-Laws of the Manila Hemp Association.

Under the By-Laws, for certain specified reasons, either party has a legal right to an arbitration, and each person has a legal right to
select his own arbitrator, and it is the duty of the person desiring an arbitration to notify the adverse party, so that he can select his
own arbitrator and be present or represented in the arbitration, if he sees fit to do so. After the arbitrators have been selected and a
hearing is held and the investigation made, it is then the duty of the arbitrators to make their findings, based upon which they make
their award, which should be in writing. The only competent evidence of all such matters is the finding and award which is made by
the arbitrators. In other words, where a person seeks to recover a judgment upon the findings and award of arbitrators, he must
both allege and prove that all of the conditions precedent, and that the necessary legal steps were taken to have an arbitration, and
submit to the court either the original or an authenticated copy of the findings and the award of the arbitrators, or in the absence of
such preliminary proof, he must both allege and prove that the findings and award of the arbitrators have been ratified and
approved by the adverse party.
There is no evidence of any one of those facts in the record. It is true that the witness Sibley on behalf of the plaintiff testified that:
"The defendants, by their duly authorized attorney, Francis Adams, accepted and approved of the award." That is not proof of any
fact. It is nothing more than the legal opinion of the witness. The question as to whether the defendant "accepted and approved of
the award" is one for the court to determine from the actual facts as to how, when and in what manner the defendant "accepted
and approved of the award." What was said and done, by whom it was said, and when and to whom it was said, and if it was in
writing, the writing should be produced. Upon the proof of the actual facts, it would then be for the court, and not for the witness,
to say whether or not the defendants "accepted and approved of the award."

In the final analysis, where, as in this case, the plaintiff seeks to recover upon the findings and the award of arbitrators, before it can
recover, it must both allege and prove a substantial compliance with all of the material provisions of the By-Laws of the Manila
Hemp Association, and without such proof, it is not entitled to a judgment upon the findings and award of the arbitrators.

If it be a fact that the alleged findings and award of the arbitrators was made in a substantial compliance with such "By-Laws," and
competent proof of that fact is submitted to the court, plaintiff would then be entitled to judgment as prayed for in its complaint. In
such a case, the award of the arbitrators could only be modified or set aside for a mistake apparent on the face of the record, or
upon the ground of fraud in the arbitration, both of which must be alleged in a proper plea and proven as any other fact, which
could not be done under a general denial.

Upon a mistake of fact, Corpus Juris, volume 5, p. 182, says:

Although an award cannot be avoided on account of a wrong conclusion, drawn by the arbitrators from the facts before
them, which conclusion amounts to a mere mistake of judgment, a plain misconception of the facts submitted, by reason of
which it is made to appear that the arbitrators must have rendered a different decision had they proceeded in view of the
true state of facts, about the existence of which there could be no reasonable question, may constitute a ground for
avoiding the award. . . .

Upon the question of fraud, on page 187, the author says:

It is ground for setting aside an award that it was obtained by the fraud, imposition, or other undue means employed a
party to the arbitration, or his agent, . . .

And again on page 189:

Fraud corruption, or misconduct of the arbitrators is ground for setting aside the award, especially where one of the parties
participates therein. And, for obvious reasons, it has been held that the rule applies, although the submission provides that
the award shall not be subject to exception or appeal, or shall be final or conclusive. . . .

As to the operation and effect of an award on the merits, the same author, on page 160, says:

As between the parties and their privies, an award is entitled to the respect which is due to the judgment of a court of last
resort. It is in fact a final adjudication by a court of the parties' own choice, and, until impeached upon sufficient grounds in
an appropriate proceeding, an award which is regular on its face is conclusive upon the merits of the controversy
submitted, and it is not for the courts to otherwise inquire whether the determination was right or wrong, for the purpose
of interfering with it. The court possesses no general supervisory power over awards and if arbitrators keep within their
jurisdiction their award will not be set because they have erred in judgment either upon the facts or the law. . . . It is the
general rule that a valid award operates to merge and extinguish all claims embraced in the stipulation. Thereafter the
submission and award furnish the only basis by which the rights of the parties can be determined, . . . .

This case involves the application and construction of the By-Laws of the Manila Hemp Association, is important to the hemp
industry, and is one of first impression in this court.

In the interest of justice, and so that the case may be tried and decided upon its actual merits, the judgment of the lower court is
reversed, and the case is remanded, with leave to the plaintiff to submit competent evidence of the arbitration and the findings and
award of the arbitrators, and that the arbitration was made in a substantial compliance with the By-Laws of the Manila Hemp
Association, and with leave to the defendant, in its discretion, to amend its answer, and to both allege and prove that the arbitration
was fraudulent por that the arbitrators made a mistake, which is apparent on the face of the record. Neither party to recover costs.
So ordered.
G.R. No. 105562 September 27, 1993

LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA ALARCON, DINA LORENA AYO, CELIA CALUMBAG and LUCIA
LONTOK, petitioners, 
vs.
HON. COURT OF APPEALS and THE INSULAR LIFE ASSURANCE COMPANY, LIMITED, respondents.

Mariano V. Ampil, Jr. for petitioners.

Ramon S. Caguiao for private respondent.

DAVIDE, JR., J.:

This is an appeal by certiorari to review and set aside the Decision of the public respondent Court of Appeals in CA-G.R. SP No.
22950 1 and its Resolution denying the petitioners' motion for reconsideration. 2 The challenged decision modified the decision of the
Insurance Commission in IC Case 
No. RD-058. 3

The petitioners were the complainants in IC Case No. RD-058, an administrative complaint against private respondent Insular Life
Assurance Company, Ltd. (hereinafter Insular Life), which was filed with the Insurance Commission on 20 September 1989. 4 They
prayed therein that after due proceedings, Insular Life "be ordered to pay the claimants their insurance claims" and that "proper
sanctions/penalties be imposed on" it "for its deliberate, feckless violation of its contractual obligations to the complainants, and of
the Insurance Code." 5 Insular Life's motion to dismiss the complaint on the ground that "the claims of complainants are all
respectively beyond the jurisdiction of the Insurance Commission as provided in Section 416 of the Insurance Code," 6 having been
denied in the Order of 14 November 1989, 7it filed its answer on 5 December 1989. 8 Thereafter, hearings were conducted on various
dates.

On 20 June 1990, the Commission rendered its decision 9 in favor of the complainants, the dispositive portion of which reads as
follows:

WHEREFORE, this Commission merely orders the respondent company to:

a) Pay a fine of FIVE HUNDRED PESOS (P500.00) a day from the receipt of a copy of this Decision until actual
payment thereof;

b) Pay and settle the claims of DINA AYO and LUCIA LONTOK, for P50,000.00 and P40,000.00, respectively;

c) Notify henceforth it should notify individual beneficiaries designated under any Group Policy, in the event of the
death of insured(s), where the corresponding claims are filed by the Policyholder;

d) Show cause within ten days why its other responsible officers who have handled this case should not be
subjected to disciplinary and other administrative sanctions for deliberately releasing to Capt. Nuval the check
intended for spouses ALARCON, in the absence of any Special Power of Attorney for that matter, and for
negligence with respect to the release of the other five checks.

SO ORDERED. 10

In holding for the petitioners, the Insurance Commission made the following findings and conclusions:

After taking into consideration the evidences [sic], testimonial and documentary for the complainants and the
respondent, the Commission finds that; First: The respondent erred in appreciating that the powers of attorney
executed by five (5) of the several beneficiaries convey absolute authority to Capt. Nuval, to demand, receive,
receipt and take delivery of insurance proceeds from respondent Insular Life. A cursory reading of the questioned
 powers of authority would disclosed [sic] that they do not contain in unequivocal and clear terms authority to
Capt. Nuval to obtain, receive, receipt from respondent company insurance proceeds arising from the death of the
seaman-insured. On the contrary, the said powers of attorney are couched in terms which could easily arouse
suspicion of an ordinary 
man. . . .

Second: The testimony of the complainants' rebuttal witness, 

Mrs. Trinidad Alarcon, who declared in no uncertain terms that neither she nor her husband, executed a special
power of attorney in favor of Captain Rosendo Nuval, authorizing him to claim, receive, receipt and take delivery of
any insurance proceeds from Insular Life arising out of the death of their insured/seaman son, is not convincingly
refuted.

Third: Respondent Insular Life did not observe Section 180 of the Insurance Code, when it issued or released two
checks in the amount of P150,000.00 for the three minor children (P50,000.00 each) of complainant, Dina Ayo and
another check of P40,000.00 for minor beneficiary Marissa Lontok, daughter of another complainant Lucia Lontok,
there being no showing of any court authorization presented or the requisite bond posted.

Section 180 is quotes [sic] partly as follows:

. . . In the absence of a judicial guardian, the father, or in the latter's absence or incapacity, the
mother of any minor, who is an insured or a beneficiary under a contract of life, health or
accident insurance, may exercise, in behalf of said minor, any right, under the policy, without
necessity of court authority or the giving of a bond where the interest of the minor in the
particular act involved does not exceed twenty thousand pesos . . . . 11

Insular Life appealed the decision to the public respondent which docketed the case as CA-G.R. SP No. 22950. The appeal urged the
appellate court to reverse the decision because the Insurance Commission (a) had no jurisdiction over the case considering that the
claims exceeded P100,000.00, 
(b) erred in holding that the powers of attorney relied upon by Insular Life were insufficient to convey absolute authority to Capt.
Nuval to demand, receive and take delivery of the insurance proceeds pertaining to the petitioners, (c) erred in not giving credit to
the version of Insular Life that the power of attorney supposed to have been executed in favor of the Alarcons was missing, and 
(d) erred in holding that Insular Life was liable for violating Section 180 of the Insurance Code for having released to the surviving
mothers the insurance proceeds pertaining to the beneficiaries who were still minors despite the failure of the former to obtain a
court authorization or to post a bond.

On 10 October 1991, the public respondent rendered a decision, 12 the decretal portion of which reads:

WHEREFORE, the decision appealed from is modified by eliminating therefrom the award to Dina Ayo and Lucia
Lontok in the amounts of P50,000.00 and P40,000.00, respectively. 13

It found the following facts to have been duly established:

It appears that on 23 September 1983, Prime Marine Services, Inc. (PMSI, for brevity), a crewing/manning outfit,
procured Group PoIicy 
No. G-004694 from respondent-appellant Insular Life Assurance Co., Ltd. to provide life insurance coverage to its
sea-based employees enrolled under the plan. On 17 February 1986, during the effectivity of the policy, six covered
employees of the PMSI perished at sea when their vessel, M/V Nemos, a Greek cargo vessel, sunk somewhere in El
Jadida, Morocco. They were survived by complainants-appellees, the beneficiaries under the policy.

Following the tragic demise of their loved ones, complainants-appellees sought to claim death benefits due them
and, for this purpose, they approached the President and General Manager of PMSI, Capt. Roberto Nuval. The
latter evinced willingness to assist complainants-appellees to recover Overseas Workers Welfare Administration
(OWWA) benefits from the POEA and to work for the increase of their PANDIMAN and other benefits arising from
the deaths of their husbands/sons. They were thus made to execute, with the exception of the spouses Alarcon,
special powers of attorney authorizing Capt. Nuval to, among others, "follow up, ask, demand, collect and receive"
for their benefit indemnities of sums of money due them relative to the sinking of M/V Nemos. By virtue of these
written powers of attorney, complainants-appellees were able to receive their respective death benefits. Unknown
 to them, however, the PMSI, in its capacity as employer and policyholder of the life insurance of its deceased
workers, filed with respondent-appellant formal claims for and in behalf of the beneficiaries, through its President,
Capt. Nuval. Among the documents submitted by the latter for the processing of the claims were five special
powers of attorney executed by complainants-appellees. On the basis of these and other documents duly
submitted, respondent-appellant drew against its account with the Bank of the Philippine Islands on 27 May 1986
six (6) checks, four for P200,00.00 each, one for P50,000.00 and another for P40,00.00, payable to the order of
complainants-appellees. These checks were released to the treasurer of PMSI upon instructions of 
Capt. Nuval over the phone to Mr. Mariano Urbano, Assistant Department Manager for Group Administration
Department of respondent-appellant. Capt. Nuval, upon receipt of these checks from the treasurer, who happened
to be his son-in-law, endorsed and deposited them in his account with the Commercial Bank of Manila, now
Boston Bank.

On 3 July 1989, after complainants-appellees learned that they were entitled, as beneficiaries, to life insurance
benefits under a group policy with respondent-appellant, they sought to recover these benefits from Insular Life
but the latter denied their claim on the ground that the liability to complainants-appellees was already
extinguished upon delivery to and receipt by PMSI of the six (6) checks issued in their names. 14

On the basis thereof, the public respondent held that the Insurance Commission had jurisdiction over the case on the ground that
although some of the claims exceed P100,000.00, the petitioners had asked for administrative sanctions against Insular Life which
are within the Commission's jurisdiction to grant; hence, "there was merely a misjoinder of causes of action . . . and, like misjoinder
of parties, it is not a ground for the dismissal of the action as it does not affect the other reliefs prayed for." 15 It also rejected Insular
Life's claim that the Alarcons had submitted a special power of attorney which they (Insular Life) later misplaced.

On the other hand, the public respondent ruled that the powers of attorney, Exhibits "1" to "5," relied upon by Insular Life were
sufficient to authorize Capt. Nuval to receive the proceeds of the insurance pertaining to the beneficiaries. It stated:

When the officers of respondent-appellant read these written powers, they must have assumed Capt. Nuval
indeed had authority to collect the insurance proceeds in behalf of the beneficiaries who duly affixed their
signatures therein. The written power is specific enough to define the authority of the agent to collect any sum of
money pertaining to the sinking of the fatal vessel. Respondent-appellant interpreted this power to include the
collection of insurance proceeds in behalf of the beneficiaries concerned. We believe this is a reasonable
interpretation even by an officer of respondent-appellant unschooled in the law. Had respondent appellant,
consulted its legal department it would not have received a contrary view. There is nothing in the law which
mandates a specific or special power of attorney to be executed to collect insurance proceeds. Such authority is
not included in the enumeration of Art. 1878 of the New Civil Code. Neither do we perceive collection of insurance
claims as an act of strict dominion as to require a special power of attorney. Moreover, respondent-appellant had
no reason to doubt Capt. Nuval. Not only was he armed with a seemingly genuine authorization, he also appeared
to be the proper person to deal with respondent-appellant being the President and General Manager of the PMSI,
the policyholder with whom respondent-appellant always dealt. The fact that there was a verbal agreement
between complainants-appellees and Capt. Nuval limiting the authority of the latter to claiming specified death
benefits cannot prejudice the insurance company which relied on the terms of the powers of attorney which on
their face do not disclose such limitation. Under the circumstances, it appearing that complainants-appellees have
failed to point to a positive provision of law or stipulation in the policy requiring a specific power of attorney to be
presented, respondents-appellant's reliance on the written powers was in order and it cannot be penalized for
such an act. 16

Insofar as the minor children of Dina Ayo and Lucia Lontok were concerned, it ruled that the requirement in Section 180 of the
Insurance Code which provides in part that:

In the absence of a judicial guardian, the father, or in the latter's absence or incapacity, the mother, of any minor,
who is an insured or a beneficiary under a contract of life, health or accident insurance, may exercise, in behalf of
said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the
interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such a right, may
include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the
policy, and giving the minor's consent to any transaction on the policy.
 has been amended by the Family Code 17 which grants the father and mother joint legal guardianship over the property of
their unemancipated common child without the necessity of a court appointment; however, when the market value of the
property or the annual income of the child exceeds P50,000.00, the parent concerned shall be required to put up a bond in
such amount as the court may determine.

Hence, this petition for review on certiorari which we gave due course after the private respondent had filed the required comment
thereon and the petitioners their reply to the comment.

We rule for the petitioners.

We have carefully examined the specific powers of attorney, Exhibits "1" to "5," which were executed by petitioners Luz Pineda,
Lucia B. Lontok, Dina Ayo, Celia Calumag, and Marilyn Montenegro, respectively, on 14 May 1986 18 and uniformly granted to Capt.
Rosendo Nuval the following powers:

To follow-up, ask, demand, collect and receipt for my benefit indemnities or sum of money due me relative to the
sinking of M.V. NEMOS in the vicinity of El Jadida, Casablanca, Morocco on the evening of February 17, 1986; and

To sign receipts, documents, pertinent waivers of indemnities or other writings of whatsoever nature with any and
all third persons, concerns and entities, upon terms and conditions acceptable to my said attorney.

We agree with the Insurance Commission that the special powers of attorney "do not contain in unequivocal and clear terms
authority to Capt. Nuval to obtain, receive, receipt from respondent company insurance proceeds arising from the death of the
seaman-insured. On the contrary, the said powers of attorney are couched in terms which could easily arouse suspicion of an
ordinary man." 19 The holding of the public respondent to the contrary is principally premised on its opinion that:

[t]here is nothing in the law which mandates a specific or special power of attorney to be executed to collect
insurance proceeds. Such authority is not included in the enumeration of art. 1878 of the New Civil Code. Neither
do we perceive collection of insurance claims as an act of strict dominion as to require a special power of attorney.

If this be so, then they could not have been meant to be a general power of attorney since Exhibits "1" to "5" are special
powers of attorney. The execution by the principals of special powers of attorney, which clearly appeared to be in prepared
forms and only had to be filled up with their names, residences, dates of execution, dates of acknowledgment and others,
excludes any intent to grant a general power of attorney or to constitute a universal agency. Being special powers of
attorney, they must be strictly construed.

Certainly, it would be highly imprudent to read into the special powers of attorney in question the power to collect and receive the
insurance proceeds due the petitioners from Group Policy No. G-004694. Insular Life knew that a power of attorney in favor of Capt.
Nuval for the collection and receipt of such proceeds was a deviation from its practice with respect to group policies. Such practice
was testified to by Mr. Marciano Urbano, Insular Life's Assistant Manager of the Group Administrative Department, thus:

ATTY. CAGUIOA:

Can you explain to us why in this case, the claim was filed by a certain Capt. Noval [sic]?

WITNESS:

a The practice of our company in claim pertaining to group insurance, the policyholder is the one
who files the claim for the beneficiaries of the deceased. At that time, Capt. Noval [sic] is the
President and General Manager of Prime Marine.

q What is the reason why policyholders are the ones who file the claim and not the designated
beneficiaries of the employees of the policyholders?

a Yes because group insurance is normally taken by the employer as an employee-benefit

program and as such, the benefit should be awarded by the policyholder to make it appear that
the benefit really is given by the employer. 20
On cross-examination, Urbano further elaborated that even payments, among other things, are coursed through the policyholder:

q What is the corporate concept of group insurance insofar as Insular Life is concerned?

WITNESS:

a Group insurance is a contract where a group of individuals are covered under one master
contract. The individual underwriting characteristics of each individual is not considered in the
determination of whether the individual is insurable or not. The contract is between the
policyholder and the insurance company. In our case, it is Prime Marine and Insular Life. We do
not have contractual obligations with the individual employees; it is between Prime Marine and
Insular Life.

q And so it is part of that concept that all inquiries, follow-up, payment of claims, premium
billings, etc. should always be coursed thru the policyholder?

a Yes that is our practice.

q And when you say claim payments should always be coursed thru the policyholder, do you
require a power of attorney to be presented by the policyholder or not?

a Not necessarily.

q In other words, under a group insurance policy like the one in this case, Insular Life could pay
the claims to the policyholder himself even without the presentation of any power of attorney
from the designated beneficiaries?

xxx xxx xxx

WITNESS:

a No. Sir.

ATTY. AMPIL:

q Why? Is this case, the present case different from the cases which you answered that no power
of attorney is necessary in claims payments?

WITNESS:

a We did not pay Prime Marine; we paid the beneficiaries.

q Will you now tell the Honorable Commission why you did not pay Prime Marine and instead
paid the beneficiaries, the designated beneficiaries?

xxx xxx xxx

ATTY. AMPIL:

I will rephrase the question.

q Will you tell the Commission what circumstances led you to pay the designated beneficiaries,
the complainants in this case, instead of the policyholder when as you answered a while ago, it is
your practice in group insurance that claims payments, etc., are coursed thru the policyholder?
 WITNESS:

a It is coursed but, it is not paid to the policyholder.

q And so in this case, you gave the checks to the policyholder only coursing them thru said
policyholder?

a That is right, Sir.

q Not directly to the designated beneficiaries?

a Yes, Sir. 21

This practice is usual in the group insurance business and is consistent with the jurisprudence thereon in the State of California —
from whose laws our Insurance Code has been mainly patterned — which holds that the employer-policyholder is the agent of the
insurer.

Group insurance is a comparatively new form of insurance. In the United States, the first modern group insurance policies appear to
have been issued in 1911 by the Equitable Life Assurance Society. 22 Group insurance is essentially a single insurance contract that
provides coverage for many individuals. In its original and most common form, group insurance provides life or health insurance
coverage for the employees of one employer.

The coverage terms for group insurance are usually stated in a master agreement or policy that is issued by the insurer to a
representative of the group or to an administrator of the insurance program, such as an employer. 23The employer acts as a
functionary in the collection and payment of premiums and in performing related duties. Likewise falling within the ambit of
administration of a group policy is the disbursement of insurance payments by the employer to the employees. 24 Most policies, such
as the one in this case, require an employee to pay a portion of the premium, which the employer deducts from wages while the
remainder is paid by the employer. This is known as a contributory plan as compared to a non-contributory plan where the
premiums are solely paid by the employer.

Although the employer may be the titular or named insured, the insurance is actually related to the life and health of the employee.
Indeed, the employee is in the position of a real party to the master policy, and even in a non-contributory plan, the payment by the
employer of the entire premium is a part of the total compensation paid for the services of the employee. 25 Put differently, the labor
of the employees is the true source of the benefits, which are a form of additional compensation to them.

It has been stated that every problem concerning group insurance presented to a court should be approached with the purpose of
giving to it every legitimate opportunity of becoming a social agency of real consequence considering that the primary aim is to
provide the employer with a means of procuring insurance protection for his employees and their families at the lowest possible
cost, and in so doing, the employer creates goodwill with his employees, enables the employees to carry a larger amount of
insurance than they could otherwise, and helps to attract and hold a permanent class of employees. 26

In Elfstrom vs.  New York Life Insurance Company, 27 the California Supreme Court explicitly ruled that in group insurance policies, the
employer is the agent of the insurer. Thus:

We are convinced that the employer is the agent of the insurer in performing the duties of administering group
insurance policies. It cannot be said that the employer acts entirely for its own benefit or for the benefit of its
employees in undertaking administrative functions. While a reduced premium may result if the employer relieves
the insurer of these tasks, and this, of course, is advantageous to both the employer and the employees, the
insurer also enjoys significant advantages from the arrangement. The reduction in the premium which results from
employer-administration permits the insurer to realize a larger volume of sales, and at the same time the insurer's
own administrative costs are markedly reduced.

xxx xxx xxx

The most persuasive rationale for adopting the view that the employer acts as the agent of the insurer, however, is
that the employee has no knowledge of or control over the employer's actions in handling the policy or its
 administration. An agency relationship is based upon consent by one person that another shall act in his behalf and
be subject to his control. It is clear from the evidence regarding procedural techniques here that the insurer-
employer relationship meets this agency test with regard to the administration of the policy, whereas that
between the employer and its employees fails to reflect true agency. The insurer directs the performance of the
employer's administrative acts, and if these duties are not undertaken properly the insurer is in a position to
exercise more constricted control over the employer's conduct.

In Neider vs.  Continental Assurance Company, 28 which was cited in Elfstrom, it was held that:

[t]he employer owes to the employee the duty of good faith and due care  in attending to the policy, and that the
employer should make clear to the employee anything required of him to keep the policy in effect, and the time
that the obligations are due. In its position as administrator of the policy, we feel also that the employer should be
considered as the agent of the insurer, and any omission of duty  to the employee in its administration should
be attributable to the insurer.

The ruling in Elfstrom was subsequently reiterated in the cases of Bass vs. John Hancock Mutual Life Insurance
Co. 29 and Metropolitan Life Insurance Co.  vs. State Board of Equalization. 30

In the light of the above disquisitions and after an examination of the facts of this case, we hold that PMSI, through its President and
General Manager, Capt. Nuval, acted as the agent of Insular Life. The latter is thus bound by the misconduct of its agent.

Insular Life, however, likewise recognized Capt. Nuval as the attorney-in-fact of the petitioners. Unfortunately, through its official,
Mr. Urbano, it acted imprudently and negligently in the premises by relying without question on the special power of attorney.
In Strong vs.  Repide, 31 this Court ruled that it is among the established principles in the civil law of Europe as well as the common
law of American that third persons deal with agents at their peril and are bound to inquire as to the extent of the power of the agent
with whom they contract. And in Harry E. Keller Electric Co.  vs. Rodriguez,32 this Court, quoting Mechem on Agency, 33 stated that:

The person dealing with an agent must also act with ordinary prudence and reasonable diligence. Obviously, if he
knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection. So if the
suggestions of probable limitations be of such a clear and reasonable quality, or if the character assumed by the
agent is of such a suspicious or unreasonable nature, or if the authority which he seeks to exercise is of such an
unusual or improbable character, as would suffice to put an ordinarily prudent man upon his guard, the party
dealing with him may not shut his eyes to the real state of the case, but should either refuse to deal with the agent
at all, or should ascertain from the principal the true condition of affairs. (emphasis supplied)

Even granting for the sake of argument that the special powers of attorney were in due form, Insular Life was grossly negligent in
delivering the checks, drawn in favor of the petitioners, to a party who is not the agent mentioned in the special power of attorney.

Nor can we agree with the opinion of the public respondent that since the shares of the minors in the insurance proceeds are less
than P50,000.00, then under Article 225 of the Family Code their mothers could receive such shares without need of either court
appointments as guardian or the posting of a bond. It is of the view that said Article had repealed the third paragraph of Section 180
of the Insurance Code. 34 The pertinent portion of Article 225 of the Family Code reads as follows:

Art. 225. The father and the mother shall jointly exercise legal guardianship over the property of their
unemancipated common child without the necessity of a court appointment. In case of disagreement, the father's
decision shall prevail, unless there is judicial order to the contrary.

Where the market value of the property or the annual income of the child exceeds P50,000, the parent concerned
shall be required to furnish a bond in such amount as the court may determine, but not less than ten per centum
(10%) of the value of the property or annual income, to guarantee the performance of the obligations prescribed
for general guardians.

It is clear from the said Article that regardless of the value of the unemancipated common child's property, the father and
mother ipso jure become the legal guardian of the child's property. However, if the market value of the property or the annual
income of the child exceeds P50,000.00, a bond has to be posted by the parents concerned to guarantee the performance of the
obligations of a general guardian.
It must, however, be noted that the second paragraph of Article 225 of the Family Code speaks of the "market value of the property
or the annual income of the child," which means, therefore, the aggregate of the child's property or annual income; if this exceeds
P50,000.00, a bond is required. There is no evidence that the share of each of the minors in the proceeds of the group policy in
question is the minor's only property. Without such evidence, it would not be safe to conclude that, indeed, that is his only property.

WHEREFORE, the instant petition is GRANTED. The Decision of 

10 October 1991 and the Resolution of 19 May 1992 of the public respondent in CA-G.R. SP No. 22950 are SET ASIDE and the
Decision of the Insurance Commission in IC Case No. RD-058 is REINSTATED.

Costs against the private respondent.

G.R. No. 158907             February 12, 2007

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

DECISION

CHICO-NAZARIO, J.:

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

The parties presented conflicting accounts of the facts.

EDUARDO B. OLAGUER’S VERSION

Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of Businessday Corporation (Businessday)
with a total par value of P600,000.00, with Certificates of Stock No. 005, No. 028, No. 034, No. 070, and No. 100.2 At the time he was
employed with the corporation as Executive Vice-President of Businessday, and President of Businessday Information Systems and
Services and of Businessday Marketing Corporation, petitioner, together with respondent Raul Locsin (Locsin) and Enrique Joaquin
(Joaquin), was active in the political opposition against the Marcos dictatorship.3 Anticipating the possibility that petitioner would be
arrested and detained by the Marcos military, Locsin, Joaquin, and Hector Holifeña had an unwritten agreement that, in the event
that petitioner was arrested, they would support the petitioner’s family by the continued payment of his salary.4 Petitioner also
executed a Special Power of Attorney (SPA), on 26 May 1979, appointing as his attorneys-in-fact Locsin, Joaquin and Hofileña for the
purpose of selling or transferring petitioner’s shares of stock with Businessday. During the trial, petitioner testified that he agreed to
execute the SPA in order to cancel his shares of stock, even before they are sold, for the purpose of concealing that he was a
stockholder of Businessday, in the event of a military crackdown against the opposition.5 The parties acknowledged the SPA before
respondent Emilio Purugganan, Jr., who was then the Corporate Secretary of Businessday, and at the same time, a notary public for
Quezon City.6

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

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

During the trial, petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular deposits, each amounting
to P10,000.00, to the Metropolitan Bank and Trust Company accounts of Manuel and Genaro Pantig, petitioner’s in-laws. The
deposits were made on every 15th and 30th of the month.9 Petitioner alleged that these funds consisted of his monthly salary, which
Businessday agreed to continue paying after his arrest for the financial support of his family.10 After receiving a total of P600,000.00,
the payments stopped. Thereafter, respondent Locsin and Fernando went to ask petitioner to endorse and deliver the rest of his
stock certificates to respondent Locsin, but petitioner refused. 11

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

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

When petitioner was detained, respondent Locsin tried to sell petitioner’s shares, but nobody wanted to buy them. Petitioner’s
reputation as an oppositionist resulted in the poor financial condition of Businessday and discouraged any buyers for the shares of
stock.16 In view of petitioner’s previous instructions, respondent Locsin decided to buy the shares himself.1awphi1.net Although the
capital deficiency suffered by Businessday caused the book value of the shares to plummet below par value, respondent Locsin,
nevertheless, bought the shares at par value.17 However, he had to borrow from Businessday the funds he used in purchasing the
shares from petitioner, and had to pay the petitioner in installments of P10,000.00 every 15th and 30th of each month.18

The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner. It ruled that the sale of shares
between petitioner and respondent Locsin was valid. The trial court concluded that petitioner had intended to sell the shares of
stock to anyone, including respondent Locsin, in order to provide for the needs of his family should he be jailed or forced to go
underground; and that the SPA drafted by the petitioner empowered respondent Locsin, and two other agents, to sell the shares for
such price and under such terms and conditions that the agents may deem proper. It further found that petitioner consented to
have respondent Locsin buy the shares himself. It also ruled that petitioner, through his wife, received from respondent Locsin the
amount ofP600,000.00 as payment for the shares of stock.19 The dispositive part of the trial court’s Decision reads:

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

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

On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected contract of sale.21 It further ruled
that granting that there was no perfected contract of sale, petitioner, nevertheless, ratified the sale to respondent Locsin by his
receipt of the purchase price, and his failure to raise any protest over the said sale.22 The Court of Appeals refused to credit the
petitioner’s allegation that the money his wife received constituted his salary from Businessday since the amount he received as his
salary, P24,000.00 per month, did not correspond to the amount he received during his detention, P20,000.00 per month (deposits
of P10,000.00 on every 15th and 30th of each month in the accounts of the petitioner’s in-laws). On the other hand, the total
amount received, P600,000.00, corresponds to the aggregate par value of petitioner’s shares in Businessday. Moreover, the financial
condition of Businessday prevented it from granting any form of financial assistance in favor of the petitioner, who was placed in an
indefinite leave of absence, and, therefore, not entitled to any salary.23

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

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

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

I.

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

II.

THE APPELLATE COURT ERRED IN RULING THAT PETITIONER CONSENTED TO THE ALLEGED SALE OF THE SHARES TO MR. LOCSIN;
 III.

THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS RECEIVED BY PETITIONER’S IN LAWS WERE NOT PETITIONER’S
SALARY FROM THE CORPORATION BUT INSTALLMENT PAYMENTS FOR THE SHARES;

IV.

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

V.

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

The petition is without merit.

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

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

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

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

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

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

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

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

In the present case, limiting the definitions of "absence" to that provided under Article 381 of the Civil Code and of "incapacity"
under Article 38 of the same Code negates the effect of the power of attorney by creating absurd, if not impossible, legal situations.
Article 381 provides the necessarily stringent standards that would justify the appointment of a representative by a judge. Among
the standards the said article enumerates is that no agent has been appointed to administer the property. In the present case,
petitioner himself had already authorized agents to do specific acts of administration and thus, no longer necessitated the
appointment of one by the court. Likewise, limiting the construction of "incapacity" to "minority, insanity, imbecility, the state of
being a deaf-mute, prodigality and civil interdiction," as provided under Article 38, would render the SPA ineffective. Article 1919(3)
of the Civil Code provides that the death, civil interdiction, insanity or insolvency of the principal or of the agent extinguishes the
agency. It would be equally incongruous, if not outright impossible, for the petitioner to require himself to qualify as a minor, an
imbecile, a deaf-mute, or a prodigal before the SPA becomes operative. In such cases, not only would he be prevented from
appointing an agent, he himself would be unable to administer his property.

On the other hand, defining the terms "absence" and "incapacity" by their everyday usage makes for a reasonable construction, that
is, "the state of not being present" and the "inability to act," given the context that the SPA authorizes the agents to attend
stockholders’ meetings and vote in behalf of petitioner, to sell the shares of stock, and other related acts. This construction covers
the situation wherein petitioner was arrested and detained. This much is admitted by petitioner in his testimony.32

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

Secondly, petitioner argued that the records failed to show that he gave his consent to the sale of the shares to respondent Locsin
for the price of P600,000.00. This argument is unsustainable. Petitioner received from respondent Locsin, through his wife and in-
laws, the installment payments for a total of P600,000.00 from 1980 to 1982, without any protest or complaint. It was only four
years after 1982 when petitioner demanded the return of the shares. The petitioner’s claim that he did not instruct respondent
Locsin to deposit the money to the bank accounts of his in-laws fails to prove that petitioner did not give his consent to the sale
since respondent Locsin was authorized, under the SPA, to negotiate the terms and conditions of the sale including the manner of
payment. Moreover, had respondent Locsin given the proceeds directly to the petitioner, as the latter suggested in this petition, the
proceeds were likely to have been included among petitioner’s properties which were confiscated by the military. Instead,
respondent Locsin deposited the money in the bank accounts of petitioner’s in-laws, and consequently, assured that the petitioner’s
wife received these amounts. Article 1882 of the Civil Code provides that the limits of an agent’s authority shall not be considered
exceeded should it have been performed in a manner more advantageous to the principal than that specified by him.

In addition, petitioner made two inconsistent statements when he alleged that (1) respondent Locsin had not asked the petitioner to
endorse and deliver the shares of stock, and (2) when Rebecca Fernando asked the petitioner to endorse and deliver the certificates
of stock, but petitioner refused and even became upset.33 In either case, both statements only prove that petitioner refused to
honor his part as seller of the shares, even after receiving payments from the buyer. Had the petitioner not known of or given his
consent to the sale, he would have given back the payments as soon as Fernando asked him to endorse and deliver the certificates
of stock, an incident which unequivocally confirmed that the funds he received, through his wife and his in-laws, were intended as
payment for his shares of stocks. Instead, petitioner held on to the proceeds of the sale after it had been made clear to him that
respondent Locsin had considered the P600,000.00 as payment for the shares, and asked petitioner, through Fernando, to endorse
and deliver the stock certificates for cancellation.

As regards the third issue, petitioner’s allegation that the installment payments he was adjudged to have received for the shares
were actually salaries which Businessday promised to pay him during his detention is unsupported and implausible. Petitioner
received P20,000.00 per month through his in-laws; this amount does not correspond to his monthly salary at P24,000.00.34 Nor
does the amount received correspond to the amount which Businessday was supposed to be obliged to pay petitioner, which was
only P45,000.00 to P60,000.00 per annum.35 Secondly, the petitioner’s wife did not receive funds from respondent Locsin or
Businessday for the entire duration of petitioner’s detention. Instead, when the total amount received by the petitioner reached the
aggregate amount of his shares at par value -- P600,000.00 -- the payments stopped. Petitioner even testified that when respondent
Locsin denied knowing the petitioner soon after his arrest, he believed respondent Locsin’s commitment to pay his salaries during
his detention to be nothing more than lip-service.36

Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of Businessday in favor of petitioner,
would be void. An arrangement whereby petitioner will receive "salaries" for work he will not perform, which is not a demandable
debt since petitioner was on an extended leave of absence, constitutes a donation under Article 72637 of the Civil Code. Under Article
748 of the Civil Code, if the value of the personal property donated exceeds P5,000.00, the donation and the acceptance shall have
to be made in writing. Otherwise, the donation will be void. In the present case, petitioner admitted in his testimony38 that such
arrangement was not made in writing and, hence, is void.

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

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

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

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

xxxx

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

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

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

From the foregoing, it is clear that petitioner knew of the transaction, agreed to the purchase price of P600,000.00 for the shares of
stock, and had in fact facilitated the implementation of the terms of the payment by providing respondent Locsin, through
petitioner’s wife, with the information on the bank accounts of his in-laws. Petitioner’s wife and his son even provided receipts for
the payments that were made to them by respondent Locsin,43 a practice that bespeaks of an onerous transaction and not an act of gratuity.

Lastly, petitioner claims that the cancellation of the shares and the subsequent transfer thereof were fraudulent, and, therefore, illegal. In the present case, the shares were transferred in the name of the buyer, respondent

Locsin, without the petitioner delivering to the buyer his certificates of stock. Section 63 of the Corporation Code provides that:
Sec.63. Certificate of stock and transfer of shares.— xxx Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other

person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction,

the date of the transfer, the number of the certificate or certificates and the number of shares transferred. (Emphasis provided.)

The aforequoted provision furnishes the procedure for the transfer of shares – the delivery of the endorsed certificates, in order to prevent the fraudulent transfer of shares of stock. However, this rule cannot be applied in the

present case without causing the injustice sought to be avoided. As had been amply demonstrated, there was a valid sale of stocks. Petitioner’s failure to deliver the shares to their rightful buyer is a breach of his duty as a seller,

which he cannot use to unjustly profit himself by denying the validity of such sale. Thus, while the manner of the cancellation of petitioner’s certificates of stock and the issuance of the new certificates in favor of respondent

Locsin was highly irregular, we must, nonetheless, declare the validity of the sale between the parties. Neither does this irregularity prove that the transfer was fraudulent. In his testimony, petitioner admitted that they had

intended to conceal his being a stockholder of Businessday.44 The cancellation of his name from the stock and transfer book, even before the shares were actually sold, had been done with his consent. As earlier explained, even

the subsequent sale of the shares in favor of Locsin had been done with his consent.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the Court of Appeals, promulgated on 30 June 2003, affirming the validity of the sale of the shares of stock in favor of

respondent Locsin. No costs.

G.R. No. 140667             August 12, 2004

WOODCHILD HOLDINGS, INC., petitioner, 

vs.
ROXAS ELECTRIC AND CONSTRUCTION COMPANY, INC., respondent.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. CV No. 56125 reversing the Decision2 of
the Regional Trial Court of Makati, Branch 57, which ruled in favor of the petitioner.

The Antecedents

The respondent Roxas Electric and Construction Company, Inc. (RECCI), formerly the Roxas Electric and Construction Company, was
the

owner of two parcels of land, identified as Lot No. 491-A-3-B-1 covered by Transfer Certificate of Title (TCT) No. 78085 and Lot No.
491-A-3-B-2 covered by TCT No. 78086. A portion of Lot No. 491-A-3-B-1 which abutted Lot No. 491-A-3-B-2 was a dirt road accessing
to the Sumulong Highway, Antipolo, Rizal.

At a special meeting on May 17, 1991, the respondent's Board of Directors approved a resolution authorizing the corporation,
through its president, Roberto B. Roxas, to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086, with an area of 7,213 square meters,
at a price and under such terms and conditions which he deemed most reasonable and advantageous to the corporation; and to
execute, sign and deliver the pertinent sales documents and receive the proceeds of the sale for and on behalf of the company.3

Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No. 491-A-3-B-2 covered by TCT No. 78086 on which it planned to
construct its warehouse building, and a portion of the adjoining lot, Lot No. 491-A-3-B-1, so that its 45-foot container van would be
able to readily enter or leave the property. In a Letter to Roxas dated June 21, 1991, WHI President Jonathan Y. Dy offered to buy Lot
No. 491-A-3-B-2 under stated terms and conditions for P1,000 per square meter or at the price of P7,213,000.4 One of the terms
incorporated in Dy's offer was the following provision:

5. This Offer to Purchase is made on the representation and warranty of the OWNER/SELLER, that he holds a good and
registrable title to the property, which shall be conveyed CLEAR and FREE of all liens and encumbrances, and that the area
of 7,213 square meters of the subject property already includes the area on which the right of way traverses from the main
lot (area) towards the exit to the Sumulong Highway as shown in the location plan furnished by the Owner/Seller to the
buyer. Furthermore, in the event that the right of way is insufficient for the buyer's purposes (example: entry of a 45-foot
container), the seller agrees to sell additional square meter from his current adjacent property to allow the buyer to full
access and full use of the property.5

Roxas indicated his acceptance of the offer on page 2 of the deed. Less than a month later or on July 1, 1991, Roxas, as President of
RECCI, as vendor, and Dy, as President of WHI, as vendee, executed a contract to sell in which RECCI bound and obliged itself to sell
to Dy Lot No. 491-A-3-B-2 covered by TCT No. 78086 for P7,213,000.6 On September 5, 1991, a Deed of Absolute Sale7 in favor of
WHI was issued, under which Lot No. 491-A-3-B-2 covered by TCT No. 78086 was sold for P5,000,000, receipt of which was
acknowledged by Roxas under the following terms and conditions:

The Vendor agree (sic), as it hereby agrees and binds itself to give Vendee the beneficial use of and a right of way from
Sumulong Highway to the property herein conveyed consists of 25 square meters wide to be used as the latter's egress
from and ingress to and an additional 25 square meters in the corner of Lot No. 491-A-3-B-1, as turning and/or
maneuvering area for Vendee's vehicles.

The Vendor agrees that in the event that the right of way is insufficient for the Vendee's use (ex entry of a 45-foot
container) the Vendor agrees to sell additional square meters from its current adjacent property to allow the Vendee full
access and full use of the property.
 …

The Vendor hereby undertakes and agrees, at its account, to defend the title of the Vendee to the parcel of land and
improvements herein conveyed, against all claims of any and all persons or entities, and that the Vendor hereby warrants
the right of the Vendee to possess and own the said parcel of land and improvements thereon and will defend the Vendee
against all present and future claims and/or action in relation thereto, judicial and/or administrative. In particular, the
Vendor shall eject all existing squatters and occupants of the premises within two (2) weeks from the signing hereof. In case
of failure on the part of the Vendor to eject all occupants and squatters within the two-week period or breach of any of the
stipulations, covenants and terms and conditions herein provided and that of contract to sell dated 1 July 1991, the Vendee
shall have the right to cancel the sale and demand reimbursement for all payments made to the Vendor with interest
thereon at 36% per annum.8

On September 10, 1991, the Wimbeco Builder's, Inc. (WBI) submitted its quotation for P8,649,000 to WHI for the construction of the
warehouse building on a portion of the property with an area of 5,088 square meters.9 WBI proposed to start the project on October
1, 1991 and to turn over the building to WHI on February 29, 1992.10

In a Letter dated September 16, 1991, Ponderosa Leather Goods Company, Inc. confirmed its lease agreement with WHI of a 5,000-
square-meter portion of the warehouse yet to be constructed at the rental rate of P65 per square meter. Ponderosa emphasized the
need for the warehouse to be ready for occupancy before April 1, 1992.11 WHI accepted the offer. However, WBI failed to commence
the construction of the warehouse in October 1, 1991 as planned because of the presence of squatters in the property and
suggested a renegotiation of the contract after the squatters shall have been evicted.12 Subsequently, the squatters were evicted
from the property.

On March 31, 1992, WHI and WBI executed a Letter-Contract for the construction of the warehouse building for P11,804,160.13 The
contractor started construction in April 1992 even before the building officials of Antipolo City issued a building permit on May 28,
1992. After the warehouse was finished, WHI issued on March 21, 1993 a certificate of occupancy by the building official. Earlier, or
on March 18, 1993, WHI, as lessor, and Ponderosa, as lessee, executed a contract of lease over a portion of the property for a
monthly rental of P300,000 for a period of three years from March 1, 1993 up to February 28, 1996.14

In the meantime, WHI complained to Roberto Roxas that the vehicles of RECCI were parked on a portion of the property over which
WHI had been granted a right of way. Roxas promised to look into the matter. Dy and Roxas discussed the need of the WHI to buy a
500-square-meter portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 as provided for in the deed of absolute sale. However,
Roxas died soon thereafter. On April 15, 1992, the WHI wrote the RECCI, reiterating its verbal requests to purchase a portion of the
said lot as provided for in the deed of absolute sale, and complained about the latter's failure to eject the squatters within the three-
month period agreed upon in the said deed.

The WHI demanded that the RECCI sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 for its beneficial use within 72
hours from notice thereof, otherwise the appropriate action would be filed against it. RECCI rejected the demand of WHI. WHI
reiterated its demand in a Letter dated May 29, 1992. There was no response from RECCI.

On June 17, 1992, the WHI filed a complaint against the RECCI with the Regional Trial Court of Makati, for specific performance and
damages, and alleged, inter alia, the following in its complaint:

5. The "current adjacent property" referred to in the aforequoted paragraph of the Deed of Absolute Sale pertains to the
property covered by Transfer Certificate of Title No. N-78085 of the Registry of Deeds of Antipolo, Rizal, registered in the
name of herein defendant Roxas Electric.

6. Defendant Roxas Electric in patent violation of the express and valid terms of the Deed of Absolute Sale unjustifiably
refused to deliver to Woodchild Holdings the stipulated beneficial use and right of way consisting of 25 square meters and
55 square meters to the prejudice of the plaintiff.

7. Similarly, in as much as the 25 square meters and 55 square meters alloted to Woodchild Holdings for its beneficial use is
inadequate as turning and/or maneuvering area of its 45-foot container van, Woodchild Holdings manifested its intention
pursuant to para. 5 of the Deed of Sale to purchase additional square meters from Roxas Electric to allow it full access and
use of the purchased property, however, Roxas Electric refused and failed to merit Woodchild Holdings' request contrary to
defendant Roxas Electric's obligation under the Deed of Absolute Sale (Annex "A").
 8. Moreover, defendant, likewise, failed to eject all existing squatters and occupants of the premises within the stipulated
time frame and as a consequence thereof, plaintiff's planned construction has been considerably delayed for seven (7)
months due to the squatters who continue to trespass and obstruct the subject property, thereby Woodchild Holdings
incurred substantial losses amounting to P3,560,000.00 occasioned by the increased cost of construction materials and
labor.

9. Owing further to Roxas Electric's deliberate refusal to comply with its obligation under Annex "A," Woodchild Holdings
suffered unrealized income of P300,000.00 a month or P2,100,000.00 supposed income from rentals of the subject
property for seven (7) months.

10. On April 15, 1992, Woodchild Holdings made a final demand to Roxas Electric to comply with its obligations and
warranties under the Deed of Absolute Sale but notwithstanding such demand, defendant Roxas Electric refused and failed
and continue to refuse and fail to heed plaintiff's demand for compliance.

Copy of the demand letter dated April 15, 1992 is hereto attached as Annex "B" and made an integral part hereof.

11. Finally, on 29 May 1991, Woodchild Holdings made a letter request addressed to Roxas Electric to particularly annotate
on Transfer Certificate of Title No. N-78085 the agreement under Annex "A" with respect to the beneficial use and right of
way, however, Roxas Electric unjustifiably ignored and disregarded the same.

Copy of the letter request dated 29 May 1992 is hereto attached as Annex "C" and made an integral part hereof.

12. By reason of Roxas Electric's continuous refusal and failure to comply with Woodchild Holdings' valid demand for
compliance under Annex "A," the latter was constrained to litigate, thereby incurring damages as and by way of attorney's
fees in the amount of P100,000.00 plus costs of suit and expenses of litigation.15

The WHI prayed that, after due proceedings, judgment be rendered in its favor, thus:

WHEREFORE, it is respectfully prayed that judgment be rendered in favor of Woodchild Holdings and ordering Roxas Electric
the following:

a) to deliver to Woodchild Holdings the beneficial use of the stipulated 25 square meters and 55 square meters;

b) to sell to Woodchild Holdings additional 25 and 100 square meters to allow it full access and use of the purchased
property pursuant to para. 5 of the Deed of Absolute Sale;

c) to cause annotation on Transfer Certificate of Title No. N-78085 the beneficial use and right of way granted to Woodchild
Holdings under the Deed of Absolute Sale;

d) to pay Woodchild Holdings the amount of P5,660,000.00, representing actual damages and unrealized income;

e) to pay attorney's fees in the amount of P100,000.00; and

f) to pay the costs of suit.

Other reliefs just and equitable are prayed for.16

In its answer to the complaint, the RECCI alleged that it never authorized its former president, Roberto Roxas, to grant the beneficial
use of any portion of Lot No. 491-A-3-B-1, nor agreed to sell any portion thereof or create a lien or burden thereon. It alleged that,
under the Resolution approved on May 17, 1991, it merely authorized Roxas to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086.
As such, the grant of a right of way and the agreement to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 in the said
deed are ultra vires. The RECCI further alleged that the provision therein that it would sell a portion of Lot No. 491-A-3-B-1 to the
WHI lacked the essential elements of a binding contract.17

In its amended answer to the complaint, the RECCI alleged that the delay in the construction of its warehouse building was due to
the failure of the WHI's contractor to secure a building permit thereon.18
During the trial, Dy testified that he told Roxas that the petitioner was buying a portion of Lot No. 491-A-3-B-1 consisting of an area
of 500 square meters, for the price of P1,000 per square meter.

On November 11, 1996, the trial court rendered judgment in favor of the WHI, the decretal portion of which reads:

WHEREFORE, judgment is hereby rendered directing defendant:

(1) To allow plaintiff the beneficial use of the existing right of way plus the stipulated 25 sq. m. and 55 sq. m.;

(2) To sell to plaintiff an additional area of 500 sq. m. priced at P1,000 per sq. m. to allow said plaintiff full access and use of
the purchased property pursuant to Par. 5 of their Deed of Absolute Sale;

(3) To cause annotation on TCT No. N-78085 the beneficial use and right of way granted by their Deed of Absolute Sale;

(4) To pay plaintiff the amount of P5,568,000 representing actual damages and plaintiff's unrealized income;

(5) To pay plaintiff P100,000 representing attorney's fees; and

To pay the costs of suit.

SO ORDERED.19

The trial court ruled that the RECCI was estopped from disowning the apparent authority of Roxas under the May 17, 1991
Resolution of its Board of Directors. The court reasoned that to do so would prejudice the WHI which transacted with Roxas in good
faith, believing that he had the authority to bind the WHI relating to the easement of right of way, as well as the right to purchase a
portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085.

The RECCI appealed the decision to the CA, which rendered a decision on November 9, 1999 reversing that of the trial court, and
ordering the dismissal of the complaint. The CA ruled that, under the resolution of the Board of Directors of the RECCI, Roxas was
merely authorized to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086, but not to grant right of way in favor of the WHI over a
portion of Lot No. 491-A-3-B-1, or to grant an option to the petitioner to buy a portion thereof. The appellate court also ruled that
the grant of a right of way and an option to the respondent were so lopsided in favor of the respondent because the latter was
authorized to fix the location as well as the price of the portion of its property to be sold to the respondent. Hence, such provisions
contained in the deed of absolute sale were not binding on the RECCI. The appellate court ruled that the delay in the construction of
WHI's warehouse was due to its fault.

The Present Petition

The petitioner now comes to this Court asserting that:

I.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF ABSOLUTE SALE (EXH. "C") IS ULTRA VIRES.

II.

THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT A QUO ALLOWING THE PLAINTIFF-
APPELLEE THE BENEFICIAL USE OF THE EXISTING RIGHT OF WAY PLUS THE STIPULATED 25 SQUARE METERS AND 55
SQUARE METERS BECAUSE THESE ARE VALID STIPULATIONS AGREED BY BOTH PARTIES TO THE DEED OF ABSOLUTE SALE
(EXH. "C").

III.

THERE IS NO FACTUAL PROOF OR EVIDENCE FOR THE COURT OF APPEALS TO RULE THAT THE STIPULATIONS OF THE DEED
OF ABSOLUTE SALE (EXH. "C") WERE DISADVANTAGEOUS TO THE APPELLEE, NOR WAS APPELLEE DEPRIVED OF ITS
PROPERTY WITHOUT DUE PROCESS.
 IV.

IN FACT, IT WAS WOODCHILD WHO WAS DEPRIVED OF PROPERTY WITHOUT DUE PROCESS BY THE ASSAILED DECISION.

V.

THE DELAY IN THE CONSTRUCTION WAS DUE TO THE FAILURE OF THE APPELLANT TO EVICT THE SQUATTERS ON THE LAND
AS AGREED IN THE DEED OF ABSOLUTE SALE (EXH. "C").

VI.

THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT A QUO DIRECTING THE DEFENDANT TO
PAY THE PLAINTIFF THE AMOUNT OF P5,568,000.00 REPRESENTING ACTUAL DAMAGES AND PLAINTIFF'S UNREALIZED
INCOME AS WELL AS ATTORNEY'S FEES.20

The threshold issues for resolution are the following: (a) whether the respondent is bound by the provisions in the deed of absolute
sale granting to the petitioner beneficial use and a right of way over a portion of Lot

No. 491-A-3-B-1 accessing to the Sumulong Highway and granting the option to the petitioner to buy a portion thereof, and, if so,
whether such agreement is enforceable against the respondent; (b) whether the respondent failed to eject the squatters on its
property within two weeks from the execution of the deed of absolute sale; and, (c) whether the respondent is liable to the
petitioner for damages.

On the first issue, the petitioner avers that, under its Resolution of May 17, 1991, the respondent authorized Roxas, then its
president, to grant a right of way over a portion of Lot No. 491-A-3-B-1 in favor of the petitioner, and an option for the respondent
to buy a portion of the said property. The petitioner contends that when the respondent sold Lot No. 491-A-3-B-2 covered by TCT
No. 78086, it (respondent) was well aware of its obligation to provide the petitioner with a means of ingress to or egress from the
property to the Sumulong Highway, since the latter had no adequate outlet to the public highway. The petitioner asserts that it
agreed to buy the property covered by TCT No. 78085 because of the grant by the respondent of a right of way and an option in its
favor to buy a portion of the property covered by TCT No. 78085. It contends that the respondent never objected to Roxas'
acceptance of its offer to purchase the property and the terms and conditions therein; the respondent even allowed Roxas to
execute the deed of absolute sale in its behalf. The petitioner asserts that the respondent even received the purchase price of the
property without any objection to the terms and conditions of the said deed of sale. The petitioner claims that it acted in good faith,
and contends that after having been benefited by the said sale, the respondent is estopped from assailing its terms and conditions.
The petitioner notes that the respondent's Board of Directors never approved any resolution rejecting the deed of absolute sale
executed by Roxas for and in its behalf. As such, the respondent is obliged to sell a portion of Lot No. 491-A-3-B-1 covered by TCT
No. 78085 with an area of 500 square meters at the price of P1,000 per square meter, based on its evidence and Articles 649 and
651 of the New Civil Code.

For its part, the respondent posits that Roxas was not so authorized under the May 17, 1991 Resolution of its Board of Directors to
impose a burden or to grant a right of way in favor of the petitioner on Lot No. 491-A-3-B-1, much less convey a portion thereof to
the petitioner. Hence, the respondent was not bound by such provisions contained in the deed of absolute sale. Besides, the
respondent contends, the petitioner cannot enforce its right to buy a portion of the said property since there was no agreement in
the deed of absolute sale on the price thereof as well as the specific portion and area to be purchased by the petitioner.

We agree with the respondent.

In San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,21 we held that:

A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly, the property of the
corporation is not the property of its stockholders or members and may not be sold by the stockholders or members
without express authorization from the corporation's board of directors. Section 23 of BP 68, otherwise known as the
Corporation Code of the Philippines, provides:

"SEC. 23. The Board of Directors or Trustees. – Unless otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the holders of
 stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1)
year and until their successors are elected and qualified."

Indubitably, a corporation may act only through its board of directors or, when authorized either by its by-laws or by its
board resolution, through its officers or agents in the normal course of business. The general principles of agency govern
the relation between the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or relevant
provisions of law. …22

Generally, the acts of the corporate officers within the scope of their authority are binding on the corporation. However, under
Article 1910 of the New Civil Code, acts done by such officers beyond the scope of their authority cannot bind the corporation unless
it has ratified such acts expressly or tacitly, or is estopped from denying them:

Art. 1910. The principal must comply with all the obligations which 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.

Thus, contracts entered into by corporate officers beyond the scope of authority are unenforceable against the corporation
unless ratified by the corporation.23

In BA Finance Corporation v. Court of Appeals,24 we also ruled that persons dealing with an assumed agency, whether the assumed
agency be a general or special one, 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.

In this case, the respondent denied authorizing its then president Roberto B. Roxas to sell a portion of Lot No. 491-A-3-B-1 covered
by TCT No. 78085, and to create a lien or burden thereon. The petitioner was thus burdened to prove that the respondent so
authorized Roxas to sell the same and to create a lien thereon.

Central to the issue at hand is the May 17, 1991 Resolution of the Board of Directors of the respondent, which is worded as follows:

RESOLVED, as it is hereby resolved, that the corporation, thru the President, sell to any interested buyer, its 7,213-sq.-meter
property at the Sumulong Highway, Antipolo, Rizal, covered by Transfer Certificate of Title No. N-78086, at a price and on
terms and conditions which he deems most reasonable and advantageous to the corporation;

FURTHER RESOLVED, that Mr. ROBERTO B. ROXAS, President of the corporation, be, as he is hereby authorized to execute,
sign and deliver the pertinent sales documents and receive the proceeds of sale for and on behalf of the company.25

Evidently, Roxas was not specifically authorized under the said resolution to grant a right of way in favor of the petitioner on a
portion of Lot No. 491-A-3-B-1 or to agree to sell to the petitioner a portion thereof. The authority of Roxas, under the resolution, to
sell Lot No. 491-A-3-B-2 covered by TCT No. 78086 did not include the authority to sell a portion of the adjacent lot, Lot No. 491-A-3-
B-1, or to create or convey real rights thereon. Neither may such authority be implied from the authority granted to Roxas to sell Lot
No. 491-A-3-B-2 to the petitioner "on such terms and conditions which he deems most reasonable and advantageous." Under
paragraph 12, Article 1878 of the New Civil Code, a special power of attorney is required to convey real rights over immovable
property.26 Article 1358 of the New Civil Code requires that contracts which have for their object the creation of real rights over
immovable property must appear in a public document.27 The petitioner cannot feign ignorance of the need for Roxas to have been
specifically authorized in writing by the Board of Directors to be able to validly grant a right of way and agree to sell a portion of Lot
No. 491-A-3-B-1. The rule is that if the act of the agent is one which requires authority in writing, those dealing with him are charged
with notice of that fact.28

Powers of attorney are generally construed strictly and courts will not infer or presume broad powers from deeds which do not
sufficiently include property or subject under which the agent is to deal.29 The general rule is that the power of attorney must be
pursued within legal strictures, and the agent can neither go beyond it; nor beside it. The act done must be legally identical with that
authorized to be done.30 In sum, then, the consent of the respondent to the assailed provisions in the deed of absolute sale was not
obtained; hence, the assailed provisions are not binding on it.
We reject the petitioner's submission that, in allowing Roxas to execute the contract to sell and the deed of absolute sale and failing
to reject or disapprove the same, the respondent thereby gave him apparent authority to grant a right of way over Lot No. 491-A-3-
B-1 and to grant an option for the respondent to sell a portion thereof to the petitioner. Absent estoppel or ratification, apparent
authority cannot remedy the lack of the written power required under the statement of frauds.31 In addition, the petitioner's fallacy
is its wrong assumption of the unproved premise that the respondent had full knowledge of all the terms and conditions contained
in the deed of absolute sale when Roxas executed it.

It bears stressing that apparent authority is based on estoppel and can arise from two instances: first, the principal may knowingly
permit the agent to so hold himself out as having such authority, and in this way, the principal becomes estopped to claim that the
agent does not have such authority; second, the principal may so clothe the agent with the indicia of authority as to lead a
reasonably prudent person to believe that he actually has such authority.32 There can be no apparent authority of an agent without
acts or conduct on the part of the principal and such acts or conduct of the principal must have been known and relied upon in good
faith and as a result of the exercise of reasonable prudence by a third person as claimant and such must have produced a change of
position to its detriment. The apparent power of an agent is to be determined by the acts of the principal and not by the acts of the
agent.33

For the principle of apparent authority to apply, the petitioner was burdened to prove the following: (a) the acts of the respondent
justifying belief in the agency by the petitioner; (b) knowledge thereof by the respondent which is sought to be held; and, (c) reliance
thereon by the petitioner consistent with ordinary care and prudence.34 In this case, there is no evidence on record of specific acts
made by the respondent35 showing or indicating that it had full knowledge of any representations made by Roxas to the petitioner
that the respondent had authorized him to grant to the respondent an option to buy a portion of Lot No. 491-A-3-B-1 covered by
TCT No. 78085, or to create a burden or lien thereon, or that the respondent allowed him to do so.

The petitioner's contention that by receiving and retaining the P5,000,000 purchase price of Lot No. 491-A-3-B-2, the respondent
effectively and impliedly ratified the grant of a right of way on the adjacent lot, Lot No. 491-A-3-B-1, and to grant to the petitioner an
option to sell a portion thereof, is barren of merit. It bears stressing that the respondent sold Lot No. 491-A-3-B-2 to the petitioner,
and the latter had taken possession of the property. As such, the respondent had the right to retain the P5,000,000, the purchase
price of the property it had sold to the petitioner. For an act of the principal to be considered as an implied ratification of an
unauthorized act of an agent, such act must be inconsistent with any other hypothesis than that he approved and intended to adopt
what had been done in his name.36 Ratification is based on waiver – the intentional relinquishment of a known right. Ratification
cannot be inferred from acts that a principal has a right to do independently of the unauthorized act of the agent. Moreover, if a
writing is required to grant an authority to do a particular act, ratification of that act must also be in writing.37 Since the respondent
had not ratified the unauthorized acts of Roxas, the same are unenforceable.38 Hence, by the respondent's retention of the amount,
it cannot thereby be implied that it had ratified the unauthorized acts of its agent, Roberto Roxas.

On the last issue, the petitioner contends that the CA erred in dismissing its complaint for damages against the respondent on its
finding that the delay in the construction of its warehouse was due to its (petitioner's) fault. The petitioner asserts that the CA
should have affirmed the ruling of the trial court that the respondent failed to cause the eviction of the squatters from the property
on or before September 29, 1991; hence, was liable for P5,660,000. The respondent, for its part, asserts that the delay in the
construction of the petitioner's warehouse was due to its late filing of an application for a building permit, only on May 28, 1992.

The petitioner's contention is meritorious. The respondent does not deny that it failed to cause the eviction of the squatters on or
before September 29, 1991. Indeed, the respondent does not deny the fact that when the petitioner wrote the respondent
demanding that the latter cause the eviction of the squatters on April 15, 1992, the latter were still in the premises. It was only after
receiving the said letter in April 1992 that the respondent caused the eviction of the squatters, which thus cleared the way for the
petitioner's contractor to commence the construction of its warehouse and secure the appropriate building permit therefor.

The petitioner could not be expected to file its application for a building permit before April 1992 because the squatters were still
occupying the property. Because of the respondent's failure to cause their eviction as agreed upon, the petitioner's contractor failed
to commence the construction of the warehouse in October 1991 for the agreed price of P8,649,000. In the meantime, costs of
construction materials spiraled. Under the construction contract entered into between the petitioner and the contractor, the
petitioner was obliged to pay P11,804,160,39including the additional work costing P1,441,500, or a net increase of P1,712,980.40 The
respondent is liable for the difference between the original cost of construction and the increase thereon, conformably to Article
1170 of the New Civil Code, which reads:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any
manner contravene the tenor thereof, are liable for damages.
The petitioner, likewise, lost the amount of P3,900,000 by way of unearned income from the lease of the property to the Ponderosa
Leather Goods Company. The respondent is, thus, liable to the petitioner for the said amount, under Articles 2200 and 2201 of the
New Civil Code:

Art. 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits
which the obligee failed to obtain.

Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be
those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen
or could have reasonably foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation.

In sum, we affirm the trial court's award of damages and attorney's fees to the petitioner.

IN LIGHT OF ALL THE FOREGOING, judgment is hereby rendered AFFIRMING the assailed Decision of the Court of Appeals WITH
MODIFICATION. The respondent is ordered to pay to the petitioner the amount of P5,612,980 by way of actual damages and
P100,000 by way of attorney's fees. No costs.

G.R. No. 176405             August 20, 2008

LEO WEE, petitioner, 
vs.
GEORGE DE CASTRO (on his behalf and as attorney-in-fact of ANNIE DE CASTRO and FELOMINA UBAN) and MARTINIANA DE
CASTRO, respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court filed by petitioner Leo Wee,
seeking the reversal and setting aside of the Decision2 dated 19 September 2006 and the Resolution3 dated 25 January 2007 of the
Court of Appeals in CA-G.R. SP No. 90906. The appellate court, in its assailed Decision, reversed the dismissal of Civil Case. No. 1990,
an action for ejectment instituted by respondent George de Castro, on his own behalf and on behalf of Annie de Castro, Felomina de
Castro Uban and Jesus de Castro4 against petitioner, by the Municipal Trial Court (MTC) of Alaminos City, which was affirmed by the
Regional Trial Court (RTC), Branch 54, Alaminos City, Pangasinan; and, ruling in favor of the respondents, ordered the petitioner to
vacate the subject property. In its assailed Resolution dated 25 January 2007, the Court of Appeals refused to reconsider its earlier
Decision of 19 September 2006.

In their Complaint5 filed on 1 July 2002 with the MTC of Alaminos City, docketed as Civil Case No. 1990, respondents alleged that
they are the registered owners of the subject property, a two-storey building erected on a parcel of land registered under Transfer
Certificate of Title (TCT) No. 16193 in the Registry of Deeds of Pangasinan, described and bounded as follows:

A parcel of land (Lot 13033-D-2, Psd-01550-022319, being a portion of Lot 13033-D, Psd-018529, LRC Rec. No. ____)
situated in Pob., Alaminos City; bounded on the NW. along line 1-2 by Lot 13035-D-1 of the subdivision plan; on the NE.
along line 2-3 by Vericiano St.; on the SE. along line 3-4 by Lot 13033-D-2 of the subdivision plan; on the SW. along line 4-1
by Lot 575, Numeriano Rabago. It is coverd by TCT No. 16193 of the Register of Deeds of Pangasinan (Alaminos City) and
declared for taxation purposes per T.D. No. 2075, and assessed in the sum of P93,400.00.6

Respondents rented out the subject property to petitioner on a month to month basis for P9,000.00 per month.7 Both parties agreed
that effective 1 October 2001, the rental payment shall be increased from P9,000.00 to P15,000.00. Petitioner, however, failed or
refused to pay the corresponding increase on rent when his rental obligation for the month of 1 October 2001 became due. The
rental dispute was brought to the Lupon Tagapagpamayapa of Poblacion, Alaminos, Pangasinan, in an attempt to amicably settle the
matter but the parties failed to reach an agreement, resulting in the issuance by the Barangay Lupon of a Certification to file action
in court on 18 January 2002. On 10 June 2002, respondent George de Castro sent a letter to petitioner terminating their lease
agreement and demanding that the latter vacate and turn over the subject property to respondents. Since petitioner stubbornly
refused to comply with said demand letter, respondent George de Castro, together with his siblings and co-respondents, Annie de
Castro, Felomina de Castro Uban and Jesus de Castro, filed the Complaint for ejectment before the MTC.

It must be noted, at this point, that although the Complaint stated that it was being filed by all of the respondents, the Verification
and the Certificate of Non-Forum Shopping were signed by respondent George de Castro alone. He would subsequently attach to his
position paper filed before the MTC on 28 October 2002 the Special Powers of Attorney (SPAs) executed by his sisters Annie de
Castro and Felomina de Castro Uban dated 7 February 2002 and 14 March 2002 respectively, authorizing him to institute the
ejectment case against petitioner.

Petitioner, on the other hand, countered that there was no agreement between the parties to increase the monthly rentals and
respondents' demand for an increase was exorbitant. The agreed monthly rental was only for the amount of P9,000.00 and he was
religiously paying the same every month. Petitioner then argued that respondents failed to comply with the jurisdictional
requirement of conciliation before the Barangay Lupon prior to the filing of Civil Case. No. 1990, meriting the dismissal of their
Complaint therein. The Certification to file action issued by the Barangay Lupon appended to the respondents' Complaint merely
referred to the issue of rental increase and not the matter of ejectment. Petitioner asserted further that the MTC lacked jurisdiction
over the ejectment suit, since respondents' Complaint was devoid of any allegation that there was an "unlawful withholding" of the
subject property by the petitioner.8

During the Pre-Trial Conference9 held before the MTC, the parties stipulated that in May 2002, petitioner tendered to respondents
the sum of P9,000.00 as rental payment for the month of January 2002; petitioner paid rentals for the months of October 2001 to
January 2002 but only in the amount of P9,000.00 per month; respondents, thru counsel, sent a letter to petitioner on 10 June 2002
terminating their lease agreement which petitioner ignored; and the Barangay Lupon did issue a Certification to file action after the
parties failed to reach an agreement before it.

After the submission of the parties of their respective Position Papers, the MTC, on 21 November 2002, rendered a
Decision10 dismissing respondents' Complaint in Civil Case No. 1990 for failure to comply with the prior conciliation requirement
before the Barangay Lupon. The decretal portion of the MTC Decision reads:

WHEREFORE, premised considered, judgment is hereby rendered ordering the dismissal of this case. Costs against the
[herein respondents].

On appeal, docketed as Civil Case No. A-2835, the RTC of Alaminos, Pangasinan, Branch 54, promulgated its Decision11 dated 27 June
2005 affirming the dismissal of respondents' Complaint for ejectment after finding that the appealed MTC Decision was based on
facts and law on the matter. The RTC declared that since the original agreement entered into by the parties was for petitioner to pay
only the sum of P9.000.00 per month for the rent of the subject property, and no concession was reached by the parties to increase
such amount to P15.000.00, petitioner cannot be faulted for paying only the originally agreed upon monthly rentals. Adopting
petitioner's position, the RTC declared that respondents' failure to refer the matter to the Barangay court for conciliation process
barred the ejectment case, conciliation before the Lupon being a condition sine qua non in the filing of ejectment suits. The RTC
likewise agreed with petitioner in ruling that the allegation in the Complaint was flawed, since respondents failed to allege that there
was an "unlawful withholding" of possession of the subject property, taking out Civil Case No. 1990 from the purview of an action for
unlawful detainer. Finally, the RTC decreed that respondents' Complaint failed to comply with the rule that a co-owner could not
maintain an action without joining all the other co-owners. Thus, according to the dispositive portion of the RTC Decision:

WHEREFORE the appellate Court finds no cogent reason to disturb the findings of the court a quo. The Decision dated
November 21, 2002 appealed from is hereby AFFIRMED IN TOTO.12

Undaunted, respondents filed a Petition for Review on Certiorari13 with the Court of Appeals where it was docketed as CA-G.R. SP
No. 90906. Respondents argued in their Petition that the RTC gravely erred in ruling that their failure to comply with the conciliation
process was fatal to their Complaint, since it is only respondent George de Castro who resides in Alaminos City, Pangasinan, while
respondent Annie de Castro resides in Pennsylvania, United States of America (USA); respondent Felomina de Castro Uban, in
California, USA; and respondent Jesus de Castro, now substituted by his wife, Martiniana, resides in Manila. Respondents further
claimed that the MTC was not divested of jurisdiction over their Complaint for ejectment because of the mere absence therein of
the term "unlawful withholding" of their subject property, considering that they had sufficiently alleged the same in their Complaint,
albeit worded differently. Finally, respondents posited that the fact that only respondent George de Castro signed the Verification
and the Certificate of Non-Forum Shopping attached to the Complaint was irrelevant since the other respondents already executed
Special Powers of Attorney (SPAs) authorizing him to act as their attorney-in-fact in the institution of the ejectment suit against the
petitioner.
On 19 September 2006, the Court of Appeals rendered a Decision granting the respondents' Petition and ordering petitioner to
vacate the subject property and turn over the same to respondents. The Court of Appeals decreed:

WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Decision dated June 27, 2005 issued by
the RTC of Alaminos City, Pangasinan, Branch 54, is REVERSED and SET ASIDE. A new one is hereby rendered ordering
[herein petitioner] Leo Wee to SURRENDER and VACATE the leased premises in question as well as to pay the sum of
P15,000.00 per month reckoned from March, 2002 until he shall have actually turned over the possession thereof to
petitioners plus the rental arrearages of P30,000.00 representing unpaid increase in rent for the period from October, 2001
to February, 2002, with legal interest at 6% per annum to be computed from June 7, 2002 until finality of this decision and
12% thereafter until full payment thereof. Respondent is likewise hereby ordered to pay petitioners the amount
of P20,000.00 as and for attorney's fees and the costs of suit.14

In a Resolution dated 25 January 2007, the appellate court denied the Motion for Reconsideration interposed by petitioner for lack
of merit.

Petitioner is now before this Court via  the Petition at bar, making the following assignment of errors:

I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT CONCILIATION PROCESS IS NOT A
JURISDICTIONAL REQUIREMENT THAT NON-COMPLIANCE THEREWITH DOES NOT AFFECT THE JURISDICTION IN EJECTMENT
CASE;

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE SUFFICIENCY OF THE ALLEGATIONS IN THE
COMPLAINT FOR EJECTMENT DESPITE THE WANT OF ALLEGATION OF "UNLAWFUL WITHOLDING PREMISES" (sic)
QUESTIONED BY PETITIONER;

III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FILING OF THE COMPLAINT OF RESPONDENT
GEORGE DE CASTRO WITHOUT JOINING ALL HIS OTHER CO-OWNERS OVER THE SUBJECT PROPERTY IS PROPER;

IV.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT APPLYING SUPREME COURT CIRCULAR NO. 10 WHICH
DIRECTS A PLEADER TO INDICATE IN HIS PLEADINGS HIS OFFICIAL RECEIPT OF HIS PAYMENT OF HIS IBP DUES.15

Petitioner avers that respondents failed to go through the conciliation process before the Barangay Lupon, a jurisdictional defect
that bars the legal action for ejectment. The Certification to file action dated 18 January 2002 issued by the Barangay Lupon,
appended by the respondents to their Complaint in Civil Case No. 1990, is of no moment, for it attested only that there was
confrontation between the parties on the matter of rental increase but not on unlawful detainer of the subject property by the
petitioner. If it was the intention of the respondents from the very beginning to eject petitioner from the subject property, they
should have brought up the alleged unlawful stay of the petitioner on the subject property for conciliation before the Barangay
Lupon.

The barangay justice system was established primarily as a means of easing up the congestion of cases in the judicial courts. This
could be accomplished through a proceeding before the barangaycourts which, according to the one who conceived of the system,
the late Chief Justice Fred Ruiz Castro, is essentially arbitration in character; and to make it truly effective, it should also be
compulsory. With this primary objective of the barangay justice system in mind, it would be wholly in keeping with the underlying
philosophy of Presidential Decree No. 1508 (Katarungang Pambarangay Law), which would be better served if an out-of-court
settlement of the case is reached voluntarily by the parties.16 To ensure this objective, Section 6 of Presidential Decree No. 1508
requires the parties to undergo a conciliation process before the Lupon Chairman or the  Pangkat ng Tagapagkasundo as a
precondition to filing a complaint in court subject to certain exceptions. The said section has been declared compulsory in nature.17
Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160 (The Local Government Code), which took effect on 1
January 1992.

The pertinent provisions of the Local Government Code making conciliation a precondition to the filing of complaints in court are
reproduced below:

SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint in court. - No complaint, petition, action, or proceeding
involving any matter within the authority of the lupon shall be filed or instituted directly in court or any other government
office for adjudication, unless there has been a confrontation between the parties before the lupon chairman or the
pangkat, and that no conciliation or settlement has been reached as certified by the lupon secretary or pangkat secretary as
attested to by the lupon or pangkat chairman or unless the settlement has been repudiated by the parties thereto.

(b) Where parties may go directly to court. - The parties may go directly to court in the following instances:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of personal liberty calling for habeas corpus proceedings;

(3) Where actions are coupled with provisional remedies such as preliminary injunction, attachment, delivery of
personal property, and support pendente lite; and

(4) Where the action may otherwise be barred by the statute of limitations.

(c) Conciliation among members of indigenous cultural communities. - The customs and traditions of indigenous cultural
communities shall be applied in settling disputes between members of the cultural communities.

SEC. 408. Subject Matter for Amicable Settlement; Exception Thereto. - The lupon of each barangay shall have authority to
bring together the parties actually residing in the same city or municipality for amicable settlement of all disputes except:

(a) Where one party is the government or any subdivision or instrumentality thereof;

(b) Where one party is a public officer or employee, and the dispute relates to the performance of his official functions;

(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five thousand pesos (P5,000.00);

(d) Offenses where there is no private offended party;

(e) Where the dispute involves real properties located in different cities or municipalities unless the parties thereto agree to
submit their differences to amicable settlement by an appropriate lupon;

(f) Disputes involving parties who actually reside in barangays of different cities or municipalities, except where such
barangay units adjoin each other and the parties thereto agree to submit their differences to amicable settlement by an
appropriate lupon;

(g) Such other classes of disputes which the President may determine in the interest of justice or upon the recommendation
of the Secretary of Justice.

There is no question that the parties to this case appeared before the Barangay Lupon for conciliation proceedings. There is also no
dispute that the only matter referred to the Barangay Lupon for conciliation was the rental increase, and not the ejectment of
petitioner from the subject property. This is apparent from a perusal of the Certification to file action in court issued by
the Barangay  Lupon on 18 January 2002, to wit:

CERTIFICATION TO FILE COMPLAINTS

This is to certify that:

 1. There was personal confrontation between parties before the barangay Lupon regarding rental increase of a commercial
building but conciliation failed;

2. Therefore, the corresponding dispute of the above-entitled case may now be filed in Court/Government
Office.18 (Emphasis ours.)

The question now to be resolved by this Court is whether the Certification dated 18 January 2002 issued by the Barangay
Lupon stating that no settlement was reached by the parties on the matter of rental increase sufficient to comply with the prior
conciliation requirement under the Katarungang Pambarangay Law to authorize the respondents to institute the ejectment suit
against petitioner.

The Court rules affirmatively.

While it is true that the Certification to file action dated 18 January 2002 of the Barangay Lupon refers only to rental increase and
not to the ejectment of petitioner from the subject property, the submission of the same for conciliation before the Barangay
Lupon constitutes sufficient compliance with the provisions of the Katarungang Pambarangay Law. Given the particular
circumstances of the case at bar, the conciliation proceedings for the amount of monthly rental should logically and reasonably
include also the matter of the possession of the property subject of the rental, the lease agreement, and the violation of the terms
thereof.

We now proceed to discuss the meat of the controversy.

The contract of lease between the parties did not stipulate a fixed period. Hence, the parties agreed to the payment of rentals on a
monthly basis. On this score, Article 1687 of the Civil Code provides:

Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon
is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to day, if the rent
is to be paid daily. However, even though a monthly rent is paid, and no period for the lease has been set, the courts may
fix a longer term for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the courts
may likewise determine a longer period after the lessee has been in possession for over six months. In case of daily rent, the
courts may also fix a longer period after the lessee has stayed in the place for over one month. (Emphasis supplied.)

The rentals being paid monthly, the period of such lease is deemed terminated at the end of each month. Thus, respondents have
every right to demand the ejectment of petitioners at the end of each month, the contract having expired by operation of law.
Without a lease contract, petitioner has no right of possession to the subject property and must vacate the same. Respondents,
thus, should be allowed to resort to an action for ejectment before the MTC to recover possession of the subject property from
petitioner.

Corollarily, petitioner's ejectment, in this case, is only the reasonable consequence of his unrelenting refusal to comply with the
respondents' demand for the payment of rental increase agreed upon by both parties. Verily, the lessor's right to rescind the
contract of lease for non-payment of the demanded increased rental was recognized by this Court in Chua v. Victorio19:

The right of rescission is statutorily recognized in reciprocal obligations, such as contracts of lease. In addition to the general
remedy of rescission granted under Article 1191 of the Civil Code, there is an independent provision granting the remedy of
rescission for breach of any of the lessor or lessee's statutory obligations. Under Article 1659 of the Civil Code, the
aggrieved party may, at his option, ask for (1) the rescission of the contract; (2) rescission and indemnification for damages;
or (3) only indemnification for damages, allowing the contract to remain in force.

Payment of the rent is one of a lessee's statutory obligations, and, upon non-payment by petitioners of the increased
rental in September 1994, the lessor acquired the right to avail of any of the three remedies outlined above.  (Emphasis
supplied.)

Petitioner next argues that respondent George de Castro cannot maintain an action for ejectment against petitioner, without joining
all his co-owners.
Article 487 of the New Civil Code is explicit on this point:

ART. 487. Any one of the co-owners may bring an action in ejectment.

This article covers all kinds of action for the recovery of possession, i.e., forcible entry and unlawful detainer (accion interdictal),
recovery of possession (accion publiciana), and recovery of ownership (accion de reivindicacion). As explained by the renowned
civilist, Professor Arturo M. Tolentino20:

A co-owner may bring such an action, without the necessity of joining all the other co-owners as co-plaintiffs, because
the suit is deemed to be instituted for the benefit of all . If the action is for the benefit of the plaintiff alone, such that he
claims possession for himself and not for the co-ownership, the action will not prosper. (Emphasis added.)

In the more recent case of  Carandang v. Heirs of De Guzman,21 this Court declared that a co-owner is not even a necessary party to
an action for ejectment, for complete relief can be afforded even in his absence, thus:

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil
Code and the relevant jurisprudence, any one of them may bring an action, any kind of action for the recovery of co-owned
properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned
property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary
parties, for a complete relief can be afforded in the suit even without their participation, since the suit is presumed to have
been filed for the benefit of all co-owners.

Moreover, respondents Annie de Castro and Felomina de Castro Uban each executed a Special Power of Attorney, giving respondent
George de Castro the authority to initiate Civil Case No. 1990.

A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and confers upon
him the authority to perform certain specified acts or kinds of acts on behalf of the principal. The written authorization itself is the
power of attorney, and this is clearly indicated by the fact that it has also been called a "letter of attorney."22

Even then, the Court views the SPAs as mere surplusage, such that the lack thereof does not in any way affect the validity of the
action for ejectment instituted by respondent George de Castro. This also disposes of petitioner's contention that respondent
George de Castro lacked the authority to sign the Verification and the Certificate of Non-Forum Shopping. As the Court ruled in
Mendoza v. Coronel23:

We likewise hold that the execution of the certification against forum shopping by the attorney-in-fact in the case at bar
is not a violation of the requirement that the parties must personally sign the same. The attorney-in-fact, who has
authority to file, and who actually filed the complaint as the representative of the plaintiff co-owner, pursuant to a Special
Power of Attorney, is a party to the ejectment suit. In fact, Section 1, Rule 70 of the Rules of Court includes the
representative of the owner in an ejectment suit as one of the parties authorized to institute the proceedings. (Emphasis
supplied.)

Failure by respondent George de Castro to attach the said SPAs to the Complaint is innocuous, since it is undisputed that he was
granted by his sisters the authority to file the action for ejectment against petitioner prior to the institution of Civil Case No. 1990.
The SPAs in his favor were respectively executed by respondents Annie de Castro and Felomina de Castro Uban on 7 February
2002 and 14 March 2002; while Civil Case No. 1990 was filed by respondent George de Castro on his own behalf and on behalf of his
siblings only on 1 July 2002, or way after he was given by his siblings the authority to file said action. The Court quotes with approval
the following disquisition of the Court of Appeals:

Moreover, records show that [herein respondent] George de Castro was indeed authorized by his sisters Annie de Castro
and Felomina de Castro Uban, to prosecute the case in their behalf as shown by the Special Power of Attorney dated
 February 7, 2002 and March 14, 2002. That these documents were appended only to [respondent George de Castro's]
position paper is of no moment considering that the authority conferred therein was given prior to the institution of the
complaint in July, 2002. x x x.24

Respondent deceased Jesus de Castro's failure to sign the Verification and Certificate of Non-Forum Shopping may be excused since
he already executed an Affidavit25 with respondent George de Castro that he had personal knowledge of the filing of Civil Case No.
1990. In Torres v. Specialized Packaging Development Corporation, 26 the Court ruled that the personal signing of the verification
requirement was deemed substantially complied with when, as in the instant case, two out of 25 real parties-in-interest, who
undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in the petition, signed the verification
attached to it.

In the same vein, this Court is not persuaded by petitioner's assertion that respondents' failure to allege the jurisdictional fact that
there was "unlawful withholding" of the subject property was fatal to their cause of action.

It is apodictic that what determines the nature of an action as well as which court has jurisdiction over it are the allegations in the
complaint and the character of the relief sought. In an unlawful detainer case, the defendant's possession was originally lawful but
ceased to be so upon the expiration of his right to possess. Hence, the phrase "unlawful withholding" has been held to imply
possession on the part of defendant, which was legal in the beginning, having no other source than a contract, express or implied,
and which later expired as a right and is being withheld by defendant.27

In Barba v. Court of Appeals,28 the Court held that although the phrase "unlawfully withholding" was not actually used by therein
petitioner in her complaint, the Court held that her allegations, nonetheless, amounted to an unlawful withholding of the subject
property by therein private respondents, because they continuously refused to vacate the premises even after notice and demand.

In the Petition at bar, respondents alleged in their Complaint that they are the registered owners of the subject property; the subject
property was being occupied by the petitioner pursuant to a monthly lease contract; petitioner refused to accede to respondents'
demand for rental increase; the respondents sent petitioner a letter terminating the lease agreement and demanding that petitioner
vacate and turn over the possession of the subject property to respondents; and despite such demand, petitioner failed to surrender
the subject property to respondents.29 The Complaint sufficiently alleges the unlawful withholding of the subject property by
petitioner, constitutive of unlawful detainer, although the exact words "unlawful withholding" were not used. In an action for
unlawful detainer, an allegation that the defendant is unlawfully withholding possession from the plaintiff is deemed sufficient,
without necessarily employing the terminology of the law.30

Petitioner's averment that the Court of Appeals should have dismissed respondents' Petition in light of the failure of their counsel to
attach the Official Receipt of his updated payment of Integrated Bar of the Philippines (IBP) dues is now moot and academic, since
respondents' counsel has already duly complied therewith. It must be stressed that judicial cases do not come and go through the
portals of a court of law by the mere mandate of technicalities.31 Where a rigid application of the rules will result in a manifest failure
or miscarriage of justice, technicalities should be disregarded in order to resolve the case. 32

Finally, we agree in the ruling of the Court of Appeals that petitioner is liable for the payment of back rentals, attorney's fees and
cost of the suit. Respondents must be duly indemnified for the loss of income from the subject property on account of petitioner's
refusal to vacate the leased premises.

WHEREFORE, premises considered, the instant Petition is DENIED. The Decision dated 19 September 2006 and Resolution dated 25
January 2007 of the Court of Appeals in CA-G.R. SP No. 90906 are hereby AFFIRMED in toto. Costs against petitioner.
G.R. No. L-4014            February 18, 1908

GENARIO HEREDIA, plaintiff-appellant, 
vs.
RAMON SALINAS, defendant-appellee.

Genaro Heredia on his own behalf.

Ramon Salinas on his own behalf.

ARELLANO, C.J.:

From the allegations and proofs in this case, it appears:

1. That this was an action between Justo Trinidad as plaintiff, on the one part, and Genaro Heredia on the other, as defendant; it was
decided against the latter by a judgment dated the 19th of April, 1906.

2. That on the 23rd of April, letters of notification were addressed to the parties, and on the 28th of said month the defendant
excepted thereto and moved for a new trial.

3. That on the 5th of May following, the motion for a new trial was heard and denied, to which exception was at once taken.

4. That on the 5th of June of the same year, the defendant gave notice of his intention to file a bill of exceptions, which was
presented on the 13th of the same month.

5. That the admission and approval, of the bill of exceptions was objected to by the plaintiff, but the court overruled his objection
and the bill was admitted and approved.

6. That upon said bill having been submitted to this Supreme Court, and upon the question being again raised, the court held that
the bill of exceptions should not have been admitted and the appeal was thus abandoned.

7. That by reason of such abandonment, the appellant in that case, believing himself prejudiced, filed the complaint which is now
before us on appeal.

8. That the object of the present complaint is to claim damages from Attorney Ramon Salinas, now the defendant, who advised him
in the former case, on the ground "that the latter as lawyer for the plaintiff in the above-mentioned case, did not perform his duties,
as he should have done, with all due diligence, and that through his fault or negligence the said plaintiff was subjected to losses. Said
losses are alleged to be as follow: (a) the sum of P611.39 which he paid to Justo Trinidad as principal, interest, and costs under the
judgment entered in the above-cited case; (b) the sum of 1,500, for which Genaro Heredia had contracted to sell the four parcels of
land which reverted to Justo Trinidad; (c) the sum of P88, paid to the clerk of the Supreme Court and to the printing establishment
"La Enriqueta" by reason of the appeal to which the complaint refer"(VI, complaint).

9. That in his answer the defendant positively denied this statement in the complaint, and alleged that he had presented the bill of
exceptions within the ten days following the date when the court was notified of his intention to submit the said bill of exceptions.

10. That in his turn, by way of counterclaim, he demands from the plaintiff the sum of P800 amount as professional fees earned in
defending him, of which P500 are for fees in connection with the so often mooted bill of exceptions in the previous suit between
Justo Trinidad and Genaro Heredia, and the P300 remaining accruing in the suit brought between Heredia on the one part and Felisa
Nepomuceno and Marciana Canon on the other.

11. That at the trial the plaintiff, who had not previously answered the counterclaim, offered his own testimony in support of his
complaint; and in his examination in reference to the counterclaim he said that he did not accept the amounts stated in the same
because he had a contract, to wit, P75 for the proceedings in the lower court; and in case of an appeal to the Supreme Court,
although the defendant had asked him P100, he only offered to pay him a further sum of P75; to this, however, the defendant did
not reply, and when questioned as to how he would construe such silence, he said that as the difference was only P25, he thought
no more of the matter, since this was the amount agreed upon between them in another suit brought against the respondent by
Felisa Nepomuceno and Marciana Canon. Upon cross-examination by the defendant, his testimony was as follows:

Q.       Is it not true that you called at my office and there intrusted to me the two cases pending against you here in the
Court of First Instance?

A.       Yes, sir.

Q.       Is it not true that I asked you P100 for each case, but that at your request I agreed to reduce it to P75 owing to the
partnership which existed between us at that time, and that I sent you a bill for P150 which was paid by you?

A.       Our agreement was for P75 for the Court of First Instance and P100 for the Supreme Court, but I asked you to reduce
the amount to P75 in your bill for the Supreme Court. You sent me a bill for P150 — that is, P75 for each case — and I paid
it.

12. That the court in its decision of the 6th of March, 1907, "found that the plaintiff is not entitled to recover anything under his
complaint nor the defendant for his counterclaim and that neither parties should recover costs."

13. And that by a new amendatory judgment of the 21st of the same month and year, entered on motion of the defendant, the
court modified its former decision in the sense that the defendant was declared to be entitled to the sum of P150, by reason of his
counterclaim.

The plaintiff appealed form the first judgment and the defendant from the second; the following bill of errors was presented by the
former:

The Court of First Instance erred, he states, (1) in considering that Attorney Ramon Salinas, now the defendant herein, had
exercised due diligence and ordinary care in presenting the bill of exceptions; (2) in rendering judgment acquitting the
defendant on the ground that both the defendant lawyer and his client were simply unfortunate, inasmuch as he
considered that the bill of exceptions had been presented within the time specified by the law.

Under the conclusions of the judgment appealed from if because the bill of exceptions was presented on the 13th of June, 1906
eight days after the date of the notice of its presentation which was given on the 5th of said month, the court considered that ""it
could hardly be said that the non-admission of such bill of exceptions was a result that ought to have been foreseen by an attorney
of reasonable knowledge and capabilities exercising ordinary care," such a conclusion is notoriously erroneous, inasmuch as the
adverse judgment having been excepted to and motion for a new trial having been made on the 28th of April, and denied on the 5th
of May, according to the facts stated above, from the latter date to the 5th of June, a period of thirty days, no action was taken by
the defendant, and there is no law authorizing that notice of the intention to present a bill of exceptions may be served thirty days
after a motion for a new trial has been denied.

It is likewise erroneous to find a similarity between the case at issue and those of Garcia vs. Hipolito (2 Phil. Rep., 732) and Paez vs.
Berenguer (6 Phil. Rep., 521), because in the first of these cases, upon the adverse judgment having been notified on the 21st of
May, on the 23d it had been excepted to and a new trial moved for, which up to the 23d of July, had not been denied by the court,
and the bill of exceptions was then presented on the 28th of said month of July, for which reason it was admitted, inasmuch as the
lapse of time from the 23rd of May to the 23d of July had transpired while the matter was in the hands of the court; it would have
been very arbitrary and devoid of all reason and justice to attribute the delay to negligence of lawyer, and to permit the action of the
court to redound to the prejudice of the party when, under the law, it could not have been considered as a period of unjustifiable
inaction on the part of the appellant, as in the present case, wherein thirty days transpired, from the 5th of May to the 5th of June,
during which absolutely no action had been taken by appellant's attorney. And in the second case, wherein the same lapse of time
occurred between the motion for new trial and the denial thereof, this court held it to be a sound application of the law, that such
lapse could not result to the prejudice of the appellant with respect to the filing of his bill of exceptions inasmuch as the law
prescribes that mention shall be made of the motion of its denial, and of the exception thereto, in order that this Supreme Court
may consider itself invested with the power to review the evidence in case of a strict appeal, and not in the mere cassation or
decision of errors of law.

Therefore, if the filing of a bill of exceptions eight days after notice of the intention to present was given is in accordance with the
law, it is not permissible to give such notice thirty days after the motion for a new trial was denied, a procedure which is not
authorized by law nor by any rule established in any case decided by this court.
Such behaviour, however, can not be the subject of an action for indemnity for losses and damages under article 1101 of the Civil
Code, cited by the appellant in the first alleged error of law stated in his brief of the judgment appealed from, which article has been
incorrectly quoted by causing it to read, "those who if fulfilling their obligations are guilty of error, negligence, or delay, ... shall be
subject to indemnify for the losses and damages caused thereby ... when it should read, "those who ... are guilty of fraud,
negligence, or delay."

In a similar case, wherein by reason of a solicitor having interposed out of time an appeal in cassation to theaudiencia  of Madrid, it
was held that his right had expired, a complaint was filed by the appellant against the said solicitor, setting forth the facts, and asking
that he be sentenced to pay him an indemnity for losses and damages, amounting to the value of the property in litigation stated in
said appeal, and a further indemnity for the costs which the plaintiff had been ordered to pay. The complaint was denied in its major
part and the plaintiff appealed in cassation to the supreme court, alleging that articles 1101, 1718, and 1902 of the Civil Code had
been violated by the Audencia de Madrid, but the supreme court established the following doctrine:

Articles 1101, 1718, and 1902 of the Civil Code which, in the two appeals interposed by the plaintiff, are cited as having
been violated, refer, for the purpose of payment of an indemnity, to losses and damages caused to those who occasioned
them through their own fault; from this fact the logical and necessary consequence is that their existence must be
substantiated; and, inasmuch as in this suit the claim has not been proven, because the appellant bases his appeal on the
unsubstantiated and arbitrary supposition of the injustice of the decision which became final through the fault and
negligence of the solicitor, the sentencing court, which denied the indemnity for losses and damages, has not committed a
violation of the said articles of the code, because established losses are not involved herein. (Decision of the 9th of January,
1897.)

We consider that the above doctrine established is sufficient for the decision of this suit wherein established losses are not involved,
and which has also been based on the unsubstantiated supposition of the injustice of the judgment in the former suit which became
final owing to the expiration of the period allowed for appeal.

With regard to the lawyer's appeal, the lower court having decided the question of the cross complaint upon preponderance of
evidence, and no assignment of errors having been filed against its findings as prescribed nor any allegation that a real mistake of
law was committed, this court finds the judgment to be in accordance with the law.

For the reasons above set forth the judgments appealed from, of the 6th and of the 21st of March, 1906, are hereby affirmed
without special ruling as to costs. So ordered.
G.R. No. L-20567             July 30, 1965

PHILIPPINE NATIONAL BANK, petitioner, 

vs.
MANILA SURETY and FIDELITY CO., INC. and THE COURT OF APPEALS (Second Division), respondents.

Besa, Galang and Medina for petitioner.

De Santos and Delfino for respondents.

REYES, J.B.L., J.:

The Philippine National Bank petitions for the review and reversal of the decision rendered by the Court of Appeals (Second
Division), in its case CA-G.R. No. 24232-R, dismissing the Bank's complaint against respondent Manila Surety & Fidelity Co., Inc., and
modifying the judgment of the Court of First Instance of Manila in its Civil Case No. 11263.

The material facts of the case, as found by the appellate Court, are as follows:

The Philippine National Bank had opened a letter of credit and advanced thereon $120,000.00 to Edgington Oil Refinery for 8,000
tons of hot asphalt. Of this amount, 2,000 tons worth P279,000.00 were released and delivered to Adams & Taguba Corporation
(known as ATACO) under a trust receipt guaranteed by Manila Surety & Fidelity Co. up to the amount of P75,000.00. To pay for the
asphalt, ATACO constituted the Bank its assignee and attorney-in-fact to receive and collect from the Bureau of Public Works the
amount aforesaid out of funds payable to the assignor under Purchase Order No. 71947. This assignment (Exhibit "A") stipulated
that:

The conditions of this assignment are as follows:

1. The same shall remain irrevocable until the said credit accomodation is fully liquidated.

2. The PHILIPPINE NATIONAL BANK is hereby appointed as our Attorney-in-Fact for us and in our name, place and stead, to
collect and to receive the payments to be made by virtue of the aforesaid Purchase Order, with full power and authority to
execute and deliver on our behalf, receipt for all payments made to it; to endorse for deposit or encashment checks, money
order and treasury warrants which said Bank may receive, and to apply said payments to the settlement of said credit
accommodation.

This power of attorney shall also remain irrevocable until our total indebtedness to the said Bank have been fully liquidated.
(Exhibit E)

ATACO delivered to the Bureau of Public Works, and the latter accepted, asphalt to the total value of P431,466.52. Of this amount
the Bank regularly collected, from April 21, 1948 to November 18, 1948, P106,382.01. Thereafter, for unexplained reasons, the Bank
ceased to collect, until in 1952 its investigators found that more moneys were payable to ATACO from the Public Works office,
because the latter had allowed mother creditor to collect funds due to ATACO under the same purchase order to a total of
P311,230.41.

Its demands on the principal debtor and the Surety having been refused, the Bank sued both in the Court of First Instance of Manila
to recover the balance of P158,563.18 as of February 15, 1950, plus interests and costs.

On October 4, 1958, the trial court rendered a decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. Ordering defendants, Adams & Taguba Corporation and Manila Surety & Fidelity Co., Inc., to pay plaintiff, Philippines
National Bank, the sum of P174,462.34 as of February 24, 1956, minus the amount of P8,000 which defendant, Manila
Surety Co., Inc. paid from March, 1956 to October, 1956 with interest at the rate of 5% per annum from February 25, 1956,
until fully paid provided that the total amount that should be paid by defendant Manila Surety Co., Inc., on account of this
case shall not exceed P75,000.00, and to pay the costs;
 2. Orderinq cross-defendant, Adams & Taguba Corporation, and third-party defendant, Pedro A. Taguba, jointly and
severally, to pay cross and third-party plaintiff, Manila Surety & Fidelity Co., Inc., whatever amount the latter has paid or
shall pay under this judgment;

3. Dismissing the complaint insofar as the claim for 17% special tax is concerned; and

4. Dismissing the counterclaim of defendants Adams & Taguba Corporation and Manila Surety & Fidelity Co., Inc.

From said decision, only the defendant Surety Company has duly perfected its appeal. The Central Bank of the Philippines did not
appeal, while defendant ATACO failed to perfect its appeal.

The Bank recoursed to the Court of Appeals, which rendered an adverse decision and modified the judgment of the court of origin as
to the surety's liability. Its motions for reconsideration having proved unavailing, the Bank appealed to this Court.

The Court of Appeals found the Bank to have been negligent in having stopped collecting from the Bureau of Public Works the
moneys falling due in favor of the principal debtor, ATACO, from and after November 18, 1948, before the debt was fully collected,
thereby allowing such funds to be taken and exhausted by other creditors to the prejudice of the surety, and held that the Bank's
negligence resulted in exoneration of respondent Manila Surety & Fidelity Company.

This holding is now assailed by the Bank. It contends the power of attorney obtained from ATACO was merely in additional security
in its favor, and that it was the duty of the surety, and not that of the creditor, owed see to it that the obligor fulfills his obligation,
and that the creditor owed the surety no duty of active diligence to collect any, sum from the principal debtor, citing Judge Advocate
General vs. Court of Appeals, G.R. No. L-10671, October 23, 1958.

This argument of appellant Bank misses the point. The Court of Appeals did not hold the Bank answerable for negligence in failing to
collect from the principal debtor but for its neglect in collecting the sums due to the debtor from the Bureau of Public Works,
contrary to its duty as holder of an exclusive and irrevocable power of attorney to make such collections, since an agent is required
to act with the care of a good father of a family (Civ. Code, Art. 1887) and becomes liable for the damages which the principal may
suffer through his non-performance (Civ. Code, Art. 1884). Certainly, the Bank could not expect that the Bank would diligently
perform its duty under its power of attorney, but because they could not have collected from the Bureau even if they had attempted
to do so. It must not be forgotten that the Bank's power to collect was expressly made irrevocable, so that the Bureau of Public
Works could very well refuse to make payments to the principal debtor itself, and a fortiori reject any demands by the surety.

Even if the assignment with power of attorney from the principal debtor were considered as mere additional security still, by
allowing the assigned funds to be exhausted without notifying the surety, the Bank deprived the former of any possibility of
recoursing against that security. The Bank thereby exonerated the surety, pursuant to Article 2080 of the Civil Code:

ART. 2080. — The guarantors, even though they be solidary, are released from their obligation whenever by come act of the
creditor they cannot be subrogated to the rights, mortgages and preferences of the latter. (Emphasis supplied.)

The appellant points out to its letter of demand, Exhibit "K", addressed to the Bureau of Public Works, on May 5, 1949, and its letter
to ATACO, Exhibit "G", informing the debtor that as of its date, October 31, 1949, its outstanding balance was P156,374.83. Said
Exhibit "G" has no bearing on the issue whether the Bank has exercised due diligence in collecting from the Bureau of Public Works,
since the letter was addressed to ATACO, and the funds were to come from elsewhere. As to the letter of demand on the Public
Works office, it does not appear that any reply thereto was made; nor that the demand was pressed, nor that the debtor or the
surety were ever apprised that payment was not being made. The fact remains that because of the Bank's inactivity the other
creditors were enabled to collect P173,870.31, when the balance due to appellant Bank was only P158,563.18. The finding of
negligence made by the Court of Appeals is thus not only conclusive on us but fully supported by the evidence.

Even if the Court of Appeals erred on the second reason it advanced in support of the decision now under appeal, because the rules
on application of payments, giving preference to secured obligations are only operative in cases where there are several distinct
debts, and not where there is only one that is partially secured, the error is of no importance, since the principal reason based on
the Bank's negligence furnishes adequate support to the decision of the Court of Appeals that the surety was thereby released.

WHEREFORE, the appealed decision is affirmed, with costs against appellant Philippine National Bank.
G.R. No. L-61464 May 28, 1988

BA FINANCE CORPORATION, petitioner, 
vs.
THE HONORABLE COURT OF APPEALS, AUGUSTO YULO, LILY YULO (doing business under the name and style of A & L
INDUSTRIES), respondents.

GUTIERREZ, JR., J.:

This is a petition for review seeking to set aside the decision of the Court of Appeals which affirmed the decision of the then Court of
First Instance of Manila, dismissing the complaint instituted by the petitioner and ordering it to pay damages on the basis of the
private respondent's counterclaim.

On July 1, 1975, private respondent Augusto Yulo secured a loan from the petitioner in the amount of P591,003.59 as evidenced by a
promissory note he signed in his own behalf and as representative of the A & L Industries. Respondent Yulo presented an alleged
special power of attorney executed by his wife, respondent Lily Yulo, who manages A & L Industries and under whose name the said
business is registered, purportedly authorizing Augusto Yulo to procure the loan and sign the promissory note. About two months
prior to the loan, however, Augusto Yulo had already left Lily Yulo and their children and had abandoned their conjugal home. When
the obligation became due and demandable, Augusto Yulo failed to pay the same.

On October 7, 1975, the petitioner filed its amended complaint against the spouses Augusto and Lily Yulo on the basis of the
promissory note. It also prayed for the issuance of a writ of attatchment alleging that the said spouses were guilty of fraud in
contracting the debt upon which the action was brought and that the fraud consisted of the spouses' inducing the petitioner to enter
into a contract with them by executing a Deed of Assignment in favor of the petitioner, assigning all their rights, titles and interests
over a construction contract executed by and between the spouses and A. Soriano Corporation on June 19, 1974 for a consideration
of P615,732.50 when, in truth, the spouses did not have any intention of remitting the proceeds of the said construction contract to
the petitioner because despite the provisions in the Deed of Assignment that the spouses shall, without compensation or costs,
collect and receive in trust for the petitioner all payments made upon the construction contract and shall remit to the petitioner all
collections therefrom, the said spouses failed and refuse to remit the collections and instead, misappropriated the proceeds for their
own use and benefit, without the knowledge or consent of the petitioner.

The trial court issued the writ of attachment prayed for thereby enabling the petitioner to attach the properties of A & L Industries.
Apparently not contented with the order, the petitioner filed another motion for the examination of attachment debtor, alleging
that the properties attached by the sheriff were not sufficient to secure the satisfaction of any judgment that may be recovered by it
in the case. This was likewise granted by the court.

Private respondent Lily Yulo filed her answer with counterclaim, alleging that although Augusta Yulo and she are husband and wife,
the former had abandoned her and their children five (5) months before the filing of the complaint; that they were already
separated when the promissory note was executed; that her signature in the special power of attorney was forged because she had
never authorized Augusto Yulo in any capacity to transact any business for and in behalf of A & L Industries, which is owned by her as
a single proprietor, that she never got a single centavo from the proceeds of the loan mentioned in the promissory note; and that as
a result of the illegal attachment of her properties, which constituted the assets of the A & L Industries, the latter closed its business
and was taken over by the new owner.

After hearing, the trial court rendered judgment dismissing the petitioner's complaint against the private respondent Lily Yulo and A
& L Industries and ordering the petitioner to pay the respondent Lily Yulo P660,000.00 as actual damages; P500,000.00 as unrealized
profits; P300,000.00 as exemplary damages; P30,000.00 as and for attorney's fees; and to pay the costs.

The petitioner appealed. The Court of Appeals affirmed the trial court's decision except for the exemplary damages which it reduced
from P300,000.00 to P150,000.00 and the attorney's fees which were reduced from P30,000.00 to P20,000.00.

In resolving the question of whether or not the trial court erred in holding that the signature of respondent Lily Yulo in the special
power of attorney was forged, the Court of Appeals said:
The crucial issue to be determined is whether or not the signatures of the appellee Lily Yulo in Exhibits B and B-1
are forged. Atty. Crispin Ordoña, the Notary Public, admitted in open court that the parties in the subject
documents did not sign their signatures in his presence. The same were already signed by the supposed parties
and their supposed witnesses at the time they were brought to him for ratification. We quote from the records the
pertinent testimony of Atty. Ordoña, thus:

Q. This document marked as Exhibit B-1, when this was presented to you by that common friend,
June Enriquez, it was already typewritten, it was already accomplished, all typewritten.?

A. Yes, sir.

Q And the parties had already affixed their signatures in this document?

A. Yes, sir.

Q. In this document marked as Exhibit B although it appears here that this is an acknowledgment,
you have not stated here that the principal actually acknowledged this document to be her
voluntary act and deed?

A This in one of those things that escaped my attention. Actually I have not gone over the second
page. I believed it was in order I signed it. (TSN pp. 13-14, Hearing of Nov. 26, 1976).

The glaring admission by the Notary Public that he failed to state in the acknowledgment portion of Exhibit B-1
that the appellee Lily Yulo acknowledged the said document to be her own voluntary act and deed, is a very strong
and commanding circumstance to show that she did not appear personally before the said Notary Public and did
not sign the document.

Additionally, the Notary Public admitted that, while June Enriquez is admittedly a mutual friend of his and the
defendant Augusta Yulo, and who is also an instrumental witness in said Exhibit B-1., he could not recognize or tell
which of the two signatures appearing therein, was the signature of this June Enriquez.

Furthermore, as the issue is one of credibility of a witness, the findings and conclusions of the trial court before
whom said witness, Atty. Crispin Ordoña, the Notary Public before whom the questioned document was
supposedly ratified and acknowledged, deserve great respect and are seldom disturbed on appeal by appellate
tribunals, since it is in the best and peculiar advantage of determining and observing the conduct, demeanor and
deportment of a particular witness while he is testifying in court, an opportunity not enjoyed by the appellate
courts who merely have to rely on the recorded proceedings which transpired in the court below, and the records
are bare of any circumstance of weight, which the trial court had overlooked and which if duly considered, may
radically affect the outcome of the case.

On the other hand, the appellee Lily Yulo, to back up her claim of forgery of her signature in Exhibit B-1, presented
in court a handwriting expert witness in the person of Police Captain Yakal Giron of the Integrated National Police
Training Command, and who is also a Document Examiner of the same Command's Crime Laboratory at Fort
Bonifacio, Metro Manila. His experience as an examiner of questioned and disputed documents, in our mind, is
quite impressive. To qualify him as a handwriting expert, he declared that he underwent extensive and actual
studies and examination of disputed or questioned document, both at the National Bureau of Investigation
Academy and National Bureau of Investigation Questioned Document Laboratory, respectively, from July 1964, up
to his appointment as Document Examiner in June, 1975, and, to further his experience along this line, he attended
the 297th Annual Conference of the American Society of Questioned Docurnent Examiners held at Seattle,
Washington, in August 1971, as a representative of the Philippines, and likewise conducted an observation of the
present and modern trends of crime laboratories in the West Coast, U.S.A., in 1971; that he likewise had
conducted actual tests and examination of about 100,000 documents, as requested by the different courts,
administrative, and governmental agencies of the Government, substantial portions of which relate to actual court
cases.

In concluding that the signatures of the appellee Lily Yulo, in the disputed document in question (Exh. B-1), were all
forgeries, and not her genuine signature, the expert witness categorically recited and specified in open court what
 he observed to be about twelve (12) glaring and material significant differences, in his comparison of the
signatures appearing in the genuine specimen signatures of the said appellee and with those appearing in the
questioned document (Exhibit B-1). Indeed, we have likewise seen the supposed notable differences, found in the
standard or genuine signatures of the appellee which were lifted and obtained in the official files of the
government, such as the Bureau of Internal Revenue on her income tax returns, as compared to the pretended
signature of the appellee appearing in Exhibits B, B-1. It is also noteworthy to mention that the appellant did not
even bother to conduct a cross-examination of the handwriting expert witness, Capt. Giron, neither did the
appellant present another handwriting expert, at least to counter-act or balance the appellee's handwriting expert.

Prescinding from the foregoing facts, we subscribe fully to the lower court's observations that the signatures of the
appellee Lily Yulo in the questioned document (Exh. B-1) were forged. Hence, we find no factual basis to disagree.
(pp. 28-30, Rollo)

As to the petitioner's contention that even if the signature of Lily Yulo was forged or even if the attached properties were her
exclusive property, the same can be made answerable to the obligation because the said properties form part of the conjugal
partnership of the spouses Yulo, the appellate court held that these contentions are without merit because there is strong
preponderant evidence to show that A & L Industries belongs exclusively to respondent Lily Yulo, namely: a) The Certificate of
Registration of A & L Industries, issued by the Bureau of Commerce, showing that said business is a single proprietorship, and that
the registered owner thereof is only Lily Yulo; b) The Mayor's Permit issued in favor of A & L Industries, by the Caloocan City Mayor's
Office showing compliance by said single proprietorship company with the City Ordinance governing business establishments; and c)
The Special Power of Attorney itself, assuming but without admitting its due execution, is tangible proof that Augusto Yulo has no
interest whatsoever in the A & L Industries, otherwise, there would have been no necessity for the Special Power of Attorney if he is
a part owner of said single proprietorship.

With regard to the award of damages, the Court of Appeals affirmed the findings of the trial court that there was bad faith on the
part of the petitioner as to entitle the private respondent to damages as shown not only by the fact that the petitioner did not
present the Deed of Assignment or the construction agreement or any evidence whatsoever to support its claim of fraud on the part
of the private respondent and to justify the issuance of a preliminary attachment, but also by the following findings:

Continuing and elaborating further on the appellant's mala fide actuations in securing the writ of attachment, the
lower court stated as follows:

Plaintiff not satisfied with the instant case where an order for attachment has already been
issued and enforced, on the strength of the same Promissory Note (Exhibit"A"), utilizing the Deed
of Chattel Mortgage (Exhibit "4"), filed a foreclosure proceedings before the Office of the Sheriff
of Caloocan (Exhibit"6") foreclosing the remaining properties found inside the premises formerly
occupied by the A & L Industries. A minute examination of Exhibit "4" will show that the
contracting parties thereto, as appearing in par. 1 thereof, are Augusto Yulo, doing business
under the style of A & L Industries (should be A & L Glass Industries Corporation), as mortgagor
and BA Finance Corporation as mortgagee, thus the enforcement of the Chattel Mortgage against
the property of A & L Industries exclusively owned by Lily T. Yulo appears to be without any
factual or legal basis whatsoever. The chattel mortgage, Exhibit "4" and the Promissory Note,
Exhibit A, are based on one and the same obligation. Plaintiff tried to enforce as it did enforce its
claim into two different modes a single obligation.

Aware that defendant Lily Yulo, filed a Motion to Suspend Proceedings by virtue of a complaint
she filed with the Court of First Instance of Caloocan, seeking annulment of the Promissory Note,
the very basis of the plaintiff in filing this complaint, immediately after the day it filed a Motion
for the Issuance of an Alias Writ of Preliminary Attachment . . .Yet, inspite of the knowledge and
the filing of this Motion to Suspend Proceedings, the Plaintiff still filed a Motion for the Issuance
of a Writ of Attachment dated February 6, 1976 before this court. To add insult to injury, plaintiff
even filed a Motion for Examination of the Attachment Debtor, although aware that Lily Yulo had
already denied participation in the execution of Exhibits "A" and "B". These incidents and actions
taken by plaintiff, to the thinking of the court, are sufficient to prove and establish the element of
bad faith and malice on the part of plaintiff which may warrant the award of damages in favor of
defendant Lily Yulo. (Ibid., pp. 102-103).<äre||anº•1àw>
 Indeed, the existence of evident bad faith on the appellant's part in proceeding against the
appellee Lily Yulo in the present case, may likewise be distressed on the fact that its officer Mr.
Abraham Co, did not even bother to demand the production of at least the duplicate original of
the Special Power of Attorney (Exhibit B) and merely contended himself with a mere xerox copy
thereof, neither did he require a more specific authority from the A & L Industries to contract the
loan in question, since from the very content and recitals of the disputed document, no
authority, express or implied, has been delegated or granted to August Yulo to contract a loan,
especially with the appellant. (pp. 33-34, Rollo)

Concerning the actual damages, the appellate court ruled that the petitioner should have presented evidence to disprove or rebut
the private respondent's claim but it remained quiet and chose not to disturb the testimony and the evidence presented by the
private respondent to prove her claim.

In this petition for certiorari, the petitioner raises three issues. The first issue deals with the appellate court's affirmance of the trial
court's findings that the signature of the private respondent on the Special Power of Attorney was forged. According to the
petitioner, the Court of Appeals disregarded the direct mandate of Section 23, Rule 132 of the Rules of Court which states in part
that evidence of handwriting by comparison may be made "with writings admitted or treated as genuine by the party against whom
the evidence is offered, or proved to be genuine to the satisfaction of the judge," and that there is no evidence on record which
proves or tends to prove the genuineness of the standards used.

There is no merit in this contention.

The records show that the signatures which were used as "standards" for comparison with the alleged signature of the private
respondent in the Special Power of Attorney were those from the latter's residence certificates in the years 1973, 1974 and 1975,
her income tax returns for the years 1973 and 1975 and from a document on long bond paper dated May 18, 1977. Not only were
the signatures in the foregoing documents admitted by the private respondent as hers but most of the said documents were used by
the private respondent in her transactions with the government. As was held in the case of Plymouth Saving & Loan Assn. No. 2 v.
Kassing (125 NE 488, 494):

We believe the true rule deduced from the authorities to be that the genuineness of a "standard" writing may be
established (1) by the admission of the person sought to be charged with the disputed writing made at or for the
purposes of the trial or by his testimony; (2) by witnesses who saw the standards written or to whom or in whose
hearing the person sought to be charged acknowledged the writing thereof; (3) by evidence showing that the
reputed writer of the standard has acquiesced in or recognized the same, or that it has been adopted and acted
upon by him his business transactions or other concerns....

Furthermore, the judge found such signatures to be sufficient as standards. In the case of Taylor-Wharton Iron & Steel Co. v.
Earnshaw (156 N.E. 855, 856), it was held:

When a writing is offered as a standard of comparison it is for the presiding judge to decide whether it is the
handwriting of the party to be charged. Unless his finding is founded upon error of law, or upon evidence which is,
as matter of law, insufficient to justify the finding, this court will not revise it upon exceptions." (Costelo v. Crowell,
139 Mass. 588, 590, 2 N.E. 648; Nuñez v. Perry, 113 Mass, 274, 276.)

We cannot find any error on the part of the trial judge in using the above documents as standards and also in giving credence to the
expert witness presented by the private respondent whose testimony the petitioner failed to rebut and whose credibility it likewise
failed to impeach. But more important is the fact that the unrebutted handwriting expert's testimony noted twelve (12) glaring and
material differences in the alleged signature of the private respondent in the Special Power of Attorney as compared with the
specimen signatures, something which the appellate court also took into account. In Cesar v. Sandiganbayan (134 SCRA 105, 132),
we ruled:

Mr. Maniwang pointed to other significant divergences and distinctive characteristics between the sample
signatures and the signatures on the questioned checks in his report which the court's Presiding Justice kept
mentioning during Maniwang's testimony.

In the course of his cross-examination, NBI expert Tabayoyong admitted that he saw the differences between the
exemplars used and the questioned signatures but he dismissed the differences because he did not consider them
 fundamental. We rule that significant differences are more fundamental than a few similarities. A forger always
strives to master some similarities.

The second issue raised by the petitioner is that while it is true that A & L Industries is a single proprietorship and the registered
owner thereof is private respondent Lily Yulo, the said proprietorship was established during the marriage and its assets were also
acquired during the same. Therefore, it is presumed that this property forms part of the conjugal partnership of the spouses Augusto
and Lily Yulo and thus, could be held liable for the obligations contracted by Augusto Yulo, as administrator of the partnership.

There is no dispute that A & L Industries was established during the marriage of Augusta and Lily Yulo and therefore the same is
presumed conjugal and the fact that it was registered in the name of only one of the spouses does not destroy its conjugal nature
(See Mendoza v. Reyes, 124 SCRA 161, 165). However, for the said property to be held liable, the obligation contracted by the
husband must have redounded to the benefit of the conjugal partnership under Article 161 of the Civil Code. In the present case, the
obligation which the petitioner is seeking to enforce against the conjugal property managed by the private respondent Lily Yulo was
undoubtedly contracted by Augusto Yulo for his own benefit because at the time he incurred the obligation he had already
abandoned his family and had left their conjugal home. Worse, he made it appear that he was duly authorized by his wife in behalf
of A & L Industries, to procure such loan from the petitioner. Clearly, to make A & L Industries liable now for the said loan would be
unjust and contrary to the express provision of the Civil Code. As we have ruled in Luzon Surety Co., Inc. v. De Gracia  (30 SCRA 111,
115-117):

As explained in the decision now under review: "It is true that the husband is the administrator of the conjugal
property pursuant to the provisions of Art. 163 of the new Civil Code. However, as such administrator the only
obligations incurred by the husband that are chargeable against the conjugal property are those incurred in the
legitimate pursuit of his career, profession or business with the honest belief that he is doing right for the benefit
of the family. This is not true in the case at bar for we believe that the husband in acting as guarantor or surety for
another in an indemnity agreement as that involved in this case did not act for the benefit of the conjugal
partnership. Such inference is more emphatic in this case, when no proof is presented that Vicente Garcia in acting
as surety or guarantor received consideration therefore, which may redound to the benefit of the conjugal
partnership.(Ibid, pp. 46-47).

xxx xxx xxx

xxx xxx xxx

In the most categorical language, a conjugal partnership under that provision is liable only for such "debts and
obligations contracted by the husband for the benefit of the conjugal partnership." There must be the requisite
showing then of some advantage which clearly accrued to the welfare of the spouses. There is none in this case.

xxx xxx xxx

Moreover, it would negate the plain object of the additional requirement in the present Civil Code that a debt
contracted by the husband to bind a conjugal partnership must redound to its benefit. That is still another
provision indicative of the solicitude and tender regard that the law manifests for the family as a unit. Its interest is
paramount; its welfare uppermost in the minds of the codifiers and legislators.

We, therefore, rule that the petitioner cannot enforce the obligation contracted by Augusto Yulo against his conjugal properties with
respondent Lily Yulo. Thus, it follows that the writ of attachment cannot issue against the said properties.

Finally, the third issue assails the award of actual damages according to the petitioner, both the lower court and the appellate court
overlooked the fact that the properties referred to are still subject to a levy on attachment. They are, therefore, still under custodia
legis and thus, the assailed decision should have included a declaration as to who is entitled to the attached properties and that
assuming arguendo that the attachment was erroneous, the lower court should have ordered the sheriff to return to the private
respondent the attached properties instead of condemning the petitioner to pay the value thereof by way of actual damages.

In the case of Lazatin v. Twaño (2 SCRA 842, 847), we ruled:

xxx xxx xxx

 ... It should be observed that Sec. 4 of Rule 59, does not prescribed the remedies available to the attachment
defendant in case of a wrongful attachment, but merely provides an action for recovery upon the bond, based on
the undertaking therein made and not upon the liability arising from a tortuous act, like the malicious suing out of
an attachment. Under the first, where malice is not essential, the attachment defendant, is entitled to recover only
the actual damages sustained by him by reason of the attachment. Under the second, where the attachment is
maliciously sued out, the damages recoverable may include a compensation for every injury to his credit, business
or feed (Tyler v. Mahoney, 168 NC 237, 84 SE 362; Pittsburg etc. 5 Wakefield, etc., 135 NC 73, 47 SE 234). ...

The question before us, therefore, is whether the attachment of the properties of A & L Industries was wrongful so as to entitle the
petitioner to actual damages only or whether the said attachment was made in bad faith and with malice to warrant the award of
other kinds of damages. Moreover, if the private respondent is entitled only to actual damages, was the court justified in ordering
the petitioner to pay for the value of the attached properties instead of ordering the return of the said properties to the private
respondent Yulo ?

Both the trial and appellate courts found that there was bad faith on the part of the petitioner in securing the writ of attachment.
We do not think so. "An attachment may be said to be wrongful when, for instance, the plaintiff has no cause of action, or that there
is no true ground therefore, or that the plaintiff has a sufficient security other than the property attached, which is tantamout to
saying that the plaintiff is not entitled to attachment because the requirements of entitling him to the writ are wanting. (7 C.J.S.,
664)" (p. 48, Section 4, Rule 57, Francisco, Revised Rules of Court).

Although the petitioner failed to prove the ground relied upon for the issuance of the writ of attachment, this failure cannot be
equated with bad faith or malicious intent. The steps which were taken by the petitioner to ensure the security of its claim were
premised, on the firm belief that the properties involved could be made answerable for the unpaid obligation due it. There is no
question that a loan in the amount of P591,003.59 was borrowed from the bank.

We, thus, find that the petitioner is liable only for actual damages and not for exemplary damages and attorney's fees. Respondent
Lily Yulo has manifested before this Court that she no longer desires the return of the attached properties since the said attachment
caused her to close down the business. From that time she has become a mere employee of the new owner of the premises. She has
grave doubts as to the running condition of the attached machineries and equipments considering that the attachment was effected
way back in 1975. She states as a matter of fact that the petitioner has already caused the sale of the machineries for fear that they
might be destroyed due to prolonged litigation. We, therefore, deem it just and equitable to allow private respondent Lily Yulo to
recover actual damages based on the value of the attached properties as proven in the trial court, in the amount of P660,000.00. In
turn, if there are any remaining attached properties, they should be permanently released to herein petitioner.

We cannot, however, sustain the award of P500,000.00 representing unrealized profits because this amount was not proved or
justified before the trial court. The basis of the alleged unearned profits is too speculative and conjectural to show actual damages
for a future period. The private respondent failed to present reports on the average actual profits earned by her business and other
evidence of profitability which are necessary to prove her claim for the said amount (See G. A. Machineries, Inc. v. Yaptinchay, 126
SCRA 78, 88).

The judgment is therefore set aside insofar as it holds the petitioner liable for P500,000.00 actual damages representing unrealized
profits, P150,000.00 for exemplary damages and P20,000.00 for attorney's fees. As stated earlier, the attached properties, should be
released in favor of the petitioner.

WHEREFORE, the decision of the Court of Appeals is hereby SET ASIDE and the petitioner is ordered to pay the private respondent
Lily Yulo the amount of SIX HUNDRED SIXTY THOUSAND PESOS (P660,000.00) as actual damages. The remaining properties subject of
the attachment are ordered released in favor of the petitioner.
G.R. No. L-46591             October 16, 1939

TAN TIONG GONG, petitioner, 

vs.
THE SECURITIES AND EXCHANGE COMMISSION and CUA OH & CO., respondents.

Sabido and Laurel, Jr., for petitioner.

Emerito M. Ramos for respondents.

AVANCEÑA, C.J.:

Tan Tiong Gong filed a claim with the Securities and Exchange Commission against Cua Oh & Co., for the payment of the sum of
P991.36. The claimant purchased and sold shares of stock through the respondent, as his broker .It is alleged that the respondent
purchased shares of stock for P3,649.86 and sold others for P2,385, without the consent or authority of the petitioner. It is likewise
alleged that, eliminating these transaction from the respondent's accounts, the latter owes the petitioner the amount of P991.36. It
is contended that, inasmuch as these transactions effected by the respondent are null and void with respect to the petitioner
because they were not consented or authorized by him, wherefore, the result thereof should be eliminated from the accounts of the
respondent, the latter should pay, as prayed for, the the petitioner the sum of P991.36, plus P750 as damages resulting from these
illegal transactions.

The Commission absolved the respondent from this claim.lâwphi1.nêt

As stated by the petitioner, the sole question at issue is whether or not the respondent acted with his knowledge or authority in the
aforesaid transactions. the petitioner contends that there was no such authority. The commission, however, after going into
evidence, reached the conclusion that the petitioner failed to establish his contention.

As the appeal from the resolution of the Commission is based upon a pure question of fact, and the factual findings of the
commission being final under section 35 of Commonwealth Act No. 83, the said resolution is affirmed, with the costs to the
petitioner. So ordered.
G.R. No. L-30573 October 29, 1971

VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA,
VICENTE JR., SALVADOR, IRENE and JOSELITO, all surnamed DOMINGO, petitioners-appellants, 
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P. PURISIMA, intervenor-respondent.

Teofilo Leonin for petitioners-appellants.

Osorio, Osorio & Osorio for respondent-appellee.

Teofilo P. Purisima in his own behalf as intervenor-respondent.

MAKASIAR, J.:

Petitioner-appellant Vicente M. Domingo, now deceased and represented by his heirs, Antonina Raymundo vda. de Domingo,
Ricardo, Cesar, Amelia, Vicente Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the reversal of the majority decision
dated, March 12, 1969 of the Special Division of Five of the Court of Appeals affirming the judgment of the trial court, which
sentenced the said Vicente M. Domingo to pay Gregorio M. Domingo P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50
with interest on both amounts from the date of the filing of the complaint, to pay Gregorio Domingo P1,000.00 as moral and
exemplary damages and P500.00 as attorney's fees plus costs.

The following facts were found to be established by the majority of the Special Division of Five of the Court of Appeals:

In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the
exclusive agency to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per square
meter (or for P176,954.00) with a commission of 5% on the total price, if the property is sold by Vicente or by anyone else during the
30-day duration of the agency or if the property is sold by Vicente within three months from the termination of the agency to
apurchaser to whom it was submitted by Gregorio during the continuance of the agency with notice to Vicente. The said agency
contract was in triplicate, one copy was given to Vicente, while the original and another copy were retained by Gregorio.

On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the 5%
commission.

Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.

Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square meter (Exhibit "B"). Vicente
directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences between Gregorio and Oscar de Leon, the latter
raised his offer to P109,000.00 on June 20, 1956 as evidenced by Exhibit "C", to which Vicente agreed by signing Exhibit "C". Upon
demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest money, after which Vicente
advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his former offer to pay for the property at P1.20 per square
meter in another letter, Exhibit "D". Subsequently, Vicente asked for an additional amount of P1,000.00 as earnest money, which
Oscar de Leon promised to deliver to him. Thereafter, Exhibit "C" was amended to the effect that Oscar de Leon will vacate on or
about September 15, 1956 his house and lot at Denver Street, Quezon City which is part of the purchase price. It was again amended
to the effect that Oscar will vacate his house and lot on December 1, 1956, because his wife was on the family way and Vicente could
stay in lot No. 883 of Piedad Estate until June 1, 1957, in a document dated June 30, 1956 (the year 1957 therein is a mere
typographical error) and marked Exhibit "D". Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of One
Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total in round figure
of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to
Vicente. Neither did Oscar pay Vicente the additional amount of One Thousand Pesos (P1,000.00) by way of earnest money. In the
deed of sale was not executed on August 1, 1956 as stipulated in Exhibit "C" nor on August 15, 1956 as extended by Vicente, Oscar
told Gregorio that he did not receive his money from his brother in the United States, for which reason he was giving up the
negotiation including the amount of One Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand
Pesos (P1,000.00) given to Gregorio as propina or gift. When Oscar did not see him after several weeks, Gregorio sensed something
fishy. So, he went to Vicente and read a portion of Exhibit "A" marked habit "A-1" to the effect that Vicente was still committed to
pay him 5% commission, if the sale is consummated within three months after the expiration of the 30-day period of the exclusive
agency in his favor from the execution of the agency contract on June 2, 1956 to a purchaser brought by Gregorio to Vicente during
the said 30-day period. Vicente grabbed the original of Exhibit "A" and tore it to pieces. Gregorio held his peace, not wanting to
antagonize Vicente further, because he had still duplicate of Exhibit "A". From his meeting with Vicente, Gregorio proceeded to the
office of the Register of Deeds of Quezon City, where he discovered Exhibit "G' deed of sale executed on September 17, 1956 by
Amparo Diaz, wife of Oscar de Leon, over their house and lot No. 40 Denver Street, Cubao, Quezon City, in favor Vicente as down
payment by Oscar de Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus learning that Vicente sold his
property to the same buyer, Oscar de Leon and his wife, he demanded in writting payment of his commission on the sale price of
One Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de Leon, who told him that Vicente
went to him and asked him to eliminate Gregorio in the transaction and that he would sell his property to him for One Hundred Four
Thousand Pesos (P104,000.0 In Vicente's reply to Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the 5%
commission because he sold the property not to Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar
de Leon.

The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract, is genuine; that Amparo Diaz, the
vendee, being the wife of Oscar de Leon the sale by Vicente of his property is practically a sale to Oscar de Leon since husband and
wife have common or identical interests; that Gregorio and intervenor Teofilo Purisima were the efficient cause in the
consummation of the sale in favor of the spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon paid Gregorio the sum of One
Thousand Pesos (P1,000.00) as "propina" or gift and not as additional earnest money to be given to the plaintiff, because Exhibit
"66", Vicente's letter addressed to Oscar de Leon with respect to the additional earnest money, does not appear to have been
answered by Oscar de Leon and therefore there is no writing or document supporting Oscar de Leon's testimony that he paid an
additional earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike the first amount of One
Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as earnest money, evidenced by the letter Exhibit "4"; and that
Vicente did not even mention such additional earnest money in his two replies Exhibits "I" and "J" to Gregorio's letter of demand of
the 5% commission.

The three issues in this appeal are (1) whether the failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar
de Leon of the amount of One Thousand Pesos (P1,000.00) as gift or "propina" for having persuaded Vicente to reduce the purchase
price from P2.00 to P1.20 per square meter, so constitutes fraud as to cause a forfeiture of his commission on the sale price; (2)
whether Vicente or Gregorio should be liable directly to the intervenor Teofilo Purisima for the latter's share in the expected
commission of Gregorio by reason of the sale; and (3) whether the award of legal interest, moral and exemplary damages, attorney's
fees and costs, was proper.

Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred in by Justice Juan Enriquez did not touch on
these issues which were extensively discussed by Justice Magno Gatmaitan in his dissenting opinion. However, Justice Esguerra, in
his concurring opinion, affirmed that it does not constitute breach of trust or fraud on the part of the broker and regarded same as
merely part of the whole process of bringing about the meeting of the minds of the seller and the purchaser and that the
commitment from the prospect buyer that he would give a reward to Gregorio if he could effect better terms for him from the seller,
independent of his legitimate commission, is not fraudulent, because the principal can reject the terms offered by the prospective
buyer if he believes that such terms are onerous disadvantageous to him. On the other hand, Justice Gatmaitan, with whom Justice
Antonio Cafizares corner held the view that such an act on the part of Gregorio was fraudulent and constituted a breach of trust,
which should deprive him of his right to the commission.

The duties and liabilities of a broker to his employer are essentially those which an agent owes to his principal. 1

Consequently, the decisive legal provisions are in found Articles 1891 and 1909 of the New Civil Code.

Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he
may have received by virtue of the agency, even though it may not be owing to the principal.

Every stipulation exempting the agent from the obligation to render an account shall be void.

xxx xxx xxx

Art. 1909. The agent is responsible not only for fraud but also for negligence, which shall be judged with more less
rigor by the courts, according to whether the agency was or was not for a compensation.
Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil Code which provides that:

Art. 1720. Every agent is bound to give an account of his transaction and to pay to the principal whatever he may
have received by virtue of the agency, even though what he has received is not due to the principal.

The modification contained in the first paragraph Article 1891 consists in changing the phrase "to pay" to "to deliver", which latter
term is more comprehensive than the former.

Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required to an agent — condemning as
void any stipulation exempting the agent from the duty and liability imposed on him in paragraph one thereof.

Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish Civil Code which reads thus:

Art. 1726. The agent is liable not only for fraud, but also for negligence, which shall be judged with more or less
severity by the courts, according to whether the agency was gratuitous or for a price or reward.

The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on the part of the agent, the real
estate broker in this case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full
disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency, so much so that
the law as amended does not countenance any stipulation exempting the agent from such an obligation and considers such an
exemption as void. The duty of an agent is likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on
the highest and truest principle of morality as well as of the strictest justice. 2

Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing
the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the
commission from his principal, even if the principal does not suffer any injury by reason of such breach of fidelity, or that he
obtained better results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the
possibility of any wrong, not to remedy or repair an actual damage. 3 By taking such profit or bonus or gift or propina from the
vendee, the agent thereby assumes a position wholly inconsistent with that of being an agent for hisprincipal, who has a right to
treat him, insofar as his commission is concerned, as if no agency had existed. The fact that the principal may have been benefited
by the valuable services of the said agent does not exculpate the agent who has only himself to blame for such a result by reason of
his treachery or perfidy.

This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil Code. Thus, for failure to deliver
sums of money paid to him as an insurance agent for the account of his employer as required by said Article 1720, said insurance
agent was convicted estafa. 4 An administrator of an estate was likewise under the same Article 1720 for failure to render an account
of his administration to the heirs unless the heirs consented thereto or are estopped by having accepted the correctness of his
account previously rendered. 5

Because of his responsibility under the aforecited article 1720, an agent is likewise liable for estafa for failure to deliver to his
principal the total amount collected by him in behalf of his principal and cannot retain the commission pertaining to him by
subtracting the same from his collections. 6

A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his client all the money and property received by him for his
client despite his attorney's lien. 7 The duty of a commission agent to render a full account his operations to his principal was
reiterated in Duhart, etc. vs. Macias. 8

The American jurisprudence on this score is well-nigh unanimous.

Where a principal has paid an agent or broker a commission while ignorant of the fact that the latter has been
unfaithful, the principal may recover back the commission paid, since an agent or broker who has been unfaithful
is not entitled to any compensation.

xxx xxx xxx

 In discussing the right of the principal to recover commissions retained by an unfaithful agent, the court in Little vs.
Phipps  (1911) 208 Mass. 331, 94 NE 260, 34 LRA (NS) 1046, said: "It is well settled that the agent is bound to
exercise the utmost good faith in his dealings with his principal. As Lord Cairns said, this rule "is not a technical or
arbitrary rule. It is a rule founded on the highest and truest principles, of morality." Parker vs. McKenna (1874) LR
10,Ch(Eng) 96,118 ... If the agent does not conduct himself with entire fidelity towards his principal, but is guilty of
taking a secret profit or commission in regard the matter in which he is employed, he loses his right to
compensation on the ground that he has taken a position wholly inconsistent with that of agent for his employer,
and which gives his employer, upon discovering it, the right to treat him so far as compensation, at least, is
concerned as if no agency had existed. This may operate to give to the principal the benefit of valuable services
rendered by the agent, but the agent has only himself to blame for that result."

xxx xxx xxx

The intent with which the agent took a secret profit has been held immaterial where the agent has in fact entered
into a relationship inconsistent with his agency, since the law condemns the corrupting tendency of the
inconsistent relationship. Little vs. Phipps (1911) 94 NE 260. 9

As a general rule, it is a breach of good faith and loyalty to his principal for an agent, while the agency exists, so to
deal with the subject matter thereof, or with information acquired during the course of the agency, as to make a
profit out of it for himself in excess of his lawful compensation; and if he does so he may be held as a trustee and
may be compelled to account to his principal for all profits, advantages, rights, or privileges acquired by him in such
dealings, whether in performance or in violation of his duties, and be required to transfer them to his principal upon
being reimbursed for his expenditures for the same, unless the principal has consented to or ratified the transaction
knowing that benefit or profit would accrue or had accrued, to the agent, or unless with such knowledge he has
allowed the agent so as to change his condition that he cannot be put in status quo. The application of this rule is
not affected by the fact that the principal did not suffer any injury by reason of the agent's dealings or that he in
fact obtained better results; nor is it affected by the fact that there is a usage or custom to the contrary or that the
agency is a gratuitous one. (Emphasis applied.) 10

In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or propina  in the amount of One Thousand
Pesos (P1,000.00) from the prospective buyer Oscar de Leon, without the knowledge and consent of his principal, herein petitioner-
appellant Vicente Domingo. His acceptance of said substantial monetary gift corrupted his duty to serve the interests only of his
principal and undermined his loyalty to his principal, who gave him partial advance of Three Hundred Pesos (P300.00) on his
commission. As a consequence, instead of exerting his best to persuade his prospective buyer to purchase the property on the most
advantageous terms desired by his principal, the broker, herein defendant-appellee Gregorio Domingo, succeeded in persuading his
principal to accept the counter-offer of the prospective buyer to purchase the property at P1.20 per square meter or One Hundred
Nine Thousand Pesos (P109,000.00) in round figure for the lot of 88,477 square meters, which is very much lower the the price of
P2.00 per square meter or One Hundred Seventy-Six Thousand Nine Hundred Fifty-Four Pesos (P176,954.00) for said lot originally
offered by his principal.

The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a middleman with the
task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of
the transaction. Neither would the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he
received from the purchaser and his principal did not object therto. 11 Herein defendant-appellee Gregorio Domingo was not merely
a middleman of the petitioner-appellant Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent of said
petitioner-appellant only. And therein petitioner-appellant was not aware of the gift of One Thousand Pesos (P1,000.00) received by
Gregorio Domingo from the prospective buyer; much less did he consent to his agent's accepting such a gift.

The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon, does not materially alter the
situation; because the transaction, to be valid, must necessarily be with the consent of the husband Oscar de Leon, who is the
administrator of their conjugal assets including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were given as
part of and constituted the down payment on, the purchase price of herein petitioner-appellant's lot No. 883 of Piedad Estate.
Hence, both in law and in fact, it was still Oscar de Leon who was the buyer.

As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must forfeit his right to the commission
and must return the part of the commission he received from his principal.
Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his one-half share of whatever
amounts Gregorio Domingo received by virtue of the transaction as his sub-agency contract was with Gregorio Domingo alone and
not with Vicente Domingo, who was not even aware of such sub-agency. Since Gregorio Domingo received from Vicente Domingo
and Oscar de Leon respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of
One Thousand Three Hundred Pesos (P1,300.00), one-half of the same, which is Six Hundred Fifty Pesos (P650.00), should be paid by
Gregorio Domingo to Teofilo Purisima.

Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental anguish and serious anxiety as well as
wounded feelings, petitioner-appellant Vicente Domingo should be awarded moral damages in the reasonable amount of One
Thousand Pesos (P1,000.00) attorney's fees in the reasonable amount of One Thousand Pesos (P1,000.00), considering that this case
has been pending for the last fifteen (15) years from its filing on October 3, 1956.

WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and directing defendant-appellee
Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral damages and
One Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3)
to pay the costs.
G.R. No. 3246            February 9, 1907

CADWALLADER & COMPANY, plaintiff-appellant, 

vs.
SMITH, BELL & COMPANY and HENRY W. PEABODY & COMPANY, defendants-appellees.

TRACEY, J.:

In this action the plaintiff, as assignee of the Pacific Export Lumber Company, sues for $3,486, United States currency, the differences
between the amount turned over to the company on account of a cargo of cedar piles consigned to the defendants as its agents and
afterwards bought by them, and the amount actually received by them on the subsequent sale thereof. The defendant were allowed
by the court below a counterclaim of $6,993.80, United States currency, from which was deducted $2,063.16 for the plaintiffs claim,
leaving a balance in favor of the defendants of $4,930.64, for the equipment of which, to wit, 9,861.28 pesos, judgment was
entered. The defendants have not appealed. The plaintiff took several exceptions, but on the argument its counsel stated that its
contention was confined to the allowance by the trial court of the commissions of the defendant on selling the piling.

In May 1902, the Pacific Export Lumber Company of Portland shipped upon the steamer Quito  five hundred and eighty-one (581)
piles to the defendant, Henry W. Peabody & Company, at Manila, on the sale of which before storage the consignees were to receive
a commission of one half of whatever sum was obtained over $15 for each pile and 5 per cent of the price of the piles sold after
storage. After the arrival of the steamer on August 2, Peabody and Company wrote the agent of the Pacific Company at Shanghai
that for lack of a demand the piles would have to be sold at considerably less than $15 apiece; whereupon the company's agent
directed them to make the best possible offer for the piles, in response to which on August 5 they telegraphed him an offer of $12
apiece. It was accepted by him on August 6, in consequence of which the defendant paid the Pacific Company $6,972.

It afterwards appeared that on July 9 Peabody & Company had entered into negotiations with the Insular Purchasing Agent for the
sale for the piles at $20 a piece, resulting of August 4 in the sale to the Government of two hundred and thirteen (213) piles at $19
each. More of them were afterwards sold to the Government at the same figure and the remainder to other parties at carrying
prices, the whole realizing to the defendants $10,41.66, amounting to $3,445.66 above the amount paid by the defendant to the
plaintiff therefor. Thus it is clear that at the time when the agents were buying from their principal these piles at $12 apiece on the
strength of their representation that no better price was obtainable, they had already sold a substantial part of them at $19. In these
transactions the defendant, Smith, Bell & Company, were associated with the defendants, Henry W. Peabody & Company, who
conducted the negotiations, and are consequently accountable with them.

It is plaint that in concealing from their principal the negotiations with the Government, resulting in a sale of the piles at 19 a piece
and in misrepresenting the condition of the market, the agents committed a breach of duty from which they should benefit. The
contract of sale to themselves thereby induced was founded on their fraud and was subject to annulment by the aggrieved party.
(Civil Code, articles 1265 and 1269.) Upon annulment the parties should be restored to their original position by mutual restitution.
(Article 1303 and 1306.) Therefore the defendants are not entitled to retain their commission realized upon the piles included under
the contract so annulled. In respect of the 213 piles, which at the time of the making of this contract on August 5 they had already
sold under the original agency, their commission should be allowed.

The court below found the net amount due from the defendants to the plaintiff for the Quito piles, after deducting the expense of
landing the same and $543.10 commission, was $1,760.88, on which it allowed interest at the rate of 6 per cent from March 1, 1903.
This amount should be increased by the addition thereto of the amount of the commission disallowed, to wit, $331.17 giving
$2,092.05. Interest computed on this sum to the date of the entry of judgment below amounts to $359.77, which added to the
principal sum makes $2,241.82, the amount of plaintiff's claim, which is to be deducted from defendants' counterclaim of $6,993.80,
leaving a balance of $4,541.98, equivalent to 9,083.96 pesos, the amount for which judgment below should have been entered in
favor of the defendants.

Let the judgment of the Court of First Instance be modified accordingly, without costs to either party.

After expiration of twenty days let judgment be entered in accordance herewith and ten days thereafter the record remanded to the
court below for proper action. So ordered.

G.R. No. 88866             February 18, 1991

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

Angara, Abello, Concepcion, Regala & Cruz for petitioner.

Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for Magno and Lucia Castillo.
Agapito S. Fajardo and Jaime M. Cabiles for respondent Golden Savings & Loan Association, Inc.

CRUZ, J.:

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

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

In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and deposited over a period of two months 38
treasury warrants with a total value of P1,755,228.37. They were all drawn by the Philippine Fish Marketing Authority and
purportedly signed by its General Manager and countersigned by its Auditor. Six of these were directly payable to Gomez while the
others appeared to have been indorsed by their respective payees, followed by Gomez as second indorser. 1

On various dates between June 25 and July 16, 1979, all these warrants were subsequently indorsed by Gloria Castillo as Cashier of
Golden Savings and deposited to its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro. They were then sent
for clearing by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of Treasury for special
clearing. 2

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

The first withdrawal was made on July 9, 1979, in the amount of P508,000.00, the second on July 13, 1979, in the amount of
P310,000.00, and the third on July 16, 1979, in the amount of P150,000.00. The total withdrawal was P968.000.00. 4

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

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

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

ACCORDINGLY, judgment is hereby rendered:

1. Dismissing the complaint with costs against the plaintiff;

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

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

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

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

SO ORDERED.

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

1. Respondent Court of Appeals erred in disregarding and failing to apply the clear contractual terms and conditions on the
deposit slips allowing Metrobank to charge back any amount erroneously credited.

(a) Metrobank's right to charge back is not limited to instances where the checks or treasury warrants are forged
or unauthorized.

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

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

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

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

The petition has no merit.

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

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

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

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

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

And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the dorsal side of the deposit slips
through which the treasury warrants were deposited by Golden Savings with its Calapan branch. The conditions read as follows:

Kindly note that in receiving items on deposit, the bank obligates itself only as the depositor's collecting agent, assuming no
responsibility beyond care in selecting correspondents, and until such time as actual payment shall have come into
possession of this bank, the right is reserved to charge back to the depositor's account any amount previously credited,
whether or not such item is returned. This also applies to checks drawn on local banks and bankers and their branches as
well as on this bank, which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft or any other reason.
(Emphasis supplied.)

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

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

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

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

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

Metrobank's argument that it may recover the disputed amount if the warrants are not paid  for any reason is not acceptable. Any
reason does not mean no reason at all. Otherwise, there would have been no need at all for Golden Savings to deposit the treasury
warrants with it for clearance. There would have been no need for it to wait until the warrants had been cleared before paying the
proceeds thereof to Gomez. Such a condition, if interpreted in the way the petitioner suggests, is not binding for being arbitrary and
unconscionable. And it becomes more so in the case at bar when it is considered that the supposed dishonor of the warrants was
not communicated to Golden Savings before it made its own payment to Gomez.
The belated notification aggravated the petitioner's earlier negligence in giving express or at least implied clearance to the treasury
warrants and allowing payments therefrom to Golden Savings. But that is not all. On top of this, the supposed reason for the
dishonor, to wit, the forgery of the signatures of the general manager and the auditor of the drawer corporation, has not been
established. 9 This was the finding of the lower courts which we see no reason to disturb. And as we said in MWSS v. Court of
Appeals: 10

Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA 238). It must be established by clear, positive and
convincing evidence. This was not done in the present case.

A no less important consideration is the circumstance that the treasury warrants in question are not negotiable instruments. Clearly
stamped on their face is the word "non-negotiable." Moreover, and this is of equal significance, it is indicated that they are payable
from a particular fund, to wit, Fund 501.

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

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

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

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

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

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

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

x x x           x x x          x x x

Sec. 3. When promise is unconditional. — An unqualified order or promise to pay is unconditional within the meaning of this
Act though coupled with —

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

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

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

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

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

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

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

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

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

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

3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter allowing defendant Golden Savings &
Loan Association, Inc. to withdraw the amount outstanding thereon, if any, after the debit.
G.R. No. 121824 January 29, 1998

BRITISH AIRWAYS, petitioner, vs.
COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents. ROMERO, J.:

In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of respondent Court of
Appeals 1 promulgated on September 7, 1995, which affirmed the award of damages and attorney's fees made by the Regional Trial
Court of Cebu, 7th Judicial Region, Branch 17, in favor of private respondent GOP Mahtani as well as the dismissal of its third-party
complaint against Philippine Airlines (PAL). 2

The material and relevant facts are as follows:

On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a
certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from BA where the following itinerary was
indicated: 3

CARRIER FLIGHT DATE TIME STATUS

MANILA MNL PR 310 Y 16 APR. 1730 OK

HONGKONG HKG BA 20 M 16 APR. 2100 OK

BOMBAY BOM BA 19 M 23 APR. 0840 OK

HONGKONG HKG PR 311 Y

MANILA MNL

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in
Hongkong he had to take a connecting flight to Bombay on board BA.

Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings and
personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for Bombay.

Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA
representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage for one week,
BA finally advised him to file a claim by accomplishing the "Property Irregularity Report." 4

Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for damages and attorney's fees5 against BA and
Mr. Gumar before the trial court, docketed as Civil Case No. CEB-9076.

On September 4, 1990, BA filed its answer with counter claim 6 to the complaint raising, as special and affirmative defenses, that
Mahtani did not have a cause of action against it. Likewise, on November 9, 1990, BA filed a third-party complaint 7 against PAL
alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly any
time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.

On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it disclaimed any liability, arguing that there was, in
fact, adequate time to transfer the luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to Hongkong
authorities should be considered as transfer to BA. 8

After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in favor of Mahtani,9 the dispositive
portion of which reads as follows:

WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the defendant for which defendant is
ordered to pay plaintiff the sum of Seven Thousand (P7,000.00) Pesos for the value of the two (2) suit cases; Four Hundred
 U.S. ($400.00) Dollars representing the value of the contents of plaintiff's luggage; Fifty Thousand (P50,000.00) Pesos for
moral and actual damages and twenty percent (20%) of the total amount imposed against the defendant for attorney's fees
and costs of this action.

The Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSED for lack of cause of action.

SO ORDERED.

Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial court's findings. Thus:

WHEREFORE, in view of all the foregoing considerations, finding the Decision appealed from to be in accordance with law
and evidence, the same is hereby AFFIRMED in toto, with costs against defendant-appellant.

SO ORDERED. 10

BA is now before us seeking the reversal of the Court of Appeals' decision.

In essence, BA assails the award of compensatory damages and attorney's fees, as well as the dismissal of its third-party complaint
against PAL. 11

Regarding the first assigned issue, BA asserts that the award of compensatory damages in the separate sum of P7,000.00 for the loss
of Mahtani's two pieces of luggage was without basis since Mahtani in his complaint 12stated the following as the value of his
personal belongings:

8. On the said travel, plaintiff took with him the following items and its corresponding value, to wit:

1. personal belonging P10,000.00

2. gifts for his parents and relatives $5,000.00

Moreover, he failed to declare a higher valuation with respect to his luggage, a condition provided for in the ticket, which reads: 13

Liability for loss, delay, or damage to baggage is limited unless a higher value is declared in advance and additional charges
are paid:

1. For most international travel (including domestic corporations of international journeys) the liability limit is
approximately U.S. $9.07 per pound (U.S. $20.000) per kilo for checked baggage and U.S. $400 per passenger for unchecked
baggage.

Before we resolve the issues raised by BA, it is needful to state that the nature of an airline's contract of carriage partakes of two
types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to their
destination. A business intended to serve the traveling public primarily, it is imbued with public interest, hence, the law governing
common carriers imposes an exacting standard. 14 Neglect or malfeasance by the carrier's employees could predictably furnish bases
for an action for damages. 15

In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is indubitable that his
luggage never arrived in Bombay on time. Therefore, as in a number of cases 16 we have assessed the airlines' culpability in the form
of damages for breach of contract involving misplaced luggage.

In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove during the
trial the existence of the factual basis of the damages and its causal connection to defendant's acts. 17

In this regard, the trial court granted the following award as compensatory damages:

Since plaintiff did not declare the value of the contents in his luggage and even failed to show receipts of the alleged gifts
for the members of his family in Bombay, the most that can be expected for compensation of his lost luggage (2 suit cases)
 is Twenty U.S. Dollars ($20.00) per kilo, or combined value of Four Hundred ($400.00) U.S. Dollars for Twenty kilos
representing the contents plus Seven Thousand (P7,000.00) Pesos representing the purchase price of the two (2) suit cases.

However, as earlier stated, it is the position of BA that there should have been no separate award for the luggage and the contents
thereof since Mahtani failed to declare a separate higher valuation for the luggage, 18 and therefore, its liability is limited, at most,
only to the amount stated in the ticket.

Considering the facts of the case, we cannot assent to such specious argument.

Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to recover a greater amount.
Article 22(1) of the Warsaw Convention, 19 provides as follows:

xxx xxx xxx

(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum of 250 francs per
kilogram, unless the consignor has made, at time the package was handed over to the carrier, a special declaration of the
value at delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a
sum not exceeding the declared sum, unless he proves that the sum is greater than the actual value to the consignor at
delivery.

American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of the limits specified
in the tariff which was filed with the proper authorities, such tariff being binding, on the passenger regardless of the passenger's lack
of knowledge thereof or assent thereto. 20 This doctrine is recognized in this jurisdiction. 21

Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts where the facts and
circumstances justify that they should be disregarded. 22

In addition, we have held that benefits of limited liability are subject to waiver such as when the air carrier failed to raise timely
objections during the trial when questions and answers regarding the actual claims and damages sustained by the passenger were
asked. 23

Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of limited liability when it allowed
Mahtani to testify as to the actual damages he incurred due to the misplacement of his luggage, without any objection. In this
regard, we quote the pertinent transcript of stenographic notes of Mahtani's direct testimony: 24

Q — How much are you going to ask from this court?

A — P100,000.00. Q — What else?

A — Exemplary damages.Q — How much?

A — P100,000.00.Q — What else?

A — The things I lost, $5,000.00 for the gifts I lost and my personal belongings, P10,000.00.

Q — What about the filing of this case?

A — The court expenses and attorney's fees is 30%.

Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse party to be
inadmissible for any reason, the latter has the right to object. However, such right is a mere privilege which can be waived.
Necessarily, the objection must be made at the earliest opportunity, lest silence when there is opportunity to speak may operate as
a waiver of objections. 25 BA has precisely failed in this regard.

To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even conducted his own cross-
examination as well. 26 In the early case of Abrenica v. Gonda, 27 we ruled that:
 . . . (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the admission of any
evidence must be made at the proper time, and that if not so made it will be understood to have been waived. The proper
time to make a protest or objection is when, from the question addressed to the witness, or from the answer thereto, or
from the presentation of proof, the inadmissibility of evidence is, or may be inferred.

Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to great respect. 28 Since the
actual value of the luggage involved appreciation of evidence, a task within the competence of the Court of Appeals, its ruling
regarding the amount is assuredly a question of fact, thus, a finding not reviewable by this Court.29

As to the issue of the dismissal of BA's third-party complaint against PAL, the Court of Appeals justified its ruling in this wise, and we
quote: 30

Lastly, we sustain the trial court's ruling dismissing appellant's third-party complaint against PAL.

The contract of air transportation in this case pursuant to the ticket issued by appellant to plaintiff-appellee was exclusively
between the plaintiff Mahtani and defendant-appellant BA. When plaintiff boarded the PAL plane from Manila to
Hongkong, PAL was merely acting as a subcontractor or agent of BA. This is shown by the fact that in the ticket issued by
appellant to plaintiff-appellee, it is specifically provided on the "Conditions of Contract," paragraph 4 thereof that:

4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.

The rule that carriage by plane although performed by successive carriers is regarded as a single operation and that the carrier
issuing the passenger's ticket is considered the principal party and the other carrier merely subcontractors or agent, is a settled
issue.

We cannot agree with the dismissal of the third-complaint.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko, 31 we expounded on the nature of a third-party complaint
thus:

The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a party nor privy to the
act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts, as
third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any
other relief, in respect of the plaintiff's claim. The third-party complaint is actually independent of and separate and distinct
from the plaintiff's complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently
and separately from the original complaint by the defendant against the third-party. But the Rules permit defendant to
bring in a third-party defendant or so to speak, to litigate his separate cause of action in respect of plaintiff's claim against a
third-party in the original and principal case with the object of avoiding circuitry of action and unnecessary proliferation of
law suits and of disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts.

Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract of carriage. Yet, BA
adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally denies. In other words, BA and PAL are
blaming each other for the incident.

In resolving this issue, it is worth observing that the contract of air transportation was exclusively between Mahtani and BA, the
latter merely endorsing the Manila to Hongkong leg of the former's journey to PAL, as its subcontractor or agent. In fact, the fourth
paragraph of the "Conditions of Contracts" of the ticket 32 issued by BA to Mahtani confirms that the contract was one of continuous
air transportation from Manila to Bombay.

4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.

Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to Hongkong acted as the
agent of BA.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any
negligence in the performance of its function. 33 and is liable for damages which the principal may suffer by reason of its negligent
act. 34 Hence, the Court of Appeals erred when it opined that BA, being the principal, had no cause of action against PAL, its agent or
sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA), wherein
member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their
relationship. 35 Therefore, in the instant case, the contractual relationship between BA and PAL is one of agency, the former being
the principal, since it was the one which issued the confirmed ticket, and the latter the agent.

Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa German Airlines v. Court of Appeals. 36 In that
case, Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya,
one of the airlines which was to carry Antiporda to a specific destination "bumped" him off.

An action for damages was filed against Lufthansa which, however, denied any liability, contending that its responsibility towards its
passenger is limited to the occurrence of a mishap on its own line. Consequently, when Antiporda transferred to Air Kenya, its
obligation as a principal in the contract of carriage ceased; from there on, it merely acted as a ticketing agent for Air Kenya.

In rejecting Lufthansa's argument, we ruled:

In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains
to be so, regardless of those instances when actual carriage was to be performed by various carriers. The issuance of
confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip abroad successive carriers concretely attest
to this.

Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL, since the latter
was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its negligent acts.
In China Air Lines, Ltd. v.  Court of Appeals, 37 while not exactly in point, the case, however, illustrates the principle which governs this
particular situation. In that case, we recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own
negligent acts or omission in the performance of its duties.

Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately
determining who was primarily at fault as between them, is without legal basis. After all, such proceeding is in accord with the
doctrine against multiplicity of cases which would entail receiving the same or similar evidence for both cases and enforcing
separate judgments therefor. It must be borne in mind that the purpose of a third-party complaint is precisely to avoid delay and
circuitry of action and to enable the controversy to be disposed of in one suit. 38 It is but logical, fair and equitable to allow BA to sue
PAL for indemnification, if it is proven that the latter's negligence was the proximate cause of Mahtani's unfortunate experience,
instead of totally absolving PAL from any liability.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 43309 dated September 7, 1995 is
hereby MODIFIED, reinstating the third-party complaint filed by British Airways dated November 9, 1990 against Philippine Airlines.
No costs.

G.R. No. L-17131             June 30, 1922

SING JUCO and SING BENGCO, plaintiffs-appellees, 

vs.
ANTONIO SUNYANTONG and his wife VICENTA LLORENTE DE SUNYANTONG, defendants-appellants.

Montinola, Montinola and Hontiveros for appellants.

Fisher and De Witt for appellees.

ROMUALDEZ, J.:
On May 20, 1919, the plaintiffs obtained from Maria Gay a written option to purchase an estate known as "San Antonio Estate,"
containing more than 2,000 hectares situated in the municipality of Passi, Province of Iloilo, together with the large cattle existing on
said estate. The term of the option expired, but the plaintiffs had it extended verbally until 12 o 'clock noon of June 17, 1919.

The defendant Antonio Sunyantong was at the time an employee of the plaintiffs, and the preponderance of evidence shows that
they reposed confidence in him and did not mind disclosing their plans to him, concerning the purchase of the aforesaid estate and
the progress of their negotiations with Maria Gay.

It also sufficiently established in the records that in one of the conferences held by the plaintiffs among themselves, relative to the
purchase of the aforesaid estate, at which the defendant was present, the latter remarked that it would be advisable to let some
days elapse before accepting the terms of the transfer as proposed by Maria Gay, in order that the latter might not think that they
were coveting said property. This mere remark along in itself cannot be taken to mean any wrongful intent on the part of said
defendant, but it ceases to be innocent when taken in connection with the fact, also proven, that when the defendant met Alipio de
los Santos after the latter's return to Iloilo, sent by the plaintiffs to examine the estate and satisfy himself of its condition, and Alipio
de los Santos told him of his favorable impression of the estate, he advised De los Santos not to report the estate to the plaintiffs as
being so highly valuable, for if it proved failure they might blame him, De los Santos. One becomes more strongly convinced that this
defendant has been unfaithful to his principals, the plaintiffs, when these circumstances are considered in connection with the fact
at an early hour in the morning of June 17, 1919, only the midday of which the term of plaintiff's when these circumstances are
considered in connection with the fact that at an early hour in the morning of June 17, 1919, on the midday of which the term of
plaintiff's option to purchase was to expire, said defendant Antonio Sunyantong called at the house of Mari Gay when she was
having breakfast, and offered to buy the estate on the same terms proposed by her not yet accepted by the plaintiffs, making the
offer to buy not for the benefit of the plaintiff's, but for own wife, his codefendant Vicenta Llorente de Sunyatong. In view of the
opportunity that offered itself, but respecting the option granted the plaintiffs, Maria Gay communicated by telephone with Manuel
Sotelo, who was communicated by telephone with Manuel Sotelo, who was acting as broker for the plaintiffs in these transactions,
and told him that another buyer of the estate had presented himself who would accept the terms proposed by her and that she
would like to know immediately what decision had been reached by the plaintiffs on the matter. In view of Maria Gay's insistence
that the plaintiff give a categorical answer, Sing Bengco, one of the plaintiffs who happened to be present at the time the telephone
conversation between Maria Gay and Manuel Sotelo took place, instructed Sotelo to inform her at the time that if she did not care
to wait until 12 o'clock, "ella cuidado": (she could do as she pleased). This is a purely Philippine phrase, an exact translation of the
Tagalog, "siya ang bahala" and approximately of the Visayan "ambut sa iya," which has very different, and even contradictory,
meanings. It might be interpreted in several different ways, such as a threat on the part of Sing Bengco to take legal action against
Maria Gay in case she did not wait until the expiration of the option, or that they would waive all claims to the option and be
agreeable to whatever action she might take. Interpreting the phrase to mean that the plaintiffs waived their option to buy, Maria
Gay closed the sale of the estate in favor of the defendant Antonio Sunyantong.

Even supposing that this latter interpretation of the phrase in question was actual intention of Sing Bengco, the action of the
defendant Sunyantong in intervening in the negotiations in the manner in which he did does not make him innocent of infidelity in
view of the fact that he was an employee of the plaintiffs to whom he owed loyalty and faithfullnes.

Even though it be concede that when he closed the contract of sale with Maria Gay the plaintiffs' option had expired, but the fact
cannot be denied that he was the cause of the option having precipitously come to such an end. His disloyalty to his employers was
responsible for Maria Gay not accepting the terms proposed by the plaintiffs, because of being certain of another less exigent buyer.
Without such intervention on the part of the defendant it is presumed, taking into account all the circumstances of the case, that the
sale of the estate in question would have been consummated between Maria Gay and the plaintiffs, perhaps with such advantages
to the plaintiffs, as they expected to obtain by prolonging negotiations.

Such an act of infidelity committed by a trusted employee calculated to redound to his own benefit and to the detriment of his
employers cannot pass without legal sanction. Nemo debet aliena jactura locupletari; nemo ex suo delicto meliorem suam
conditionem facere potest. It is an illicit act committed with culpa and, therefore, its agent is liable (art. 1089, Civil Code), for the
damage caused (art. 1902, ibidem). Not identical, but similar, to this infidelity is the abuse of the confidence sanctioned in our Penal
Code as a generic circumstances, nay as specific aggravating one, and even as an essential element of certain crimes.

This reparation provided for in the Civil Code and applied to the case at bar seems to be limited to the indemnification of damages,
as we are not aware of any express provision in said Code which imposes upon the person thus held liable, any obligation, such as
that of transferring to plaintiffs the estate in question.
Such principle, however, in case of this nature is generally recognized in our laws, since the case of commercial agents ( factories) it
is expressly established. Undoubtedly, formerly under the circumstances then prevailing such sanction was not necessary in the field
of civil law, because is sphere of action is the general relations of society; but event then it was deemed necessary expressly to
protect with such sanction the commercial relations wherein the question of gain was involved, which is sometimes so imperatives
as to ignore everything, even the very principles of loyalty, honesty, and fidelity.

This specific relief, however, has already come to be applied in this jurisdiction in similar cases, among which can be cited that
of Camacho vs. Municipality of Baliuag  (28 Phil., 466.)

And in the North American law such sanction is expressly recognized, and the transaction of this nature might be regarded as an
"equitable trust" by virtue of which the things acquired by an employee is deemed not to have been acquired for his own benefit or
that of any other person but for his principal, and held in trust for the latter (21 R. C. L., 825; 2 Corpus Juris, 353).

After examination and consideration of the case we do not find in the appealed judgment any of errors assigned to it; wherefore the
same is affirmed with costs against the appellants. So ordered.
G.R. No. L-21036             April 5, 1924

RAMON ABOITIZ, plaintiff-appellant, 
vs.
ARNALDO F. DE SILVA, ET AL., defendants. 
ARNALDO F. DE SILVA, appellant.

Block, Johnston and Greenbaum for plaintiff-appellant.

Del Rosario and Del Rosario and Andres Jayme for defendant-appellant.

OSTRAND, J.:

This action is brought to recover the sum of P159,000, the alleged unpaid balance of the purchase price of the plaintiff's shares in the
partnerships of G. & R. Aboitiz and Viuda e Hijos de P. Aboitiz, sold by him to the defendants.

The answer of the defendants Guillermo and Vidal Aboitiz constitutes a confession of judgment for the full amount demanded; the
defendant De Silva, in his second amended answer, sets up various special defenses together with a cross-complaint and a
counterclaim alleging that the accounts between the parties upon the books of Aboitiz & Co. are inaccurate and that instead of a
balance being due the plaintiff there is in reality a balance in favor of the defendants in the sum of P41,186.88.

The action is based on a notarial document, Exhibit A, and two statements of account, Exhibits C and D. Exhibit A reads as follows:

Sepan todos por la presente: Que este documento otorgado de una parte por Ramon Aboitiz, casado con Doña Dolores S. de
Aboitiz, mayor de edad y vecino del Municipio de Cebu, Provincia de Cebu, Islas Filipinas; y de otra parte los Senores
Arnaldo F. de Silva, Guillermo Aboitiz, ambos casados y Vidal Aboitiz, soltero, todos mayores de edad, el primero vecino del
Municipio de Cebu, Provincia de Cebu, Islas Filipinas y los dos ultimos de Ormoc, Provincia de Leyte, I. F.

MANIFIESTA Y HACE CONSTAR:

Primero. Que Ramon Aboitiz, por y en consideracion a la cantidad de doscientos veinticinco mil pesos, moneda filipina,
pagaderos en la forma y plazos ques mas abajo se mencionaran, cede, vende, y transpasa de un modo absoluto y a
perpetuidad, libre de toda carga y gravamen a favor de los mencionados Arnaldo F. de Silva, Guillermo Aboitiz y Vidal
Aboitiz, sus herederos y causahabientes, el negocio y participacion que dicho Ramon Aboitiz tiene en la Sociedad "Viuda e
Hijos de P. Aboitiz" y en la de "G. & R. Aboitiz" en las proporciones siguientes:

(a) Una novena parte de la mitad del negocio y participacion en la sociedad "Viuda e Hijos de P. Aboitiz" y la mitad del
negocio y participacion en la sociedad "G. & R. Aboitiz."

El negocio referido consiste en los objetos, bienes y creditos que se hallan inventariados, cuyos inventarios tanto el de
"Viuda e Hijos de P. Aboitiz" como el de "G. & R. Aboitiz" se hallan unidos a esta escritura formado parte de la misma, y
cuyos inventarios se ajustan al balance correspondiente al 31 de diciembre de 1918.

Segundo. Que la citada cantidad de doscientos veintecinco mil pesos (P225,000), precio de esta venta, se pagara por dichos
compradores Arnaldo F. de Silva, Guillermo Aboitiz y Vidal Aboitiz en la forma y plazos siguintes a saber:

(a) Diez mil pesos (P10,000) al contado y al firmarse la presente escritura, y los doscientos quince mil pesos (P215,000)
restantes a razon de cuatro mil pesos (P4,000) mensuales y al interes del siete por ciento (7%) anual a contar desde el
primero de mayo de 1919, pagaderos mensualmente.

Tercero. Las utilidades que puede rebicir el vendedor Ramon Aboitiz en los negocios, en ambas sociedades, asi pueda tener
como Gerente y como socio de las mencionadas sociedades, desde el primero de enero hasta la fecha en que se ha
enajenado este negocio, quedaran por cuenta de los compradores, renunciando por consiguiente a ellos el vendedor
Ramon Aboitiz.
 Cuarto. Se hace constar tambien que el motor Lolita  se halla avaluado en cincuenta mil pesos (P50,000) de cuya cantidad
solamente se ha pagado al vendedor la mitad, o sean veintecinco mil pesos (P25,000), teniendo por consiguiente el
vendedor una participacion de dicho motor en la proporcion de una mitad;Entendiendose, sin embargo, Que si despues que
dicho motor hayan terminado las obras que actualmente se estan realizando en el mismo, ascendiera su costo en una
cantidad mayor o menor que la avaluacion actual; si el costo es mas, el vendedor Ramon Aboitiz pagara la diferencia a los
compradores; pero si el costo es menos los compradores pagaran la diferencia al vendedor Ramon Abotiz.

Quito. Que para garantizar el pago de la mencionada cantidad de doscientos quince mil pesos (P215,000) en los plazos
arriba mencionados y sus intereses convenidos a razon del siete por ciento (7%) anual, los compradores Arnaldo F. de Silva,
Guillermo Aboitiz y Vidal Aboitiz, constituyen primera hipoteca especial y voluntaria sobre los bienes muebles inventariados
y descritos en los dos inventarios que van unidos a esta escritura formado parte de la misma a favor del vendador Sr.
Ramon Aboitiz.

Sexto. Que en caso de venta de cualesquiera propiedades inventariadas o cualquiera parte de las mismas por los
compradores Arnaldo F. de Silva, Guillermo Aboitiz y Vidal Aboitiz, estos quedan obligados a entregar el producto de dicha
venta al Sr. Ramon Aboitiz hasta la cantidad de ciento veintecinco mil pesos (P125,000) y pasando de esta suma la mitad del
producto de dichas ventas, cuyas cantidades se destinan o se aplican a la amortizacion de los plazos arriba mencionados.

Septimo. Que la falta de pago de cualquiera de los plazos arriba mencionados y de todas y de cada una de las demas
condiciones de este contrato dara lugar al vencimiento total de la hipoteca como si naturalmente hubiera expirado el
termino de la misma, pudiendo en tal caso exigir el pago de todas las cantidades que aun adeudaren los citados
compradores Arnaldo F. de Silva, Guillermo Aboitiz y Vidal Aboitiz.

Octavo. Se hace constar que el vendedor Ramon Aboitiz, durante la vigencia de esta escritura y cinco anos despues del
completo pago de las obligaciones contraidas en virtud de la presente escritura por los compradores, se abstendra de
emprender o realizar cualesquiera negocios similares a los que actualmente tienen establecidos los Sres. "Viuda e Hijos de
P. Aboitiz" y "G. & R. Aboitiz" en las provincias de Leyte, Samar, Cebu y la Isla de Camiguin y en otro donde actualmente
tengan dichas sociedades negocios.

En testimonio de todo lo cual firman las partes en Cebu, Cebu, I. F., hoy dia 28 de abril de 1919.

(Signatures and acknowledgment.)

This document is referred to in the briefs as the "Hipoteca-Venta" and the account relating to the transaction therein set forth is
designated as the "Hipoteca-Venta Account." Of the purchase price the sum of P10,000 was, as provided in the document, paid in
cash and for the subsequent installments fifty-three promissory notes of P4,000 each were given, the first note to be paid on June 1,
1919, and the rest of them falling due successively on the 1st day of each of the following months. The last installment of P3,000 was
not covered by any note.

Subsequently to the purchase of the interests of plaintiff in the two partnerships, the defendants also required the interests of the
plaintiff's partners, and on March 26, 1920, the three defendants, together with Manuel Moraza and Joaquin Irastorza, formed a
corporation under the name of Aboitiz & Co., Inc., the defendants transferring to the corporation the property and good will of
Viuda e Hijos de P. Aboitiz, and G. & R. Aboitiz. The defendant De Silva was the general manager of the business of the two
partnerships from the time of the purchase from Ramon Aboitiz and continued as general manager after the incorporation.

Shortly after the sale of his business to the defendants, the plaintiff left the Philippine Islands for Spain, his brother, the defendant
Guillermo Aboitiz, looking after his remaining interests here under a power of attorney and making the necessary collections and
disbursements in connection with these interests, for which a separate personal account was kept on the books of G. & R. Aboitiz in
addition to the "Hipoteca-Venta Account." On November 30, 1919, the two accounts were consolidated by the personal direction of
De Silva, the balance of P803.53 being transferred to the "Hipoteca-Venta Account," and thereafter all entries of Ramon Aboitiz'
credits and debits were made under the head of "Hipoteca-Venta" on the books of G. & R. Aboitiz and subsequently on the books of
the corporation. De Silva denies that this was done in pursuance of his instructions, but the weight of the evidence is decidedly
against his contention.

The business of Aboitiz & Co. did not prosper under De Silva's management and in October, 1920, Ramon Aboitiz, at the urgent
request of Guillermo Aboitiz, returned to the Philippine Islands and De Silva was promptly ousted from the management of the
business of the corporation. In the meantime, the defendants had, according to the books of account of Aboitiz & Co., defaulted in
the payment of the installments due on the purchase price under Exhibit A, and after fruitless negotiations for a settlement between
the parties, this action was finally brought. Upon the filing of the complaint and at the instance of the plaintiff, a preliminary
attachment was levied on the defendant De Silva's stock in Aboitiz & Co., and the latter's cross-complaint relates to the damages
alleged to have been suffered by him in consequence of this attachment.

The trial court held that as the books of account of Aboitiz & Co. were under the control of De Silva and as the entries in them were
made under his direction, he was estopped from questioning the correctness of the entries there found, and judgment was rendered
against the defendants for the sum of P154,298.88, the balance in favor of the plaintiff appearing upon said books, together with
interests at the rate of 7 per cent per annum from December 31, 1920, with costs. The court further found that the attachment
above-mentioned was wrongful and rendered judgment against the plaintiff on the defendant De Silva's cross-complaint in the sum
of P6,000. Both the plaintiff and the defendant De Silva appeal.

The defendant-appellant makes six assignments of error. The fifth assignment intimates that the primary purpose of this action is to
ruin the defendant De Silva. The assignment, in common with the insinuations against the trial judge found elsewhere in the
defendant-appellant's brief, finds no support in the record and is, under the circumstances, highly improper. The plaintiff does not
appear to have dealt ungenerously with the defendant; indeed, as far as the record shows, he might possibly be criticised for having
placed too much confidence in the latter.

Under the fourth assignments of error the defendant-appellant maintains that the liability of the defendants under the "Hipoteca-
Venta" had, with the plaintiff's implied consent, been transferred to Aboitiz & Co.; that there consequently had been a novation of
the original agreement; and that the action, therefore, should have been directed against Aboitiz & Co. and not against the
defendants individually. There is nothing in this contention. It is true that the three defendants transferred all the assets and
liabilities of G. & R. Aboitiz to the corporation Aboitiz & Co. (Exhibit 9), and that at the time at least two of the defendants, Guillermo
and Vidal Aboitiz, held a general power of attorney from the plaintiff. But, in the first place, the defendants appear to have acted for
themselves only and none of them pretended to act on behalf of Ramon Aboitiz; in the second place, the defendant's liability under
the "Hipoteca-Venta" was a personal and individual liability, while the transfer in question related to the business of the partnership
of G. & R. Aboitiz; and, in the third place, the defendants who held powers of attorney could not represent both themselves and
their principal in a transaction involving the shifting of the liability from themselves to another party. Neither does the fact that the
plaintiff subsequently accepted payments on the "Hipoteca-Venta Account" from Aboitiz & Co. work a novation. (See  Pacific
Commercial Co. vs. Sotto, 34 Phil., 237.) Novation is never presumed. Unless it is clearly shown either by express agreement of the
parties or by acts of equivalent import, this defense will never be allowed. (Civil Code, art. 1205; Zapanta vs. De Rotaeche, 21 Phil.,
154; Martinez vs. Cavives, 25 Phil., 581; Vaca vs. Kosca, 26 Phil., 388.)

The first assignment of error relates to the conclusion of the trial court that in view of the fact that the account books of G. & R.
Aboitiz and Aboitiz & Co. have been kept under the defendant De Silva's direction and control, he is now estopped from questioning
the correctness of the entries therein. In so holding, the court was clearly in error. It is true that a party will not be heard to object to
the form of his own account books or the manner in which they are kept, but the entries therein can only be regarded as admissions
against interests which may be overcome by other competent evidence, unless the adverse party has been misled to his prejudice by
such entries or admissions. (See 22 C. J., 889-892.) It does not appear that the plaintiff has been so misled in the present case.

Under the remaining assignments of error, the defendant-appellant impugns the correctness of the balance in favor of the plaintiff
as shown by Exhibits C and D, which are copies of the "Hipoteca-Venta Account" in the books of G. & R. Aboitiz and Aboitiz Co., and
in connection therewith he strenuously objects to the mingling of the plaintiff's personal current account with the "Hipoteca-Venta
Account," but as what was done not only with the full knowledge of the defendant-appellant, but also, according to the weight of
the evidence, by his express instructions, he cannot now be heard to complain.

As we have already stated, the entries appearing in Exhibits C and D having been copied from books kept under the defendant-
appellant's direction, must be regarded as admissions against interest which, unless overcome by the weight of other evidence, are
conclusive. To rebut these admissions we have only the defendant-appellant's testimony and that of the witness Cabellon. Cabellon
testified as an expert accountant who "audited" the portions of the books in question relating to the account of the plaintiff. His
figures seem to be correct as far as the mathematical operations are concerned, and, in that respect, do not necessarily conflict with
the plaintiff's figures, but it appears that he has obtained his data as to the origin of the entries from the defendant-appellant
himself, so that in the last analysis his testimony is that of the defendant-appellant and stands and falls with that of the latter.

The testimony of the defendant De Silva covers one hundred seventy pages of the transcript and a careful reading thereof does not
inspire us with confidence in his good faith. Even if it were uncontradicted by other testimony, we should hardly regard it as
sufficient to overcome the implied admissions contained in the accounts in question. To indicate the general character of his attacks
upon the accounts in question, we shall briefly discuss the most plausible of his contentions, namely, that relating to the motor
boat Lolita.

Exhibit A, the "Hipoteca-Venta," was drafted by Mr. De Silva. Reading the document, it will be observed that its paragraph 4 is
somewhat ambiguous and in apparent conflict with paragraphs 1 and 2 of the same document. According to paragraphs 1 and 2, all
of the plaintiff's participation in Viuda e Hijos de P. Aboitiz and G. & R. Aboitiz is sold to the defendants for the sum of P225,000; in
paragraph 4 the Lolita  is valued at P50,000, of which the vendor (the plaintiff) has received only one-half and therefore remains the
owner of a one-half interest in the boat, with the understanding that if certain work which is being done on the boat brings its costs
above the sum of P50,000, the vendor will pay the difference to the vendees (the defendants), but that if the cost of the boat proves
to be less that P50,000, the vendees will pay the difference to the vendor.

In view of the ambiguity of the language of paragraph 4, in connection with paragraphs 1 and 2, parol evidence was properly
admitted by the trial court to explain the circumstances of the transactions there referred to. (Sec. 289, Code of Civil Procedure.) It
appears from the oral evidence that at the time the transaction took place theLolita  was under construction and that when her
construction and equipment was completed the total cost was found to be P95,378.23 instead of P50,000. A fair construction of
paragraph 4 would be to charge the plaintiff with one-half of the cost and the defendants with the other half, but De Silva, in the so-
called "Corrected Account" (defendant's Exhibit 13) which has been prepared by himself and Cabellon upon which his counterclaim
for a balance of P43,097.56 in his favor is based, debits the plaintiff and credits the defendant with P25,000 for the plaintiff's half
interest in the Lolita plus P45,578.24, the entire difference between P50,000 and the actual cost of the construction, plus the sum of
P19,452.68 for construction and equipment, making a total sum of P90,029.92 charged to the plaintiff. In other words, the plaintiff's
half of the Lolita cost him P90,029.92, while the defendants obtained their half for only P5,348.31. This is, of course, absurd on its
face. But assuming, for the sake of argument, that it is true that the intention of the parties was that the estimated cost of the
plaintiff's one-half interest in the Lolita, P25,000, was to be deducted from the P225,000, the purchase price stated in Exhibit A, why
then were fifty-three notes for P4,000 each issued instead of only forty-seven? The defendant is apparently a very intelligent man,
the transaction was of great importance to him and had been discussed for some time. In these circumstances it is inconceivable
that he would have signed notes for a total amount of P24,000 for a debt he and the other two defendants did not owe. The
conclusion is irresistible that his explanation is not given in good faith, that he did not tell the truth upon the witness stand, and
what is still worse, that he knew he did not tell the truth.

The plaintiff explains that at the beginning of the negotiations for the sale of the business to the defendants, he demanded a
minimum price of P250,000. Later on he decided to retain a one-half interest in the Lolita and made the corresponding reduction of
P25,000 in the purchase price; that the provisions in paragraph 4 that in the event the cost of the boat proved more than the
estimated cost of P50,000 he would pay the difference was, at the time of the execution of the document, understood by all parties
to mean that he would reimburse the defendants for the extra cost of his half of the boat, and that he therefore owed them only
one-half of P45,578.24, i.e., the sum of P22,789.12. The boat being treated as an asset to the extent of P50,000 at the time of the
sale and therefore assuming, as we must, in the absence of evidence to the contrary, that at that time he had already paid P50,000,
on account of its construction, and the extra cost was subsequently paid to the builders and outfitters by the defendant, the
plaintiff's explanation seems reasonable and is in reality not in conflict with Exhibit A.

Considerable space and energy have been devoted by counsel to pointing out that in the document Exhibit C, the plaintiff is credited
with the sum of P250,000 instead of P225,000 as the purchase price of the business sold by him to the defendants. But in the same
account the plaintiff is debited with P25,000 for his retained one-half of theLolita which bears out plaintiff's statement that the
purchase price was reduced from P250,000 to P225,000 in consideration of his retaining a one-half interest in the boat. The result is,
of course, the same whether the account states a purchase price of P225,000 without a debit, or whether it states a purchase price
of P250,000 with a debit of P25,000.

We have not lost sight of the fact that one may infer from Exhibit C that the P25,000 in excess of the P225,000 was paid by the
defendants for the plaintiff's share of the business of Viuda e Hijos de P. Aboitiz; but that may be due to a misunderstanding by the
person making the entry in question and is not binding upon the plaintiff.

The defendant-appellant has been no more successful in his attacks upon the other items of the accounts in question. The additional
alleged debits with which he seeks to charge the plaintiff have been fully explained by the latter and are, in our opinion, unfounded.
It can serve no useful purpose to devote time and space to their discussion in detail.

The plaintiff, as appellant, makes only one assignment of error, namely, that "The court erred in awarding damages to the defendant
Arnaldo F. de Silva upon his counter claim for illegal attachment."
The assignment is well taken. The defendant De Silva has proved no specific damages. His testimony that the levy of the attachment
and his consequent loss of reputation prevented the consummation of a, to him, very advantageous business arrangement with
Gabino Veloso, is contradicted by Veloso himself. Neither is there any evidence before us from which malice on the part of the
plaintiff or loss of credit to the defendant may be inferred or presumed. It is admitted by Mr. De Silva that he contemplated going
abroad at the time the action was brought and the order of attachment levied. As far as the record shows, his only assets consisted
in his interest in Aboitiz & Co., but this interest might have been disposed of through the sale of the shares. The attachment was
unobtrusively levied and was accomplished by simply giving a written notice to the bank in which the defendant had mortgaged his
shares for 25,000. In these circumstances, the defendant-appellant is clearly not entitled to damages.

The judgment against the defendants for the sum of P154,298.05 is therefore affirmed and that against the plaintiff for P6,000 is
reversed. The appellant De Silva will pay the costs. So ordered.
G.R. No. 79253 March 1, 1993

UNITED STATES OF AMERICA and MAXINE BRADFORD, petitioners, 

vs.
HON. LUIS R. REYES, as Presiding Judge of Branch 22, Regional Trial Court of Cavite, and NELIA T. MONTOYA, respondents.

DAVIDE, JR., J.:

This is a petition for certiorari and prohibition under Rule 65 of the Rules of Court. Petitioners would have Us annul and set aside, for
having been issued with grave abuse of discretion amounting to lack of jurisdiction, the Resolution of 17 July 1987 of Branch 22 of
the Regional Trial Court (RTC) of Cavite in Civil Case No. 224-87. The said resolution denied, for lack of merit, petitioners' motion to
dismiss the said case and granted the private respondent's motion for the issuance of a writ of preliminary attachment. Likewise
sought to be set aside is the writ of attachment subsequently issued by the RTC on 28 July 1987.

The doctrine of state immunity is at the core of this controversy.

The readings disclose the following material operative facts:

Private respondent, hereinafter referred to as Montoya, is an American citizen who, at the time material to this case, was employed
as an identification (I.D.) checker at the U.S. Navy Exchange (NEX) at the Joint United States Military Assistance Group (JUSMAG)
headquarters in Quezon City. She is married to one Edgardo H. Montoya, a Filipino-American serviceman employed by the U.S. Navy
and stationed in San Francisco, California. Petitioner Maxine Bradford, hereinafter referred to as Bradford, is likewise an American
citizen who was the activity exchange manager at the said JUSMAG Headquarters.

As a consequence of an incident which occurred on 22 January 1987 whereby her body and belongings were searched after she had
bought some items from the retail store of the NEX JUSMAG, where she had purchasing privileges, and while she was already at the
parking area, Montoya filed on
7 May 1987 a complaint 1 with the Regional Trial Court of her place of residence — Cavite — against Bradford for damages due to the
oppressive and discriminatory acts committed by the latter in excess of her authority as store manager of the NEX JUSMAG. The
complaint, docketed as Civil Case No. 224-87 and subsequently raffled off to Branch 22 at Imus, Cavite, alleges the following,
material operative facts:

xxx xxx xxx

3. That on January 22, 1987, after working as the duty ID checker from 7:45 to 11:45 a.m., plaintiff went shopping
and left the store at l2:00 noon of that day;

4. That on the way to her car while already outside the store, Mrs. Yong Kennedy, also an ID checker, upon the
instruction of the store manager, Ms. Maxine Bradford, approached plaintiff and informed her that she needed to
search her bags;

5. That plaintiff went to defendant, who was then outside the store talking to some men, to protest the search but
she was informed by the defendant that the search is to be made on all Jusmag employees that day;

6. That the search was thereafter made on the person, car and bags of the plaintiff by Mrs. Yong Kennedy in the
presence of the defendant and numerous curious onlookers;

7. That having found nothing irregular on her person and belongings, plaintiff was allowed to leave the premises;

8. That feeling aggrieved, plaintiff checked the records and discovered that she was the only one whose person and
belonging was (sic) searched that day contrary to defendant's allegation as set forth in par. 5 hereof and as
evidenced by the memorandum dated January 30, 1987 made by other Filipino Jusmag employees, a photocopy of
which is hereto attached as ANNEX "A" and made integral (sic) part hereof:
 9. That moreover, a check with Navy Exchange Security Manager, R.L. Roynon on January 27, 1987 was made and
she was informed by Mr. Roynon that it is a matter of policy that customers and employees of NEX Jusmag are not
searched outside the store unless there is a very strong evidence of a wrongdoing;

10. That plaintiff knows of no circumstances sufficient to trigger suspicion of a wrongdoing on her part but on the
other hand, is aware of the propensity of defendant to lay suspicion on Filipinos for theft and/or shoplifting;

11. That plaintiff formally protested the illegal search on February 14, 1987 in a letter addressed to Mr. R.L.
Roynon, a photocopy of which is hereto attached as ANNEX "B" and made integral (sic) part hereof; but no action
was undertaken by the said officer;

12. That the illegal search on the person and belongings of the plaintiff in front of many people has subjected the
plaintiff to speculations of theft, shoplifting and such other wrongdoings and has exposed her to contempt and
ridicule which was caused her undue embarrassment and indignity;

13. That since the act could not have been motivated by other (sic) reason than racial discrimination in our own
land, the act constitute (sic) a blow to our national pride and dignity which has caused the plaintiff a feeling of
anger for which she suffers sleepless nights and wounded feelings;

14. That considering the above, plaintiff is entitled to be compensated by way of moral damages in the amount of
P500,000.00;

15. That to serve as a deterrent to those inclined to follow the oppressive act of the defendant, exemplary
damages in the amount of P100,000.00 should also be awarded. 2

She then prayed for judgment ordering Bradford to pay her P500,000.00 as moral damages, P100,000.00 as exemplary damages and
reasonable attorney's fees plus the costs of the suit. 3

Summons and a copy of the complaint were served on Bradford on 13 May 1987. In response thereto, she filed two (2) motions for
extension of time to file her Answer which were both granted by the trial court. The first was filed through Atty. Miguel
Famularcano, Jr., who asked for a 20-day extension from 28 May 1987. The second, filed through the law firm of Luna, Sison and
Manas, sought a 15-day extension from 17 June 1987. 4 Thus, Bradford had up to 1 July 1987 to file her Answer. Instead of doing so,
however, she, together with the government of the United States of America (hereinafter referred to as the public petitioner), filed
on 25 June 1987, also through the law firm of Luna, Sison and Manas, a Motion to Dismiss 5 based on the following grounds:

1) (This) action is in effect a suit against the United States of America, a foreign sovereign immune from suit
without its consent for the cause of action pleaded in the complaint; and

2) Defendant, Maxine Bradford, as manager of the US Navy Exchange Branch at JUSMAG, Quezon City, is immune
from suit for act(s) done by her in the performance of her official functions under the Philippines-United States
Military Assistance Agreement of 1947 and Military Bases Agreement of 1947, as amended. 6

In support of the motion, the petitioners claimed that JUSMAG, composed of an Army, Navy and Air Group, had been established
under the Philippine-United States Military Assistance Agreement entered into on 21 March 1947 to implement the United States'
program of rendering military assistance to the Philippines. Its headquarters in Quezon City is considered a temporary installation
under the provisions of Article XXI of the Military Bases Agreement of 1947. Thereunder, "it is mutually agreed that the United
States shall have the rights, power and authority within the bases which are necessary for the establishment, use and operation and
defense thereof or appropriate for the control thereof." The 1979 amendment of the Military Bases Agreement made it clear that
the United States shall have "the use of certain facilities and areas within the bases and shall have effective command and control
over such facilities and over United States personnel, employees, equipment and material." JUSMAG maintains, at its Quezon City
headquarters, a Navy Exchange referred to as the NEX-JUSMAG. Checking of purchases at the NEX is a routine procedure observed
at base retail outlets to protect and safeguard merchandise, cash and equipment pursuant to paragraphs 2 and 4(b) of
NAVRESALEACT SUBIC INST. 5500.1. 7Thus, Bradford's order to have purchases of all employees checked on 22 January 1987 was
made in the exercise of her duties as Manager of the NEX-JUSMAG.

They further claimed that the Navy Exchange (NAVEX), an instrumentality of the U.S. Government, is considered essential for the
performance of governmental functions. Its mission is to provide a convenient and reliable source, at the lowest practicable cost, of
articles and services required for the well-being of Navy personnel, and of funds to be used for the latter's welfare and recreation.
Montoya's complaint, relating as it does to the mission, functions and responsibilities of a unit of the United States Navy, cannot
then be allowed. To do so would constitute a violation of the military bases agreement. Moreover, the rights, powers and authority
granted by the Philippine government to the United States within the U.S. installations would be illusory and academic unless the
latter has effective command and control over such facilities and over American personnel, employees, equipment and material.
Such rights, power and authority within the bases can only be exercised by the United States through the officers and officials of its
armed forces, such as Bradford. Baer vs.  Tizon 8 and United States of America vs. 
Ruiz 9 were invoked to support these claims.

On 6 July 1987, Montoya filed a motion for preliminary attachment 10 on the ground that Bradford was about to depart from the
country and was in the process of removing and/or disposing of her properties with intent to defraud her creditors. On 14 July 1987,
Montoya filed her opposition to the motion to dismiss 11 alleging therein that the grounds proffered in the latter are bereft of merit
because (a) Bradford, in ordering the search upon her person and belongings outside the NEX JUSMAG store in the presence of
onlookers, had committed an improper, unlawful and highly discriminatory act against a Filipino employee and had exceeded the
scope of her authority; (b) having exceeded her authority, Bradford cannot rely on the sovereign immunity of the public petitioner
because her liability is personal; (c) Philippine courts are vested with jurisdiction over the case because Bradford is a civilian
employee who had committed the challenged act outside the U.S. Military Bases; such act is not one of those exempted from the
jurisdiction of Philippine courts; and (d) Philippine courts can inquire into the factual circumstances of the case to determine
whether or not Bradford had acted within or outside the scope of her authority.

On 16 July 1987, public petitioner and Bradford filed a reply to Montoya's opposition and an opposition to the motion for
preliminary attachment. 12

On 17 July 1987, 13 the trial court 14 resolved both the motion to dismiss and the motion for preliminary attachment in this wise:

On the motion to dismiss, the grounds and arguments interposed for the dismissal of this case are determined to
be not indubitable. Hence, the motion is denied for lack of merit.

The motion for preliminary attachment is granted in the interest of justice, upon the plaintiff's filing of a bond in
the sum of P50,000.00.

Upon Montoya's filing of the required bond, the trial court issued on 28 July 1987 an Order 15 decreeing the issuance of a writ of
attachment and directing the sheriff to serve the writ immediately at the expense of the private respondent. The writ of attachment
was issued on that same date. 16

Instead of filing a motion to reconsider the last two (2) orders, or an answer — insofar as Bradford is concerned — both the latter
and the public petitioner filed on 6 August 1987 the instant petition to annul and set aside the above Resolution of 17 July 1987 and
the writ of attachment issued pursuant thereto. As grounds therefor, they allege that:

10. The respondent judge committed a grave abuse of discretion amounting to lack of jurisdiction in denying the
motion to dismiss the complaint in Civil Case No. 224-87 "for lack of merit." For the action was in effect a suit
against the United States of America, a foreign sovereign immune from suit without its consent for the cause of
action pleaded in the complaint, while its co-petitioner was immune from suit for act(s) done by her in the
performance of her official functions as manager of the US Navy Exchange Branch at the Headquarters of JUSMAG,
under the Philippines-United States Military Assistance Agreement of 1947 and Military Bases Agreement of 1947,
as amended. 17

On 5 August 1987, the trial court set Civil Case No. 224-87 for pre-trial and trial on 27 August 1987 at 9:30 a.m.18

On 12 August 1987, this Court resolved to require the respondents to comment on the petition. 19

On 19 August 1987, petitioners filed with the trial court a Motion

to Suspend Proceedings 20 which the latter denied in its Order of 21 August 1987. 21

In the meantime, however, for failure to file an answer, Bradford was declared in default in Civil Case No. 224-87 and Montoya was
allowed to present her evidence ex-parte. 22 She thus took the witness stand and presented Mrs. Nam Thi Moore and Mrs. Miss Yu as
her witnesses.
On 10 September 1987, the trial court rendered its decision 23 in Civil Case No. 224-87, the dispositive portion of which reads:

Prescinding from the foregoing, it is hereby determined that the unreasonable search on the plaintiff's person and
bag caused (sic) done recklessly and oppressively by the defendant, violated, impaired and undermined the
plaintiff's liberty guaranteed by the Constitution, entitling her to moral and exemplary damages against the
defendant. The search has unduly subjected the plaintiff to intense humiliation and indignities and had
consequently ridiculed and embarrassed publicly said plaintiff so gravely and immeasurably.

WHEREFORE, judgment is hereby rendered for the plaintiff and against the defendant Maxine Bradford assessing
the latter to pay unto the former the sums of P300,000.00 for moral damages, P100,000.00 for exemplary damages
and P50,000.00 for actual expenses and attorney's fees.

No costs.

SO ORDERED. 24

Bradford received a copy of the decision on 21 September 1987. On that same date, she and the public petitioner filed with this
Court a Petition for Restraining Order 25 which sought to have the trial court's decision vacated and to prevent the execution of the
same; it was also prayed that the trial court be enjoined from continuing with Civil Case No. 224-87. We noted this pleading in the
Resolution of 23 September 1987. 26

In the meantime, since no motion for reconsideration or appeal had been interposed by Bradford challenging the 10 September
1987 Decision which she had received on 21 September 1987, respondent Judge issued on 14 October 1987 an order directing that
an entry of final judgment be made. A copy thereof was received by Bradford on 21 October, 1987. 27

Also on 14 October 1987, Montoya filed her Comment with Opposition to the Petition for Restraining Order. 28Respondent Judge had
earlier filed his own Comment to the petition on 14 September 1987. 29

On 27 October 1987, Montoya filed before the trial court a motion for the execution of the Decision of 10 September 1987 which
petitioners opposed on the ground that although this Court had not yet issued in this case a temporary restraining order, it had
nevertheless resolved to require the respondents to comment on the petition. It was further averred that execution thereof would
cause Bradford grave injury; moreover, enforcement of a writ of execution may lead to regrettable incidents and unnecessarily
complicate the situation in view of the public petitioner's position on the issue of the immunity of its employees. In its Resolution of
11 November 1987, the trial court directed the issuance of a writ of execution. 30

Consequently, the petitioners filed on 4 December 1987, a Manifestation and Motion reciting the foregoing incidents obtaining
before the trial court and praying that their petition for a restraining order be resolved. 31

On 7 December 1987, this Court issued a Temporary Restraining Order "ENJOINING the respondents and the Provincial Sheriff of
Pasig, Metro Manila, from enforcing the Decision dated September 10, 1987, and the Writs of Attachment and Execution issued in
Civil Case No. 224-87." 32

On 28 November 1988, after the private respondent filed a Rejoinder to the Consolidated Reply to the Comments filed by the
petitioners, this Court gave due course to the petition and required the parties to submit their respective memoranda-Petitioners
filed their Memorandum on 8 February
1989 33 while private respondent filed her Memorandum on 14 November
1990. 34

The kernel issue presented in this case is whether or not the trial court committed grave abuse of discretion in denying the motion
to dismiss based on the following grounds: (a) the complaint in Civil Case No. 224-87 is in effect a suit against the public petitioner, a
foreign sovereign immune from suit which has not given consent to such suit and (b) Bradford is immune from suit for acts done by
her in the performance of her official functions as manager of the U.S. Navy Exchange of JUSMAG pursuant to the Philippines-United
States Military Assistance Agreement of 1947 and the Military Bases Agreement of 1947, as amended.

Aside from maintaining the affirmative view, the public petitioner and Bradford even go further by asserting that even if the latter's
act were ultra vires she would still be immune from suit for the rule that public officers or employees may be sued in their personal
capacity for ultra vires and tortious acts is "domestic law" and not applicable in International Law. It is claimed that the application of
the immunity doctrine does not turn upon the lawlessness of the act or omission attributable to the foreign national for if this were
the case, the concept of immunity would be meaningless as inquiry into the lawlessness or illegality of the act or omission would first
have to be made before considering the question of immunity; in other words, immunity will lie only if such act or omission is found
to be lawful.

On the other hand, Montoya submits that Bradford is not covered by the protective mantle of the doctrine of sovereign immunity
from suit as the latter is a mere civilian employee of JUSMAG performing non-governmental and proprietary functions. And even
assuming arguendo that Bradford is performing governmental functions, she would still remain outside the coverage of the doctrine
of state immunity since the act complained of is ultra viresor outside the scope of her authority. What is being questioned is not the
fact of search alone, but also the manner in which the same was conducted as well as the fact of discrimination against Filipino
employees. Bradford's authority to order a search, it is asserted, should have been exercised with restraint and should have been in
accordance with the guidelines and procedures laid down by the cited "NAVRESALEACT, Subic Inst." Moreover, ultra vires acts of a
public officer or employee, especially tortious and criminal acts, are his private acts and may not be considered as acts of the State.
Such officer or employee alone is answerable for any liability arising therefrom and may thus be proceeded against in his personal
capacity.

Montoya further argues that both the acts and person of Bradford are not exempt from the Philippine courts' jurisdiction because
(a) the search was conducted in a parking lot at Scout Borromeo, Quezon City, outside the JUSMAG store and, therefore, outside the
territorial control of the U.S. Military Bases in the Philippines; (b) Bradford does not possess diplomatic immunity under Article 16(b)
of the 1953 Military Assistance Agreement creating the JUSMAG which provides that only the Chief of the Military Advisory Group
and not more than six (6) other senior members thereof designated by him will be accorded diplomatic immunity; 35 and (c) the acts
complained of do not fall under those offenses where the U.S. has been given the right to exercise its jurisdiction (per Article 13 of
the 1947 Military Bases Agreement, as amended by the, Mendez-Blair Notes of 10 August 1965). 36

Finally, Montoya maintains that at the very least, Philippine courts may inquire into the factual circumstances of the case to
determine whether petitioner Bradford is immune from suit or exempt from Philippine jurisdiction. To rule otherwise would render
the Philippine courts powerless as they may be easily divested of their jurisdiction upon the mere invocation of this principle of
immunity from suit.

A careful review of the records of this case and a judicious scrutiny of the arguments of both parties yield nothing but the weakness
of the petitioners' stand. While this can be easily demonstrated, We shall first consider some procedural matters.

Despite the fact that public petitioner was not impleaded as a defendant in Civil Case No. 224-87, it nevertheless joined Bradford in
the motion to dismiss — on the theory that the suit was in effect against it — without, however, first having obtained leave of court
to intervene therein. This was a procedural lapse, if not a downright improper legal tack. Since it was not impleaded as an original
party, the public petitioner could, on its own volition, join in the case only by intervening therein; such intervention, the grant of
which is discretionary upon the court, 37 may be allowed only upon a prior motion for leave with notice to all the parties in the
action. Of course, Montoya could have also impleaded the public petitioner as an additional defendant by amending the complaint if
she so believed that the latter is an indispensible or necessary party.

Since the trial court entertained the motion to dismiss and the subsequent pleadings filed by the public petitioner and Bradford, it
may be deemed to have allowed the public petitioner to intervene. Corollarily, because of its voluntary appearance, the public
petitioner must be deemed to have submitted itself to the jurisdiction of the trial court.

Moreover, the said motion does not specify any of the grounds for a motion to dismiss enumerated in Section 1, Rule 16 of the Rules
of Court. It merely recites state immunity on the part of the public petitioner and immunity on the part of Bradford for the reason
that the act imputed to her was done in the performance of her official functions. The upshot of this contention is actually lack of
cause of action — a specific ground for dismissal under the aforesaid Rule — because assuming arguendo that Montoya's rights had
been violated by the public petitioner and Bradford, resulting in damage or injury to the former, both would not be liable therefor,
and no action may be maintained thereon, because of the principle of state immunity.

The test of the sufficiency of the facts to constitute a cause of action is whether or not, admitting the facts alleged in the complaint,
the court could render a valid judgment upon the same, in accordance with the prayer in the complaint. 38

A motion to dismiss on the ground of failure to state a cause of action hypothetically admits the truth of the allegations in the
complaint.
In deciding a motion to dismiss, a court may grant, deny, allow amendments to the pleadings or defer the hearing and determination
of the same if the ground alleged does not appear to be indubitable. 39 In the instant case, while the trial court concluded that "the
grounds and arguments interposed for the dismissal" are not "indubitable," it denied the motion for lack of merit. What the trial
court should have done was to defer there solution on the motion instead of denying it for lack of merit.

In any event, whatever may or should have been done, the public petitioner and Bradford were not expected to accept the verdict,
making their recourse to this Court via the instant petition inevitable. Thus, whether the trial court should have deferred resolution
on or denied outright the motion to dismiss for lack of merit is no longer pertinent or relevant.

The complaint in Civil Case No. 224-87 is for damages arising from what Montoya describes as an "illegal search" on her "person and
belongings" conducted outside the JUSMAG premises in front of many people and upon the orders of Bradford, who has the
propensity for laying suspicion on Filipinos for theft or shoplifting. It is averred that the said search was directed only against
Montoya.

Howsoever viewed, it is beyond doubt that Montoya's cause of action is premised on the theory that the acts complained of were
committed by Bradford not only outside the scope of her authority — or more specifically, in her private capacity — but also outside
the territory where she exercises such authority, that is, outside the NEX-JUSMAG — particularly, at the parking area which has not
been shown to form part of the facility of which she was the manager. By their motion to dismiss, public petitioner and Bradford are
deemed to have hypothetically admitted the truth of the allegation in the complaint which support this theory.

The doctrine of state immunity and the exceptions thereto are summarized in Shauf vs. Court of Appeals, 40 thus:

I. The rule that a state may not be sued without its consent, now expressed in Article XVI Section 3, of the 1987
Constitution, is one of the generally accepted principles of international law that we have adopted as part of the
law of our land under Article II, Section 2. This latter provision merely reiterates a policy earlier embodied in the
1935 and 1973 Constitutions and also intended to manifest our resolve to abide by the rules of the international
community. 41

While the doctrine appears to prohibit only suits against the state without its consent, it is also applicable to
complaints filed against officials of the state for acts allegedly performed by them in the discharge of their duties.
The rule is that if the judgment against such officials will require the state itself to perform an affirmative act to
satisfy the same, such as the appropriation of the amount needed to pay the damages awarded against them, the
suit must be regarded as against the state itself although it has not been formally impleaded. 42 It must be noted,
however, that the rule is not so all-encompassing as to be applicable under all circumstances.

It is a different matter where the public official is made to account in his capacity as such for acts contrary to law
and injurious to the rights of plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of
Telecommunications, et al. vs. Aligaen, etc., et al. 43 "Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an action against the officials or
officers by one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a
suit against the State within the rule of immunity of the State from suit. In the same tenor, it has been said that an
action at law or suit in equity against a State officer or the director of a State department on the ground that, while
claiming to act or the State, he violates or invades the personal and property rights of the plaintiff, under an
unconstitutional act or under an assumption of authority which he does not have, is not a suit against the State
within
the constitutional provision that the State may not be sued without its consent." 44 The rationale for this ruling is
that the doctrinaire of state immunity cannot be used as an instrument for perpetrating an injustice. 45

In the case of Baer, etc. vs. Tizon, etc., et al.,  46 it was ruled that:

There should be no misinterpretation of the scope of the decision reached by this Court.
Petitioner, as the Commander of the United States Naval Base in Olongapo, does not possess
diplomatic immunity. He may therefore be proceeded against in his personal capacity, or when
the action taken by him cannot be imputed to the government which he represents.

Also, in Animos, et al. vs. Philippine Veterans Affairs Office, et al.,  47 we held that:
 . . . it is equally well-settled that where a litigation may have adverse consequences on the public
treasury, whether in the disbursements of funds or loss of property, the public official proceeded
against not being liable in his personal capacity, then the doctrine of non-suability may
appropriately be invoked. It has no application, however, where the suit against such a
functionary had to be instituted because of his failure to comply with the duty imposed by
statute appropriating public funds for the benefit of plaintiff or petitioner. . . . .

The aforecited authorities are clear on the matter. They state that the doctrine of immunity from suit will not apply
and may not be invoked where the public official is being sued in his private and personal capacity as an ordinary
citizen. The cloak of protection afforded the officers and agents of the government is removed the moment they
are sued in their individual capacity. This situation usually arises where the public official acts without authority or
in excess of the powers vested in him. It is a well-settled principle of law that a public official may be liable in his
personal private capacity for whatever damage he may have caused by his act done
with malice and in bad faith, or beyond the scope of his authority or jurisdiction. 48

The agents and officials of the United States armed forces stationed in Clark Air Base are no exception to this rule.
In the case of United States of America, et al. vs. Guinto, etc., et al., ante, 49 we declared:

It bears stressing at this point that the above observations do not confer on the United States of
America Blanket immunity for all acts done by it or its agents in the Philippines. Neither may the
other petitioners claim that they are also insulated from suit in this country merely because they
have acted as agents of the United States in the discharge of their official functions.

Since it is apparent from the complaint that Bradford was sued in her private or personal capacity for acts allegedly done beyond the
scope and even beyond her place of official functions, said complaint is not then vulnerable to a motion to dismiss based on the
grounds relied upon by the petitioners because as a consequence of the hypothetical admission of the truth of the allegations
therein, the case falls within the exception to the doctrine of state immunity.

In the recent cases of Williams vs. Rarang  50 and Minucher vs. Court of Appeals, 51 this Court reiterated this exception. In the former,
this Court observed:

There is no question, therefore, that the two (2) petitioners actively participated in screening the features and
articles in the POD as part of their official functions. Under the rule that U.S. officials in the performance of their
official functions are immune from suit, then it should follow that petitioners may not be held liable for the
questioned publication.

It is to be noted, however, that the petitioners were sued in their personal capacities for their alleged tortious acts
in publishing a libelous article.

The question, therefore, arises — are American naval officers who commit a crime or tortious act while discharging
official functions still covered by the principle of state immunity from suit? Pursuing the question further, does the
grant of rights, power, and authority to the United States under the RP-US Bases Treaty cover immunity of its
officers from crimes and torts? Our answer is No.

In the latter, even on the claim of diplomatic immunity — which Bradford does not in fact pretend to have in the instant case as she
is not among those granted diplomatic immunity under Article 16(b) of the 1953 Military Assistance Agreement creating the
JUSMAG 52 — this Court ruled:

Even Article 31 of the Vienna Convention on Diplomatic Relations admits of exceptions. It reads:

1. A diplomatic agent shall enjoy immunity from the criminal jurisdiction of the receiving State.
He shall also enjoy immunity from its civil and administrative jurisdiction except in the case of:

xxx xxx xxx

 (c) an action relating to any professional or commercial activity exercised by the
diplomatic agent in the receiving State outside his official functions(Emphasis
supplied).

There can be no doubt that on the basis of the allegations in the complaint, Montoya has a sufficient and viable cause of action.
Bradford's purported non-suability on the ground of state immunity is then a defense which may be pleaded in the answer and
proven at the trial.

Since Bradford did not file her Answer within the reglementary period, the trial court correctly declared her in default upon motion
of the private respondent. The judgment then rendered against her on 10 September 1987 after the  ex parte reception of the
evidence for the private respondent and before this Court issued the Temporary Restraining Order on 7 December 1987 cannot be
impugned. The filing of the instant petition and the knowledge thereof by the trial court did not prevent the latter from proceeding
with Civil Case No.
224-87. "It is elementary that the mere pendency of a special civil action for certiorari, commenced in relation to a case pending
before a lower Court, does not interrupt the course of the latter when there is no writ of injunction restraining it." 53

WHEREFORE, the instant petition is DENIED for lack of merit. The Temporary Restraining Order of 7 December 1987 is hereby
LIFTED.

Costs against petitioner Bradford.

G.R. No. L-7154             February 21, 1912

ELEANOR ERICA STRONG, ET AL., plaintiffs-appellees, 

vs.
FRANCISCO GUTIERREZ REPIDE, defendant-appellant.

Chicote and Miranda and Tirso de Irureta Goyena for appellant. 

Bruce, Lawrence, Ross and Block for appellees.

MORELAND, J.:

Prior to October 10, 1903, the plaintiff, Eleanor Erica Strong, was the owner of 800 shares of the capital stock of the Philippine Sugar
Estates Development Company, Limited (sociedad anonima), of the par value of P100 each, evidenced by certificates Nos. 2125 to
2924, inclusive. On the said 10th day of October, 1903, the defendant, Francisco Gutierrez Repide, by means subsequently found
and adjudged to have been fraudulent, obtained possession of said shares and thereafter alleged to be the owner thereof. On the
12th day of January, 1904, the plaintiff commenced an action against the defendant in the Court of First Instance of the city of
Manila (case No. 2365) asking that the fraudulent sale by means of which the defendant obtained possession of the said shares be
declared null and void and that they be returned to her. On the 29th of April, 1904, the Court of First Instance of the city of Manila
rendered its decision, finding in part as follows:

Upon the facts stated, the court holds that the sale of these shares was made without the authority of Mrs. Strong, that she
never ratified the sale but repudiated it as soon as she learned of it, that this sale was induced by fraud on the part of the
defendant, and therefore was a fraudulent sale.

The court, therefore, declares that the purchase of these shares of stock by the defendant is fraudulent and void, and it is
ordered by the court that the same be set aside and for nothing held.

This judgment fixed the value of the shares at P138,352.71, awarding judgment in this amount to the plaintiff and directing that the
said judgment might be satisfied by defendant's delivering to the plaintiff the said shares, in which event the plaintiff should pay to
the defendant $16,000 Mexican currency, or its equivalent in Philippine currency. This judgment was, on appeal to the Supreme
Court of the Philippine Islands, reversed, and plaintiff's complaint dismissed on the merits.1 Thereupon plaintiff prosecuted an appeal
to the Supreme Court of the United States, which court, on the 3d of May, 1909, rendered its judgment, reversing the decision of the
Supreme Court of the Philippine Islands and affirming the judgment of the trial court. On the 27th of July, 1909, the said judgment of
April 29, 1904, was satisfied by defendant's returning to the plaintiff 800 shares of stock of said company, evidenced by certificates
Nos. 1621, 1623, 1624, 1625, 1626, 1628, 1629, and 1630, and the payment by the plaintiff to the defendant of P14,159.29
Philippine currency, equivalent to $16,000 Mexican currency. Said satisfaction was effected by means of a stipulation or agreement
entered into between the attorneys for the plaintiff and the defendant, in which the satisfaction of the judgment was acknowledged
by both parties. From the 10th day of October, 1903, the date of the said fraudulent purchase by the defendant, until the 27th day
of July, 1909, the defendant retained said shares in his possession or under his control and after the rendition of said judgment of
April 29, 1904, collected the dividends earned by said shares for the years 1905, 1906, 1907, and 1908 at the rate of 6 per cent per
annum, amounting to a total of P19,200, which sum the defendant retained and refused to pay over to the plaintiff. After demand
upon and refusal by the defendant, the plaintiff began this action for the recovery of said sum. On the 24th of March, 1911, the
Court of First Instance of the city of Manila rendered judgment in favor of the plaintiff for the said sum of P19,200, with interest
thereon at the rate of 6 per cent per annum from the date of the filing of the complaint, allowing to the defendant as an offset
interest on P14,159.29 at 6 per cent per annum from October 10, 1903, to July 27, 1909, being the dates, respectively, of the
purchase of the stock by the defendant and the satisfaction of the judgment in case No. 2365. Both parties excepted to this
judgment and filed motions for a new trial, and the court upon the hearings modified its judgment by allowing defendant to offset
against plaintiff's judgment interest on P14,159.29 at the rate of 6 per cent per annum from the 10th day of October, 1903, to the
12th day of January, 1904, the latter date being that of plaintiff's tender of repayment of defendant. From said judgment as modified
the defendant prosecutes this appeal. The plaintiff is satisfied.

The appellant in this case relies for the success of this appeal upon the form of the judgment of the court below in said action No.
2365. He asserts that that judgment is for a sum of money and not for the rescission of a contract and the return of shares of stock.
This being so, he maintains that the payment of the sum named in the judgment, whether by money or by shares of stock, was a
complete satisfaction of the judgment in that case. The mere fact that it was paid in shares of stock did not indicate that the
judgment of the trial court was for shares of stock but said judgment was, on the contrary, in reality and in legal effect for a sum of
money which could be paid in shares of stock as well as in coin of the realm. Basing himself upon this contention appellant asserts
that that judgment having been satisfied by the payment of the sum adjudged to be due, a subsequent action for dividends on said
stock is in effect an action for interest on the said sum found to be due, that it affects the subject matter of a judgment already paid
and discharged.

We do not believe that the contention of the appellant is sound. The action begun in the trial court was to set aside a sale made by
the plaintiff to the defendant and for the return of the shares of stock which were the subject of that sale. The basis of that action
was the claim that the plaintiff had been deprived of the shares of stock in question by false and fraudulent representations and
fraudulent concealment on the part of the defendant, or of his agents, and that thereby she had been induced to part with those
shares without just compensation and, in reality, without her legal consent. The trial court found in favor of the plaintiff, declaring
the sale of the stock to have been fraudulently obtained and setting aside the sale absolutely, as is indicated by that portion of its
opinion heretofore quoted. On the appeal to the Supreme Court of the United States the fraudulent character of the representations
by which the plaintiff had been induced to part with her stock was fully affirmed after a thorough consideration of the facts and
circumstances of the case and the judgment of the trial court setting aside the sale on the ground of fraud was affirmed in every
particular. It is a necessary conclusion, therefore, that the action was in reality for the return of the stock itself, with appropriate
damages in case the return was not made by the defendant. The finding of the court that the value of the stock was P138,352.71
was not made for the purpose of declaring the nature of the action to be one for the recovery of money, but rather, for the purpose
of giving to the plaintiff her alternative remedy in case the stock itself should not be returned. That the same identical shares of
stock obtained by the defendant were not, as a matter of fact, returned to plaintiff is not controlling. They were identical in
everything except their numbers and were tendered and received in fulfillment of the provisions of the judgment. All of the stock of
said company was the same kind and paid the same dividend.

The judgment of the trial court, as affirmed by the Supreme Court of the United States, set aside the sale as fraudulent, and,
therefore, by necessary result, the title to the shares of stock in question passed to the plaintiff if it be conceded that the title ever
legally passed from her. The delivery of those shares to her by the defendant under that judgment was an admission of her title as
declared by the court and was a delivery of possession in pursuance of that declaration of ownership. Under the decisions referred
to, as between the parties thereto, the plaintiff was legally the owner of said stock from the time when she was fraudulently
deprived of it until the time it was returned to her as fully and as completely as she was after the adjudication of the title and return
of the stock itself. Whoever, therefore, during that period collected the dividends upon the said stock took from the plaintiff
something which belonged to her. While the defendant asserts that he was at no time the owner of said stock, the finding of the trial
court and the finding of the Supreme Court of the United States on appeal were to the effect that the defendant was the real
purchaser of the stock from the plaintiff under the fraudulent sale, although the negotiations leading up to the sale were carried on
by other persons. The fraudulent sale having been made to him, it is unquestionable that he became responsible to the plaintiff from
that moment forward. So far as the responsibility of the defendant was concerned, it is of no consequence who actually collected
and retained the dividends. The plaintiff had a right to look to the defendant and to him alone.
Unless, therefore, the plaintiff has, by some act subsequent to obtaining the judgment referred to, released her rights to recover of
the defendant the income of the stock during the time he held it, that right still subsists. The consideration of this question brings us
to the other contention of the appellant. It is to the effect that when the judgement in question was paid a stipulation or agreement
was entered into between him and the plaintiff by virtue of which the plaintiff released him from all responsibility in connection with
the transaction relating to the stock. That agreement, translated, reads as follows:

I, W. H. Lawrence, lawyer, with full authority from the plaintiff in the above-entitled action for the purpose of this
instrument; and I, Eduardo Gutierrez Repide, lawyer, and being also fully authorized and empowered hereto by the
defendant in said action, now, for the purpose of satisfying the judgment rendered therein, I, W. H. Lawrence, hereby
deliver to Eduardo Gutierrez P14,159.29, and I, Eduardo Gutierrez, on my part deliver to said W. H. Lawrence the cost of
this action and eight certificates of stock of the Philippine Sugar Estates Development Company, each certificate
representing 100 shares, which certificates are of the par value of P10,000 each, and are numbered 1621, 1623, 1624, 1625,
1626, 1628, 1629, and 1630. Wherefore, both parties agree and stipulate that, by reason of the said payments hereby
mutually made, the judgment in the above-entitled action is entirely paid and the action is finally settled and terminated,
together with all the legal results flowing from said judgment.

We see nothing in this written discharge which could properly be given the legal effects which the appellant in this case assigns to it.
It is a discharge of a judgment and nothing more. Being such, it reaches no further than the terms of the judgment itself. It is to be
presumed that an instrument satisfying a debt or obligation manifested in another instrument extends no further than the terms of
the instrument which manifests the obligation to be discharged, unless, from the terms of the instrument, it is clear that the parties
intended something more. So far as the record discloses, at the time this satisfaction was executed nothing whatever occurred
between the parties relative to the dividends on the stock which formed the subject-matter of that judgment, nor did anything
transpire as to any other relations between the parties than those embraced within the judgment itself. There was nothing in the
conduct of the parties, or in their relations or attitudes, from which it could be implied or inferred that they were dealing with aught
else than the judgement itself. There is no basis, then, for the contention of the appellant unless it be found in the wording of that
instrument itself. As we have already indicated, however, there is nothing in the phraseology of that document which in the
remotest way touches the rights of the parties as to the dividends upon the stock or which embraces any other matter between the
parties than the subject matter of the judgment itself. The words employed in such an instrument should not be extended beyond
the consideration upon which the instrument was executed as otherwise the courts would be making for the parties a release which
they never intended or contemplated.

Relative to the scope and extent of the satisfaction referred to the trial court said:

While it may appear from the stipulation entered into when the judgment was satisfied between the parties interchanging
the shares of stock and money, as before stated, that the plaintiff had no further claim against the defendant, because at
that time the plaintiff paid the defendant a large sum of money without making claim, it also appears that the plaintiff was
not aware that the defendant had collected the dividends before referred to.

In arguing this question plaintiff's counsel devotes himself at some length to sustaining this finding of fact, and asserts that "even
had she been aware of this fact it would make no difference for the reason that the matter of dividends was not and could not have
been involved in the original suit." It is true that the dividends were not included in the cause of action set forth in the complaint in
cause No. 2365 and were not, therefore, a subject of adjudication in that action. We are of the opinion, however, that they might
have been, at least in part. The plaintiff in suing for the recovery of shares illegally taken from her by the defendant had the right to
demand their return and with them whatever damages she had sustained by reason of their retention, which would be in this case
the dividends which had been collected on them by the defendant while they were in his possession. That is, strictly speaking, what
the plaintiff should have demanded in her complaint. Generally speaking, it is not permitted that a plaintiff sue for the recovery of
property which is illegally detained by another, and, after recovering that property, sue in a separate action for the damages
sustained by that illegal detention. The law seeks to prevent multiplicity of actions, and it is the duty of every person suing to join in
one action every cause of action which he has against the defendant, to the end that all questions between the parties be litigated in
one suit and multiplicity of actions and resulting expenses prevented. This is a question, however, which could have been raised in
the court below by the defendant. He did not do so. Neither has he raised the question in this court directly. We, therefore, do not
pass upon it or base any finding upon it. The purpose which we have in referring to it at all is to indicate that the real question arising
from the controversy between the parties relative to this particular assignment of error really resolves itself into one of multiplicity
of actions, that is, of the duty of the plaintiff to join all her causes of action against the defendant in one complaint, and not the one
presented by the appellant in his argument relative to the reach which should be given to the document of satisfaction. We,
therefore, disapprove of the contention of the appellant that the satisfaction of the judgment reaches further than the terms of the
judgment itself. It does not embrace any other relations between the parties than those embraced in the plain wording of the
judgment. While the dividends might, in part, have been included in the cause of action set forth in the complaint in that action and,
as far as possible, should have been incorporated therein, nevertheless they were not so made and, therefore, formed no part of the
judgment in which that action terminated. When, therefore, after the satisfaction of that judgment, plaintiff began a separate action
to recover the dividends, the only defense available to the defendant was the plea of multiplicity. That plea not having been made,
no question relating thereto is presented on this appeal.

It is true that plaintiff could have included in her action and recovered at the most only those dividends which were due at the time
judgment in her favor was entered. It happens in this case that most of the dividends became payable after the plaintiff had secured
her judgment. That being so, they could not have been included by her in the original complaint, not could they have been
incorporated within the judgment in that action. This, then, furnishes another reason why the contention of the appellant in this
regard cannot be sustained. Under such circumstances a plea of multiplicity, even if made, would not have been available as to those
dividends which became payable after the judgment was entered in that action.

The remaining question presented by appellant relates to the interest which he was entitled to recover or the amount due him from
the plaintiff. As we have already seen, the judgment of the court in the first place gave him the interest on said amount from the
10th day of October, 1903, to the 27th day of July, 1909. On motion made by the plaintiff the court amended that judgment by
giving the defendant interest on said sum from the 10th day of October, 1903, to the 12th day of January, 1904. The reason for the
amendment was the fact, as disclosed by the proofs, that on the latter date the plaintiff tendered to the defendant said sum of
money and the defendant at that time refused to accept the same. Under such circumstances, the court properly held that the
tender of the sum and its refusal by the defendant stopped the running of interest in favor of the latter and he was not, therefore,
entitled to recover interest from that day forward. The appellant argues in this connection that he should not be blamed or punished
for the refusal to accept the tender of the plaintiff for the reason that he was not the owner of the stock at the time of such tender
and, therefore, could not accept it. As we have already seen in touching another question raised on this appeal, the court, in a
judgment now final, found that the sale of stock afterwards declared fraudulent was executed between the plaintiff and the
defendant. As to this there can be no question. As a necessary result the plaintiff need look for her redress no further than the
defendant himself and she could produce all of the legal effects possible in her favor by dealing directly with him, as she did when
she made the tender in question.

For these reasons the judgment appealed from is affirmed, without special finding as to costs. So ordered.
G.R. No. L-20274            October 30, 1969

ELOY MIGUEL and DEMETRIO MIGUEL, petitioners, 

vs.
THE COURT OF APPEALS and ANACLETA M. VDA. DE REYES, respondents.

Silvestre Br. Bello for petitioners.

Teofilo A. Leonin for respondent.

CASTRO, J.:

Petition for review on certiorari of the decision and the two resolutions of the Court of Appeals promulgated on May 10, July 23, and
September 5, all in the year 1962, in CA-G.R.-16497-R, entitled "Eloy Miguel and Demetrio Miguel, plaintiffs-appellees vs. Anacleta
M. Vda. de Reyes, defendant-appellant."

During the Spanish regime and prior to July 26, 1894, Eloy Miguel, then single and resident of Laoag, Ilocos Norte, went to Isabela
and for some appreciable period of time stayed with his kinsman Juan Felipe in Barrio Ingud Norte, Municipality of Angadanan.
There he spotted an uncultivated parcel of land, one hectare of which he forthwith occupied, and then cleared and planted to corn.
After the Philippine Revolution, he returned to Laoag, Ilocos Norte and took a wife. In the early years of the ensuing American
regime, Eloy Miguel returned to Ingud Norte with his family, resettled on the same land, cultivated and planted it to rice, declared it
for taxation purposes, and paid the annual realty taxes thereon.

During the year 1932, Leonor Reyes, an ambulatory notary public and husband of the private respondent Anacleta M. Reyes, used to
visit Barrio Ingud Norte, looking for documents to notarize. He and Eloy Miguel became acquaintances. Later, Leonor Reyes asked
Miguel if he wanted to secure expeditiously a title to his landholding. Having received an affirmative answer and after Eloy Miguel
had handed to him the tax declaration and tax receipts covering the land, Leonor Reyes prepared and filed a homestead application
in the name of Eloy Miguel and, furthermore, promised to work for the early approval of the said application. Reyes handed to
Miguel the receipt for the filing fee (exh. A) corresponding to the homestead application, advising the latter to keep it, but he
(Reyes) withheld other papers including the tax declaration and tax receipts, assuring Miguel that he would return them as soon as
the homestead patent was issued in Miguel's name. Reyes likewise advised Miguel to cease paying the land taxes until the patent
shall have been issued by the Bureau of Lands.

After a long wait and becoming impatient about the issuance of the promised title, Eloy Miguel inquired from Leonor Reyes about
the status of his application. Reyes promised to send a letter-tracer to the Bureau of Lands, and, in fact, asked Eloy Miguel to affix his
thumbmark to a blank paper upon which was supposed to be written a letter-tracer. However, World War II broke out in the Pacific,
and Miguel did not hear of and about his homestead application; after the war he had no way of ascertaining the outcome of his
application because Leonor Reyes had died meanwhile during the Japanese occupation of the Philippines.

For the services rendered and still to be rendered by Leonor Reyes in preparing the homestead application and in securing the
issuance of the correspondent patent, Miguel gave the former 1/5 of his yearly harvest from the land. After the death of Leonor
Reyes Miguel continued to deliver an equal number of cavanes of palay to the former's widow, Anacleta M. Vda. de Reyes, who
likewise promised to help him secure the necessary homestead patent.

Meanwhile, Demetrio Miguel helped his father, Eloy Miguel, clear and cultivate the land. Sometime in 1932, on the occasion of the
marriage of Demetrio, Eloy Miguel ceded to Demetrio 14 hectares of the southern portion of the land as a gift propter nuptias.
Demetrio forthwith declared the said portion for taxation purposes in his name, as evidenced by tax declaration 7408 (exh. G).

However, unknown to Eloy and Demetrio Miguel, Leonor Reyes on June 25, 1935 filed sales application 20240 in the name of his
wife, Anacleta M. Vda. de Reyes (hereinafter referred to as the private respondent), covering the same parcel of land occupied and
cultivated by the Miguels and the subject of Eloy Miguel's homestead-application. The sales application was duly acknowledged by
the Bureau of Lands on June 29, 1935, and a sale at public auction took place on August 3, 1939 whereat the private respondent was
the sole bidder. The Director of lands awarded the land to her on March 7, 1940, the value of which was to be paid on installments.

Sometime in 1950, the private respondent had the land surveyed by Maximo Lorenzo who, in the course of the survey, assured Eloy
Miguel that the land was being surveyed in the latter's name. The private respondent, who was present during the survey, made the
same assurance to Eloy Miguel. However, because his suspicions were aroused by the act of the private respondent of having the
land surveyed, Eloy Miguel directed his son, Demetrio, to inquire from the office of the district land officer of Ilagan, Isabela, about
the status of his (Eloy's) homestead application. Demetrio discovered that their land was covered by the sales application of the
private respondent. Eloy Miguel forthwith filed on February 16, 1950 a protest with the Bureau of Lands against sales application
20240 of the private respondent. Consequently, on February 21, 1950, the Director of Lands ordered an investigation. Hearing of the
protest was scheduled for May 26, 1950 by deputy public lands inspector Alejandro Ramos of Land District 4, Bureau of Lands,
Ilagan, Isabela, but was postponed at the instance of the private respondent. The hearing was then reset for February 10, 1951, by
assistant public lands inspector Hilarion Briones. However, the Miguels had in the interim discovered that notwithstanding their
protest and the investigation ostensibly being conducted by the administrative branch of the Government, sales patent V-522 and
original certificate of title P-1433, covering the parcel of land in question, were granted and issued to the private respondent on
January 10, 1951 and January 22, 1951, respectively.

Consequently, on February 17, 1951 Eloy and Demetrio Miguel lodged a complaint with the Court of First Instance of Isabela against
the private respondent, Anacleta M. Vda. de Reyes, the Director of Lands, and the Register of Deeds of Isabela, for the annulment of
sales patent V-522 and the cancellation of original certificate of title P-1433. That case, docketed as civil case 315 of the Court of
First Instance of Isabela, was dismissed by that court on grounds that the plaintiffs did not have personality to institute the action,
and that it was prematurely filed — the Miguels not having exhausted all administrative remedies, more specifically not appealing to
the Secretary of Agriculture and Natural Resources from the grant by the Director of Land of the patent to the private respondent.
On appeal to this Court, the dismissal was affirmed on the second ground (G.R. No. L-4851, promulgated July 31, 1953).

On September 7, 1953, Eloy and Demetrio Miguel commenced the action (civil case 616) in the Court of First Instance of Isabela
against the private respondent to compel her to reconvey to them the land covered by the abovementioned patent and title. After
due hearing, the trial court found that Eloy Miguel "has always been, and up to this time, in physical possession of the whole tract of
land in question under claim of ownership thru occupancy, he having occupied and cultivated the land since the Spanish regime;"
that he was a homestead applicant way back in 1932 for the land possessed by him; that there exists a trust relationship Eloy Miguel
would himself have personally attented to his own application; and that, through fraud and misrepresentations, Leonor Reyes
caused the filing and approval of an application and the issuance by the Bureau of Lands of a sales patent covering the property in
the name of his wife, the private respondent, without the consent and knowledge of the Miguels. The lower court, however, held
that reconveyance is not proper because the land in question is not the private property of the Miguels since time immemorial but
remains a part of the public domain, and instead declared that Eloy Miguel "should be given priority to acquire the land under the
foregoing premises, the court a quo  rendered judgment ordering (1) the Director of Land to cancel patent V-522 issued in the name
of Anacleta M. Vda. de Reyes, (2) the Registrar of Deeds of Isabela to cancel original certificate of title P-1433 in the name of
Anacleta M. Vda. de Reyes and to return Patent V-522 to the Bureau of Lands, and (3) the Director of Lands to give due course to the
homestead application of Eloy Miguel over the land.

The private respondent appealed to the Court of Appeals (hereafter referred to as the respondent Court) which dismissed the
complaint upon the ground that the judgment appealed from could not and did not bind the Director of Lands and the Registrar of
Deeds of Isabela who were not parties thereto. Eloy and, Demetrio Miguel (hereafter referred to as the petitioners) filed a motion
for reconsideration, wherein they argued that while the trial court might have incurred error in the legal conclusions drawn from its
own findings of fact, the respondent Court was not legally precluded by the Rules of Court and applicable jurisprudence to modify
the judgment of the trial court, so as to make it conform to the evidence, and to grant the relief of reconveyance sought in the
action, in which action the Director of Land and the Register of Deeds of Isabela are not proper or necessary parties. The motion for
reconsideration wag denied in an extended resolution of the respondent Court Promulgated on July 23, 1962, which ruled that the
petitioners should have appealed from the decision of the trial court. A second motion for reconsideration was denied in a minute
resolution dated September 5, 1962.

The petitioners are now before us on appeal by certiorari, assigning as errors (1) the Court of Appeals' holding that they should have
appealed from the decision of the trial court, and (2) its finding that, assuming that reconveyance in favor of the petitioners as mere
appellees is still proper, the cases cited in the latter's first motion for reconsideration are not in point.

It has been postulated — and, we think, correctly — that the Supreme Court is vested with ample authority to review matters not
assigned as errors in an appeal, if it finds that their consideration and resolution are indispensable or necessary in arriving at a just
decision in a given case.1 Thus, before passing upon the foregoing assigned errors, we shall first resolve in seriatim the matters raised
in both the appealed decision and resolutions of the respondent Court because to do so is imperative in arriving at a fair and
equitable adjudication of this case.

1. The respondent Court points up the failure of the petitioners to present a petition for judicial confirmation of imperfect title, if
they indeed had been in possession of the land since July 26, 1894, in accordance with the Public Land Act. Eloy Miguel should not,
however, be expected to file such a petition because all along he was relying on the solemn assurances of Leonor Reyes and later his
wife, the private respondent, that they were in the process of securing a homestead patent for him.

2. The respondent Court observed in its decision that the evidence on the allegation that Leonor Reyes acted fraudulently in applying
for the purchase of the land and later transferring his right to his wife, is sharply conflicting, and that even granting that there was
fraud in the obtention of the issuance of the patent, any objection based on that ground should have been interposed within one
year from the date of its issuance.

We cannot give our approval to this view. As found by the court below, the petitioners have proven by preponderance of evidence
the fraud perpetrated by the private respondent and her husband on Eloy Miguel. The weight of evidence leans heavily in favor of
the fact of occupation by Eloy Miguel of the land from prior to July 26, 1894. This was the finding of the lower court — which belies
the private respondent's allegation that Eloy Miguel entered as her tenant only in 1935. There is also the receipt, exh. A, evidencing
the payment of a filing fee for a homestead application, which receipt, in the session of Eloy Miguel, raises at least the presumption
that he had filed a homestead application. That the records of the Bureau of Lands or of any of its units, particularly the district land
office at Ilagan, Isabela, do not show that such application was ever filed, supports the petitioners' thesis, concurred in by the trial
court, that the blank paper which Eloy Miguel thumbmarked at the behest of Leonor Reyes was used by the latter to withdraw the
formers application instead of to trace the application. Finally, there is the private respondent's and her husband's act of misleading
the Bureau of Lands by falsely stating in their application for a sales patent that there was no improvement on the land, when, as
found by the lower court, the land had already been cultivated and improved by Eloy Miguel since 1932, by the latest. (This
misleading statement, noted by the court a quo on exh. 15 dated March 28, 1939 of the private respondent, significantly, is not
impugned by the latter.) In fact, the lower court observed that the private respondent herself affirmed on the witness stand that
Eloy Miguel was in 1935 already working on the land, although supposedly as her tenant. Therefore, at the time the private
respondent's sales patent application was filed in 1935, Leonor Reyes and she led the Bureau of Lands to believe that the land was
uncultivated and unoccupied by other claimants. The very relevant question arises: Why did the Reyes spouses conceal from the
Bureau of Lands the fact that the land was occupied and being cultivated by the Miguels, when there existed no prohibition against
having the land cultivated for them by tenants? There are only two logical reasons for the mysterious conduct of the Reyes spouses.
First, had they stated in their sales application that the whole parcel of land was under cultivation by the petitioners, the Director of
Lands would have in all probability discovered that the land applied for was covered by the prior homestead application of Eloy
Miguel and most likely would have disapproved the sales application of the private respondent. Second, had a survey of the land
been conducted earlier, this would have aroused the suspicions of Eloy Miguel earlier and enabled him to discover much sooner the
fraud perpetrated by Leonor Reyes before the sales application of the private respondent was given due course. Indeed, the private
respondent waited until she had just about paid all the installments on the land before ordering a final survey thereof. It was this
survey which aroused Eloy Miguel's suspicions and enabled him and his son to discover the fraud perpetrated upon them.

The respondent Court's holding that any objection based on fraud should have been interposed within one year from the date the
issuance of the sales patent has no relevance to the case at bar. This is an action for theenforcement of a constructive trust  — the
ultimate object of which is the reconveyance of property lost through breach of fiduciary relations and/or fraud. Therefore, it can be
filed within four years from the discovery of the fraud.2 And since the petitioners discovered the fraud committed against them by
the Reyes spouses in 1950, they had until 1954 within which to bring this action. This action was seasonably instituted because the
complaint was filed on September 7, 1953.

3. The respondent Court also held that the only remedy available at the time the action below was instituted was for the
Government (through the Solicitor General) to file an action for the reversion of the land to the public domain based on the illegality
of the grant — a suit which a private person is not authorized to file. The foregoing rule is correct but inapplicable in this case, which,
as earlier mentioned, is an action for reconveyance of a piece of land through enforcement of a constructive trust. For this same
reason, the provision of Land Administrative Order 6 of the Secretary of Agriculture and Natural Resources, cited in the respondent
court's decision, is likewise inapt.

4. The respondent Court attributes error to the lower court's finding that Eloy Miguel filed a homestead application for the land in
question, stating that no other evidence was presented to show that such application was filed except the testimony of Eloy Miguel
and the receipt for the filing fee of a homestead application; and that if such application was really filed, some trace or tell-tale
evidence of it would be extant, and the application could have been easily reconstituted after the liberation in 1945 when the
Government adopted a policy to enable all public land applicants to reconstitute their applications. It is too well-settled to require
any citation of authority that the lower Court's findings of fact are entitled to considerable weight, especially with respect to the
appreciation of the testimony of witnesses on the stand, since it was in the best position to observe the demeanor of the witnesses.
The testimony of Eloy Miguel regarding his filing of a homestead application over the parcel of land — as found by the lower court —
should not therefore lightly be brushed aside. The receipt, exh. A, for the filing of the homestead application raises a presumption in
favor of Eloy Miguel's having filed such an application. As earlier explained, if no trace of the said application could be found among
the records of the Bureau of Lands or of any of its units particularly the district land office at Ilagan, Isabela, it is because through
fraud — i.e., by asking Eloy Miguel to thumbmark a blank piece of paper — Leonor Reyes succeeded in withdrawing the application
of Miguel. And he did this to pave the way for his wife, the private respondent herein, herself to apply for the land under a sales
application. Of course, having relied on the assurances of the Reyes spouses that they would help him secure a homestead patent,
Eloy Miguel found no need to reconstitute his homestead application. It is not even farfetched to suppose that Miguel, being
illiterate, never even came to learn of the Government's policy of enabling public land applicants to reconstitute their applications.

5. Coming now to the assigned errors, the respondent Court's view is not correct that it cannot grant the relief of reconveyance
because the petitioners did not appeal from the decision of the lower court. There exist sufficient bases, hereinafter to be discussed,
for the respondent Court to award said relief in the exercise of its broad appellate powers to affirm, reverse or modify the judgment
or order appealed from.

To start with, the petitioners cannot entirely be blamed if they thought it the better part of prudence not to appeal. For although it
did not incorporate a decree of reconveyance, still the decision of the court below was favorable to them because it vindicated their
actual possession of the land under a bona fide  claim of ownership since the Spanish regime, and adjudged them as having a better
right to the land and the priority to own it under the Public Land Act. Besides, it was their legitimate desire to avoid incurring
additional expenses incident to the bringing of an appeal.

However, as appellees in the Court of Appeals, the petitioners pointedly called the attention of the respondent Court in their brief to
several questions decided against them in the court below. Thus, working on the theory that it was plain error for the trial court to
order the Director of Lands and the Register of Deeds of Isabela to implement its decision, the petitioners called the attention of the
respondent Court to the precise nature of the action below in which the Director of Lands and the Register of Deeds of Isabela need
not be impleaded.

... The action in this case is reconveyance, the purpose of which is to compel the defendant to return to the plaintiffs-
appellees the land in question which she has acquired through fraudulent means. Such being the case, it would have been
utterly improper for the plaintiffs to have impleaded the Director of Lands or the Register of Deeds of Isabela inasmuch as
the action is personal in nature directed against the person of the defendant." .

The petitioners likewise called the attention of the respondent Court to the trust relationship existing between them, on one hand,
and the Reyes spouses, on the other, which was breached by the latter. Thus, to justify the reconveyance to them of the property,
they stated that:

Moreover, a situation of trust has been created in the instant case between the plaintiff and the defendant-appellant
deceased husband upon whom the plaintiff Eloy Miguel relied through his (Reyes') representations that the corresponding
title to said land would be secured in favor of the plaintiff Eloy Miguel. The evidence likewise shows that the defendant Vda.
de Reyes promised the plaintiff to continue the work begun by her late husband with the ultimate result of securing the said
homestead patent and title in favor of the plaintiff Eloy Miguel. Inasmuch as the said promise was violated by the defendant
who secretly worked toward the acquisition of the said land for her own self, fraudulently and stealthily, no prescription can
run as against plaintiffs' right to claim ownership of the said property.

We held in one case that appellants need not make specific assignment of errors provided they discuss at length and assail in their
brief the correctness of the trial court's findings regarding the matter. Said discussion warrants the appellate court to rule upon the
point because it substantially complies with sec. 7, Rule 51 of the Revised Rules of Court, intended merely to compel the appellant to
specify the questions which he wants to raise and be disposed of in his appeal. A clear discussion regarding an error allegedly
committed by the trial court accomplishes the purpose of a particular assignment of error.3

Reasoning a fortiori from the above-cited authority, an appellee who occupies a purely defensive position and is not required to
make assignments of errors, need only discuss or call the attention of the appellate court in his brief to the issues erroneously
decided against him by the trial court.4 Here the petitioners (appellees in the Court of Appeals) stated quite explicitly in their brief
that since the action was for reconveyance, it was utterly improper to implead the Director of Lands and the Register of Deeds — in
effect calling the attention of the respondent Court to a plain error committed by the trial court in ordering the Director of Lands and
the Register of Deeds to nullify the sales patent and original certificate of title issued to the private respondent. And, in discussing
the trust relationship between the Miguels and the Reyes spouses which was breached by the latter, the petitioners (as appellees)
also clearly brought to the attention of the respondent Court a valid ground disregarded by the lower court as a basis for granting
the relief of reconveyance.
Moreover, the Rules of Court5 and jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1)
errors affecting the lower court's jurisdiction over the subject matter, (2) plain errors 6 not specified, and (3) clerical errors. Certainly,
the mandate contained in the dispositive portion of the lower court's decision and addressed to the Director of Lands and the
Register of Deeds, who were not parties to the case, is a plain error which the respondent Court properly corrected. As
aforenarrated, the petitioners (as appellees) brought this error to the attention of the respondent Court. Another plain error which
the respondent Court should have considered was the court a quo's  conclusion that the land in litigation was still part of the public
domain, in the face of the parties' mutual allegations to the contrary and despite the admitted fact that a sales patent and an
original certificate of title over the land had already been issued, thus segregating the land from the public domain and making it
private land.

It is noteworthy that the complaint for reconveyance was not dismissed by the trial court. What it denied was merely the relief or
remedy of reconveyance. However, in its decision, the trial court made certain findings of fact which justified the relief of
reconveyance — e.g., that Eloy Miguel "has always been, and up to this time, in physical possession of the whole tract of land in
question under claim of ownership thru occupancy, he having occupied and cultivated the land since the Spanish regime;" that there
was a trust relationship between Eloy Miguel and the Reyes spouses; and that the Reyes spouses have fraudulently and in bad faith
breached that trust. Hence, in reiterating their positions before the respondent Court on the private nature of the land, on the
impropriety of impleading the Director of Lands and the Register of Deeds of Isabela, and on the existence of a trust relationship
between the petitioners and the Reyes spouses, the petitioners were in point of fact inviting the respondent Court's attention to
questions erroneously decided against them by the trial court, in the hope that the respondent Court would render judgment in
accordance with the facts adjudged by the trial court as proven.

If the complaint states a claim upon which any relief can be given, it is immaterial what the plaintiff has asked for in his
prayer or whether he has asked for the proper relief; the court will grant him the relief to which he is entitled under the
facts proven (Kansas City St. L. and C. R. Co. v. Alton R. Co., 5 Fed. Rules Service, p. 638; U.S. Circuit Court of Appeals,
Seventh Circuit, Dec. 18, 1941).

On appeal to the respondent Court by the private respondent, the suit was, as it has always been in the court of origin, one for
reconveyance. And of course, the petitioners did not ask the respondent Court for an affirmative relief different from what was
logically justified by the facts found by and proven in the court a quo.

6. The respondent Court opined that the cases cited by the petitioners in their motion for reconsideration (i.e., Republic of the
Philippines v. Carle Heirs, L-12485, July 21, 1959, and Roco, et al. v. Gimeda L-11651, Dec. 27, 1958) are not applicable because they
involved properties which admittedly belonged to the parties entitled to reconveyance, unlike the herein petitioners who are mere
public land applicants and have not acquired title under the Public Land Act. Assuming the respondent Court to be correct, a legion
of cases there are which can be cited in favor of the petitioners' position. Since the law of trust has been more frequently applied in
England and in the United States than it has been in Spain, we may draw freely upon American precedents in determining the effects
of trusts, especially so because the trusts known to American and English equity jurisprudence are derived from the fidei
commissa of the Roman Law and are based entirely upon civil law principles.7 Furthermore, because the case presents problems not
directly covered by statutory provisions or by Spanish or local precedents, resort for their solution must be had to the underlying
principles of the law on the subject. Besides, our Civil Code itself directs the adoption of the principles of the general law of trusts,
insofar as they are not in conflict with said Code, the Code of Commerce, the Rules of Court and special laws.8

In holding that the cases cited by the petitioners in their motion for reconsideration (i,e., Republic of the Philippines v. Carle
Heirs, supra, and Roco, et al. v. Gimeda, supra) are inapplicable, the respondent Court advances the theory that an action for
reconveyance based on constructive trust will prosper only if the properties involved belong to the parties suing for and entitled to
reconveyance. This is not entirely accurate. In Fox v. Simons9 the plaintiff employed the defendant to assist him in obtaining oil
leases in a certain locality in Illinois, the former paying the latter a salary and his expenses. The defendant acquired some leases for
the plaintiff and others for himself. Whereupon, the plaintiff brought suit to compel the defendant to assign the leases which he had
acquired for himself. The court found for the plaintiff, holding that it was a breach of the defendant's fiduciary duty to purchase for
himself the kind of property which he was employed to purchase for the plaintiff. 10

It is to be observed that in Fox v. Simons, supra, the plaintiff was not the original owner of the oil leases. He merely employed the
defendant to obtain them for him, but the latter obtained some for the plaintiff and some for himself. Yet, despite the absence of
this former-ownership circumstance, the court there did not hesitate to order the defendant to assign or convey the leases he
obtained for himself to the plaintiff because of the breach of fiduciary duty committed by said defendant. Indeed, there need only be
a fiduciary relation and a breach of fiduciary duty before reconveyance may be adjudged. In fact, a fiduciary may even be chargeable
as a constructive trustee of property which he purchases for himself, even though he has not undertaken to purchase it for the
beneficiary if in purchasing it he was improperly competing with the beneficiary.11
Parenthetically, a fiduciary relation arises where one man assumes to act as agent for another and the other reposes confidence in
him, although there is no written contract or no contract at all. If the agent violates his duty as fiduciary, a constructive trust arises. It
is immaterial that there was no antecedent fiduciary relation and that it arose contemporaneously with the particular transaction. 12

In the case at bar, Leonor Reyes, the private respondent's husband, suggested that Eloy Miguel file a homestead application over the
land and offered his services in assisting the latter to secure a homestead patent. Eloy Miguel accepted Leonor Reyes' offer of
services, thereby relying, on his word and reposing confidence in him. And in payment for the services rendered by Leonor Reyes in
preparing and filing the homestead application and those still to be rendered by him in securing the homestead patent, Eloy Miguel
delivered to Reyes 1/5 of his yearly harvest from the said land. When Leonor Reyes died, the petitioners continued to deliver the
same percentage of their annual harvest to the private respondent who undertook to continue assisting the former to secure a
homestead patent over said land. However, in breach of their fiduciary duty and through fraud, Leonor Reyes and the private
respondent filed a sales application and obtained a sales patent and ultimately an original certificate of title over the same parcel of
land. Therefore, following the ruling in Fox v. Simons, supra, the private respondent can be compelled to reconvey or assign to the
petitioners the parcel of land in the proportion of nine hectares in favor of Eloy Miguel and 14 hectares in favor of Demetrio Miguel,
respectively.

The private respondent argues that there is no violation of trust relationship because the petitioners could have participated in the
public bidding. She avers that the alleged fraud supposedly committed upon the petitioners, and on which the claim for
reconveyance is founded, is clearly of no moment because the sales patent in question was not the necessary consequence thereof,
but rather, it was granted in consideration of her being the highest bidder and the purchaser of the land. In refutation of the
foregoing argument, it must be observed, firstly, that the petitioners — because of the fraud practised on them by the Reyes
spouses — never came to know about the public bidding in which the land was offered for sale and therefore could not have
participated therein. Had not the Reyes spouses misrepresented in their sales application that the land was uncultivated and
unoccupied, the Director of Lands would in all probability have found out about the occupancy and cultivation of the said land by the
petitioners and about Eloy Miguel's homestead application over the same, and consequently would have denied the sales
application of the Reyes spouses. Secondly, it may justifiably be postulated that equity will convert one who, for any reason
recognized by courts of equity as a ground for interference, has received legal title from the Government to lands, which in equity
and by the laws of Congress ought to have gone to another, into a trustee for such other and compel him to convey the legal title
accordingly.13 Thirdly, Eloy Miguel could have very easily obtained title to the said parcel of land in either of two ways, had he not
been inveigled by Leonor Reyes to file a homestead application. Thus, since he is a natural-born Filipino citizen, who is not an owner
of more than twenty-four hectares of land, and who since prior to July 4, 1926 (under R.A. 782, approved June 21, 1952, occupation
and cultivation since July 4, 1945, or prior thereto, is deemed sufficient) has continuously occupied and cultivated a parcel of land
not more than twenty-four hectares in area, he was entitled to apply for a free patent for, or gratuitous grant, of said land. This is
known as confirmation of imperfect or incomplete titles by administrative legalization.14 Or, since Eloy Miguel has possessed the land
prior to July 26, 1894 and said possession has been continuous, uninterrupted, open, adverse and in the concept of an owner, there
is a presumption  juris et de jure that all necessary conditions for a grant by the State have been complied with, and he would have
been by force of law entitled — pursuant to the provisions of sec. 48(b) of the Public Land Act — to the registration of his title to the
land. 15

ACCORDINGLY, the decision of the Court of Appeals of May 10, 1962 and its resolutions of July 23 and September 5, 1962, are set
aside. Another judgment is hereby entered, ordering the private respondent Anacleta M. Vda. de Reyes to convey the land subject
matter of the complaint, in fee simple, to the petitioners, in the proportion of nine (9) hectares in favor of Eloy Miguel and fourteen
(14) hectares in favor of Demetrio Miguel. In the event of failure of the said private respondent, for any reason whatsoever, to
convey within thirty (30) days from the date this judgment becomes final, it is hereby decreed that at the end of that period she will
be automatically divested of her title to the property in dispute, and this decision shall be authority for the Register of Deeds to
forthwith cancel the original of the original certificate of title P1433 in his office and the owner's copy thereof in the name of
Anacleta M. Vda. de Reyes, and to issue in favor of Eloy Miguel and Demetrio Miguel new Torrens titles over the land in the
proportion above indicated. Costs against the private respondent Reyes.
G.R. No. L-21237             March 22, 1924

JAMES D. BARTON, plaintiff-appellee, 
vs.
LEYTE ASPHALT & MINERAL OIL CO., LTD., defendant-appellant.

Block, Johnston & Greenbaum and Ross, Lawrence & Selph for appellant.
Frank B. Ingersoll for appellee.

STREET, J.:

This action was instituted in the Court of First Instance of the City of Manila by James D. Barton, to recover of the Leyte Asphalt &
Mineral Oil Co., Ltd., as damages for breach of contract, the sum of $318,563.30, United States currency, and further to secure a
judicial pronouncement to the effect that the plaintiff is entitled to an extension of the terms of the sales agencies specified in the
contract Exhibit A. The defendant answered with a general denial, and the cause was heard upon the proof, both documentary and
oral, after which the trial judge entered a judgment absolving the defendant corporation from four of the six causes of action set
forth in the complaint and giving judgment for the plaintiff to recover of said defendant, upon the first and fourth causes of action,
the sum of $202,500, United States currency, equivalent to $405,000, Philippine currency, with legal interest from June 2, 1921, and
with costs. From this judgment the defendant company appealed.

The plaintiff is a citizen of the United States, resident in the City of Manila, while the defendant is a corporation organized under the
law of the Philippine Islands with its principal office in the City of Cebu, Province of Cebu, Philippine Islands. Said company appears
to be the owner by a valuable deposit of bituminous limestone and other asphalt products, located on the Island of Leyte and known
as the Lucio mine. On April 21, 1920, one William Anderson, as president and general manager of the defendant company,
addressed a letter Exhibit B, to the plaintiff Barton, authorizing the latter to sell the products of the Lucio mine in the
Commonwealth of Australia and New Zealand upon a scale of prices indicated in said letter.

In the third cause of action stated in the complaint the plaintiff alleges that during the life of the agency indicated in Exhibit B, he
rendered services to the defendant company in the way of advertising and demonstrating the products of the defendant and
expended large sums of money in visiting various parts of the world for the purpose of carrying on said advertising and
demonstrations, in shipping to various parts of the world samples of the products of the defendant, and in otherwise carrying on
advertising work. For these services and expenditures the plaintiff sought, in said third cause of action, to recover the sum of
$16,563.80, United States currency. The court, however, absolved the defendant from all liability on this cause of action and the
plaintiff did not appeal, with the result that we are not now concerned with this phase of the case. Besides, the authority contained
in said Exhibit B was admittedly superseded by the authority expressed in a later letter, Exhibit A, dated October 1, 1920. This
document bears the approval of the board of directors of the defendant company and was formally accepted by the plaintiff. As it
supplies the principal basis of the action, it will be quoted in its entirety.

(Exhibit A) 
CEBU, CEBU, P. I. 
October 1, 1920.

JAMES D. BARTON, Esq., 

Cebu Hotel City.

DEAR SIR: — You are hereby given the sole and exclusive sales agency for our bituminous limestone and other asphalt products of
the Leyte Asphalt and Mineral Oil Company, Ltd., May first, 1922, in the following territory:

Australia Saigon Java

New Zealand India China
Tasmania Sumatra Hongkong

Siam and the Straits Settlements, also in the United States of America until May 1, 1921.
As regard bituminous limestone mined from the Lucio property. No orders for less than one thousand (1,000) tons will be accepted
except under special agreement with us. All orders for said products are to be billed to you as follows:

Per ton
In 1,000 ton lots ........................................... P15
In 2,000 ton lots ........................................... 14
In 5,000 ton lots ........................................... 12
In 10,000 ton lots .......................................... 10

with the understanding, however that, should the sales in the above territory equal or exceed ten thousand (10,000) tons in the year
ending October 1, 1921, then in that event the price of all shipments made during the above period shall be ten pesos (P10) per ton,
and any sum charged to any of your customers or buyers in the aforesaid territory in excess of ten pesos (P10) per ton, shall be
rebated to you. Said rebate to be due and payable when the gross sales have equalled or exceeded ten thousand (10,000) tons in the
twelve months period as hereinbefore described. Rebates on lesser sales to apply as per above price list.

You are to have full authority to sell said product of the Lucio mine for any sum see fit in excess of the prices quoted above and such
excess in price shall be your extra and additional profit and commission. Should we make any collection in excess of the prices
quoted, we agree to remit same to your within ten (10) days of the date of such collections or payments.

All contracts taken with municipal governments will be subject to inspector before shipping, by any authorized representative of
such governments at whatever price may be contracted for by you and we agree to accept such contracts subject to draft attached
to bill of lading in full payment of such shipment.

It is understood that the purchasers of the products of the Lucio mine are to pay freight from the mine carriers to destination and
are to be responsible for all freight, insurance and other charges, providing said shipment has been accepted by their inspectors.

All contracts taken with responsible firms are to be under the same conditions as with municipal governments.

All contracts will be subject to delays caused by the acts of God, over which the parties hereto have no control.

It is understood and agreed that we agree to load all ships, steamers, boats or other carriers prompty and without delay and load
not less than 1,000 tons each twenty-four hours after March 1, 1921, unless we so notify you specifically prior to that date we are
prepared to load at that rate, and it is also stipulated that we shall not be required to ship orders of 5,000 tons except on 30 days
notice and 10,000 tons except on 60 days notice.

If your sales in the United States reach five thousand tons on or before May 1, 1921, you are to have sole rights for this territory also
for one year additional and should your sales in the second year reach or exceed ten thousand tons you are to have the option to
renew the agreement for this territory on the same terms for an additional two years.

Should your sales equal exceed ten thousand (10,000) tons in the year ending October 1, 1921, or twenty thousand (20,000) tons by
May 1, 1922, then this contract is to be continued automatically for an additional three years ending April 30, 1925, under the same
terms and conditions as above stipulated.

The products of the other mines can be sold by you in the aforesaid territories under the same terms and conditions as the products
of the Lucio mine; scale of prices to be mutually agreed upon between us.

LEYTE ASPHALT & MINERAL OIL CO., LTD.

By (Sgd.) WM. ANDERSON
President

(Sgd.) W. C. A. PALMER
Secretary

Approved by Board of Directors,

October 1, 1920.
(Sgd.) WM. ANDERSON 
President

Accepted.
(Sgd.) JAMES D. BARTON
Witness D. G. MCVEAN

Upon careful perusal of the fourth paragraph from the end of this letter it is apparent that some negative word has been
inadvertently omitted before "prepared," so that the full expression should be "unless we should notify you specifically prior to that
date that we are unprepared to load at that rate," or "not prepared to load at that rate."

Very soon after the aforesaid contract became effective, the plaintiff requested the defendant company to give him a similar selling
agency for Japan. To this request the defendant company, through its president, Wm. Anderson, replied, under date of November
27, 1920, as follows:

In re your request for Japanese agency, will say, that we are willing to give you, the same commission on all sales made by
you in Japan, on the same basis as your Australian sales, but we do not feel like giving you a regular agency for Japan until
you can make some large sized sales there, because some other people have given us assurances that they can handle our
Japanese sales, therefore we have decided to leave this agency open for a time.

Meanwhile the plaintiff had embarked for San Francisco and upon arriving at that port he entered into an agreement with Ludvigsen
& McCurdy, of that city, whereby said firm was constituted a subagent and given the sole selling rights for the bituminous limestone
products of the defendant company for the period of one year from November 11, 1920, on terms stated in the letter Exhibit K. The
territory assigned to Ludvigsen & McCurdy included San Francisco and all territory in California north of said city. Upon an earlier
voyage during the same year to Australia, the plaintiff had already made an agreement with Frank B. Smith, of Sydney, whereby the
latter was to act as the plaintiff's sales agent for bituminous limestone mined at the defendant's quarry in Leyte, until February 12,
1921. Later the same agreement was extended for the period of one year from January 1, 1921. (Exhibit Q.)

On February 5, 1921, Ludvigsen & McCurdy, of San Francisco, addressed a letter to the plaintiff, then in San Francisco, advising hi
that he might enter an order for six thousand tons of bituminous limestone to be loaded at Leyte not later than May 5, 1921, upon
terms stated in the letter Exhibit G. Upon this letter the plaintiff immediately indorsed his acceptance.

The plaintiff then returned to Manila; and on March 2, 1921, Anderson wrote to him from Cebu, to the effect that the company was
behind with construction and was not then able to handle big contracts. (Exhibit FF.) On March 12, Anderson was in Manila and the
two had an interview in the Manila Hotel, in the course of which the plaintiff informed Anderson of the San Francisco order.
Anderson thereupon said that, owing to lack of capital, adequate facilities had not been provided by the company for filling large
orders and suggested that the plaintiff had better hold up in the matter of taking orders. The plaintiff expressed surprise at this and
told Anderson that he had not only the San Francisco order (which he says he exhibited to Anderson) but other orders for large
quantities of bituminous limestone to be shipped to Australia and Shanghai. In another interview on the same Anderson definitely
informed the plaintiff that the contracts which be claimed to have procured would not be filled.

Three days later the plaintiff addressed a letter (Exhibit Y) to the defendant company in Cebu, in which he notified the company to
be prepared to ship five thousand tons of bituminous limestone to John Chapman Co., San Francisco, loading to commence on May
1, and to proceed at the rate of one thousand tons per day of each twenty-four hours, weather permitting.

On March 5, 1921, Frank B. Smith, of Sydney, had cabled the plaintiff an order for five thousand tons of bituminous limestone; and in
his letter of March 15 to the defendant, the plaintiff advised the defendant company to be prepared to ship another five thousand
tons of bituminous limestone, on or about May 6, 1921, in addition to the intended consignment for San Francisco. The name Henry
E. White was indicated as the name of the person through whom this contract had been made, and it was stated that the consignee
would be named later, no destination for the shipment being given. The plaintiff explains that the name White, as used in this letter,
was based on an inference which he had erroneously drawn from the cable sent by Frank B. Smith, and his intention was to have the
second shipment consigned to Australia in response to Smith's order.

It will be noted in connection with this letter of the plaintiff, of March 15, 1921, that no mention was made of the names of the
person, or firm, for whom the shipments were really intended. The obvious explanation that occurs in connection with this is that
the plaintiff did not then care to reveal the fact that the two orders had originated from his own subagents in San Francisco and
Sydney.
To the plaintiff's letter of March 15, the assistant manager of the defendant company replied on March, 25, 1921, acknowledging the
receipt of an order for five thousand tons of bituminous limestone to be consigned to John Chapman Co., of San Francisco, and the
further amount of five thousand tons of the same material to be consigned to Henry E. White, and it was stated that "no orders can
be entertained unless cash has been actually deposited with either the International Banking Corporation or the Chartered Bank of
India, Australia and China, Cebu." (Exhibit Z.)

To this letter the plaintiff in turn replied from Manila, under date of March, 1921, questioning the right of the defendant to insist
upon a cash deposit in Cebu prior to the filling of the orders. In conclusion the plaintiff gave orders for shipment to Australia of five
thousand tons, or more, about May 22, 1921, and ten thousand tons, or more, about June 1, 1921. In conclusion the plaintiff said "I
have arranged for deposits to be made on these additional shipments if you will signify your ability to fulfill these orders on the
dates mentioned." No name was mentioned as the purchaser, or purchases, of these intended Australian consignments.

Soon after writing the letter last above-mentioned, the plaintiff embarked for China and Japan. With his activities in China we are not
here concerned, but we note that in Tokio, Japan, he came in contact with one H. Hiwatari, who appears to have been a suitable
person for handling bituminous limestone for construction work in Japan. In the letter Exhibit X, Hiwatari speaks of himself as if he
had been appointed exclusive sales agent for the plaintiff in Japan, but no document expressly appointing him such is in evidence.

While the plaintiff was in Tokio he procured the letter Exhibit W, addressed to himself, to be signed by Hiwatari. This letter, endited
by the plaintiff himself, contains an order for one thousand tons of bituminous limestone from the quarries of the defendant
company, to be delivered as soon after July 1, 1921, as possible. In this letter Hiwatari states, "on receipt of the cable from you,
notifying me of date you will be ready to ship, and also tonnage rate, I will agree to transfer through the Bank of Taiwan, of Tokio, to
the Asia Banking Corporation, of Manila, P. I., the entire payment of $16,000 gold, to be subject to our order on delivery of
documents covering bill of lading of shipments, the customs report of weight, and prepaid export tax receipt. I will arrange in
advance a confirmed or irrevocable letter of credit for the above amounts so that payment can be ordered by cable, in reply to your
cable advising shipping date."

In a letter, Exhibit X, of May 16, 1921, Hiwatari informs the plaintiff that he had shown the contract, signed by himself, to the
submanager of the Taiwan Bank who had given it as his opinion that he would be able to issue, upon request of Hiwatari, a credit
note for the contracted amount, but he added that the submanager was not personally able to place his approval on the contract as
that was a matter beyond his authority. Accordingly Hiwatari advised that he was intending to make further arrangements when the
manager of the bank should return from Formosa.

In the letter of May 5, 1921, containing Hiwatari's order for one thousand tons of bituminous limestone, it was stated that if the
material should prove satisfactory after being thoroughly tested by the Paving Department of the City of Tokio, he would contract
with the plaintiff for a minimum quantity of ten thousand additional tons, to be used within a year from September 1, 1921, and that
in this event the contract was to be automatically extended for an additional four years. The contents of the letter of May 5 seems to
have been conveyed, though imperfectly, by the plaintiff to his attorney, Mr. Frank B. Ingersoll, of Manila; and on May 17, 1921,
Ingersoll addressed a note to the defendant company in Cebu in which he stated that he had been requested by the plaintiff to
notify the defendant that the plaintiff had accepted an order from Hiwatari, of Tokio, approved by the Bank of Taiwan, for a
minimum order of ten thousand tons of the stone annually for a period of five years, the first shipment of one thousand tons to be
made as early after July 1 as possible. It will be noted that this communication did not truly reflect the contents of Hiwatari's letter,
which called unconditionally for only one thousand tons, the taking of the remainder being contingent upon future eventualities.

It will be noted that the only written communications between the plaintiff and the defendant company in which the former gave
notice of having any orders for the sale of bituminous limestone are the four letters Exhibit Y, AA, BB, and II. In the first of these
letters, dated March 15, 1921, the plaintiff advises the defendant company to be prepared to ship five thousand tons of bituminous
limestone, to be consigned to John Chapman, Co., of San Francisco, to be loaded by March 5, and a further consignment of five
thousand tons, through a contract with Henry E. White, consignees to be named later. In the letter Exhibit BB dated May 17, 1921,
the plaintiff's attorney gives notice of the acceptance by plaintiff of an order from Hiwatari, of Tokio, approved by the Bank of
Taiwan, for a minimum of ten thousand annually for a period of five years, first shipment of a thousand tons to be as early after July
1 as possible. In the letter Exhibit H the plaintiff gives notice of an "additional" (?) order from H. E. White, Sydney, for two lots of
bituminous limestone of five thousand tons each, one for shipment not later than June 30, 1921, and the other by July 20, 1921. In
the same letter thousand tons from F. B. Smith, to be shipped to Brisbane, Australia, by June 30, and a similar amount within thirty
days later.

After the suit was brought, the plaintiff filed an amendment to his complaint in which he set out, in tabulated form, the orders which
he claims to have received and upon which his letters of notification to the defendant company were based. In this amended answer
the name of Ludvigsen & McCurdy appears for the first time; and the name of Frank B. Smith, of Sydney, is used for the first time as
the source of the intended consignments of the letters, Exhibits G, L, M, and W, containing the orders from Ludvigen & McCurdy,
Frank B. Smith and H. Hiwatari were at no time submitted for inspection to any officer of the defendant company, except possibly
the Exhibit G, which the plaintiff claims to have shown to Anderson in Manila on March, 12, 1921.

The different items conspiring the award which the trial judge gave in favor of the plaintiff are all based upon the orders given by
Ludvigsen & McCurdy (Exhibit G), by Frank B. Smith (Exhibit L and M), and by Hiwatari in Exhibit W; and the appealed does not
involve an order which came from Shanghai, China. We therefore now address ourselves to the question whether or not the orders
contained in Exhibit G, L, M, and W, in connection with the subsequent notification thereof given by the plaintiff to the defendant,
are sufficient to support the judgment rendered by the trial court.

The transaction indicated in the orders from Ludvigsen, & McCurdy and from Frank B. Smith must, in our opinion, be at once
excluded from consideration as emanating from persons who had been constituted mere agents of the plaintiff. The San Francisco
order and the Australian orders are the same in legal effect as if they were orders signed by the plaintiff and drawn upon himself;
and it cannot be pretended that those orders represent sales to bona fide purchasers found by the plaintiff. The original contract by
which the plaintiff was appointed sales agent for a limited period of time in Australia and the United States contemplated that he
should find reliable and solvent buyers who should be prepared to obligate themselves to take the quantity of bituminous limestone
contracted for upon terms consistent with the contract. These conditions were not met by the taking of these orders from the
plaintiff's own subagents, which was as if the plaintiff had bought for himself the commodity which he was authorized to sell to
others. Article 267 of the Code of Commerce declares that no agent shall purchase for himself or for another that which he has been
ordered to sell. The law has placed its ban upon a broker's purchasing from his principal unless the latter with full knowledge of all
the facts and circumstances acquiesces in such course; and even then the broker's action must be characterized by the utmost good
faith. A sale made by a broker to himself without the consent of the principal is ineffectual whether the broker has been guilty of
fraudulent conduct or not. (4 R. C. L., 276-277.) We think, therefore, that the position of the defendant company is indubitably
sound in so far as it rest upon the contention that the plaintiff has not in fact found any bona fidepurchasers ready and able to take
the commodity contracted for upon terms compatible with the contract which is the basis of the action.

It will be observed that the contract set out at the beginning of this opinion contains provisions under which the period of the
contract might be extended. That privilege was probably considered a highly important incident of the contract and it will be seen
that the sale of five thousand tons which the plaintiff reported for shipment to San Francisco was precisely adjusted to the purpose
of the extension of the contract for the United States for the period of an additional year; and the sales reported for shipment to
Australia were likewise adjusted to the requirements for the extention of the contract in that territory. Given the circumstances
surrounding these contracts as they were reported to the defendant company and the concealment by the plaintiff of the names of
the authors of the orders, -- who after all were merely the plaintiff's subagents, — the officers of the defendant company might
justly have entertained the suspicion that the real and only person behind those contracts was the plaintiff himself. Such at least
turns out to have been the case.

Much energy has been expended in the briefs upon his appeal over the contention whether the defendant was justified in laying
down the condition mentioned in the letter of March 26, 1921, to the effect that no order would be entertained unless cash should
be deposited with either the International Banking Corporation of the Chartered Bank of India, Australia and China, in Cebu. In this
connection the plaintiff points to the stipulation of the contract which provides that contracts with responsible parties are to be
accepted "subject to draft attached to bill of lading in full payment of such shipment." What passed between the parties upon this
point appears to have the character of mere diplomatic parrying, as the plaintiff had no contract from any responsible purchaser
other than his own subagents and the defendant company could no probably have filled the contracts even if they had been backed
by the Bank of England.

Upon inspection of the plaintiff's letters (Exhibit Y and AA), there will be found ample assurance that deposits for the amount of each
shipment would be made with a bank in Manila provided the defendant would indicated its ability to fill the orders; but these
assurance rested upon no other basis than the financial responsibility of the plaintiff himself, and this circumstance doubtless did not
escape the discernment of the defendant's officers.

With respect to the order from H. Hiwatari, we observe that while he intimates that he had been promised the exclusive agency
under the plaintiff for Japan, nevertheless it does not affirmatively appear that he had been in fact appointed to be such at the time
he signed to order Exhibit W at the request of the plaintiff. It may be assumed, therefore, that he was at that time a stranger to the
contract of agency. It clearly appears, however, that he did not expect to purchase the thousand tons of bituminous limestone
referred to in his order without banking assistance; and although the submanager of the Bank of Taiwan had said something
encouraging in respect to the matter, nevertheless that official had refrained from giving his approval to the order Exhibit W. It is
therefore not shown affirmatively that this order proceeds from a responsible source.
The first assignment of error in the appellant's brief is directed to the action of the trial judge in refusing to admit Exhibit 2, 7, 8, 9
and 10, offered by the defendant, and in admitting Exhibit E, offered by the plaintiff. The Exhibit 2 is a letter dated June 25, 1921, or
more than three weeks after the action was instituted, in which the defendant's assistant general manager undertakes to reply to
the plaintiff's letter of March 29 proceeding. It was evidently intended as an argumentative presentation of the plaintiff's point of
view in the litigation then pending, and its probative value is so slight, even if admissible at all, that there was no error on the part of
the trial court in excluding it.

Exhibit 7, 8, 9 and 10 comprise correspondence which passed between the parties by mail or telegraph during the first part of the
year 1921. The subject-matter of this correspondence relates to efforts that were being made by Anderson to dispose of the
controlling in the defendant corporation, and Exhibit 9 in particular contains an offer from the plaintiff, representing certain
associates, to but out Anderson's interest for a fixed sum. While these exhibits perhaps shed some light upon the relations of the
parties during the time this controversy was brewing, the bearing of the matter upon the litigation before us is too remote to exert
any definitive influence on the case. The trial court was not in error in our opinion in excluding these documents.

Exhibit E is a letter from Anderson to the plaintiff, dated April 21, 1920, in which information is given concerning the property of the
defendant company. It is stated in this letter that the output of the Lucio  (quarry) during the coming year would probably be at the
rate of about five tons for twenty-four hours, with the equipment then on hand, but that with the installation of a model cableway
which was under contemplation, the company would be able to handle two thousand tons in twenty-four hours. We see no
legitimate reason for rejecting this document, although of slight probative value; and her error imputed to the court in admitting the
same was not committed.

Exhibit 14, which was offered in evidence by the defendant, consists of a carbon copy of a letter dated June 13, 1921, written by the
plaintiff to his attorney, Frank B. Ingersoll, Esq., of Manila, and in which plaintiff states, among other things, that his profit from the
San Francisco contract would have been at the rate of eigthy-five cents (gold) per ton. The authenticity of this city document is
admitted, and when it was offered in evidence by the attorney for the defendant the counsel for the plaintiff announced that he had
no objection to the introduction of this carbon copy in evidence if counsel for the defendant would explain where this copy was
secured. Upon this the attorney for the defendant informed the court that he received the letter from the former attorneys of the
defendant without explanation of the manner in which the document had come into their possession. Upon this the attorney for the
plaintiff made this announcement: "We hereby give notice at this time that unless such an explanation is made, explaining fully how
this carbon copy came into the possession of the defendant company, or any one representing it, we propose to object to its
admission on the ground that it is a confidential communication between client and lawyer." No further information was then given
by the attorney for the defendant as to the manner in which the letter had come to his hands and the trial judge thereupon excluded
the document, on the ground that it was a privileged communication between client and attorney.

We are of the opinion that this ruling was erroneous; for even supposing that the letter was within the privilege which protects
communications between attorney and client, this privilege was lost when the letter came to the hands of the adverse party. And it
makes no difference how the adversary acquired possession. The law protects the client from the effect of disclosures made by him
to his attorney in the confidence of the legal relation, but when such a document, containing admissions of the client, comes to the
hand of a third party, and reaches the adversary, it is admissible in evidence. In this connection Mr. Wigmore says:

The law provides subjective freedom for the client by assuring him of exemption from its processes of disclosure against
himself or the attorney or their agents of communication. This much, but not a whit more, is necessary for the maintenance
of the privilege. Since the means of preserving secrecy of communication are entirely in the client's hands, and since the
privilege is a derogation from the general testimonial duty and should be strictly construed, it would be improper to extend
its prohibition to third persons who obtain knowledge of the communications. One who overhears the communication,
whether with or without the client's knowledge, is not within the protection of the privilege. The same rule ought to apply
to one who surreptitiously reads or obtains possession of a document in original or copy. (5 Wigmore on Evidence, 2d ed.,
sec. 2326.)

Although the precedents are somewhat confusing, the better doctrine is to the effect that when papers are offered in evidence a
court will take no notice of how they were obtained, whether legally or illegally, properly or improperly; nor will it form a collateral
issue to try that question. (10 R. C. L., 931; 1 Greenl. Evid., sec. 254a; State vs. Mathers, 15 L. R. A., 268; Gross vs. State, 33 L. R. A.,
[N. S.], 477, note.)

Our conclusion upon the entire record is that the judgment appealed from must be reversed; and the defendant will be absolved
from the complaint. It is so ordered, without special pronouncement as to costs of either instance.
G.R. No. L-2886             August 22, 1952

GREGORIO ARANETA, INC., plaintiff-appellant, vs.

PAZ TUASON DE PATERNO and JOSE VIDAL, defendants-appellants.TUASON, J.:

This is a three-cornered contest between the purchasers, the seller, and the mortgagee of certain portions (approximately 40,703
square meters) of a big block of residential land in the district of Santa Mesa, Manila. The plaintiff, which is the purchaser, and the
mortgagee elevated this appeal. Though not an appellant, the seller and mortgagor has made assignments of error in her brief, some
to strengthen the judgment and others for the purpose of new trial.

The case is extremely complicated and multiple issues were raised.

The salient facts in so far as they are not controverted are these. Paz Tuason de Paterno is the registered owner of the aforesaid
land, which was subdivided into city lots. Most of these lots were occupied by lessees who had contracts of lease which were to
expire on December 31,1952, and carried a stipulation to the effect that in the event the owner and lessor should decide to sell the
property the lessees were to be given priority over other buyers if they should desire to buy their leaseholds, all things being equal.
Smaller lots were occupied by tenants without formal contract.

In 1940 and 1941 Paz Tuason obtained from Jose Vidal several loans totalling P90,098 and constituted a first mortgage on the
aforesaid property to secure the debt. In January and April, 1943, she obtained additional loans of P30,000 and P20,000 upon the
same security. On each of the last-mentioned occasions the previous contract of mortgage was renewed and the amounts received
were consolidated. In the first novated contract the time of payment was fixed at two years and in the second and last at four years.
New conditions not relevant here were also incorporated into the new contracts.

There was, besides, a separate written agreement entitled "Penalidad del Documento de Novacion de Esta Fecha" which, unlike the
principal contracts, was not registered. The tenor of this separate agreement, all copies, of which were alleged to have been
destroyed or lost, was in dispute and became the subject of conflicting evidence. The lower court did not make categorical findings
on this point, however, and it will be our task to do so at the appropriate place in this decision.

In 1943 Paz Tuason decided to sell the entire property for the net amount of P400,000 and entered into negotiations with Gregorio
Araneta, Inc. for this purpose. The result of the negotiations was the execution on October 19, 1943, of a contract called "Promesa
de Compra y Venta" and identified as Exhibit "1." This contract provided that subject to the preferred right of the lessees and that of
Jose Vidal as mortgagee, Paz Tuason would sell to Gregorio Araneta, Inc. and the latter would buy for the said amount of P400,000
the entire estate under these terms.

El precio sera pagado como sigue: un 40 por ciento juntamente con la carta de aceptacion del arrendatario, un 20 por
ciento delprecio al otorgarse la escritura de compromiso de venta, y el remanente 40 por ciento al otorgarse la escritura de
venta definitiva, la cual sera otorgada despues de que se habiese canceladola hipoteca a favor de Jose Vidal que pesa sobre
dichos lotes. Lacomision del 5 por ciento que corresponde a Jose Araneta serapagada al otorgarse la escritura de
compromiso de venta.

Paz Tuason se obliga a entregar mediante un propio las cartasque dirigira a este efecto a los arrendatarios, de conformidad
con el formulario adjunto, que se marca como Apendice A.

Expirado el plazo arriba mencionado, Paz Tuason otorgara las escrituras correspondientes de venta a los arrendatarios que
hayan decidido comprar sus respectivos lotes.

9. Los alquieres correspondientes a este año se prorratearan entre la vendedora y el comprador, correspondiendo al
comprador los alquileres correspondientes a Noviembre y Diciembre de este año y asimismo sera por cuenta del comprador
el amillaramiento correspondiente a dichos meses.

10. Paz Tuason, reconoce haver recibido en este acto de Gregorio Araneta, Inc., la suma de Ciento Noventa Mil Pesos
(P190,000)como adelanto del precio de venta que Gregorio Araneta, Inc., tuviere que pagar a Paz Tuason.

La cantidad que Paz Tuason recibe en este acto sera aplicadapor ella a saldar su deuda con Jose Vidal, los amillaramientos,
sobre el utilizado por Paz Tuason para otros fines.
 11. Una vez determinados los lotes que Paz Tuason podra vendera Gregorio Araneta, Inc., Paz Tuason otorgara una
escritura deventa definitiva sobre dichos lotes a favor de Gregorio Araneta, Inc.

Gregorio Araneta, Inc., pagara el precio de venta como sigue: 90 por ciento del mismo al otorgarse la escritura de venta
definitiva descontandose de la cantidad que entonces se tenga que pagar de adelanto de P190,000 que se entrega en virtud
de esta escritura. El 10 por ciento remanente se pagara a Paz Tuazon, una vez se haya cancelado la hipoteca que pesa
actualmente sobre el terreno.

No obstante la dispuesto en el parrafo 8, cualquier arrendatario que decida comprar el lote que occupa con contrato de
arrendamiento podra optar por pedir el otorgamiento inmediato a su favor el acto de la escritura de venta definitiva
pagando en el acto el 50 por ciento del precio (ademas del 40 por ciento que debio incluir en su carta de aceptacion) y el
remanente de 10 por ciento inmediatemente despues de cancelarse la hipoteca que pesa sobre el terreno.

12. Si la mencionada cantidad de P190,000 excediere del 90 por ciento de la cantidad que Gregorio Araneta, Inc., tuviere
que vender a dicho comprador, el saldo sera pagado inmediatamente por Paz Tuazon, tomandolo de las cantidades que
reciba de los arrendatarios como precio de venta.

In furtherance of this promise to buy and sell, letters were sent the lessees giving them until August 31, 1943, an option to buy the
lots they occupied at the price and terms stated in said letters. Most of the tenants who held contracts of lease took advantage of
the opportunity thus extended and after making the stipulated payments were giving their deeds of conveyance. These sales, as far
as the record would show, have been respected by the seller.

With the elimination of the lots sold or be sold to the tenants there remained unencumbered, except for the mortgage to Jose Vidal,
Lots 1, 8-16 and 18 which have an aggregate area of 14,810.20 square meters; and on December 2, 1943, Paz Tuason and Gregorio
Araneta, Inc. executed with regard to these lots an absolute deed of sale, the terms of which, except in two respects, were similar to
those of the sale to the lessees. This deed, copy of which is attached to the plaintiff's complaint as Exhibit A, provided, among other
things, as follows:

The aforesaid lots are being sold by he Vendor to the Vendee separately at the prices mentioned in paragraph (6) of the
aforesaid contract entitled "Promesa de Compra y Venta," making a total sum of One Hundred Thirty-Nine Thousand
Eighty-three pesos and Thirty-two centavos (P139,083.32), ninety (90%) per cent of which amount, i.e., the sum of One
Hundred Twenty-five Thousand One Hundred Seventy-four Pesos and Ninety-nine centavos (P125,174.99), the Vendor
acknowledges to have received by virtue of the advance of One Hundred Ninety Thousand (P190,000) Pesos made by the
Vendee to the Vendor upon the execution of the aforesaid contract entitled "Promesa de Compra y Venta". The balance of
Sixty-Four Thousand Eight Hundred Twenty-five Pesos and One centavo (P64,825.01) between the sum of P125,174.99, has
been returned by the Vendor to the Vendee, which amount the Vendee acknowledges to have received by these presents;

The aforesaid sum of P190,000 was delivered by the Vendee to the Vendor by virtue of four checks issued by the Vendee
against the Bank of the Philippine Islands, as follows:

No. C-286445 in favor of Paz Tuason de Paterno P13,476.62

No. C-286444 in favor of the City Treasurer, Manila 3,373.38
No. C-286443 in favor of Jose Vidal 30,000.00
No. C-286442 in favor of Jose Vidal 143,150.00
            Total P190,000.00

The return of the sum of P64,825.01 was made by the Vendor to the Vendee in a liquidation which reads as follows:

Hemos recibido de Da. Paz Tuason de Paterno la cantidad de

Sesenta y Cuatro mil Ochocientos Veinticinco Pesos y un
centimo (P64,825.01) enconcepto de devolucion que nos hace
del excesode lo pagadoa ella de P190,000.00
Menos el 90% de P139,083.32, importe de los lotes que vamos a
comprar 125,174.99
             Exceso 64,825.01
Cheque BIF No. D-442988 de Simplicio del Rosario 21,984.20
Cheque PNB No. 177863-K de L.E. Dumas 21,688.60
Cheque PNB No. 267682-K de Alfonso Sycip 20,000.00
Cheque PNB No. 83940 de Josefina de Pabalan 4,847.96
Billetes recibidos de Alfonso Sycip           42.96
P68,563.21
Menos las comisiones de 5 % recibidas de Josefina
de Pabalan P538.60
L.E. Dumas 1,084.43
Angela S. Tuason 1,621.94     3,244.97
P65,318.24
Menos cheque BIF No. C-288642 a favor de Da. Paz
Tuason de Paterno que le entregamos como exceso         493.23
P64,825.01

Manila, Noviembre 2, 1943

GREGORIO ARANETA, INCORPORATED

Por;
      (Fdo.) "JOSE ARANETA
                  Presidente

Recibido cheque No. C-288642 BIF-P493.23

Por:
      (Fdo.) "M.J. GONZALEZ

In view of the foregoing liquidation, the vendor acknowledges fully and unconditionally, having received the sum of
P125,174.99 of the present legal currency and hereby expressly declares that she will not hold the Vendee responsible for
any loss that she might suffer due to the fact that two of the checks paid to her by the Vendee were issued in favor of Jose
Vidal and the latter has, up to the present time, not yet collected the same.

The ten (10%) per cent balance of the purchase price not yet paid in the total sum of P13,908.33 will be paid by the Vendee
to the Vendor when the existing mortgage over the property sold by the Vendor to the Vendee is duly cancelled in the
office of the Register of Deeds, or sooner at the option of the Vendee.

This Deed of Sale is executed by the Vendor free from all liens and encumbrances, with the only exception of the existing
lease contracts on parcels Nos. 1, 10, 11, and 16, which lease contracts will expire on December 31, 1953, with the
understanding, however, that this sale is being executed free from any option or right on the part of the lessees to purchase
the lots respectively leased by them.

It is therefore clearly understood that the Vendor will pay the existing mortgage on her property in favor of Jose Vidal.

The liquidation of the amounts respectively due between the Vendor and the Vendee in connection with the rents and real
estate taxes as stipulated in paragraph (9) of the contract entitled "Promesa de Compara y Venta" will be adjusted between
the parties in a separate document.

Should any of the aforesaid lessees of lots Nos. 2, 3, 4, 5, 6, 7, 9 and 17 fail to carry out their respective obligations under
the option to purchase exercised by them so that the rights of the lessee to purchase the respective property leased by him
 is cancelled, the Vendor shall be bound to sell the same to the herein Vendee, Gregorio Araneta, Incorporated, in
conformity with the terms and conditions provided in the aforesaid contract of "Promesa de Compra y Venta";

The documentary stamps to be affixed to this deed will be for the account of the Vendor while the expenses for the
registration of this document will be for the account of the Vendee.

The remaining area of the property of the Vendor subject to Transfer Certificates of Title Nos. 60471 and 60472, are lots
Nos. 2, 3, 4, 5, 6, 7, 9, and 17, all of the Consolidation of lots Nos. 20 and 117 of plan II-4755, G.L.R.O. Record No. 7680.

Before the execution of the above deed, that is, on October 20, 1943, the day immediately following the signing of the agreement to
buy and sell, Paz Tuason had offered to Vidal the check for P143,150 mentioned in Exhibit A, in full settlement of her mortgage
obligation, but the mortgagee had refused to receive that check or to cancel the mortgage, contending that by the separate
agreement before mentioned payment of the mortgage was not to be effected totally or partially before the end of four years from
April, 1943.

Because of this refusal of Vidal's Paz Tuason, through Atty. Alfonso Ponce Enrile, commenced an action against the mortgagee in
October or the early paret of November 1943. the record of that case was destroyed and no copy of the complaint was presented in
evidence. Attached to the complaint or deposited with the clerk of court by Attorney Ponce Enrile simultaneously with the docketing
of the suit were the check for P143,150 previously turned down by Vidal, another certified check for P12,932.61, also drawn by
Gregorio Araneta, Inc., in favor of Vidal, and one ordinary check for P30,000 issued by Paz Tuazon. These three checks were
supposed to cover the whole indebtedness to Vidal including the principal and interest up to that time and the penalty provided in
the separate agreement.

But the action against Vidal never came on for trial and the record and the checks were destroyed during the war operations in
January or February, 1945; and neither was the case reconstituted afterward. This failure of the suit for the cancellation of Vidal's
mortgage, coupled with the destruction of the checks tendered to the mortgagee, the nullification of the bank deposit on which
those checks had been drawn, and the tremendous rise of real estate value following the termination of the war, gave occasion to
the breaking off the schemes outlined in Exhibits 1 and A; Paz Tuason after liberation repudiated them for the reasons to be
hereafter set forth. The instant action was the offshoot, begun by Gregorio Araneta, Inc. to compel Paz Tuason to deliver to the
plaintiff a clear title to the lots described in Exhibit A free from all liens and encumbrances, and a deed of cancellation of the
mortgage to Vidal. Vidal came into the case in virtue of a summon issued by order of the court, and filed a cross-claim against Paz
Tuazon to foreclose his mortgage.

It should be stated that the outset that all the parties are in agreement that Vidal's loans are still outstanding. Paz Tuason's counsel
concede that the tender of payment to Vidal was legally defective and did not operate to discharge the mortgage, while the plaintiff
is apparently uninterested in this feature of the case considering the matter one largely between the mortgagor and the mortgagee,
although to a certain degree this notion is incorrect. At any rate, the points of discord between Paz Tuason and Vidal concern only
the accrual of interest on the loans, Vidal's claim to attorney's fees, and the application of the debt moratorium law which the
debtor now invokes. These matters will be taken up in the discussion of the controversy between Paz Tuason and Jose Vidal.

The principal bone of contention between Gregorio Araneta, Inc., and Paz Tuason was the validity of the deed of sale of Exhibit A on
which the suit was predicated. The lower court's judgment was that this contract was invalid and was so declared, "sin per juicio de
que la demandada Paz Tuason de Paterno pague a la entidad demandante todas las cantidades que habia estado recibiendo de
lareferida entidad demandante, en concepto de pago de losterrenos, en moneda corriente, segun el cambio que debiaregir al
tiempo de otorgarse la escritura segun la escalade "Ballentine", descontando, sin embargo, de dichas cantidades cualesquiera que la
demandante haya estadorecibiendo como alquileres de los terrenos supuestamentevendidos a ella." The court based its opinion
that Exhibit 1. His Honor, Judge Sotero Rodas, agreedwith the defendant that under paragraph 8 of Exhibit 1 there was to be no
absolute sale to Gregorio Araneta, Inc., unless Vidal's mortgage was cancelled.

In our opinion the trial court was in error in its interpretation of Exhibit 1. The contemplated execution of an absolute deed of sale
was not contingent on the cancellation of Vidal's mortgage. What Exhibit 1 did provide (eleventh paragraph) was that such deed of
absolute sale should be executed "una vez determinado los lotes que Paz Tuason podra vender a Gregorio Araneta, Inc." The lots
which could be sold to Gregorio Araneta, Inc. were definitely known by October 31, 1943, which was the expiry of the tenants'
option to buy, and the lots included in the absolute of which the occupants' option to buy lapsed unconditionally. Such deed as
Exhibit A was then in a condition to be made.
Vidal's mortgage was not an obstacle to the sale. An amount had been set aside to take care of it, and the parties, it would appear,
were confident that the suit against the mortgagee would succeed. The only doubt in their minds was in the amount to which Vidal
was entitled. The failure of the court to try and decide that the case was not foreseen either.

This refutes, were think, the charge that there was undue rush on the part of the plaintiff to push across the sale. The fact that
simultaneously with Exhibit A similar deeds were given the lessees who had elected to buy their leaseholds, which comprise an area
about twice as big as the lots described in Exhibit A, and the further fact that the sale to the lessees have never been questioned and
the proceeds thereof have been received by the defendant, should add to dispel any suspicion of bad faith on the part of the
plaintiff. If anyone was in a hurry it could have been the defendant. The clear preponderance of the evidence that Paz Tuason was
pressed for cash and that the payment of the mortgage was only an incident, or a necessary means to effectuate the sale. Otherwise
she could have settled her mortgage obligation merely by selling a portion of her estate, say, some of the lots leased to tenants who,
except two who were in concentration camps, were only too anxious to buy and own the lots on which their houses were built.

Whatever the terms of Exhibit 1, the plaintiff and the defendant were at perfect liberty to make a new agreement different from or
even contrary to the provisions of that document. The validity of the subsequent sale must of necessity depend on what it said and
not on the provisions of the promise to buy and sell.

It is as possible proof or fraud that the discrepancies between the two documents bear some attention. It was alleged that Attorneys
Salvador Araneta and J. Antonio Araneta who the defendant said had been her attorneys and had drawn Exhibit A, and not informed
or had misinformed her about its contents; that being English, she had not read the deed of sale; that if she had not trusted the said
attorneys she would not have been so foolish as to affix her signature to a contract so one-sided.

The evidence does not support the defendant. Except in two particulars, Exhibit A was a substantial compliance with Exhibit 1 in
furtherance of which Exhibit A was made. One departure was the proviso that 10 per cent of the purchase price should be paid only
after Vidal's mortgage should have been cancelled. This provisional deduction was not onerous or unusual. It was not onerous or
unusual that the vendee should withhold a relatively small portion of the purchase price before all the impediments to the final
consummation of the sale had been removed. The tenants who had bought their lots had been granted the privilege to deduct as
much as 40 per cent of the stipulated price pending discharge of the mortgage, although his percentage was later reduced to 10 as
in the case of Gregorio Araneta, Inc. It has also been that the validity of the sales to the tenants has not been contested; that these
sales embraced in the aggregate 24,245.40 square meters for P260,916.68 as compared to 14,811.20 square meters sold to Gregorio
Araneta, Inc. for P139,083.32; that the seller has already received from the tenant purchasers 90 per cent of the purchase money.

There is good reason to believe that had Gregorio Araneta, Inc. not insisted on charging to the defendant the loss of the checks
deposited with the court, the sale in question would have gone the smooth way of the sales to the tenants. Thus Dindo Gonzales,
defendant's son, declared:

P. Despues de haberse presentado esta demanda, recuerda usted haber tenido conversacion con Salvador Araneta acerca
de este asunto?

R. Si Señor.

P. Usted fue quien se acerco al señor Salvador Araneta?

R. Si, señor.

P. Quiero usted decir al Honorable Juzgado que era lo que usted dijo al señor Salvador Araneta?

R. No creo que es propio que yo diga, por tratarse de mi madre.

P. En otras palabras, usted quiere decir que no quiere usted que se vuelva decir o repetir ante este Honorable Juzgado lo
que usted dijo al señor Salvador Araneta, pues, se trata de su madre?

R. No, señor.

P. Puede usted decirnos que quiso usted decir cuando que no quisiera decir?
 R. Voy a decir lo que Salvador Araneta, yo me acerque a Don Salvador Araneta, y yo le dije que es una verguenza de que
nosotros, en la familia tengamos que ir a la Corte por este, y tambien dije que mi madre de por si quiere vender el terreno a
ellos, porque mi madre quiere pagar al señor Vidal, y que es una verguenza, siendo entre parientes, tener que venir por
este; era lo que yo dije al señor Salvador Araneta.

xxx     xxx     xxx

P. No recuerda usted tambien dijo al señor Salvador Araneta que usted no comulgaba con ella (su madre) en este asunto?

R. Si, Señor; porque yo creia que mi madre solamente queria anular esta venta, pero cuando me dijo el señor La O y sus
abogados que, encima de quitar la propiedad, todavia tendria ella que pagar al señor Vidal, este no veso claro.

xxx     xxx     xxx

P. Ahora bien; de tal suerte que, tal como nosotros desperendemos de su testimonio, tanto, usted como, su madre, esteban
muy conformes en la venta, es asi?

R. Si, señor.

The other stipulation embodied in Exhibit A which had no counterpart in Exhibit 1 was that by which Gregorio Araneta Inc. would
hold Paz Tuason liable for the lost checks and which, as stated, appeared to be at the root of the whole trouble between the plaintiff
and the defendant.

The stipulation reads:

In view of the foregoing liquidation, the Vendor acknowledges fully and unconditionally, having received the sum of
P125,174.99 of the present legal currency and hereby expressly declares that she will not hold the Vendee responsible for
any loss that she might suffer due to the fact that two of the checks paid to her by the Vendee were used in favor of Jose
Vidal and the latter has, up to the present time, not yet collected the same.

It was argued that no person in his or her right senses would knowingly have agreed to a covenant so iniquitous and unreasonable.

In the light of all the circumstances, it is difficult to believe that the defendant was deceived into signing Exhibit A, in spite of the
provision of which she and her son complaint. Intelligent and well educated who had been managing her affairs, she had an able
attorney who was assisting her in the suit against Vidal, a case which was instituted precisely to carry into effect Exhibit A or Exhibit
1, and a son who is leading citizen and a business-man and knew the English language very well if she did not. Dindo Gonzalez took
active part in, if he was not the initiator of the negotiations that led to the execution of Exhibit 1, of which he was an attesting
witness besides. If the defendant signed Exhibit A without being apprised of its import, it can hardly be conceived that she did not
have her attorney or her son read it to her afterward. The transaction involved the alienation of property then already worth a
fortune and now assessed by the defendant at several times higher. Doubts in defendant's veracity are enhanced by the fact that
she denied or at least pretended in her answer to be ignorant of the existence of Exhibit A, and that only after she was confronted
with the signed copy of the document on the witness did she spring up the defense of fraud. It would look as if she gambled on the
chance that no signed copy of the deed had been saved from the war. She could not have forgotten having signed so important a
document even if she had not understood some of its provisions.

From the unreasonableness and inequity of the aforequoted Exhibit A it is not to be presumed that the defendant did not
understand it. It was highly possible that she did not attach much importance to it, convinced that Vidal could be forced to accept
the checks and not foreseeing the fate that lay in store for the case against the mortgagee.

Technical objections are made against the deed of sale.

First of these is that Jose Araneta, since deceased, was defendant's agent and at the same time the president of Gregorio Araneta,
Inc.
The trial court found that Jose Araneta was not Paz Tuason's agent or broker. This finding is contrary to the clear weight of the
evidence, although the point would be irrelevant, if the court were right in its holding that Exhibit A was void on another ground, i.e.,
it was inconsistent with Exhibit 1.

Without taking into account defendant's Exhibit 7 and 8, which the court rejected and which, in our opinion, should have been
admitted, Exhibit 1 is decisive of the defendant's assertion. In paragraph 8 of Exhibit 1 Jose Araneta was referred to as defendant's
agent or broker "who acts in this transaction" and who as such was to receive a commission of 5 per cent, although the commission
was to be charged to the purchasers, while in paragraph 13 the defendant promised, in consideration of Jose Araneta's services
rendered to her, to assign to him all her right, title and interest to and in certain lots not embraced in the sales to Gregorio Araneta,
Inc. or the tenants.

However, the trial court hypothetically admitting the existence of the relation of principal and agent between Paz Tuason and Jose
Araneta, pointed out that not Jose Araneta but Gregorio Araneta, Inc. was the purchaser, and cited the well-known distinction
between the corporation and its stockholders. In other words, the court opined that the sale to Gregorio Araneta, Inc. was not a sale
to Jose Araneta the agent or broker.

The defendant would have the court ignore this distinction and apply to this case the other well-known principle which is thus stated
in 18 C.J.S. 380: "The courts, at law and in equity, will disregard the fiction of corporate entity apart from the members of the
corporation when it is attempted to be used as a means of accomplishing a fraud or an illegal act.".

It will at once be noted that this principle does not fit in with the facts of the case at bar. Gregorio Araneta, Inc. had long been
organized and engaged in real estate business. The corporate entity was not used to circumvent the law or perpetrate deception.
There is no denying that Gregorio Araneta, Inc. entered into the contract for itself and for its benefit as a corporation. The contract
and the roles of the parties who participated therein were exactly as they purported to be and were fully revealed to the seller.
There is no pretense, nor is there reason to suppose, that if Paz Tuason had known Jose Araneta to Gregorio Araneta, Inc's
president, which she knew, she would not have gone ahead with the deal. From her point of view and from the point of view of
public interest, it would have made no difference, except for the brokerage fee, whether Gregorio Araneta, Inc. or Jose Araneta was
the purchaser. Under these circumstances the result of the suggested disregard of a technicality would be, not to stop the
commission of deceit by the purchaser but to pave the way for the evasion of a legitimate and binding commitment buy the seller.
The principle invoked by the defendant is resorted to by the courts as a measure or protection against deceit and not to open the
door to deceit. "The courts," it has been said, "will not ignore the corporate entity in order to further the perpetration of a fraud."
(18 C.J.S. 381.)

The corporate theory aside, and granting for the nonce that Jose Araneta and Gregorio Araneta, Inc. were identical and that the acts
of one where the acts of the other, the relation between the defendant and Jose Araneta did not fall within the purview of article
1459 of the Spanish Civil Code.1

Agency is defined in article 1709 in broad term, and we have not come across any commentary or decision dealing directly with the
precise meaning of agency as employed in article 1459. But in the opinion of Manresa(10 Manresa 4th ed. 100), agent in the sense
there used is one who accepts another's representation to perform in his name certain acts of more or less transcendency, while
Scaevola (Vol. 23, p. 403) says that the agent's in capacity to buy his principal's property rests in the fact that the agent and the
principal form one juridicial person. In this connection Scaevola observes that the fear that greed might get the better of the
sentiments of loyalty and disinterestedness which should animate an administrator or agent, is the reason underlying various classes
of incapacity enumerated in article 1459. And as American courts commenting on similar prohibition at common law put it, the law
does not trust human nature to resist the temptations likely to arise of antogonism between the interest of the seller and the buyer.

So the ban of paragraph 2 of article 1459 connotes the idea of trust and confidence; and so where the relationship does not involve
considerations of good faith and integrity the prohibition should not and does not apply. To come under the prohibition, the agent
must be in a fiduciary with his principal.

Tested by this standard, Jose Araneta was not an agent within the meaning of article 1459. By Exhibits 7 and 8 he was to be nothing
more than a go-between or middleman between the defendant and the purchaser, bringing them together to make the contract
themselves. There was no confidence to be betrayed. Jose Araneta was not authorize to make a binding contract for the defendant.
He was not to sell and he did not sell the defendant's property. He was to look for a buyer and the owner herself was to make, and
did make, the sale. He was not to fix the price of the sale because the price had been already fixed in his commission. He was not to
make the terms of payment because these, too, were clearly specified in his commission. In fine, Jose Araneta was left no power or
discretion whatsoever, which he could abuse to his advantage and to the owner's prejudice.
Defendant's other ground for repudiating Exhibit A is that the law firm of Araneta & Araneta who handled the preparation of that
deed and represented by Gregorio Araneta, Inc. were her attorneys also. On this point the trial court's opinion is likewise against the
defendant.

Since attorney Ponce Enrile was the defendant's lawyer in the suit against Vidal, it was not likely that she employed Atty. Salvador
Araneta and J. Antonio Araneta as her attorneys in her dealings with Gregorio Araneta, Inc., knowing, as she did, their identity with
the buyer. If she had needed legal counsels, in this transaction it seems certain that she would have availed herself of the services of
Mr. Ponce Enrile who was allegedly representing her in another case to pave the way for the sale.

The fact that Attys. Salvador and Araneta and J. Antonio Araneta drew Exhibits 1 and A, undertook to write the letters to the tenants
and the deeds of sale to the latter, and charged the defendant the corresponding fees for all this work, did not themselves prove
that they were the seller's attorneys. These letters and documents were wrapped up with the contemplated sale in which Gregorio
Araneta, Inc. was interested, and could very well have been written by Attorneys Araneta and Araneta in furtherance of Gregorio
Araneta's own interest. In collecting the fees from the defendant they did what any other buyer could have appropriately done since
all such expenses normally were to be defrayed by the seller.

Granting that Attorney Araneta and Araneta were attorneys for the defendant, yet they were not forbidden to buy the property in
question. Attorneys are only prohibited from buying their client's property which is the subject of litigation. (Art. 1459, No. 5,
Spanish Civil Code.) The questioned sale was effected before the subject thereof became involved in the present action. There was
already at the time of the sale a litigation over this property between the defendant and Vidal, but Attys. Salvador Araneta and J.
Antonio Araneta were not her attorneys in that case.

From the pronouncement that Exhibit A is valid, however, it does not follow that the defendant should be held liable for the loss of
the certified checks attached to the complaint against Vidal or deposited with the court, or of the funds against which they had been
issued. The matter of who should bear this loss does not depend upon the validity of the sale but on the extent and scope of the
clause hereinbefore quoted as applied to the facts of the present case.

The law and the evidence on this branch of the case revealed these facts, of some of which passing mention has already been made.

The aforesaid checks, one for P143,150 and one for P12,932.61, were issued by Gregorio Araneta, Inc. and payable to Vidal, and
were drawn against the Bank of the Philippines with which Gregorio Araneta, Inc. had a deposit in the certification stated that they
were to be "void if not presented for payment date of acceptance" office (Bank) within 90 days from date of acceptance."

Under banking laws and practice, by the clarification" the funds represented by the check were transferred from the credit of the
maker to that of the payee or holder, and, for all intents and purposes, the latter became the depositor of the drawee bank, with
rights and duties of one such relation." But the transfer of the corresponding funds from the credit of the depositor to that of that of
the payee had to be co-extensive with the life of the checks, which in the case was 90 days. If the checks were not presented for
payment within that period they became invalid and the funds were automatically restored to the credit of the drawer though not as
a current deposit but as special deposit. This is the consensus of the evidence for both parties which does not materially differ on
this proposition.

The checks were never collected and the account against which they were drawn was not used or claimed by Gregorio Araneta, Inc.;
and since that account "was opened during the Japanese occupation and in Japanese currency," the checks "became obsolete as the
account subject thereto is considered null and void in accordance with Executive Order No. 49 of the President of the Philippines",
according to the Bank.

Whether the Bank of the Philippines could lawfully limit the negotiability of certified checks to a period less than the period provided
by the Statute of Limitations does not seem material. The limitation imposed by the Bank as to time would adversely affect the
payee, Jose Vidal, who is not trying to recover on the instruments but on the contrary rejected them from the outset, insisting that
the payment was premature. As far as Vidal was concerned, it was of no importance whether the certification was or was not
restricted. On the other hand, neither the plaintiff nor the defendant now insists that Vidal should present, or should have
presented, the checks for collection. They in fact agree that the offer of those checks to Vidal did not, for technical reason, work to
wipe out the mortgage.

But as to Gregorio Araneta and Paz Tuason, the conditions specified in the certification and the prevailing regulations of the Bank
were the law of the case. Not only this, but they were aware of and abided by those regulations and practice, as instanced by the
fact that the parties presented testimony to prove those regulations and practice. And that Gregorio Araneta, Inc. knew that Vidal
had not cashed the checks within 90 days is not, and could not successfully be denied.

In these circumstances, the stipulation in Exhibit A that the defendant or seller "shall not hold the vendee responsible for any loss of
these checks" was unconscionable, void and unenforceable in so far as the said stipulation would stretch the defendant's liability for
this checks beyond 90 days. It was not in accord with law, equity or good conscience to hold a party responsible for something he or
she had no access to and could not make use of but which was under the absolute control and disposition of the other party. To
make Paz Tuason responsible for those checks after they expired and when they were absolutely useless would be like holding an
obligor to answer for the loss or destruction of something which the obligee kept in its safe with no power given the obligor to
protect it or interfere with the obligee's possession.

To the extent that the contract Exhibit A would hold the vendor responsible for those checks after they had lapsed, the said contract
was without consideration. The checks having become obsolete, the benefit in exchange for which the defendant had consented to
be responsible for them had vanished. The sole motivation on her part for the stipulation was the fact that by the checks the
mortgage might or was to be released. After 90 days the defendant stood to gain absolutely nothing by them, which had become
veritable scraps of paper, while the ownership of the deposit had reverted to the plaintiff which alone could withdraw and make use
of it.

What the plaintiff could and should have done if the disputed stipulation was to be kept alive was to keep the funds accessible for
the purpose of paying the mortgage, by writing new checks either to Vidal or to the defendant, as was done with the check for
P30,000, or placing the deposit at the defendant's disposal. The check for P30,000 intended for the penalty previously had been
issued in the name of Vidal and certified, too, but by mutual agreement it was changed to an ordinary check payable to Paz Tuason.
Although that check was also deposited with the court and lost, its loss undoubtedly was imputable to the defendant's account, and
she did not seem to disown her liability for it.

Let it be remembered that the idea of certifying the lost checks was all the plaintiff's. The plaintiff would not trust the defendant and
studiously so arranged matters that she could not by any possibility put a finger on the money. For all the practical intents and
purposes the plaintiff dealt directly with the mortgagee and excluded the defendant from meddling in the manner of payment to
Vidal. And let it also be kept in mind that Gregorio Araneta, Inc. was not a mere accommodator in writing these checks. It was as
much interested in the cancellation of the mortgage as Paz Tuason.

Coming down to Vidal's cross-claim Judge Rodas rendered no judgment other than declaring that the mortgage remained intact and
subsisting. The amount to be paid Vidal was not named and the question whether interest and attorney's fees were due was not
passed upon. The motion for reconsideration of the decision by Vidal's attorney's praying that Paz Tuason be sentenced to pay the
creditor P244,917.90 plus interest at the rate of 1 percent monthly from September 10, 1948 and that the mortgaged property be
ordered sold in case of default within 90 days, and another motion by the defendant seeking specification of the amount she had to
pay the mortgagee were summarily denied by Judge Potenciano Pecson, to whom the motions were submitted, Judge Rodas by that
time having been appointed to the Court of Appeals.

All the facts and evidence on this subject are on the record, however, and we may just as well determine from these facts and
evidence the amount to which the mortgagee is entitled, instead of remanding the case for new trial, if only to avoid further delay if
the disposition of this case.

It is obvious that Vidal had a right to judgment for his credit and to foreclose the mortgage if the credit was not paid.

There is no dispute as to the amount of the principal and there is agreement that the loans made in 1943, in Japanese war notes,
should be computed under the Ballantyne conversion table. As has been said, where the parties do not see eye-to-eye was in regard
to the mortgagee's claim to attorney's fees and interest from October, 1943, which was reached a considerable amount. It was
contended that, having offered to pay Vidal her debt in that month, the defendant was relieved thereafter from paying such interest.

It is to be recalled that Paz Tuason deposited with the court three checks which were intended to cover the principal and interest up
to October, 1943, plus the penalty provided in the instrument "Penalidad del Documento de Novacion de Esta Fecha." The
mortgagor maintains that although these checks may not have constituted a valid payment for the purpose of discharging the debt,
yet they did for the purpose of stopping the running of interest. The defendant draws attention to the following citations:

An offer in writing to pay a particular sum of money or to deliver a written instrument or specific personal property is, if
rejected, equivalent to the actual production and tender of the money, instrument or property. (Sec. 24, Rule 123.)
 It is not accord with either the letter or the spirit of the law to impose upon the person affecting a redemption of property,
in addition to 12 per cent interest per annum up to the time of the offer to redeem, a further payment of 6 per cent per
annum from the date of the officer to redeem. (Fabros vs. Villa Agustin, 18 Phil., 336.)

A tender by the debtor of the amount of this debt, if made in the proper manner, will suspend the running of interest on
the debt for the time of such tender. (30 Am. Jur., 42.)

In the case of Fabrosa vs. Villa Agustin, supra, a parcel of land had been sold on execution to one Tabliga. Within the period of
redemption Fabros, to whom the land had been mortgaged by the execution debtor, had offered to redeem the land from the
execution creditor and purchaser at public auction. The trial court ruled that the redemptioner was not obliged to pay the stipulated
interest of 12 per cent after he offered to redeem the property; nevertheless he was sentenced to pay 6 per cent interest from the
date of the offer.

This court on appeal held that "there is no reason for this other (6 per cent) interest, which appears to be a penalty for delinquency
while there was no delinquency." The court cited an earlier decision, Martinez vs. Campbell, 10 Phil., 626, where this doctrine was
laid down: "When the right of redemption is exercised within the term fixed by section 465 of the Code of Civil Procedure, and an
offer is made of the amount due for the repurchase of the property to which said right refers, it is neither reasonable nor just that
the repurchaser should pay interest on the redemption money after the time when he offered to repurchase and tendered the
money therefor."

In the light of these decisions and law, the next query is; Did the mortgagor have the right under the contract to pay the mortgage
on October 20, 1943? The answer to this question requires an inquiry into the provision of the "Penalidad del Documento de
Novacion de Esta Fecha."

Vidal introduced oral evidence to the effect that he reserved unto himself in that agreement the right "to accept or refuse the total
payment of the loan outstanding . . ., if at the time of such offer of payment he considered it advantageous to his interest." This was
gist of Vidal's testimony and that of Lucio M. Tiangco, one of Vidal's former attorneys who, as notary public, had authenticated the
document. Vidal's above testimony was ordered stricken out as hearsay, for Vidal was blind and, according to him, only had his other
lawyer read the document to him.

We are of the opinion that the court erred in excluding Vidal's statement. There is no reason to suspect that Vidal's attorney did not
correctly read the paper to him. The reading was a contemporaneous incident of the writing and the circumstances under which the
document was read precluded every possibility of design, premeditation, or fabrication.

Nevertheless, Vidal's testimony, like the testimony of Lucio M. Tiangco's, was based on recollection which, with the lapse of time,
was for from infallible. By contrast, the testimony of Attorneys Ponce Enrile, Salvador Araneta, and J. Antonio Araneta does not
suffer from such weakness and is entitled to full faith and credit. The document was the subject of a close and concerted study on
their part with the object of finding the rights and obligations of the mortgagee and the mortgagor in the premises and mapping out
the course to be pursued. And the results of their study and deliberation were translated into concrete action and embodied in a
letter which has been preserved. In line with the results of their study, action was instituted in court to compel acceptance by Vidal
of the checks consigned with the complaint, and before the suit was commenced, and with the document before him, Atty. Ponce
Enrile, in behalf of his client, wrote Vidal demanding that he accept the payment and execute a deed of cancellation of the
mortgage. In his letter Atty. Ponce Enrile reminded Vidal that the recital in the "Penalidad del Documento de Novacion de Esta
Fecha" was "to the effect that should the debtor wish to pay the debt before the expiration of the period the reinstated (two years)
such debtor would have to pay, in addition to interest due, the penalty of P30,000 — this is in addition to the penalty clause of 10
per cent of the total amount due inserted in the document of mortgage of January 20, 1943."

Atty. Ponce Enrile's concept of the agreement, formed after mature and careful reading of it, jibes with the only possible reason for
the insertion of the penalty provision. There was no reason for the penalty unless it was for defendant's paying her debt before the
end of the agreed period. It was to Vidal's interest that the mortgage be not settled in the near future, first, because his money was
earning good interest and was guaranteed by a solid security, and second, which was more important, he, in all probability, shared
the common belief that Japanese war notes were headed for a crash and that four years thence, judging by the trends of the war,
the hostilities would be over.

To say, as Vidal says, that the debtor could not pay the mortgage within four years and, at the same time, that there would be
penalty if she paid after that period, would be a contradiction. Moreover, adequate remedy was provided for failure to pay or after
the expiration of the mortgage: increased rate or interest, foreclosure of the mortgage, and attorney's fees.
It is therefore to be concluded that the defendant's offer to pay Vidal in October, 1943, was in accordance with the parties' contract
and terminated the debtor's obligation to pay interest. The technical defects of the consignation had to do with the discharge of the
mortgage, which is conceded on all sides to be still in force because of the defects. But the matter of the suspension of the running
of interest on the loan stands of a different footing and is governed by different principles. These principles regard reality rather than
technicality, substance rather than form. Good faith of the offer or and ability to make good the offer should in simple justice excuse
the debtor from paying interest after the offer was rejected. A debtor can not be considered delinquent who offered checks backed
by sufficient deposit or ready to pay cash if the creditor chose that means of payment. Technical defects of the offer cannot be
adduced to destroy its effects when the objection to accept the payment was based on entirely different grounds. If the creditor had
told the debtor that he wanted cash or an ordinary check, which Vidal now seems to think Paz Tuason should have tendered,
certainly Vidal's wishes would have been fulfilled, gladly.

The plain truth was that the mortgagee bent all his efforts to put off the payment, and thanks to the defects which he now, with
obvious inconsistency, points out, the mortgage has not perished with the checks.

Falling within the reasons for the stoppage of interest are attorney's fees. In fact there is less merit in the claim for attorney's fees
than in the claim for interest; for the creditor it was who by his refusal brought upon himself this litigation, refusal which, as just
shown, resulted greatly to his benefit.

Vidal, however, is entitled to the penalty, a point which the debtor seems to a grant. The suspension of the running of the interest is
premised on the thesis that the debt was considered paid as of the date the offer to pay the principal was made. It is precisely the
mortgagor's contention that he was to pay said penalty if and when she paid the mortgage before the expiration of the four-year
period provided in the mortgage contract. This penalty was designed to take the place of the interest which the creditor would be
entitled to collect if the duration of the mortgage had not been cut short and from which interest the debtor has been relieved. "In
obligations with a penalty clause the penalty shall substitute indemnity for damages and the payment of interest. . ." (Art. 1152, Civil
Code of Spain.).

To summarize, the following are our findings and decision:

The contract of sale Exhibit A was valid and enforceable, but the loss of the checks for P143,150 and P12,932.61 and invalidation of
the corresponding deposit is to be borne by the buyer. Gregorio Araneta, Inc. the value of these checks as well as the several
payments made by Paz Tuason to Gregorio Araneta, Inc. shall be deducted from the sum of P190,000 which the buyer advanced to
the seller on the execution of Exhibit 1.

The buyer shall be entitled to the rents on the land which was the subject of the sale, rents which may have been collected by Paz
Tuason after the date of the sale.

Paz Tuason shall pay Jose Vidal the amount of the mortgage and the stipulated interest up to October 20,1943, plus the penalty of
P30,000, provided that the loans obtained during the Japanese occupation shall be reduced according to the Ballantyne scale of
payment, and provided that the date basis of the computation as to the penalty is the date of the filing of the suit against Vidal.

Paz Tuason shall pay the amount that shall have been found due under the contracts of mortgage within 90 days from the time the
court's judgment upon the liquidation shall have become final, otherwise the property mortgaged shall be ordered sold provided by
law.

Vidal's mortgage is superior to the purchaser's right under Exhibit A, which is hereby declared subject to said mortgage. Should
Gregorio Araneta, Inc. be forced to pay the mortgage, it will be subrogated to the right of the mortgagee.

This case will be remanded to the court of origin with instruction to hold a rehearing for the purpose of liquidation as herein
provided. The court also shall hear and decide all other controversies relative to the liquidation which may have been overlooked at
this decision, in a manner not inconsistent with the above findings and judgment.

The mortgagor is not entitled to suspension of payment under the debt moratorium law or orders. Among other reasons: the bulk of
the debt was a pre-war obligation and the moratorium as to such obligations has been abrogated unless the debtor has suffered war
damages and has filed claim for them; there is no allegation or proof that she has. In the second place, the debtor herself caused her
creditor to be brought into the case which resulted in the filing of the cross-claim to foreclose the mortgage. In the third place,
prompt settlement of the mortgage is necessary to the settlement of the dispute and liquidation between Gregorio Araneta, Inc. and
Paz Tuason. If for no other reason, Paz Tuason would do well to forego the benefits of the moratorium law.
G.R. No. L-42958             October 21, 1936

C. N. HODGES, plaintiff-appellant, 
vs.
CARLOTA SALAS and PAZ SALAS, defendants-appellees.

Jose P. Orozco and Gibbs, McDonough and Ozaeta for appellant.

Vicente Varela and Conrado V. Sanchez for appellees.

IMPERIAL, J.:

The action was brought by the plaintiff to foreclose a certain real estate mortgage constituted by the defendants to secure a loan.
The plaintiff appealed from the judgment of the Court of First Instance of Occidental Negros absolving the defendants from the
complaint and stating: That of the capital of P28,000 referred to in Exhibit A, the defendants were liable only for the sum of
P14,451.71; that the transactions and negotiations specified in Exhibit A as well as the interest charged are usurious; that the sum of
P14,778.77 paid by the defendants to the plaintiff should be applied to the payment of the capital of P14,451.71; that the plaintiff
must refund the sum of P3,327.06 to the defendants and, lastly, he must pay the costs.

On September 2, 1923, the defendants executed a power of attorney in favor of their brother-in-law Felix S. Yulo to enable him to
obtain a loan and secure it with a mortgage on the real property described in transfer certificate of title No. 3335. The power of
attorney was registered in the registry of deeds of the Province of Occidental Negros and the pertinent clauses thereof read as
follows:

That we confer upon our brother-in-law Mr. Felix S. Yulo, married, of age and resident of the municipality of Bago, Province
of Occidental Negros, P. I., as required by law, a special power of attorney to obtain, in our respective names and
representation, a loan in any amount which our said brother-in-law may deem necessary, being empowered, by virtue of
the authority conferred in this power of attorney, to constitute a mortgage on a parcel of land absolutely belonging to us,
the technical description of which is as follows:

"TRANSFER CERTIFICATE OF TITLE NO. 3335

"A parcel of land (lot No. 2464 of the Cadastral Survey of Bago) with the improvements thereon, situated in municipality of
Bago. Bounded on the NE. and NW. by the Lonoy Sapa and lot No. 2465; on the SE. by the Ilabo Sapa; and on the SW. by the
Ilabo Sapa, lot No. 2508 and the Sapa Talaptapan. Containing an area of one million nine hundred ninety-four thousand
eight hundred and thirty-four square meters (1,994,834), more or less."

That we confer and grant to our said brother-in-law Mr. Felix S. Yulo power and authority to perform and execute each and
every act necessary to the performance of his trust, which acts shall be for all purposes as if we had performed or executed
them personally, hereby ratifying and confirming everything that our said brother-in-law Mr. Felix S. Yulo may execute or
cause to be executed.

Acting under said power of attorney, Felix S. Yulo, on March 27, 1926, obtained a loan of P28,000 from the plaintiff, binding his
principals jointly and severally, to pay it within ten (10) years, together with interest thereon at 12 per cent per annum payable
annually in advance, to which effect he signed a promissory note for said amount and executed a deed of mortgage of the real
property described in transfer certificate of title No. 3335 and the improvements thereon consisting in concrete buildings. It was
stated in the deed that in case the defendants failed to pay the stipulated interest and the taxes on the real property mortgaged and
if the plaintiff were compelled to bring an action to recover his credit, said defendants would be obliged to pay 10 per cent more on
the unpaid capital, as fees for the plaintiff's attorneys. The mortgage so constituted was registered in the registry of deeds of the
Province of Occidental Negros and noted on the back of the transfer certificate of title.

The sum of P28,000 was not delivered to Felix S. Yulo, but by agreement between him and the plaintiff, it was employed as follows:

Interest for one year from March 27, 1926, to March 26,
1927, collected in advance by the plaintiff ......................... P3,360.00
 Paid for the mortgage constituted by Felix S. Yulo, cancelled
on the date of the loan .......................................................... 8,188.29
Paid by Felix S. Yulo on account of the purchase price of the
real property bought by him on Ortiz Street ........................ 2,000.00
Check No. 4590 delivered to Felix S. Yulo .......................... 3,391.71
Check No. 4597 in the name of Rafael Santos, paid to him to
cancel the mortgage constituted by the defendants ..... 9,200.00
Check No. 4598 delivered to Felix S. Yulo ........................... 1,860.00

Total ........................................................................ 28,000.00

The defendants failed to pay at maturity the interest stipulated which should have been paid one year in advance. All the sums paid
by them on account of accrued interest up to March 27, 1934, on which the complaint was filed, together with the corresponding
exhibits, are as follows:

Date Amount
Exhibit 1 April 5, 1927 ............................................................... P1,500.00
Exhibit 2 May 2, 1927 ................................................................ 500.00
Exhibit 4 August 30, 1927 ......................................................... 336.00
Exhibit 7 June 4, 1928 ................................................................ 3,360.00
Exhibit 8 May 15, 1929 .............................................................. 67.20
Exhibit 9 June 19, 1929 .............................................................. 67.20
Exhibit 10 July 25,
33.60
1929 ...............................................................
Exhibit 11 August 26,
33.60
1929 .........................................................
Exhibit 12 October 7,
392.55
1929 ..........................................................
Exhibit 13 October 7,
30.00
1929 ..........................................................
Exhibit 14 November 9,
29.67
1929 ......................................................
Exhibit 15 November 9,
938.95
1929 ......................................................
Exhibit 16 February 8,
61.04
1930 ........................................................
Exhibit 17 February 8,
936.46
1930 ........................................................
Exhibit 18 No
498.75
date .......................................................................
Exhibit 19 February 10,
498.75
1931 ......................................................
Exhibit 20 August 20,
498.75
1931 .........................................................
Exhibit 21 July 7,
498.75
1932 .................................................................
Exhibit 22 July 29,
500.00
1932 ...............................................................
Exhibit 23 September 23,
500.00
1932 ....................................................
Exhibit 24 December 17,
997.50
1932 .....................................................
Exhibit 25 No 1,000.00
 date ........................................................................
Exhibit 26 January 23,
500.00
1934 .........................................................
Total ...........................................................................................
.. 14,779.77

To the foregoing amount must be added the sum of P3,360 deducted by the plaintiff upon granting the loan, as interest for one year,
thereby making the total amount of interest paid by the defendants and received by the plaintiff P18,138.77.

The foregoing are facts inferred from the evidence and are not controverted by the parties, with the exception of the existence of
the promissory note, the registration of the mortgage deed and the notation on the back of the certificate of title.lâwphi1.nêt

I. The action brought by the plaintiff was for the foreclosure of a mortgage in accordance with the provisions of sections 254 to 261
of the Code of Civil Procedure. It was not expressly alleged in the complaint that the mortgage deed had been registered in
accordance with Act No. 496, which was the law applicable in the case of the real property registered under the Torrens system. A
copy of the mortgage deed was attached to the complaint and made a part thereof, but said copy did not show that the original had
been duly registered. In paragraph 3 of the complaint, however, it was alleged that the mortgage deed had been noted on the back
of transfer certificate of title No. 3335 by the register of deeds of the Province of Occidental Negros, in accordance with the
provisions of the Mortgage Law. This specific allegation is equivalent to a statement that the mortgage deed had been duly
registered.

At the trial of the case, the attorney for the plaintiff did not present the mortgage deed showing the registration thereof in the
registry, or the owner's transfer certificate of title. In their stead the plaintiff testified that the mortgage had been duly registered in
the registry of deeds of Occidental Negros and had been noted on the back of the transfer certificate of title. The oral evidence was
admitted without any objection on the part of the attorney for the defendants. In the appealed decision the court held that the
plaintiff had failed to substantiate his foreclosure suit and, not having presented competent evidence, the action arising from his
evidence was merely a personal action for the recovery of a certain sum of money. The plaintiff excepted to this conclusion and
assigns it in his brief as the first error of law committed by the court.

Section 284 of the Code of Civil Procedure requires the contents of a writing to be proven by the writing itself, except in cases
therein specified. Section 313, No. 6, provides that official or public documents must be proven by presenting the original or a copy
certified by the legal keeper thereof. According to this, the plaintiff was obliged to present the original or a certified copy of the
mortgage deed showing the registration thereof, as well as the owner's transfer certificate of title. Both would have been the best
evidence to prove the registration of the mortgage and the notation thereof on the back of the title. Had the defendants objected to
the oral evidence offered, there is no doubt that it would have been rejected as incompetent. But it is universally accepted that
when secondary or incompetent evidence is presented and accepted without any objection on the part of the other party, the latter
is bound thereby and the court is obliged to grant it, the probatory value it deserves. (City of Manila vs. Cabangis, 10 Phil., 151;
Bersabal vs. Bernal, 13 Phil., 463; Kuenzle & Streiff vs. Jiongco, 22 Phil., 110; U. S. vs. Choa Tong, 22 Phil., 562; U. S. vs. Ong Shiu, 28
Phil., 242; De Leon vs. Director of Prisons, 31 Phil., 60: U. S. vs. Hernandez, 31 Phil., 342; 23 C. J., 39, section 1783, and the cases
therein cited; 10 R. C. L., 1008, paragraph 197, and the cases therein cited.)

Inasmuch as the registration of the mortgage and the notation thereof on the back of the transfer certificate of title have been
established by the oral evidence above stated, the court was without authority to conclude that the action was personal in character
and, consequently, the first assignment of error is well founded.

II. The court held that the loan and the mortgage were usurious and illegal for two reasons: First, because the plaintiff charged
compound interest notwithstanding the fact that it had not been stipulated, and second, because the plaintiff charged interest
yearly in advance in accordance with the agreement. These conclusions are the subject matter of the plaintiff's second assignment of
error.

The plaintiff categorically denied having charged compound interest, stating in his brief that all the interest charged by him should
be applied to the interest unpaid by the defendants. We have examined Exhibits 8 to 17 of the defendants, which are the evidence
offered to establish the fact that compound interest had been charged, and we have, without any difficulty, arrived at the conclusion
that the plaintiff has really charged said unauthorized and unstipulated interest. If there is any doubt on this fact, it is dispelled by
Exhibit 10, in the handwriting of the plaintiff himself, wherein it appears that the sum of P33.60 was charged by him on account of
interest on unpaid interest. But the fact of charging illegal interest that may be charged, does not make the loan or the mortgage
usurious because the transactions took place subsequent to the execution of said contracts and the latter do not appear to be
void ab initio (66 C. J., pages 243, 244, section 194). Said interest should be applied first to the payment of the stipulated and unpaid
interest and, later, to that of the capital. (Aguilar vs. Rubiato and Gonzalez Vila, 40 Phil., 570; Go Chioco vs. Martinez, 45 Phil., 256;
Gui Jong & Co. vs. Rivera and Avellar, 45 Phil., 778; Lopez and Javelona vs. El Hogar Filipino, 47 Phil., 249; Sajo vs. Gustilo, 48 Phil,
451.)

The plaintiff admits having charged in advance the interest corresponding to the first year. The mortgage deed contains the
stipulation that the defendants should pay in advance the stipulated interest corresponding to each year. The court declared the
contract usurious for this reason, basing its opinion upon some American authorities holding the same point of view. This court
cannot adopt said doctrine in this jurisdiction. Section 5 of Act No. 2655, as amended by section 3 of Act No. 3291, expressly permit
a creditor to charge in advance interest corresponding to not more than one year, whatever the duration of the loan. What is
prohibited is the charging in advance of interest for more than one year. Section 6 reiterates said rule in exempting a creditor found
guilty of usury from the obligation to return the interest and commissions collected by him in advance, provided said interest and
commissions are not for a period of more than one year and the rate of interest does not exceed the maximum limit fixed by law.

This court concludes, therefore, that the second assignment of error is well founded in the sense that both the loan and the
mortgage are not usurious or illegal.

III. In his third assignment of error, the plaintiff contends that the court should have declared the action for the usury interposed by
the defendants in their cross-complaint barred by the statute of limitations, in accordance with the provision of section 6 of Act No.
2655, as amended by section 4 of Act No. 3291. It is true that according to the evidence more than two years have already elapsed
from the time the defendants paid and the plaintiff received the usurious interest to the registration of the cross-complaint, but the
plaintiff cannot successfully invoke the defense of prescription because he failed to allege it in his reply to the cross-complaint. In
order that prescription may constitute a valid defense and it may be considered on appeal, it must be specifically pleaded in the
answer and proven with the same degree of certainty with which an essential allegation in a civil action is established. Otherwise it
will not be taken into consideration, much less if it is alleged for the first time on appeal. (Aldeguer vs. Hoskyn, 2 Phil., 500;
Domingo vs. Osorio, 7 Phil, 405; Marzon vs. Udtujan, 20 Phil., 232; Pelaez vs.Abreu, 26 Phil., 415; Corporacion de PP. Agustinos
Recoletos vs. Crisostomo, 32 Phil., 427; Karagdag vs.Barado, 33 Phil., 529.)

IV. The defendants proved that their attorney's fees were contracted at P3,000. The evidence has not been contradicted. The
amount so fixed is not unreasonable or unconscionable. In the fourth assignment of error, the plaintiff questions that part of the
judgment ordering him to pay said fees. He contends that he is not responsible for the payment thereof because neither the loan
nor the mortgage is usurious. However, this court has already stated that the plaintiff violated the Usury Law in charging compound
interest notwithstanding the fact that it has not been so stipulated and that adding these sums to the stipulated interest the average
exceeds the maximum rate of interest that may be charged for the loan which has been the subject matter of the transaction. This
violation falls under the precept of section 6 of the Usury Law and the plaintiff is obliged to pay the fees of the attorney for the
defendants. This court holds that the fourth assignment of error is unfounded.

V. In the fifth assignment of error, the plaintiff alleges that the judgment is erroneous for not having declared that the defendants
ratified all the obligations contracted by their attorney in fact. In the sixth assignment of error he contends that an error was likewise
committed in not declaring that by virtue of the authority conferred by the defendants, agent Yulo was authorized to borrow money
and invest it as he wished, without being obliged to apply it necessarily for the benefit of his principals. In the seventh assignment of
error the plaintiff alleges that the court erred in fixing the capital, which the defendants are obliged to pay him by virtue of the
power of attorney executed by them, at only P14,451.71. In the eighth and last assignment of error, he insists that the court should
have ordered the defendants to pay the entire capital owed, with interest thereon in accordance with the mortgage deed, together
with 10 per cent thereof as attorney's fees, the action having been instituted due to nonfeasance on the part of the defendants.

These four assignments of errors refer to the interpretation and scope of the power of attorney and to the computation of the
capital and the interest to be paid by the defendants and, finally, to whether or not the latter are obliged to pay the fees of the
attorney for the plaintiff. For this reason, this court passes upon them jointly.

The pertinent clauses of the power of attorney from which may be determined the intention of the principals in authorizing their
agent to obtain a loan, securing it with their real property, were quoted at the beginning. The terms thereof are limited; the agent
was thereby authorized only to borrow any amount of money which he deemed necessary. There is nothing, however, to indicate
that the defendants had likewise authorized him to convert the money obtained by him to his personal use. With respect to a power
of attorney of special character, it cannot be interpreted as also authorizing the agent to dispose of the money as he pleased,
particularly when it does not appear that such was the intention of the principals, and in applying part of the funds to pay his
personal obligations, he exceeded his authority (art. 1714, Civil Code; Bank of the Philippine Islands vs. De Coster, 47 Phil., 594 and
49 Phil., 574). In the case like the present one, it should be understood that the agent was obliged to turn over the money to the
principals or, at least, place it at their disposal. In the case of Manila Trading & Supply Co., vs. Uy Tiepo (G.R. No. 30339, March 2,
1929, not reported), referring to a power of attorney to borrow any amount of money in cash and to guarantee the payment thereof
by the mortgage of certain property belonging to the principals, this court held that the agent exceeded his authority in
guaranteeing his personal account for automobile parts by the mortgage, not having been specially authorized to do so. This court
then said:

Inasmuch as Jose S. Uy Tiepo, as agent of Daniel Ramos and Emilio Villarosa, was only authorized to "borrow any amount of
cash", and to guaranty the payment of the sums of money so borrowed by the mortgage of the property stated in the
power of attorney, he exceeded the authority conferred upon him in mortgaging his principal's property to secure the
payment of his personal debt for automobile parts, and the guaranties so made are null and void, the principals in question
not being responsible for said obligations.

The plaintiff contends that the agent's act of employing part of the loan to pay his personal debts was ratified by the defendants in
their letter to him dated August 21, 1927 (Exhibit E). This court has carefully read the contents of said document and has found
nothing implying ratification or approval of the agent's act. In it the defendants confined themselves to stating that they would
notify their agent of the maturity of the obligation contracted by him. They said nothing about whether or not their agent was
authorized to use the funds obtained by him in the payment of his personal obligations.

In view of the foregoing, this court concludes that the fifth and sixth assignments of error are unfounded.

In the seventh assignment of error, the plaintiff insists that the defendants should answer for the entire loan plus the stipulated
interest thereon. This court has already stated the manner in which the agent employed the loan, according to the plaintiff. Of the
loan of P28,000, the agent applied the sum of P10,188.29 to the payment of his personal debt to the plaintiff. The balance of
P17,811.71 constitutes the capital which the defendants are obliged to pay by virtue of the power conferred upon their agent and
the mortgage deed.

In connection with the stipulated interest, it appears that the capital of P17,811.71 bore interest at 12 per cent per annum from
March 27, 1926, to September 30, 1936, equivalent to P22,460.56. All the interest paid by the defendants to the plaintiff, including
that which is considered as usurious, amounts to P18,138.77, so that they are still indebted in said concept in the sum of P4,321.79.
Adding this sum to the capital of P17,811.71, makes a total of P22,133.50, from which the sum of P3,000 constituting the fees of the
attorney for the defendants must be deducted, leaving a net balance of P19,133.50 which is all that the defendants must pay to the
plaintiff up to said date.

The foregoing disposes of the seventh assignment of error.

In the mortgage deed the defendants bound themselves to pay the fees of the attorney for the plaintiff were to resort to the courts
to foreclose the mortgage. Said fees were fixed at 10 per cent of the capital which the defendants might owe. This penalty according
to what has been stated heretofore, amounts to P1,781.17 which would have to be added to the total amount to be paid to the
plaintiff by the defendants. The court, having declared the contracts usurious, did not order the defendants to pay the penalty and
for this reason the plaintiff assigns the omission as the eighth and last assignment of alleged error. Inasmuch as the fees agreed upon
are neither excessive nor unreasonable, this court finds no good reason to disapprove it, particularly because the defendants were
also granted a larger amount in the same concept.

In view of the conclusions arrived at, the motion for a new trial filed by the attorneys for the plaintiff on March 12, 1935, is denied,
and the amendments to the complaint proposed by them in their pleading of March 20 of said year are admitted.

For all the foregoing reasons, the appealed judgment is modified and the defendants are ordered to, pay jointly and severally to the
plaintiff the sums of P19,133.50 and P1,781.17. Within three months they shall make payment of said two sums of money or deposit
them with the clerk of court, at the disposal of the plaintiff, upon failure to do which the real property mortgaged with the
improvements thereon shall be sold at public auction and the proceeds thereof applied to the payment of the two sums of money
above-stated; without special pronouncement as to the costs of this instance. So ordered.
G.R. No. L-3572             September 30, 1952

PAULINO DUMAGUIN, plaintiff-appellant, 
vs.
A.I. REYNOLDS, E.J. HARRISON and BIG WEDGE MINING COMPANY, defendants-appellees.

Ernesto Sibal and Tañada, Pelaez and Teehankee for appellant.

Juan L. Orbeta for appellee A.I. Reynolds.
Basilio Francisco for appellee E.J. Harrison.
Claro M. Recto for appellee Big Wedge Mining Company.

MONTEMAYOR, J.:

For purposes of this decision, the following facts may be said to be agreed upon by the parties or to be without dispute. Because the
plaintiff Paulino M. Dumaguin would appear to be the central figure in this case, we shall begin by making reference to his
background and his status at the time he entered into the transactions and executed the deeds of conveyance whose legality is now
the subject of the present petition.

Paulino M. Dumaguin was a teacher in the public elementary schools for a year and a half, and from 1916 to 1918 was the Manager
of the Head Waters Mining Company in Baguio. As Manager of said mining company Paulino acquired some knowledge of mining.
On or before May 21, 1929, he was a supervising line-man of the Bureau of Posts. On that date, (May 21, 1929) he was admitted to
the Insular Psychopathic Hospital at San Felipe Neri (now National Psychopathic Hospital), Mandaluyong, Rizal, said to be suffering
from "paranoia". On October 15, 1929, Dr. Toribio Joson, assistant alienist of said Hospital, submitted the following memorandum:

"MEMORANDUM

To: the Alienist in Charge Insular Psychopathic Hospital, San Felipe Neri, Rizal.

Subject: Paulino M. Dumaguin. — Male, married, 33 years old, Ex-Supervising Lineman of the Bureau of Posts,
admitted to the hospital at 11:25 a.m. on May 21, 1929.

1. The patient is well-behaved, oriented in all spheres, coherent in his speech and has no more illusion or
hallucinations; but is having a delusion that one of the patients in the Hospital is trying to chloroform him. He
consequently keeps away from the said patient.

2. He is not also sure that his former officemates whom he erroneously believed chloroformed him before, would
not chloroform him anymore when he goes home.

3. This type of insanity which Paulino M. Dumaguin is suffering from is therefore that of Paranoia, which runs a
very chronic course of usually a lifetime, but which may show improvement as the patient grow older. (See Exhibits
42, folio 195; Emphasis ours).

After Paulino's discharge from the Hospital on or about November 11, 1929, in order to enable his wife to withdraw his
retirement gratuity from the government, on September 16, 1930, she filed guardianship proceedings in the Court of First
Instance of Camarines Sur. Said court relying presumably on the report of Dr. Joson above-quoted, granted the petition and
appointed her as Paulino's guardian.

On February 2, 1931, Paulino and his guardian in a joint motion before the Court of Camarines Sur among others alleged
that —

4. Que en la actualidad, el citado Paulino M. Dumaguin, ya esta restablecido, por lo que se le ha permitido dejar el
Hospital y ahora vive con su familia en esta localidad, que es su residencia.

5. Que el mencionado Paulino M. Dumaguin ha recibido un cheque del Gobierno por la cantidad de P412.38, como
parte de su pension.
 6. Que los comparecientes necesitan el importe de dicho cheque para atender a su subsistencia, pues se hallan en
la actualidad faltos de todo necesario.

and asked that they be authorized to cash said check and use its proceeds for their support:

"Por tanto, suplican al Juzgado que se les autorice a cambiar el referido cheque, y disponer de su producto para su
manutencion."

In 1934, the guardianship proceedings were closed.

In and before the year 1930, defendants A.I. Reynolds and E.J. Harrison as gold prospectors had located some mineral claims in the
Itogon District, sub-province of Benguet, Mountain Province, known as the "ANACONDA GROUP". They employed Fructuoso
Dumaguin, brother of plaintiff Paulino, in their work as prospectors.

At the beginning of 1931, Fructuoso Dumaguin was thus working for said defendants Reynolds and Harrison relocating some of their
mining claims previously located and locating new ones, for which work he was paid P5.00 a day. About the same time his brother
Paulino M. Dumaguin, plaintiff herein, leaving his home in Camarines Sur went up to Baguio in search of work. To help him Fructuoso
got him employed by the defendants and the two brothers worked together in the mining business for the defendants.

The theory of the plaintiffs that he was employed only to relocate defendants' mining claims in the Anaconda Group while the
defense claims that like his brother Fructuoso, Paulino was employed not only to relocate mining claims within the Anaconda Group
but also to stake and locate new mining claims for them. For said work Paulino was also paid by the day by the defendants.

During the months of May, June and July of that year 1931 the two brothers Fructuoso and Paulino staked and located ten mining
claims or fractions thereof named Victoria, Greta, Triangle, Lolita, Frank, Paul, Leo, Loreto, Arthur and G. Ubalde, all said claims or
fractions being late registered in the name of Paulino M. Dumaguin as locator in the office of the Mining Recorder. By virtue of an
instrument (Exhibit A) entitled "Deed of Transfer" dated September 10, 1931, Paulino M. Dumaguin conveyed and transferred to
defendants A.I. Reynolds and E.J. Harrison nine of the ten mineral claims just mentioned, and in another instrument (Exhibit B) on
the same date September 10, 1931, Paulino transferred and conveyed to defendant Reynolds the remaining claim Victoria.

Later, Reynolds as vendee of the mining claim Victoria by virtue of a Deed of Sale (Exhibit C) dated November 2, 1931 sold and
transferred said claim to the defendant Big Wedge Mining Company the claims Frank, Paul, Leo, Loreto, and Arthur. In still another
Deed of Sale (Exhibit J) Reynolds and Harrison sold and transferred to the same Big Wedge Mining Co. the Greta, Lolita and Triangle
fractions or mineral claims. As a result all the ten mineral claims or fractions transferred by Paulino to Reynolds and Harrison, with
the exception of the claim G. Ubalde were in turn sold and transferred to the Big Wedge Mining Co.. What was done to this last
claim or fraction G. Ubalde, does not appear on the record, but it must still remain in the name of Reynolds and Harrison.

Plaintiff Dumaguin initiated this case in the Court of First Instance of Baguio by filing his original complaint on November 5, 1934,
later amending it on July 26, 1939 and finally re-amending it on June 4, 1940. Under his re-amended complaint which contains three
case of action, he alleges that when he executed the deeds of transfer (Exhibits A and B) he was under guardianship and did not
possess the mental capacity to contract and so asked the court that the said two deeds be declared null and void. He also alleged
that those two deed being void, Reynolds and Harrison had no title to transmit to the Big Wedge Mining Co., by virtue of the deeds
of sale, Exhibits C and D (plaintiff evidently overlooked the deed, Exhibit J) and therefore those two deeds of sale (Exhibit C and D)
should also be declared null and void, and that he, (Paulino) should be declared the owner of the ten mining claims or fractions in
question. Finally, he claimed that the Big Wedge Mining Co., had illegally taken possession of the ten mining claims and profitably
worked or operated them and so he asked that said company be ordered to render an accounting of its operations and profits made
therefrom, and that the defendants should be ordered jointly and severally to pay to the plaintiff such profits, as may have been
derived by the Big Wedge Mining Co. as shown by its accounts.

Defendants Reynolds and Harrison fled their original answers on January 30, 1935 and April 12, 1935, respectively, both superseded
by their amended answers on January 22, 1936. Defendant Big Wedge Mining Co., filed its answer on January 30, 1935 which was
amended January 18, 1936 and later re-amended on February 5, 1940. Reynolds and Harrison claimed in their answers that plaintiff
Paulino and his brother Fructuoso had been expressly employed by them to locate and stake mineral claims, and that said two
brothers staked and located the ten mineral claims in question for them (defendants), and that there was an understanding between
the two brothers and the two defendants that the said mineral claims so located would eventually be transferred to them. In its turn
defendant Big Wedge Mining Co., followed the theory of Reynolds and Harrison about Paulino having been employed by them and
having made the location of the mineral claims in question for their employers, and that the company was not aware of the alleged
mental incapacity of plaintiff at the time that he executed the deeds of transfer in favor of Reynolds and Harrison, and that even if
the plaintiff was under guardianship at the time, yet he confirmed and ratified the deeds of transfer by his acts and letters after his
release from guardianship, and that said company bought the said mineral claims in good faith and for valuable consideration from
the registered owners.

Hearing was held on July 31, 1940. The evidence submitted was mainly documentary. Only three witnesses took the witness stand.
Atty. Alberto Jamir was presented by the Big Wedge Mining Co. to identify a copy of a decision rendered by the Securities and
Exchange Commission. Defendant Reynolds testified for the defense. For the plaintiff, only Fructuoso Dumaguin testified for his
brother. Why Paulino, the plaintiff, did not take the witness stand, if not to support the allegations of his complaint, at least to refute
the evidence for the defense particularly that which tended to show that he was employed by defendants Reynolds and Harrison to
stake and locate mineral claims for them with the understanding that he would later transfer said claims to his employers, is not
known to this court. After trial, Judge Jose R. Carlos before whom the hearing was held, rendered judgment on January 16, 1941,
dismissing the complaint.

Paulino Dumaguin appealed from that decision. His Record on Appeal was approved on April 16, 1941 and the brief was filed on
November 3, 1941 and the brief for the Big Wedge Mining Co. was filed or rather is dated December 31, 1941. It is not known
whether defendants Reynolds and Harrison ever filed a brief. The fact is that the record of the case was lost or destroyed during the
war and only copies of the record on appeal and the briefs were salvaged. As to the oral and documentary evidence which was lost,
only those portions of the transcript and documents reproduced and appearing in the briefs are now available. But the parties have
agreed to the correctness of these portions so quoted in the briefs.

After the reconstitution of the case, the Court of Appeals which had taken charge of the appeal found that the amount involved was
beyond its jurisdiction and so certified the case to us. Neither Reynolds nor Harrison has appeared before the Court of appeals or
before this Court. Appellant's attorney represented that Harrison's counsel could not appear in the appeal due to lack of authority,
not having heard from his client since liberation and being of the belief that his client is dead. There was also information to the
effect that defendant Reynolds had been killed during the early part of the occupation by the Japanese. So, only the Big Wedge
Mining Co., is opposing the present appeal.

The decisive and pivotal question here is whether plaintiff Paulino M. Dumaguin and hid brother Fructuoso acting on their account
staked and located these mining claims or fractions in dispute for Paulino, or whether they acting as employees and agents of
defendants Reynolds and Harrison, staked and located said claims for and in behalf of their employers. We agree with the trial court
that the great preponderance of evidence is to the effect that these claims were located for Reynolds and Harrison by Paulino and
Fructuoso as employees, and that the latter were purposely employed and paid for this work. All the expenses incident to the
skating and location of said claims and registration of the corresponding declarations of location were paid by Reynolds and
Harrison. It is true that in one part of his testimony, Fructuoso claimed that he and his brother were employed merely to relocate
the mining claims of the defendants within the Anaconda Group but later on, he admitted in his testimony and also in his affidavit
(Exhibit 1) which was prepared before these proceedings were initiated in court that he and his brother Paulino working together
were paid by the defendants Reynolds and Harrison to locate new mining claims outside the Anaconda Group; that as a matter of
fact, Paulino engaged in this work at the beginning, but because he (Fructuoso) found that Paulino physically was not equal to the
arduous work of climbing up and down mountains to stake and locate claims, he was placed in charge of the payroll of the
defendants and detailed to do paper work which, it is presumed, included in the registration of the declarations of location of the
mining claims in the office of the Mining Recorder, in his name. Fructuoso also admitted that there was an understanding before and
pending the staking and location of said mining claims that they would eventually be transferred to their real owners, Reynolds and
Harrison.

In consonance to this correct theory that these mining claims were located for defendants Reynolds and Harrison, as counsel for
appellee well observes, Exhibit A and E are both entitled "Deed of Transfer". This conveys the idea that Paulino was merely
transferring to the real owners property which technically and in name were registered as his own. Otherwise, if he really owned
these mining claims, the two deeds (Exhibit A and B) would have been more appropriately entitled "Deed of Sale" and the body of
said instruments should have stated that he was selling the mining claims. On the other hand, we have the instruments (Exhibits C
and D) wherein Reynolds and Harrison sold said mining claims or fractions to the Big Wedge Mining Co., and the documents were
each entitled "Deed of Sale".

It would really be unfair, even against public policy to allow a person employed to stake and locate mining claims for his employer to
make locations on his own account and for his own benefit tho done outside hours of work or employment, because there is an
obvious incompatibility and conflict of interest between those of the employer on the one hand and those of the employee on the
other, unless there is a clear and express agreement to the contrary. Judge Carlos in his well-considered decision correctly states the
fiduciary relation between Paulino and his employers Reynolds and Harrison and the sound and correct rule and public policy on this
matter.

The fiduciary relation between the plaintiff and the defendants A.I. Reynolds and E.J. Harrison, is very clear from the
evidence. Fructuoso M. Dumaguin, has clearly stated that his brother, Paulino M. Dumaguin, was working under him while
he was locating the claims in question for A.I. Reynolds and E.J. Harrison. There can be no doubt that these claims in
question were among those which these defendants wanted staked because, according to Fructuoso Dumaguin himself,
they all adjoined the Anaconda Group, which ground he was specially instructed to stake for the said defendants. The
plaintiff, herein, therefore, learned of the existence, especially of the fractional mineral claims, because he was with the
party who staked the rest of the claims in that locality. To permit the plaintiff herein to assert his claim of ownership over
these claims in question would be tantamount to allowing him to violate and infringe all the sound and age-old rules which
govern principal and agent. There can be no doubt that this relation existed because Fructuoso M. Dumaguin, the sole
witness for the plaintiff, stated categorically in his affidavit Exhibit I that all the claims subject of this litigation, except G.
Ubalde mineral claim, had been located and staked by him for A.I. Reynolds and E.J. Harrison, though the same were
recorded in the name of his brother Paulino. It is quite evident, therefore, that even if no transfers were made or Exhibit
"A" and "B did not exist, these two defendants would still be entitled to an assignment of the said claims. The evidence of
the fiduciary relation between plaintiff and the defendants A.I. Reynolds and E.J. Harrison was given by none other than
Fructuoso M. Dumaguin, the brother the only witness of the plaintiff in this case.

Any act of an agent, the object or tendency of which is to commit a fraud or breach of the agency, should be discouraged. In
the first place, such acts are condemned by public policy. They are against the morals; therefore, they should never be
tolerated. An agent or trustee, or anybody who acts in a fiduciary capacity, should never be permitted to capitalize on his
fiduciary position to mulct or take advantage of his principal or employer.

It has been the practice of miners to employ others to stake mining claims for them. This is usually done after the
prospectors have assured themselves that a mine exists in a certain locality. The man who place the stake could easily leave
fractional mineral claims in between the claims without reporting the existence of this fractions to his principal. Later he
could stake and claim them. If this is permitted to happen, bona fide miners can easily be held up by the very man whom
they have employed to stake their mining claims. If the mining industry shall be protected and the exploitation of the
natural resource of this country encouraged, such practice should not be tolerated. The wrong or the damage that can be
done is unlimited. If agents or employees or laborers are permitted to conceal or withhold certain mining claims ordered
staked by their employer who gave them specific instructions to stake the entire ground in a certain locality, the effect will
practically be the condonation and legalization of a holdup. For this reason Mechem on Agency, Sec. 1224, said the
following:

"The well-settled and salutary principle that person who undertakes to act for another shall not be in the same matter, act
for himself, results also in the other rule, that all profits made and advantage gained by the agent in the execution of the
agency belong to the principal. And it matters not whether such profit or advantage be the result of the performance or of
the violation of the duty of the agent if it be the fruit of the agency. If his duty be strictly performed, the resulting profit
accrues to their principal as the legitimate consequence of the relation. If profit accrues from his violation of duty while
executing the agency, that likewise belongs to the principal, not only because the principal has to assume the responsibility
of the transaction, but also because the agent cannot be permitted to derive advantage from his own fault.

"It is only by rigid adherence to this rule that all temptation can be removed from one acting in a fiduciary capacity, to
abuse his trust or seek his own advantage in the position which it affords him."

In view of our conclusion and holding that these mining claims were staked and located for the benefit of the defendants Reynolds
and Harrison, the other points and questions involved in the appeal exhaustively, in detail and with a wealth of authorities, discussed
by counsel for both appellant and appellee with ability and skill, become incidental and not of much if any relevancy whatsoever,
although we may discuss one or two of them not so much to strengthen our decision but rather to render more clear our views.

Appellants contends that the deeds of transfer (Exhibits A and B) should be annulled for lack of mental capacity because at the time
of their execution he was under guardianship for insanity. It is contended that altho in a case of execution of a will by a testator who
was under guardianship for mental derangement, the presumption of insanity is only  juris tantum, subject to rebuttal, and
nevertheless, mental incapacity as regards contracts, particularly those transferring property, under similar circumstances, involves a
conclusive presumption which cannot be rebutted by evidence, We have studied the arguments and authorities adduced by both
counsel on this point and we are inclined to agree with counsel for appellee that the better rule is that even in the execution of
contracts, in the absence of a statute to the contrary, the presumption of insanity and mental incapacity is onlyprima facie  and may
be rebutted by evidence; and that a person under guardianship for insanity may still enter into a valid contract and even convey
property, provided it is proven that at the time if entering into said contract, he was not insane or that his mental defect if mentally
deranged did not interfere with or affect his capacity to appreciate the meaning and significance of the transaction entered into by
him.

Section 66. Generally. — Of course, not every substandard mentality or even every mental infirmity has the effect of
rendering the afflicted person disabled for the purpose of entering into contract and making conveyance. . . . A reasonable
test, suggested by several courts for the purpose of determining whether an infirmity operates to render a person incapable
of binding himself absolutely by contract, is whether his mind has been so affected as to render him incapable of
understanding the nature and consequences of his acts, or more exactly, whether his mental powers have become so far
affected as to make him unable to understand the character of the transaction in question. . . . Some authorities take a view
that a grantor may be competent to execute a deed notwithstanding his disability to transact business generally, provided
he understands the nature of what he is doing and recollects the property of which he is making a disposition and to whom
he is conveying it. Other authorities, however, take the position that to sustain a deed, the grantor must have the ability to
transact ordinary business. In any event, if it appears that the grantor in a deed was incapable of comprehending that the
effect of the instrument, when made, executed, and delivered, would be to divest him of title to the land covered by the
instrument, it is not binding upon him. . . . (28 Am. Jur., Insane, etc., See Sec. 66, pp. 701-702.)

. . . Even partial insanity will not render a contract voidable unless it exists in connection with or is referable to the subject
matter of the contract. Similarly, a delusion if unconnected with the transaction in question, is not sufficient to affect the
validity of a contract consummated by the person thus affected. Monomania or a mental fixation or abnormality respecting
a matter disconnected with the act of conveying property will not affect the validity of the conveyance. . . . (Ibid, p. 703.)

There are many case of persons mentally deranged who although they have been having obsessions and delusions for many years
regarding certain subjects and situations, still are mentally sound in other respects. There are others who though insane, have their
lucid intervals when in all respects they are perfectly sane and mentally sound.

In the case of Paulino M. Dumaguin, according to the doctor who observed and examined him, and who made his report on October
15, 1929, and that was more than two years before Exhibits A and B were executed, he (Paulino) while in the hospital was "well-
behaved, oriented in all spheres, coherent in his speech and has no more illusions or hallucinations; but is having a delusions that
one of the patients in the hospital is trying to chloroform him. He consequently keeps away from said patient and that he was "not
sure that his former officemates whom he erroneously believed chloroformed him before would not chloroform him anymore when
he gets home". This was in 1929. The same year Paulino was discharged from the hospital presumably because his condition had
improved, and on February 2, 1931, Paulino and his wife in a motion assured the court of Camarines Sur that Paulino was already re-
established (ya esta restablecido). Several months later he went to Baguio looking for work. It is to be presumed that he was then no
longer insane. It is equally to be presumed that his brother Fructuoso would not have recommended him for employment by
defendants Reynolds and Harrison and actually let him work for them, at the beginning climbing up and down mountains to stake
and locate claims for his employers; and if Paulino was then insane, it was not likely that Reynolds and Harrison would employ him
to do the work of staking and locating claims to say nothing of taking charge of the payroll of their employees, and registering with
the Mining Recorder the declarations of location of mining claims. There is every reason to believe as we do and hold that at least
from about the beginning of the year 1931 when Paulino began working for his employers Reynolds and Harrison, and when he
executed Exhibits A and B, he had the mental capacity to transact ordinary business and was mentally capable of validity entering
into a contract even conveying property to another. But even assuming that at the time of executing Exhibits A and B, Paulino were
still mentally incapacitated, still, because of his moral and legal obligation to transfer said claims to his employers, he could through
his guardian have been compelled by the court to execute said transfer, or after termination of his guardianship obliged personally
to execute said transfer to his employers. He acted as a trustee for his employers and the law will not allow him to invoke insanity or
mental in capacity to violate his trust.

In relation with this alleged incapacity of Paulino, it is interesting to note that when he and his lawyers filed his first complaint in
1934, that is, about three years after executing Exhibits A and B, they said nothing about being mentally incapacitated in 1931. They
did not ask for the annulment of the deeds of transfer (Exhibits A an B) on the ground of lack of mental capacity. They assumed and
took it for granted and led others to believe that said deeds of transfer were valid. They only asked for the payment of damages. It
was not until five years later in the year 1939 when they filed the first amended complaint that they raised this question of mental
incapacity. It took him and his lawyers almost five years to discover and claim that he (Paulino) was not mentally capable to enter
into a contra when he executed exhibits A and B. In view of all this, we may well and logically presume that all the time that Paulino
was employed by Reynolds and Harrison to locate and register mining claims for them, and at the same time he executed Exhibits A
and B and for several years thereafter when he continued in their employ, neither Fructuoso, Paulino's brother nor defendants
Reynold and Harrison had any reason to suspect, much less, to believe that Paulino was other than a sane, responsible and mentally
capable individual, able to take care not only of him and his interest but also of the interest of his employers. Neither did the other
employees of Reynolds and Harrison to whom Paulino paid wages on pay-days, be being in charge of the payroll, and the Mining
Recorder before whom he executed proper and valid affidavits of locations for purpose of registration, note any mental incapacity
on the part of Paulino. All this goes to reinforce the finding that Paulino was mentally sane and capable in 1931.

Counsel for appellant next contends that Exhibits A and B should be declared void for lack of consideration. Said two deeds each
mentions P1.00 and other valuable consideration, the receipt whereof was acknowledge, to be the consideration. We believe that
consideration is sufficient, this aside from the provision of law (Article 1277 of the Civil Code), that consideration in a contract will be
presumed and that it is licit, unless the debtor prove the contrary which Paulino in this case failed to establish. Furthermore,
according to Reynolds, in consideration of the transfer of these mining claims, he had later paid Paulino between P3,000 and P5,000.
This was not refuted by Paulino. Moreover, under the view we take of the mining claims having been located for the benefit of
defendants Reynolds and Harrison, by Paulino in his capacity as their employee, paid for that purpose, no consideration for the
conveyances was even necessary. He was merely fulfilling an obligation and complying with a trust.

In conclusion we find and hold that Exhibits A and B were valid conveyances executed by one who was mentally capable.
Consequently, Reynolds and Harrison had a valid title to convey as they did convey to defendant Big Wedge Mining Co., in Exhibits C,
D, and J.1âwphïl.nêt

In view of the foregoing, finding no reversible error in the decision appealed from the same is hereby affirmed, with costs.
G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner, 
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering
sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-
wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his
vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that service,
respondent charged freight rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines),
Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of
General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent
himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and
employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck
which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with
them the truck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding
payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be
held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the
value of the lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common carrier and holding him
liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in
finding that he had habitually offered trucking services to the public; in not exempting him from liability on the ground of force
majeure; and in ordering him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return
loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition
for Review assigning as errors the following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

 3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly
characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the
public.

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services
to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733 deliberaom making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on
common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:

... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice
plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and
other similar public services. ... (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled"
goods for other merchants from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent'sprincipal  occupation was not the carriage of goods for others.
There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was
not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under
the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent
from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory
requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of
those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to
render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and
diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence
in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and
1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods
which they carry, "unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for
responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force
majeure fall within the scope of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case — the hijacking
of the carrier's truck — does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow,
therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the
private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however,
may be overthrown by proof of extraordinary diligence on the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner
argues that in the circumstances of this case, private respondent should have hired a security guard presumably to ride with the
truck carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security guard to ride with the truck and to engage brigands in a
firelight at the risk of his own life and the lives of the driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in the vigilance
over the goods carried in the specific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification
not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or its
employees;

(6) that the common carrier's liability for acts committed by thieves, or of robbers who donot act
with grave or irresistible threat, violence or force, is dispensed with or diminished; and

(7) that the common carrier shall not responsible for the loss, destruction or deterioration of
goods on account of the defective condition of the car vehicle, ship, airplane or other equipment
used in the contract of carriage. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such
responsibility — even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance
over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible
threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record
shows that an information for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198
entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the
accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada
and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision
of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-
uppers were armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver and his
helper, detaining them for several days and later releasing them in another province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of
robbery in band.  4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the
common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made
absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be
foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of
the undelivered merchandise which was lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977
is AFFIRMED. No pronouncement as to costs.
G.R. No. L-3754               November 15, 1907

ANGELA OJINAGA, plaintiff-appellant, 
vs.
THE ESTATE OF TOMAS R. PEREZ, defendant-appellee.

WILLARD, J.:

The appellant, Doña Angela Ojinaga, as judicial administratrix of Eladio Ojinaga, deceased, presented to the commissioners
appointed to hear claims against the estate of Tomas R. Perez, deceased, a demand for 12,053.54 pesos with interest from the 1st of
May, 1893. This claim was disallowed by the commissioners and from that disallowance the appellant appealed to the Court of First
Instance. That court entered judgment against the appellant and from that judgment she has appealed to this court.

Domingo Perez died in the town of Nueva Caceres in 1882, leaving as surviving heir ten children, six by one marriage and four by
another. His estate was administered by one Manuel Achondo until 1889, when the administration was assumed by Tomas R. Perez,
one of the heirs.

In April, 1890, a partition of such estate was had among the heirs of Domingo Perez. By this partition the six children of the first
marriage received 31,608.90 pesos each, and the four children of the second marriage 17,241.24 pesos each. Two of the children of
the first marriage, Adela and Aurora, withdrew their participation. The remaining children, however, four of the first marriage and
four of the second — Tomas R. Perez being included among the former — continued Tomas R. Perez in the administration of their
respective portions. The community as thus constituted was as follows:

Of the first marriage, Tomas R. Perez, Patricio Perez, Juan Perez and Eladio Ojinaga, the latter being the surviving husband and
successor in interest of Isabel Perez, one of the children of the first marriage. These four contributed to the community their
respective portions, i. e., 31,608.90 pesos each.

Of the second marriage, Filomena, Jose, Rodolfo, and Margarita Perez, who contributed 17,241.24 pesos each.

Tomas R. Perez continued the administration of this property from April 20, 1890, to May, 1893. In such administration he acted as
guardian for all the persons interested except Eladio Ojinaga, and as to him Tomas R. Perez acted as agent. In 1893, when,
apparently, Juan and Patricio Perez became of age, Tomas R. Perez filed an account of his administration in the Court of First
Instance at Nueva Caceres. In this accounting he showed the net profits of the business for the period stated as 8,084 pesos. The
brothers Juan and Patricio refused to accept this statement as correct, claiming that the profits actually drived by Tomas R. Perez
from such business during the period named were greater than shown by him. Eladio Ojinaga accepted the account as rendered and
permitted Tomas R. Perez to continue in the administration of his interest. Patricio Perez and his brother Juan persisted in their
charge that the account was not correct and continued to demand a new accounting from Tomas R. Perez. The result was that in
1896 or 1897 arbitrators were appointed to examine the accounts of Tomas R. Perez from April 20, 1890, to May 1, 1893. These
arbitrators had before them the books of Tomas R. Perez which were examined by Patricio Perez. While this examination was going
on, and before it had been completed, Patricio Perez offered to accept 32,000 pesos as a final settlement and determination of the
whole question. It seems that Thomas R. Perez was willing to pay this amount as a settlement of the transaction, but Patricio Perez
and his associates insisted that in the division of this 32,000 pesos among the heirs Eladio Ojinaga be excluded, and that it be divided
among seven heirs instead of being divided among eight heirs.

Patricio Perez knew at this time that Eladio Ojinaga was satisfied with the accounting rendered in 1893, and, testifying at the trial, he
said that the reason why they excluded Ojinaga from participation in this amount was because they suspected that there was an
agreement between him and Tomas R. Perez and that the idea of Tomas R. Perez was to take his own share out so as to reduce the
share of each for his own benefit. This settlement, therefore, was never carried out. Litigation was begun by Patricio and Juan Perez
against Tomas R. Perez for an accounting. Other judicial proceedings were commenced by Tomas R. Perez against the heirs, or some
of them. A final settlement of all the suits and proceedings then pending and of the entire matter in controversy was made on the
14th of August, 1901, in a public document of that date. By that agreement: "4. Don Tomas R. Perez binds himself to pay Don
Patricio Perez the sum of 12,053.54 pesos, as profits, together with the interests agreed upon during the period of his administration
from April 20, 1890, to May 1, 1893." He agreed to pay to the other heirs who joined in the agreement, and who were all of the heirs
except Eladio Ojinaga, a proportionate amount.lawphil.net
It is claimed by the appellant that this document proves conclusively that the amount of the profits to which Eladio Ojinaga was
entitled for the period in question was this sum of 12,053.54 pesos and that he is entitled to that sum with interest thereon from the
1st of May, 1893. It is, however, apparent from the whole document, and from the testimony of Patricio Perez, a witness presented
by the appellant at the trial, that this agreement was a compromise settlement and that this sum of 12,000 pesos included interest,
costs, and expenses. Patricio Perez testified:

Q. What is the ultimate account on which was calculated your share of 12,053 pesos? — A. I can not tell precisely now from
whence that account was taken, but, adding my share to the shares of my brothers and the other four, this was the total
sum to be given to us, including the prejudice and damage suffered by us.

x x x           x x x          x x x

Q. What was to be your share of this 32,000 pesos? — A. I do not know exactly.

Q. More or less? — A. about 6,000 pesos, approximately.

Q. And how was it that you ultimately received 12,000 pesos? — A. Because here in Manila I had incurred further expense
and the interest had been accumulating.

The appellant sought to prove at the trial the actual amount of the profits during the period in question by the books kept at the
time, but it appears that these had been lost and destroyed. With the exception of these compromise settlements, the only evidence
as to the actual profits was that furnished by Patricio Perez. He testified that the reason why he would not accept 8,084 pesos as the
amount of the profits was "because the first year he (Tomas R. Perez) rendered the account to the court there was 17,000 pesos
profit, and the second year not more than 8,000 pesos profit, and the third year not more than 4,000 pesos profit, but my brother
stated to me that on account of some mistakes in the account the profits became reduced by reason of paying off some expenses."

It appears from testimony that Tomas R. Perez filed yearly statements in regard to the profits and that from these yearly statements
they would appear to amount to 29,000 pesos, but when he presented his final account for the whole time he showed profits of only
8,084 pesos, claiming that expenses had been paid which had not been included in the yearly accounts. Tomas R. Perez having died
in 1903, his explanation of this difference could not be given.

But assuming that the profits for the period above mentioned were 29,000 pesos instead of 8,000, the question is whether Eladio
Ojinaga so conducted himself with regard to the transaction that his administratrix has now lost the right to claim a proportionate
share of the said 29,000 pesos.

On the 25th of October, 1894, Tomas R. Perez rendered to Eladio Ojinaga an account of his administration from April 1, 1893, to
October 25, 1894. In that account are found the following items:

Pesos
Proportionate share of profits during 91, 92 and 93 .............. 1,662.00
6 per cent interest on the above
99.72
amount ..................................

On the 29th of October, 1894, Ojinaga stated in writing his consent to this account and left to the administration of Tomas R. Perez
all the property which belonged to him coming from the estate. The rendition of this account and the agreement of Ojinaga to the
correctness thereof constituted a contract between these parties (Ternate vs.Aniversario, 1 5 Off. Gaz., 462; Enriquez, vs. Enriquez, 2 5
Off. Gaz., 739), a contract which can be set aside only upon the grounds upon which any other contract can be annulled. It is claimed
by the appellant that it can be annulled on the ground o fraud committed by Tomas R. Perez in concealing from Ojinaga the truth in
regard to the amount of profits for the period in question. No contract can be set aside on the ground of fraud if the person who
claims to be defrauded knew all of the facts upon which his claim of fraud is based.

Patricio Perez, who testified as a witness for the appellant, stated that —

. . . In the year 1894 Eladio Ojinaga invited me to approve that account because he had done so, and he advised me to
approve it because it would be more just to him, and I did not like to follow his advice.
 x x x           x x x          x x x

Q. Did Eladio Ojinaga know all this trouble between you and Tomas R. Perez, and your brothers? — A. Yes, sir. He
had knowledge of that at the time when he invited me to approve the account. I informed him about that. I gave
him all of my reasons for not wishing to approve the account and he told me that he on his part approved it.

It is thus seen that in 1894 Ojinaga knew practically everything that is known to-day. Whether this conversation took place before
and after the 29th day of October, 1894, is immaterial, because on the 30th of April, 1895, Perez rendered another account to
Ojinaga for the time between the 25th of October, 1894, and the 30th of April, 1895. The first item in this account approved by
Ojinaga on the 29th of October, 1894. On the 30th of April, 1896, he rendered another account to Ojinaga for the time between 1st
day of May, 1895, and the 30th of April, 1896. The first item in this account is the balance of the last preceding account. On the 30th
of November, 1896, Ojinaga agreed in writing to the correctness of this account. On the 30th of June, 1897, Tomas R. Perez rendered
another account to Ojinaga for the time between the 1st of May, 1896, and the 30th of June, 1897. The first item in this account is
the balance of the last preceding account. On September 18, 1897, Ojinaga agreed in writing to the correctness of this account.

The appellant admitted at the trial that when litigation was commenced against Tomas R. Perez, about 1897, Ojinaga complained
bitterly of the conduct of Juan and Patricio and accused them of being unkind to their brother. Evidence was introduced at the trial
as to the contents of two letters said to be lost, written by Tomas R. Perez to Ojinaga at the time the settlement of 32,000 pesos was
under discussion, in which Perez advised Ojinaga to claim his part of that sum. Even then Ojinaga took no action in the matter. He
died in Kobe in July, 1898. His will, made in that month, stated that the last time when he settled accounts with Tomas R. Perez was
in 1894, but that this settlement was not made effective because there were discovered certain irregularities in the account,
irregularities which had been, and are now, the subject to litigation, and he added:

At any rate, it is my desire that whatever profit may accrue from this property, it should be equally divided between my son
and my wife.

From what has been said it is seen that this statement is not exactly correct as he kept on approving the accounts of Perez up to the
time of his death.

The appellant testified at the trial that she learned the facts in regard to these accounts before her husband's death, and that after
his death Juan and Patricio Perez proposed to her to join them in this litigation. This she refused to do, but said that in case they won
the suit she would pay her share of the expenses when they paid her proportionate share of what they obtained. No action in court
was taken by her until November, 1902.

Under the circumstances above stated this action can not be maintained. Eladio Ojinaga not only agreed to the correctness of this
account in 1894, but after he was thoroughly informed in the same year as to all the facts in the case he agreed to other accounts,
which necessarily, as he then knew, involved in a repetition of his agreement to the account of 1894. And knowing all the facts in the
case, he not only did not join in litigation commenced for the purpose of securing a true statement of the profits but expressly
refused to do so and censured the persons who promoted such litigation. The judgment of the court below is affirmed, with the
costs of this instance against the appellant. So ordered.
G.R. No. L-31739             March 11, 1930

LEONOR MENDEZONA, plaintiff-appellee, 
vs.
ENCARNACION C. VIUDA DE GOITIA, administratrix of the estate of Benigno Goitia, defendant-appellant.

-----------------------------

G.R. No. L-31740             March 11, 1930

VALENTINA IZAGUIRRE Y NAZABAL, plaintiff-appellee, 

vs.
ENCARNACION C. VIUDA DE GOITIA, ETC., defendant-appellant.

Avanceña and Lata for appellant.

Ramon Sotelo for appellees.

VILLAMOR, J.:

The plaintiffs, Leonor Mendezona and Valentina Izaguirre y Nazabal, filed separate claims with the committee of claims and appraisal
against the intestate estate of Benigno Goitia y Lazaga (Court of First Instance of Manila, civil case No. 30273), the first for the
amount of P5,940, and the second, P2,376. By order of the court dated June 16, 1927, these claims were heard by the committee.
The claimants presented their evidence, which the committee deemed insufficient and disapproved their claims. Both claimants
appealed from the report of the committee, and in accordance with section 776 of the Code of Civil Procedure, filed a new complaint
which was later amended with the approval of the court, there being nothing in the bill of exceptions to show that the defendant, or
the administratrix of the deceased Benigno Goitia, excepted to the court's order admitting the amendments to the complaints.

The defendant answered the amended complaints, pleading in special defense, that not having no knowledge of the supposed
management of their rights in the "Tren de Aguadas," and , furthermore, not having seen nor received any money of the plaintiff's
from said business, she is not in a position to render an account of any sort to the plaintiffs, either in her own personal capacity or as
judicial administratrix of Benigno Goitia's intestate estate.

By agreement of the parties, both cases were tried together, and the trial court rendered but one decision upon them on October
31, 1928, holding it sufficiently proved, "that defendant Encarnacion C. Vda, de Goitia has been duly appointed judicial administratrix
of the estate of her deceased husband Benigno Goitia in special proceeding No. 30273 of this court; that Benigno Goitia was the
representative and attorney-in-fact of the plaintiffs in the joint-account partnership known as the "Tren de Aguadas" and located in
the City of Manila, of which the plaintiff Leonor Mendezona, widow of Juan Bautista Goitia, owns 180 shares worth P18,000, and the
plaintiff Valentina Izaguirre y Nazabal owns 72 shares worth P7,200; that prior to 1915, Benigno Goitia, at that time the manager of
the aforesaid co-partnership, collected the dividends for the plaintiffs, which he remitted to them every year; that prior to 1915, the
usual dividends which Benigno Goitia forwarded to plaintiff Leonor Mendezona each year were P540, and to plaintiff Valentina
Izaguirre y Nazabal, P216; that from 1915 until his death in August, 1926, Benigno Goitia failed to remit to the dividends upon their
shares in the "Tren de Aguadas"; that some time before his death, more particularly, in July, 1926, Benigno Goitia, who was no
longer the manager of the said business, receive as attorney-in-fact of both plaintiff, the amount of P90 as dividend upon plaintiff
Leonor Mendezona's shares, and P36 upon Valentina Izaguirre y Nazabal's stock; that from 1915 to 1926, the "Tren de Aguadas"
paid dividends to the share-holders, one of them, Ramon Salinas, having received the total amount of P1,155 as ordinary and special
dividends upon his 15 shares' that calculating the dividends due from 1915 to 1926 upon Leonor Mendezona's 180 shares at P540
per annum, and at P216 yearly upon the 72 shares held by Valentina Izaguirre y Nazabal, counsel for both plaintiffs filed their claims
with the committee of claims and appraisal of the estate of Benigno Goitia, and, upon their disallowance, appealed from the
committee's decision by means of the complaints in these two cases."

The trial court likewise deemed it proven that "during the period from 1915 to 1926, Benigno Goitia collected and received certain
sums as dividends and profits upon the plaintiffs's stock in the "Tren de Aguadas" in his capacity as representative and attorney-in-
fact for both of them, which he has neither remitted nor accounted for to the said plaintiffs, although it has been prove that said
Benigno Goitia was their attorney-in-fact and representative in the "Tren de Aguadas" up to the time of his death."
The court below therefore ordered the defendant, as judicial administratrix of Benigno Goitia's estate to render a judicial account of
the intestate estate of the deceased Benigno Goitia, in special proceeding No. 30273 of this court (below), to render an account of
the amounts collected by her aforesaid husband Benigno Goitia, as attorney-in-fact and representative of the plaintiffs Leonor
Mendezona and Valentina Izaguirre y Nazabal in the copartnership known as the "Tren de Aguadas" from 1915 to July, 1926, within
thirty days from notice of this decision; and that the defendant may see, examine, and make a copy of the books and documents
relative to the business of the aforementioned copartnership, in accordance with the provisions of section 664 of the Code of Civil
Procedure. Without special pronouncement of costs.

On December 15, 1928, at the instance of the plaintiffs, the trial court set the 15th of January, 1929, as the date on which the
defendant should present her account of the dividends and profits collected by the decedent, as attorney-in-fact for the plaintiffs,
with regard to the "Tren de Aguatas" copartnership, form 1915 to 1926, and the hearing was postponed to the 7th of February,
1929.

On February 6, 1929, the defendant, reiterating her exception to the court's decision enjoining her to render accounts, manifested
that after a painstaking examination of the books of account of the copartnership "Tren de Aguadas," and several attempts to obtain
data from Ruperto Santos, the manager and administrator thereof, she has found no more evidence of any amount received by her
late husband, Benigno de Goitia, than a book of accounts where she came upon an item of P90 for Leonor Mendezona, and another
of P36 for Valentina Izaguirre.

In view of this report and the evidence taken at the hearing the court rendered a suppletory judgment, upon motion of the plaintiffs
dated December 3, 1928; and taking into account chiefly the testimony of Ruperto Santos and Ramon Salinas, it was held that, upon
the basis of the dividends received by the witness Salinas on his fifteen shares in the "Tren de Aguadas" from 1915 to 1925, it
appears that the dividends distributed for each share was equal to one-fifteenth of P1,087.50, that is P72.50. Thus the dividends
upon plaintiff Leonor Mendezona's 180 shares would be P13,050, and upon the 72 shares pertaining to Valentina Izaguirre, P5,220;
and these sums, added to those collected by the attorney-in-fact Benigno Goitia as part of the 1926 dividends, P90 for Leonor
Mendezona, and P36 for Valentina Izaguirre, show that Benigno Goitia thereby received P13,140 in behalf of Leonor Mendezona,
and P5,256 in behalf of Valentina Izaguirre.

Wherefore, the court ordered the defendant, as judicial administratrix of the estate of the deceased Benigno Goitia, to pay the
plaintiff Leonor Mendezona the sum of P13,140 with legal interest from the date of the filing of the complaint, and to pay the
plaintiff Valentina Izaguirre P5,256 likewise with legal interest from the date of the filing of the complaint, and moreover, to pay the
costs of both instances.

The defendant duly appealed from this judgment to this Supreme Court through the proper bill of exceptions.

The fundamental question raised by the appellant in the first assignment of error refers to the court's jurisdiction to admit the
amended complaints whereby the plaintiffs claim P13,680 and P5,470 respectively, whereas the claims presented to the committee
of claims and appraisal were only for P5,940 and P2,376, respectively. Appellant contends that the plaintiffs have not perfected their
appeal in accoundance with section 773 of the Code of Civil Procedure in claiming more in their complaints than in the claims filed
with the committee of claims and appraisal, by including therein, not only the yearly dividends paid from 1915 to 1925, inclusive, but
also the ordinary and extraordinary dividends upon their shares for the years of 1915 to 1926, alleged to have been delivered to
Benigno Goitia.

The fact that the claims filed with the committee were upon the basis of annual dividends, while those filed with the court below
were on ordinary and extraordinary dividends, is of no importance, for, after all they refer to the same amounts received by the
deceased Benigno Goitia in the name and for the benefit of the plaintiffs. The question to be decided is whether or not in this
jurisdiction a greater sum may be claimed before the court than was claimed before the committee. It should be noted that
according to the cases cited by the appellant on pages 12 and 13 of her brief, to wit, Patrick vs. Howard, 47 Mich., 40; 10 N. W. 71.
72; Dayton vs. Dakin's Estate, 61 N. W., 349; and Luizzi vs. Brandy's Estate, 113 N. W., 574; 140 Mich., 73; 12 Detroit Leg., 59, the
claims passed upon by the committee cannot be enlarged in the Circuit Court by amendment. But counsel for the appellees draws
our attention to the doctrines of the Vermont Supreme Court (Maughan vs. Burns' Estate, 64 Vt., 316; 23 Atlantic, 583), permitting
an augmentative amendment to the claim filed with the committee.

In the Maughan case, supra, the court stated:

ROWELL, J. This is an appeal from the decision and report of the commissioners on the estate of Michael Burns. Plaintiff
presented her claim to the commissioners at $2,789.65. The ad damnum  in her declaration filed in the probate court was
 $3,500. In the country court she recovered $3,813.49. Thereupon she moved for leave to amend her declaration by raising
the ad damnum  to $4,000, which was granted, and she had judgment for the amount of her recovery. The identical claim
presented to the commissioners was the claim tried above. The amount of plaintiff's recovery rested on the quantum
meruit. The jury found that she merited more than she estimated her claim when she presented it to the commissioners.
But such underestimate did not preclude her from recovering more, if the testimony show her entitled to it, as presumably
it did, as more was found. The fact of such estimate was evidence against here deserving more, as it was an implied
admission that what she claimed was enough; but the admission was not conclusive upon her, and did not prevent 527;
Stowe vs. Bishop, 58 Vt., 498; 3 Atl. Rep., 494; Hard vs.Burton, 62 Vt., 314; 20 Atl. Rep., 269.)

It is conceded that in common-low actions the court has power to raise the ad damnum at any time; but it is claimed that as
the probate court is not a common-low court, but is a court of special and limited jurisdiction, and has by statue original
jurisdiction of settlement of the estates of deceased person, the country court has no power to raise the ad damnum  of the
declaration filed in the probate court. The county court has, by statue, appellate jurisdiction of matters originally within the
jurisdiction of the probate court and in such appeals it sits as a higher court of probate, and its jurisdiction is co-extensive
with that of the probate court. It is not limited to the particular questions that arose in the probate court in the matter
appealed, but is expressly extended to matters originally within the jurisdiction of that court. It is an appellate court for the
rehearing and the re-examination of matters — not particular questions merely — that have been acted upon in the court
below. (Adams vs. Adams, 21 Vt., 162) And these matters embrace even those that rest in discretion. (Holmes vs. Holmes,
26 Vt., 536.) In Francis vs. Lathrope, 2 Tyler, 372, the claimant was allowed, on terms, to file a declaration in the country
court, he having omitted to file one in the probate court as required by statute. It was within the jurisdiction of the probate
court to have allowed this amendment, and, as the county court had all the jurisdiction of the probate court in this behalf, it
also had power to allow the amendment.

However this may be, in this jurisdiction there is a rule governing the question raised in this assignment of error, namely, section 776
of the Code of Civil Procedure, as construed in the cases of Zaragoza vs. Estate of De Viademonte (10 Phil., 23); Escuin vs. Escuin (11
Phil., 332); and In re Estate of Santos (18 Phil., 403). This section provides:

SEC. 776. Upon the lodging of such appeal; with the clerk, the disputed claim shall stand for trial in the same manner as any
other action in the Court of First Instance, the creditor being deemed to be the plaintiff, and the estate the defendant, and
pleading as in other actions shall be filed.

Just as in ordinary actions in which the pleadings may be amended, so in the instant case, the original complaint for the same
amounts claimed before the committee was altered, increasing the amounts, and the amended complaint was approved by the
court and not objected to by the adverse party. The character of the action throughout is the same. The action before the committee
rested on the contention that as attorney-in-fact for the plaintiffs with respect to the partnership "Tren de Aguadas," the late
Benigno Goitia had received dividends upon their shares which he failed to turn over to them; the appeal to the Court of First
Instance is founded on the same contention. When the claim was filed with the committee, counsel for the plaintiffs merely made a
calculation of the amounts due, in view of the fact that he had not all the data from the plaintiffs, who live in Spain; but after filing
the complaint on appeal with the court of First Instance, he discovered that his clients were entitled to larger sums, and was
therefore compelled to change the amount of the claims.

Considering the distance that separated the plaintiffs from their attorney-in-fact, the deceased Benigno Goitia, and that the latter
failed to supply them with data from 1915 until his death in 1926, it is natural that they had to resort to calculating the amounts due
them from the "Tren de Aguadas." To deny them the right to amend their complaint in accordance with section 776, when they had
secured more definite information as to the amounts due them, would be an injustice, especially when it is taken into consideration
that this action arises from trust relations between the plaintiffs and the late Benigno Goitia as their attorney-in-fact.

The first error is therefore overruled.

The allegation found in the second assignment of error that the plaintiffs are not in reality interested parties in this case is
untenable. It does not appear from the bill of exceptions that the appellant demurred on the ground of misjoinder of parties, or
alleged such misjoinder in her answer. In accordance with section 93 of the Code of Civil Procedure, the appellant has waived the
right to raise any objection on the ground that the plaintiffs are not the real parties in interest, or that they are not the owners of the
stock in question. (Broce vs. Broce, 4 Phil., 611; and Ortiz vs. Aramburo, 8 Phil., 98) Furthermore it appears from Exhibits D, E, F, and
G, that the late Benigno Goitia recognized that those shares of the "Tren de Aguadas" really belonged to the plaintiffs. And above all,
Exhibit K-1, which is a copy of the balance sheet for May and June, 1926, taken from the books of the partnership, clearly shows that
Leonor Mendezona owned 180 shares, and Valentina Izaguirre, 72 shares. Therefore the appellant cannot now contend that the
plaintiffs are not the real interested parties.

In the third assignment of error it is argued that following section 676 of the Code of Civil Procedure, the court below had no power
to order the defendant to render an account of dividends supposed to have been received by her deceased husband. We are of
opinion that the order of the court enjoining the appellant to render an account of all the amounts collected by her aforesaid
husband Benigno Goitia as representative and attorney-in-fact of the plaintiffs, from 1915 until June, 1926, was made for the
purpose of giving her an opportunity of showing, if she could, just what amounts the deceased Goitia received on account of the
appellees' stock. There is no reversible error in this; for, as the complaint demanded the return of amounts alleged to have been
received by the deceased attorney-in-fact represented by the appellant, it was quite in order to determine whether such amounts
were really received or not.

The fourth assignment of error relates to Exhibits A and B, being the appellees' depositions made before the American consul at
Bilbao, Spain, in accordance with section 356 of the Code of Civil Procedure. Counsel for the appellant was notified of the taking of
these depositions, and he did not suggest any other interrogatory in addition to the questions of the committee. When these
depositions were read in court, the defendant objected to their admission, invoking section 383, No. 7, of the Code of Civil
Procedure. Her objection referred mainly to the following questions:

1. Did Mr. Benigno Goitia render you an account of your partnership in the "Tren de Aguadas?" — Yes, until the year 1914.

2. From the year 1915, did Mr. Benigno Goitia send you any report or money on account of profits upon your shares? — He
sent me nothing, nor did he answer, my letters.

3. did you ever ask him to send you a statement of your account — Yes, several times by letter, but I never received an
answer.

The first of these questions tends to show the relationship between the principals and their attorney-in-fact Benigno Goitia up to
1914. Supposing it was error to permit such a question, it would not be reversible error, for that very relationship is proved by
Exhibits C to F, and H to I. As to the other two questions, it is to be noted that the deponents deny having received from the
deceased Benigno Goitia any money on account of profits on their shares, since 1915. We are of opinion that the claimants' denial
that a certain fact occurred before the death of their attorney-in-fact Benigno Agoitia does not come within the legal prohibitions
(section 383, No. 7, Code of Civil Procedure). The law prohibits a witness directly interested in a claim against the estate of a
decedent from testifying upon a matter of fact which took place before the death of the deceased. The underlying principle of this
prohibition is to protect the intestate estate from fictitious claims. But this protection should not be treated as an absolute bar or
prohibition from the filing of just claims against the decedent's estate.

The facts in the case of Maxilom vs. Tabotabo (9 Phil., 390), differ from those in the case at bar. In that case, the plaintiff Maxilom
liquidated his accounts with the deceased Tabotabo during his lifetime, with the result that there was a balance in his favor and
against Tabotabo of P312.37, Mexican currency. The liquidation was signed by both Maxilom and Tabotabo. In spite of this, some
years later, or in 1906, Maxilom filed a claim against the estate of Tabotabo for P1,062.37, Mexican currency, alleging that P750
which included the 1899 liquidation had not really been received, and that therefore instead of P312.37, Mexican currency, that
liquidation should have shown a balance of P1,062.37 in favor of Maxilom. It is evident that in view of the prohibition of section 383,
paragraph 7, of the Code of Civil Procedure, Maxilom could not testify in his own behalf against Tabotabo's estate, so as to alter the
balance of the liquidation made by and between himself and the decedent. But in the case before us there has been no such
liquidation between the plaintiffs and the deceased Goitia. They testify, denying any such liquidation. To apply to them the rule that
"if death has sealed the lips of one of the parties, the law seals those of the other," would be to exclude all possibility of a claim
against the testamentary estate. We do not believe that this was the legislator's intention.

The plaintiffs-appellees did not testify to a fact which took place before their representative's death, but on the contrary denied that
it had taken place at all, i.e. they denied that a liquidation had been made or any money remitted on account of their shares in the
"Tren de Aguadas" which is the ground of their claim. It was incumbent upon the appellant to prove by proper evidence that the
affirmative proposition was true, either by bringing into court the books which the attorney-in-fact was in duty bound to keep, or by
introducing copies of the drafts kept by the banks which drew them, as was the decedents's usual practice according to Exhibit I, or
by other similar evidence.

The appellant admits having found a book of accounts kept by the decedent showing an item of P90 for the account of Leonor
Mendezona and another of P36 for the account of Valentina Izaguirre, which agrees with the statement of Ruperto Santos, who
succeeded Benigno Goitia in the administration of said partnership, to the effect that the deceased attorney-in-fact had collected the
amounts due the plaintiffs as dividends on their shares for the months of May and June, 1926, or P90 for Leonor Mendezona, and
P36 for Valentina Izaguirre, amounts which had not been remitted by the deceased to the plaintiffs.

Finally, the appellant complains that the trial court held by mere inference that Benigno Goitia received from the "Tren de Aguadas"
the amounts of P13,140 and P5,265 for Mendezona and Izaguirre, respectively, as dividends for the years from 1915 to 1926,
inclusive, and in holding again, by mere inference, that Benigno Goitia did not remit said sums to the plaintiffs.

It is a well established fact in the record that the plaintiffs had an interest or some shares in the partnership called "Tren de
Aguadas," Mendezona holding 180 shares, worth P18,000, and Izaguirre, 72 shares worth P7,200. By the testimony of Ruperto
Santos, former secretary of Benigno Goitia and his successor in the administration of that partnership, it appears that the deceased
Benigno Goitia had received the dividends due the appellees for the months of May and June, 1926. And according to Exhibit K-I, the
dividend for the months of May and June was P0.50 a share. And witness Ramon Salinas, a practising attorney and one of the
shareholders of the partnership "Tren de Aguadas," testified, from a notebook which he had, that he received from the "Tren de
Aguadas" the following ordinary dividends: P45 in 1915; P45 in 1916; P45 in 1917; P45 in 1918; P45 in 1919; P90 in 1920; P67.50 in
1921, and P45 each for 1922, 1923, 4924, 1925, and 1926. By way of extraordinary dividends, the witness testified that he received
P22.50 each year from 1915 to 1918 inclusive; P45 in 1919; P60 in 1920; P37.50 in 1921, 1922, 1923, and 1924; P15 in 1925; and
P22.50 in 1926. He further stated that he received P165 in 1918 as his share of the proceeds of the sale of the boat Santolan.
Summing up all these amounts, we find that the witness Ramon Salinas, from 1915 to 1925, received a total of P1,087.50.

It further appears that Ruperto Santos assured the court that the dividends for the period from 1915 to 1926 have been distributed
among the shareholders, and that the late Benigno Goitia received the dividends due on the shares pertaining to Leonor Mendezona
and Valentina Izaguirre, deducting them from the total distribution. In view of these data, the court below reached the conclusion,
on the basis of the dividends received by partner Ramon Salinas, that the attorney-in-fact Benigno Goitia received for the plaintiffs-
appellees, respectively, the amounts of P13,140 and P5.256, including the dividends for 1926, or P90 for Leonor Mendezona, and
P36 for Valentina Izaguirre.

As to the interest imposed in the judgment appealed from, it is sufficient to cite article 1724 of the Civil Code, which provides that an
agent shall be liable for interest upon any sums he may have applied to his own use, from the day on which he did so, and upon
those which he still owes, after the expiration of the agency, from the time of his default.

The judgment appealed form being in accordance with the merits of the case, we are of opinion, and so hold, that the same must be,
as it is hereby, affirmed, with costs against the appellant. So ordered.
G.R. No. L-31946             March 12, 1930

A. L. AMMEN TRANSPORTATION CO., petitioner-appellant, 

vs.
MARIA DE MARGALLO, objector-appellee.

L. D. Lockwood and C. de G. Alvear for appellant.

Gregorio C. Javier for appellee.

STATEMENT

September 23, 1926, Maria de Margallo applied for a certificate of public convenience to operate an autobus line for freight and
passengers, as a public carrier, between the towns of Legaspi and Manito of the Province of Albay. In her original application she
proposed an hourly service at terminal points between 6 a.m. and 6 p.m. November 3, 1926, she filed an amended application
providing for half hour service. October 7, 1926, the commission in the usual order set the application for hearing on November 3,
1926, and of which the applicant was ordered to serve notice on all competing operators and to make and file proof of service, and
was advised that "Failure to comply with any requirements provided in this order will be sufficient ground for an immediate
dismissal of this case." No copy of this order was ever served on any competing operator. Neither is there any proof of service. When
the case was called on November 3, 1926, the hearing was postponed for the simple reason that the road over which the license was
sought was in the form of a project only and was not constructed. August 10, 1927, the applicant filed a motion for a provisional
permit known in the record as Exhibit D, which was never granted. February 24, 1928, the commission again set down the original
application for hearing, this time on March 14, 1928, and this order provided that a copy of the notice of hearing should be served
on the A. L. Ammen Transportation Company, which appeared and claimed that it was duly licensed to operate an auto-truck service
between all principal points of the Provinces of Albay, Camarines Sur, and Sorsogon. That in Case No. 8859 it obtained a certificate of
public convenience from the commission to operate an auto-truck service between Legaspi and Banqueroha, which line lies within
and is a part of the proposed Legaspi-Manito line, for which the applicant here seeks a license; then follows the schedule of its
license, with the statement that "As soon as the road between Jomapon and Banquerohan is completed, the hours of departure
from Banquerohan shall be the same hours of departure from Jomapon, prescribed in this itinerary." That in case No. 11903, the
commission granted a certificate of public convenience to Felipe Lotivio to operate an auto-truck service between Legaspi and
Manito, providing for an hourly service between those points from 5 a.m. to 6 a.m. That for value and with the consent and approval
of the Public Service Commission, the Ammen Transportation Company Purchased and acquired all right which had been granted to
Lotivio. That the Ammen Transportation Company could not operate between Legaspi and Manito for the reason that the road was
not open to traffic. March 14, 1928, a hearing was had on the application of Maria de Margollo and the opposition of the Ammen
Transportation Company, and briefs were submitted, and on June 22, 1928, the district engineer of Albay filed his certificate showing
that the road in question was then opened to traffic as far as the barrio of Taysan. June 11, 1929, the commission granted the
petition of Maria de Margallo, of which the Ammen Transportation Company was notified on June 22, 1929, and on July 3, 1929,
filed a motion for a rehearing in which among other things it was stated that the Ammen Transportation Company has been
operating a half hour service over all that portion of the road which was opened to traffic from 5 a.m. to 8 p.m. since October, 1928.
The commission denied the petition for a rehearing on July 17, 1929, and on review the Ammen Transportation Company assigns the
following errors:

First assignment of error

That the Public Service Commission erred in granting a Certificate of Public Convenience to Maria de Margallo.

Second assignment of error

That the Public Service Commission erred in denying the motion of reconsideration.

JOHNS, J.:

As stated by the petitioner, no important questions of fact are involved.

It appears that the application of the Ammen Transportation Company for a certificate of public convenience was filed on February
10, 1926. That a hearing was had on February 16, 1927, and the decision granting the certificate was rendered on April 30, 1927.
That the original application of Maria de Margallo for the certificate was filed September 23, 1926, upon which a hearing was had
March 14, 1928, and the decision granting here certificate was rendered on June 11, 1929.

That in the Lotivio case, the application for the certificate was filed October 23, 1926, upon which a hearing was had January 12,
1927, and the decision granting the certificate was rendered on April 19, 1927. That is to say, that Lotivio was granted his certificate
more than two years before Maria de Margallo was granted her certificate. It also appears that the petition for the approval of the
sale which Lotivio made to the Ammen Transportation Company of his certificate was presented to the commission on March 29,
1927, and approved by it on April 19, 1927. It thus appears that the certificate of the Ammen Transportation Company was prior in
time, both as to the filing of the application and the granting of the certificate. That Maria de Margallo's application was filed one
month before the Lotivio's filing was made, but the decision granting the Lotivio certificate was rendered on April 19, 1927, and the
certificate was granted to Maria de Margallo on June 11, 1929.

The record is conclusive that after a hearing in case No. 8859, the commission granted the certificate of public convenience to the
Ammen Transportation Company to operate an auto-truck service between Legaspi and Banquerohan, which is over the same route
and about 40 percent of the distance from Legaspi to Manito, and there is no claim or pretense that any complaint or criticism was
made by the public of the service which it rendered between Legaspi and Banquerohan. In fact it appears from the record that the
Ammen Transportation Company on its own motion and to meet the growing demands of the public, applied to the commission for
a half hour schedule between those points. That is to say, it is an undisputed fact that the Ammen Transportation company made
the first application and was granted the first license, and for aught that appears in the records, it was rendering good and efficient
service without any complaint or criticism from the public, and that on its own motion and to make the service more efficient, it
applied for a half hour schedule, from which it must follow that as to Maria de Margallo, it was prior in both time and right between
Legaspi and Banquerohan, and that in all things and respects, the legal rights of the Ammen Transportation Company come within
the law laid down by this court in the cases of Batangas Transportation Co. vs. Orlanes (52 Phil., 455), and Javier vs. Orlanes (53 Phil.,
468); from which it must fallow that all of that portion of the decision of the commission which grants a certificate of public
convenience to Maria de Margallo to operate an autobus line between Legaspi and Banquerohan must be revoked, for the reason
that it is in conflict with those decisions, and for want of any evidence to sustain it, and that the application of the Ammen
Transportation Company for a half hour schedule between those points should be granted.

The record presents a very novel situation. The application of Maria de Margallo to operate between Legaspi and Manito was filed
on September 23, 1926, and that of Lotivio over the same route was filed on October 23, 1926, upon which a hearing was had
January 12, 1927, and a certificate was granted to him on April 19, 1927. But strange as it may seem, Maria de Margallo with a prior
application, for some unknown reason, was not notified and was not a party to that hearing. Yet it appears from the record of the
commission that her application over the same route was prior to that of Lotivio. For want of such notice, any decision rendered in
the Lotivio case was not legally binding on Maria de Margallo, and any rights which the Ammen Transportation Company acquired
from the purchase of the Lotivio certificate would be subject to any right which Maria de Margallo may have acquired by her prior
application to that of Lotivio. In addition to that, it appears that one member of the commission at a former hearing refused to grant
a certificate to Maria de Margallo, for the simple reason that the road was not then constructed, and that another member of the
commission granted a certificate to Lotivio over a road which was not then constructed. The application of Maria de Margallo being
prior to that of Lotivio, it is hard to conceive how she could be divested of her rights by the granting of the certificate by the
commission in the Lotivio case, of which she did not have any notice, and to which she was not a party, and, in particular, because
the hearing on her application was delayed and postponed by one commissioner, because the road was not then constructed, and
another commissioner granted Lotivio his certificate over a road which was not then constructed.

It may well be doubted whether the Public Service Commission should, or that it has any legal right to, grant a certificate of public
convenience over a proposed road which has not been constructed. The granting of such a certificate presupposes that it is granted
for the use and benefit and convenience of the travelling public, and if the route over which the certificate is granted is nothing more
than a proposed road, which has not been constructed, and hence cannot be used or travelled by the public, how then can it be
claimed or asserted that the certificate was granted for the convenience of the public? Be that as it may, it must be conceded that
the commission has the power to grant a certificate of public convenience for any portion of a proposed road when and as soon as
such portion to any given point is constructed and ready for use. It must also be conceded that everything else being equal, the
commission has more or less discretion in deciding as to whom the certificate shall issue, having in mind the ability and equipment
of the applicant to render the best and most efficient service to the public.

In the pending case based upon the undisputed facts, we hold that based upon its prior application and the services which it has
since rendered, the Ammen Transportation Company is both prior in time and right to operate between Legaspi and Banquerohan,
for which it should have a corresponding certificate. Its application was filed February 10, 1926, in which it was expressly stated that
"As soon as the road between Jomapon and Banquerohan is completed, the hours of departure from Banquerohan shall be the same
hours of departure from Jomapon, prescribed in this itinerary," and it further appears that since the granting of its certificate, it has
been rendering good and efficient service over the route as fast as soon as the road has been constructed.

As between Banquerohan and Manito or intervening points, the court is not disposed to define the legal rights of either party, for
the simple reason that the road between those points is nothing but a proposed road which has never been constructed, and which
for many years may not be constructed, to which we might add that any rights which Maria de Margallo may have acquired by virtue
of her prior filing to operate over the road between Banquerohan and Manito, when constructed or any portion of it, were not
divested by the granting of the certificate to Lotivio, to which she was not a party and of which she did not have any notice.

The decision of the commission is reversed, and based upon its original application, an exclusive certificate of public convenience
should be issued to the Ammen Transportation Company to operate between Legaspi and Banquerohan, so long as it shall render
good and efficient service and meet the reasonable demands of the public, but in so far as the legal rights of the parties are not
defined, and for the reasons stated, the court is not disposed to otherwise define the legal rights of either party for a certificate of
public convenience to operate between Banquerohan and Manito. Neither party to recover costs on this appeal. So ordered.
G.R. No. L-6622             July 31, 1957

Intestate Estate of the deceased MARCELO DE BORJA. CRISANTO DE BORJA, administrator-appellant, 

vs.
JUAN DE BORJA, ET AL., oppositors-appellees.

E. V. Filamor for appellant.

Juan de Borja for himself and co-appellees.

FELIX, J.:

The case. — Quintin, Francisco, Crisanta and Juliana, all surnamed de Borja, are legitimate children of Marcelo de Borja who, upon
his demise sometime in 1924 or 1925, left a considerable amount of property. Intestate proceedings must have followed, and the
pre-war records of the case either burned, lost or destroyed during the last war, because the record shows that in 1930 Quintin de
Borja was already the administrator of the Intestate Estate of Marcelo de Borja.

In the early part of 1938, Quintin de Borja died and Crisanto de Borja, son of Francisco de Borja, was appointed and took over as
administrator of the Estate. Francisco de Borja, on the other hand, assumed his duties as executor of the will of Quintin de Borja, but
upon petition of the heirs of said deceased on the ground that his interests were conflicting with that of his brother's estate he was
later required by the Court to resign as such executor and was succeeded by Rogelio Limaco, a son-in-law of Quintin de Borja.

It also appears that on February 16, 1940, at the hearing set for the approval of the statement of accounts of the late administrator
of the Intestate Estate of Marcelo de Borja, then being opposed by Francisco de Borja, the parties submitted an agreement, which
was approved by the Court (Exh. A). Said agreement, translated into English, reads as follows:

1. All the accounts submitted and those that are to be submitted corresponding to this year will be considered approved;

2. No heir shall claim anything of the harvests from the lands in Cainta that came from Exequiel Ampil, deceased, nor from
the land in Tabuatin, Nueva Ecija;

3. That the amounts of money taken by each heir shall be considered as deposited in conjunction with the other properties
of the intestate and shall form part of the mass without drawing any interest;

4. That it shall be understood as included in this mass the sum of twelve thousand pesos (P12,000) that the sisters Crisanta
and Juliana de Borja paid of their own money as part of the price the lands and three thousand pesos (P3,000) the price of
the machinery for irrigation;

5. The right, interests or participation that the deceased Quintin de Borja has or may have in Civil Case No. 6190 of the
Court of First Instance of Nueva Ecija, shall be likewise included in the total mass of the inheritance of the Intestate;

6. Not only the lands in Tabuatin but also those in Cainta coming from the now deceased Exequiel Ampil shall also from part
of the total mass of the inheritance of the Intestate of the late Marcelo de Borja;

7. Once the total of the inheritance of the intestate is made up as specified before in this Agreement, partition thereof will
be made as follows:

From the total mass shall be deducted in case or in kind, Twelve Thousand Pesos (P12,000) that shall be delivered to Da.
Juliana de Borja and Da. Crisanta de Borja in equal shares, and the rest shall be divided among the four heirs, i. e., Don
Francisco de Borja, the heirs of Quintin de Borja, Da. Juliana de Borja, and Da. Crisanta de Borja, in equal parts.
(TRANSLATION)

The Intestate remained under the administration of Crisanto de Borja until the then outbreak of the war. From then on and until the
termination of the war, there was a lull and state of inaction in Special proceeding No. 2414 of the Court of First Instance of Rizal,
Pasig branch (In the Matter of the Intestate Estate of Marcelo de Borja), until upon petition filed by Miguel B. Dayco, as
administrator of the estate of his deceased mother, Crisanta de Borja, who is one of heirs, for reconstitution of the records of this
case, the Court on December 11, 1945, ordered the reconstitution of the same, requiring the administrator to submit his report and
a copy of the project of partition.

On January 3, 1946, the administrator, Dr. Crisanto de Borja, filed his accounts for the period ranging from March 1 to December 22,
1945, which according to the heirs of Quintin de Borja were so inadequate and general that on February 28, 1946, they filed a
motion for specification. On April 30, 1946, they also filed their opposition to said statement of accounts alleging that the income
reported in said statement was very much less than the true and actual income of the estate and that the expenses appearing
therein were exaggerated and/or not actually incurred, and prayed that the statement of accounts submitted by the administrator
be disapproved.

The administrator later filed another report of his administration, dated August 9, 1949, corresponding to the period lapsed from
December 23, 1945, to July 31, 1949, showing a cash balance of P71.96, but with pending obligation amounting to P35,415.

On August 22, 1949, Juan de Borja and sisters, heirs of the deceased Quintin de Borja, filed their opposition to the statement of
accounts filed by the administrator on the ground that same was not detailed enough to enable the interested parties to verify the
same; that they cannot understand why the Intestate could suffer any loss considering that during the administration of the same by
Quintin de Borja, the Estate accumulated gains of more than P100,000 in the form of advances to the heirs as well as cash balance;
that they desired to examine the accounts of Dr. Crisanto de Borja to verify the loss and therefore prayed that the administrator be
ordered to deposit with the Clerk of Court all books, receipts, accounts and other papers pertaining to the Estate of Marcelo de
Borja. This motion was answered by the administrator contending that the Report referred to was already clear and enough, the
income as well as the expenditures being specified therein; that he had to spend for the repairs of the properties of the Estate
damaged during the Japanese occupation; that the allegation that during the administration of Quintin de Boria the Estate realized a
profit of P100,000 was not true, because instead of gain there was even a shortage in the funds although said administrator had
collected all his fees (honorarios) and commissions corresponding to the entire period of his incumbency; that the obligations
mentioned in said report will be liquidated before the termination of the proceedings in the same manner as it is done in any other
intestate case; that he was willing to submit all the receipts of the accounts for the examination of the interested parties before the
Clerk or before the Court itself; that this Intestate could be terminated, the project of partition having been allowed and confirmed
by the Supreme Court and that the Administrator was also desirous of terminating it definitely for the benefit of all the parties.

On September 14, 1949, the administrator filed another statement of accounts covering the period of from March 1, 1945, to July
31, 1949, which showed a cash balance of P71.95, with pending obligations in the sum of P35,810.

The heirs of Quintin de Borja, Juan de Borja and his sisters, registered their opposition said statement of accounts and prayed the
Court to disapprove the same and to appoint an account to go over the books of the administrator and to submit a report thereon as
soon as possible. The heir Juliana de Borja also formally offered her objection to the approval of the accounts submitted by the
administrator and prayed further that said administrator be required to submit a complete accounting of his administration of the
Estate from 1937 to 1949. On the other hand, Francisco de Borja and Miguel B. Dayco, as the only heir of the deceased Crisanta de
Borja, submitted to the Court an agreement to relieve the administrator from accounting for the period of the Japanese occupation;
that as to the accounting from 1937 to 1941, they affirmed their conformity with the agreement entered into by all the heirs
appearing in the Bill of Exceptions of Juliana de Borja; and they have no objection to the approval of the statement of accounts
submitted by the administrator covering of the years 1945 to 1949.

On December 6, 1949, the administrator, answered the opposition of the heir Juliana de Borja, alleging that the corresponding
statement of accounts for the years 1937, 1938, 1939, 1940 and 1941 were presented and approved by the Court before and during
the Japanese occupation, but the records of the same were destroyed in the Office of the Clerk of that Court during the liberation of
the province of Rizal, and his personal records were also lost during the Japanese occupation, when his house was burned; that
Judge Peña who was presiding over the Court in 1945 impliedly denied the petition of heirs to require him to render an accounting
for the period from 1942 to the early part of 1945, for the reason that whatever money obtained from the Estate during said period
could not be made the subject of any adjudication it having been declared fiat money and without value, and ordered that the
statement of accounts be presented only for the period starting from March 1, 1945. The administrator further stated that he was
anxious to terminate this administration but some of the heirs had not yet complied with the conditions imposed in the project of
partition which was approved by the Supreme Court; that in accordance with said partition agreement, Juliana de Borja must deliver
to the administrator all the jewelry, objects of value, utensils and other personal belongings of the deceased spouses Marcelo de
Borja and Tircila Quiogue, which said heir had kept and continued to retain in her possession; that the heirs of Quintin de Borja
should deliver to the administrator all the lands and a document transferring in favor of the Intestate the two parcels of land with a
total area of 71 hectares of cultivated land in Cabanatuan, Nueva Ecija which were in the possession of said heirs, together with the
house of Feliciana Mariano Vda. de Sarangaya, which were the objects of Civil Case No. 6190 mentioned in Paragraph 11 of the
project of partition; that as consequence of the said dispossession the heirs of Quintin de Borja must deliver to the administrator the
products of the 71 hectares of land in Cabanatuan, Nueva Ecija, and the rentals of the house of Feliciana Mariano or else render to
the Court an accounting of the products of these properties from the time they took possession of the same in 1937 to the present;
that there was a pending obligation amounting to P36,000 as of September 14, 1949, which the heirs should pay before the
properties adjudicated to them would be delivered. The Court, however, ordered the administrator on December 10, 1949, to show
and prove by evidence why he should not be accounts the proceeds of his administration from 1937.

Meantime, Juliana de Borja filed a Constancia denying possession of any jewelry belonging to the deceased spouses Marcelo de
Borja and Tarcilla Quiogue or any other personal belonging of said spouses, and signified her willingness to turn over to the
administrator the silver wares mentioned in Paragraph III of the project of partition, which were the only property in her care, on the
date that she would expect the delivery to her of her share in the inheritance from her deceased parents.

On July 6, 1950, Juan de Borja and his sisters Marcela, Saturnina, Eufracia, Jacoba and Olimpia, all surnamed de Borja, as heirs of
Quintin de Borja, filed a motion for the delivery to them of their inheritance in the estate, tendering to the administrator a
document ceding and transferring to the latter all the rights, interests and participation of Quintin de Borja in Civil Case No. 7190 of
the Court of First Instance of Nueva Ecija, pursuant to the provisions of the project of Partition, and expressing their willingness to
put up a bond if required to do so by the Court, and on July 18, 1950, the Court ordered the administrator to deliver to Marcela,
Juan, Saturniana, Eufracia, Jacoba and Olimpia, all surnamed de Borja, all the properties adjudicated to them in the Project of
Partition dated February 8, 1944, upon the latter's filing a bond in the sum of P10,000 conditioned upon the payment of such
obligation as may be ordered by the Court after a hearing on the controverted accounts of the administrator. The Court considered
the fact that the heirs had complied with the requirement imposed by the Project of Partition when they tendered the document
ceding and transferring the rights and interests of Quintin de Borja in the aforementioned lands and expressed the necessity of
terminating the proceedings as soon as practicable, observing that the Estate had been under administration for over twenty-five
years already. The Court, however, deferred action on the petition filed by the special administratrix of the Intestate Estate of Juliana
de Borja until after compliance with the conditions imposed by the project of partition. But on July 20, 1950, apparently before the
properties were delivered to the heirs, Francisco de Borja and Miguel B. Dayco filed a motion informing the Court that the two
parcels of land located in Cabanatuan, Nueva Ecija, produced some 21,300 cavans of palay, amounting to P213,000 at P10 per cavan,
which were enjoyed by some heirs; that the administrator Crisanto de Borja had not taken possession of the same for circumstances
beyond his control; and that there also existed the sum of P70,204 which the former administrator, Quintin de Borja, received from
properties that were redeemed, but which amount did not come into the hands of the present, administrator because according to
reliable information, same was delivered to the heir Juliana de Borja who deposited it in her name at the Philippine National Bank. It
was, therefore prayed that the administrator be required to exert the necessary effort to ascertain the identity of the person or
persons who were in possession of the same amount and of the value of the products of the lands in Mayapyap, Cabanatuan, Nueva
Ecija, and to recover the same for the Intestate Estate.

On July 28, 1950, the special administratrix of the estate of Juliana de Borja, then deceased, filed an answer to the motion of these
two heirs, denying the allegation that said heir any product of the lands mentioned from Quintin de Borja, and informed the Court
that the Mayapyap property had always been in the possession of Francisco de Borja himself and prayed the court that the
administrator be instructed to demand all the fruits and products of said property from Francisco de Borja.

On July 28, 1950, the heirs of Quintin de Borja also filed their opposition to the said motion of Francisco de Borja and Miguel B.
Dayco on the ground that the petition was superfluous because the present proceeding was only for the approval of the statement
of accounts filed by the administrator; that said motion was improper because it was asking the Court to order the administrator to
perform what he was duty bound to do; and that said heirs were already barred or stopped from raising that question in view of
their absolute ratification of and assent to the statement of accounts submitted by the administrator.

On August 16, 1950, by order of the Court, the properties adjudicated to Juliana de Borja in the project of Partition were finally
delivered to the estate of said heir upon the filing of a bond for P20,000. In that same order, the Court denied the administrator's
motion to reconsider the order of July 18, 1950, requiring him to deliver to the heirs of Quintin de Borja the properties
corresponding to them, on the ground that there existed no sufficient reason to disturb said order. It also ruled that as the petition
of Francisco de Borja and Miguel B. Dayco made mention of certain properties allegedly belonging to the Intestate, said petition
should properly be considered to gather with the final accounts of the administrator.

The administrator raised the matter by certiorari to this Tribunal, which was, docketed as G.R. No. L-4179, and on May 30, 1951, We
rendered decision affirming the order complained of, finding that the Juan de Borja and sisters have complied with the requirement
imposed in the Project of Partition upon the tender of the document of cession of rights and quit-claim executed by Marcela de
Borja, the administratrix of the Estate of Quintin de Borja, and holding that the reasons advanced by the administrator in opposing
the execution of the order of delivery were trivial.
On August 27, 1951, the administrator filed his amended statement of accounts covering the period from March 1, 1945, to July 31,
1949, which showed a cash balance of P36,660. An additional statement of accounts filed on August 31, 1961 for the period of from
August 1, 1949, to August 31, 1951, showed a cash balance of P5,851.17 and pending obligations in the amount of P6,165.03.

The heirs of Quintin de Borja again opposed the approval of the statements of accounts charging the administrator with having
failed to include the fruits which the estate should have accrued from 1941 to 1951 amounting to P479,429.70, but as the other
heirs seemed satisfied with the accounts presented by said administrator and as their group was only one of the 4 heirs of Intestate
Estate, they prayed that the administrator be held liable for only P119,932.42 which was 1/4 of the amount alleged to have been
omitted. On October 4, 1951, the administrator filed a reply to said opposition containing a counterclaim for moral damages against
all the heirs of Quintin de Borja in the sum of P30,000 which was admitted by the Court over the objection of the heirs of Quintin de
Borja that the said pleading was filed out of time.

The oppositors, the heirs of Quintin de Borja, then filed their answer to the counterclaim denying the charges therein, but later
served interrogatories on the administrator relative to the averments of said counterclaim. Upon receipt of the answer to said
interrogatories specifying the acts upon which the claim for moral damages was based, the oppositors filed an amended answer
contending that inasmuch as the acts, manifestations and pleadings referred to therein were admittedly committed and prepared by
their lawyer, Atty. Amador E. Gomez, same cannot be made the basis of a counterclaim, said lawyer not being a party to the action,
and furthermore, as the acts upon which the claim for moral damages were based had been committed prior to the effectivity of the
new Civil Code, the provisions of said Code on moral damages could not be invoked. On January 15, 1952, the administrator filed an
amended counterclaim including the counsel for the oppositors as defendant.

There followed a momentary respite in the proceedings until another judge was assigned to preside over said court to dispose of the
old case pending therein. On August 15, 1952, Judge Encarnacion issued an order denying admission to administrator's amended
counterclaim directed against the lawyer, Atty. Amador E. Gomez, holding that a lawyer, not being a party to the action, cannot be
made answerable for counterclaims. Another order was also issued on the same date dismissing the administrator's counterclaim for
moral damages against the heirs of Quintin de Borja and their counsel for the alleged defamatory acts, manifestation and
utterances, and stating that granting the same to be meritorious, yet it was a strictly private controversy between said heirs and the
administrator which would not in any way affect the interest of the Intestate, and, therefore, not proper in an intestate proceedings.
The Court stressed that to allow the ventilation of such personal controversies would further delay the proceedings in the case
which had already lagged for almost 30 years, a situation which the Court would not countenance.

Having disposed of these pending incidents which arose out of the principal issue, that is, the disputed statement of accounts
submitted by the administrator, the Court rendered judgment on September 5, 1952, ordering the administrator to distribute the
funds in his possession to the heirs as follows: P1,395.90 to the heirs of Quintin de Borja; P314.99 to Francisco de Borja; P314.99 to
the Estate of Juliana de Borja and P314.99 to Miguel B. Dayco, but as the latter still owed the intestate the sum of P900, said heirs
was ordered to pay instead the 3 others the sum of P146.05 each. After considering the testimonies of the witnesses presented by
both parties and the available records on hand, the Court found the administrator guilty of maladministration and sentenced
Crisanto de Borja to pay to the oppositors, the heirs of Quintin de Borja, the sum of P83,337.31, which was 1/4 of the amount which
the state lost, with legal interest from the date of the judgment. On the same day, the Court also issued an order requiring the
administrator to deliver to the Clerk of that Court PNB Certificate of Deposit No. 211649 for P978.50 which was issued in the name
of Quintin de Borja.

The administrator, Dr. Crisanto de Borja, gave notice to appeal from the lower Court's orders of August 15, 1952, the decision of
September 5, 1952, and the order of even date, but when the Record on Appeal was finally approved, the Court ordered the
exclusion of the appeal from the order of September 5, 1952, requiring the administrator to deposit the PNB Certificate of Deposit
No. 2114649 with the Clerk of Court, after the oppositors had shown that during the hearing of that incident, the parties agreed to
abide by whatever resolution the Court would make on the ownership of the funds covered by that deposit.

The issues. — Reducing the issues to bare essentials, the questions left for our determination are: (1) whether the counsel for a party
in a case may be included as a defendant in a counterclaim; (2) whether a claim for moral damages may be entertained in a
proceeding for the settlement of an estate; (3) what may be considered as acts of maladministration and whether an administrator,
as the one in the case at bar, may be held accountable for any loss or damage that the estate under his administration may incur by
reason of his negligence, bad faith or acts of maladministration; and (4) in the case at bar has the Intestate or any of the heirs
suffered any loss or damage by reason of the administrator's negligence, bad faith or maladministration? If so, what is the amount of
such loss or damage?

I. — Section 1, Rule 10, of the Rules of Court defines a counterclaim as:

 SECTION 1. Counterclaim Defined. — A counterclaim is any claim, whether for money or otherwise, which a party may have
against the opposing party. A counterclaim need not dismiss or defeat the recovery sought by the opposing party, but may
claim relief exceeding in amount or different in kind from that sought by the opposing party's claim.

It is an elementary rule of procedure that a counterclaim is a relief available to a party-defendant against the adverse party which
may or may not be independent from the main issue. There is no controversy in the case at bar, that the acts, manifestations and
actuations alleged to be defamatory and upon which the counterclaim was based were done or prepared by counsel for oppositors;
and the administrator contends that as the very oppositors manifested that whatever civil liability arising from acts, actuations,
pleadings and manifestations attributable to their lawyer is enforceable against said lawyer, the amended counterclaim was filed
against the latter not in his individual or personal capacity but as counsel for the oppositors. It is his stand, therefore, that the lower
erred in denying admission to said pleading. We differ from the view taken by the administrator. The appearance of a lawyer as
counsel for a party and his participation in a case as such counsel does not make him a party to the action. The fact that he
represents the interests of his client or that he acts in their behalf will not hold him liable for or make him entitled to any award that
the Court may adjudicate to the parties, other than his professional fees. The principle that a counterclaim cannot be filed against
persons who are acting in representation of another — such as trustees — in their individual capacities (Chambers vs. Cameron, 2
Fed. Rules Service, p. 155; 29 F. Supp. 742) could be applied with more force and effect in the case of a counsel whose participation
in the action is merely confined to the preparation of the defense of his client. Appellant, however, asserted that he filed the
counterclaim against said lawyer not in his individual capacity but as counsel for the heirs of Quintin de Borja. But as we have
already stated that the existence of a lawyer-client relationship does not make the former a party to the action, even this allegation
of appellant will not alter the result We have arrived at.

Granting that the lawyer really employed intemperate language in the course of the hearings or in the preparation of the pleadings
filed in connection with this case, the remedy against said counsel would be to have him cited for contempt of court or take other
administrative measures that may be proper in the case, but certainly not a counterclaim for moral damages.

II. — Special Proceedings No. 6414 of the Court of First Instance of Rizal (Pasig branch) was instituted for the purpose of settling the
Intestate Estate of Marcelo de Borja. In taking cognizance of the case, the Court was clothed with a limited jurisdiction which cannot
expand to collateral matters not arising out of or in any way related to the settlement and adjudication of the properties of the
deceased, for it is a settled rule that the jurisdiction of a probate court is limited and special (Guzman vs. Anog, 37 Phil. 361).
Although there is a tendency now to relax this rule and extend the jurisdiction of the probate court in respect to matters incidental
and collateral to the exercise of its recognized powers (14 Am. Jur. 251-252), this should be understood to comprehend only cases
related to those powers specifically allowed by the statutes. For it was even said that:

Probate proceedings are purely statutory and their functions limited to the control of the property upon the death of its
owner, and cannot extend to the adjudication of collateral questions (Woesmes, The American Law of Administration, Vol.
I, p. 514, 662-663).

It was in the acknowledgment of its limited jurisdiction that the lower court dismissed the administrator's counterclaim for moral
damages against the oppositors, particularly against Marcela de Borja who allegedly uttered derogatory remarks intended to cast
dishonor to said administrator sometime in 1950 or 1951, his Honor's ground being that the court exercising limited jurisdiction
cannot entertain claims of this kind which should properly belong to a court general jurisdiction. From what ever angle it may be
looked at, a counterclaim for moral damages demanded by an administrator against the heirs for alleged utterances, pleadings and
actuations made in the course of the proceeding, is an extraneous matter in a testate or intestate proceedings. The injection into the
action of incidental questions entirely foreign in probate proceedings should not be encouraged for to do otherwise would run
counter to the clear intention of the law, for it was held that:

The speedy settlement of the estate of deceased persons for the benefit of the creditors and those entitled to the residue
by way of inheritance or legacy after the debts and expenses of administration have been paid, is the ruling spirit of our
probate law (Magabanua vs. Akel, 72 Phil., 567, 40 Off Gaz., 1871).

III. and IV. — This appeal arose from the opposition of the heirs of Quintin de Borja to the approval of the statements of accounts
rendered by the administrator of the Intestate Estate of Marcelo de Borja, on the ground that certain fruits which should have been
accrued to the estate were unaccounted for, which charge the administrator denied. After a protracted and extensive hearing on the
matter, the Court, finding the administrator, Dr. Crisanto de Borja, guilty of certain acts of maladministration, held him liable for the
payment to the oppositors, the heirs of Quintin de Borja, of 1/4 of the unreported income which the estate should have received.
The evidence presented in the court below bear out the following facts:
(a) The estate owns a 6-door building, Nos. 1541, 1543, 1545, 1547, 1549 and 1551 in Azcarraga Street, Manila, situated in front of
the Arranque market. Of this property, the administrator reported to have received for the estate the following rentals:

Annual
Total
Period of time monthly
rentals
rental
March to December, 1945 P3,085.00 P51.42
January to December, 1946 4,980.00 69.17
January to December, 1947 8,330.00 115.70
January to December, 1948 9,000.00 125.00
January to December, 1949 8,840.00 122.77
January to December, 1950     6,060.00 184.16
                Total P40,295.00

The oppositors, in disputing this record income, presented at the witness stand Lauro Aguila, a lawyer who occupied the basement
of Door No. 1541 and the whole of Door No. 1543 from 1945 to November 15, 1949, and who testified that he paid rentals on said
apartments as follows:

1945

Door No. 1541 (basement)

February P20.00 Door No. 1543

March 20.00 For 7 months at P300
April 60.00 a month P2,100.00
May-December   800.00
Total P900.00
1946
January-December P1,200.00 January-December P4,080.00
1947
January P100.00 January P380.00
February 100.00 February 380.00
March 180.00 March 1-15 190.00
April-December 1,140.00 March 16-December 4,085.00
P1,820.00 P5,035.00
1948
January-December P1,920.00 January-December P5,150.00
1949
January-November 15 P1,680.00 January-December P4,315.00

From the testimony of said witness, it appears that from 1945 to November 15,1949, he paid a total of P28,200 for the lease of Door
No. 1543 and the basement of Door No. 1541. These figures were not controverted or disputed by the administrator but claim that
said tenant subleased the apartments occupied by Pedro Enriquez and Soledad Sodora and paid the said rentals, not to the
administrator, but to said Enriquez. The transcript of the testimony of this witness really bolster this contention — that Lauro Aguila
talked with said Pedro Enriquez when he leased the aforementioned apartments and admitted paying the rentals to the latter and
not to the administrator. It is interesting to note that Pedro Enriquez is the same person who appeared to be the administrator's
collector, duly authorized to receive the rentals from this Azcarraga property and for which services, said Enriquez received 5 per
cent of the amount he might be able to collect as commission. If we are to believe appellant's contention, aside from the
commission that Pedro Enriquez received he also sublet the apartments he was occupying at a very much higher rate than that he
actually paid the estate without the knowledge of the administrator or with his approval. As the administrator also seemed to
possess that peculiar habit of giving little importance to bookkeeping methods, for he never kept a ledger or book of entry for
amounts received for the estate, We find no record of the rentals the lessees of the other doors were paying. It was, however,
brought about at the hearing that the 6 doors of this building are of the same sizes and construction and the lower Court based its
computation of the amount this property should have earned for the estate on the rental paid by Atty. Aguila for the 1 1/2 doors
that he occupied. We see no excuse why the administrator could not have taken cognizance of these rates and received the same for
the benefit of the estate he was administering, considering the fact that he used to make trips to Manila usually once a month and
for which he charged to the estate P8 as transportation expenses for every trip.

Basing on the rentals paid by Atty. Aguila for 1 1/2 doors, the estate received P112,800 from February 1, 1945, to November 15,
1949, for the 6 doors, but the lower Court held him accountable not only for the sum of P34,235 reported for the period ranging
from March 1, 1945, to December 31, 1949, but also for a deficit of P90,525 or a total of P124,760. The record shows, however that
the upper floor of Door No. 1549 was vacant in September, 1949, and as Atty. Aguila used to pay P390 a month for the use of an
entire apartment from September to November, 1949, and he also paid P160 for the use of the basement of an apartment (Door No.
1541), the use, therefore, of said upper floor would cost P230 which should be deducted, even if the computation of the lower Court
would have to be followed.

There being no proper evidence to show that the administrator collected more rentals than those reported by him, except in the
instance already mentioned, We are reluctant to bold him accountable in the amount for which he was held liable by the lower
Court, and We think that under the circumstances it would be more just to add to the sum reported by the administrator as received
by him as rents for 1945-1949 only, the difference between the sum reported as paid by Atty. Aguila and the sum actually paid by
the latter as rents of 1 1/2 of the apartments during the said period, or P25,457.09 1/4 of which is P6,364.27 which shall be paid to
the oppositors.

The record also shows that in July, 1950, the administrator delivered to the other heirs Doors Nos. 1545, 1547, 1549 and 1551
although Doors Nos. 1541 and 1543 adjudicated to the oppositors remained under his administration. For the period from January
to June, 1950, that the entire property was still administered by him, the administrator reported to have received for the 2
oppositors' apartments for said period of six months at P168.33 a month, the sum of P1,010 which belongs to the oppositors and
should be taken from the amount reported by the administrator.

The lower Court computed at P40 a month the pre-war rental admittedly received for every apartment, the income that said
property would have earned from 1941 to 1944, or a total of P11,520, but as We have to exclude the period covered by the
Japanese occupation, the estate should receive only P2,880 1/4 of which P720 the administrator should pay to the oppositors for the
year 1941.

(b) The Intestate estate also owned a parcel of land in Mayapyap, Nueva Ecija, with an area of 71 hectares, 95 ares and 4 centares,
acquired by Quintin de Borja the spouses Cornelio Sarangaya and Feliciana Mariano in Civil Case NO. 6190 of the Court of First
Instance of said province, In virtue of the agreement entered into by the heirs, this property was turned over by the estate of
Quintin de Borja to the intestate and formed part of the general mass of said estate. The report of the administrator failed to
disclose any return from this property alleging that he had not taken possession of the same. He does not deny however that he
knew of the existence of this land but claimed that when he demanded the delivery of the Certificate of Title covering this property,
Rogelio Limaco, then administrator of the estate of Quintin de Borja, refused to surrender the same and he did not take any further
action to recover the same.

To counteract the insinuation that the Estate of Quintin de Borja was in possession of this property from 1940 to 1950, the
oppositors presented several witnesses, among them was an old man, Narciso Punzal, who testified that he knew both Quintin and
Francisco de Borja; that before the war or sometime in 1937, the former administrator of the Intestate, Quintin de Borja, offered
him the position of overseer (encargado) of this land but he was notable to assume the same due to the death of said administrator;
that on July 7, 1951, herein appellant invited him to go to his house in Pateros, Rizal, and while in said house, he was instructed by
appellant to testify in court next day that he was the overseer of the Mayapyap property for Quintin de Borja from 1937-1944,
delivering the yearly proceeds of 1,000 cavanes of Palay to Rogelio Limaco; that he did not need to be afraid because both Quintin
de Borja and Rogelio Limaco were already dead. But as he knew that the facts on which he was to testify were false, he went instead
to the house of one of the daughters of Quintin de Borja, who, together with her brother, Atty. Juan de Borja, accompanied him to
the house of the counsel for said oppositors before whom his sworn declaration was taken (Exh. 3).

Other witnesses, i.e., Isidro Benuya, Federico Cojo, Emilio de la Cruz and Ernesto Mangulabnan, testified that they were some of the
tenants of the Mayapyap property; that they were paying their shares to the overseers of Francisco de Borja and sometimes to his
wife, which the administrator was not able to contradict, and the lower Court found no reason why the administrator would fail to
take possession of this property considering that this was even the subject of the agreement of February 16, 1940, executed by the
heirs of the Intestate.

The lower Court, giving due credence to the testimonies of the witnesses for the oppositors, computed the loss the estate suffered
in the form of unreported income from the rice lands for 10 years at P67,000 (6,700 a year)and the amount of P4,000 from the
remaining portion of the land not devoted to rice cultivation which was being leased at P20 per hectare. Consequently, the Court
held the administrator liable to appellees in the sum of P17,750 which is 1/4 of the total amount which should have accrued to the
estate for this item.

But if We exclude the 3 years of occupation, the income for 7 years would be P46,900 for the ricelands and P2,800 (at P400 a year)
for the remaining portion not developed to rice cultivation or a total of P48,700, 1/4 of which is P12,175 which We hold the
administrator liable to the oppositors.

(c) The Hacienda Jalajala located in said town of Rizal, was divided into 3 parts: the Punta section belonged to Marcelo de Borja, the
Bagombong pertained to Bernardo de Borja and Francisco de Borja got the Jalajala proper. For the purpose of this case, we will just
deal with that part called Junta. This property has an area of 1,345, hectares, 29 ares and 2 centares (Exh. 36) of which, according to
the surveyor who measured the same, 200 hectares were of cultivated rice fields and 100 hectares dedicated to the planting of
upland rice. It has also timberland and forest which produce considerable amount of trees and firewoods. From the said property
which has an assessed value of P115,000 and for which the estates pay real estate tax of P1,500 annually, the administrator reported
the following:

Expenditure
(not including
administration's
Year Income fees
1945........... P625.00 P1,310.42
1946............. 1,800.00 3,471.00
1947............. 2,550.00 2,912.91
1948............. 1,828.00 3,311.88
1949............. 3,204.50 4,792.09
1950............. 2,082.00 2,940.91
P12,089.50 P18,739.21

This statement was assailed by the oppositors and to substantiate their charge that the administrator did not file the true income of
the property, they presented several witnesses who testified that there were about 200 tenants working therein; that these tenants
paid to Crisanto de Borja rentals at the rate of 6 cavanes of palay per hectare; that in the years of 1943 and 1944, the Japanese were
the ones who collected their rentals, and that the estate could have received no less than 1,000 cavanes of palay yearly. After the
administrator had presented witnesses to refute the facts previously testified to by the witnesses for the oppositors, the Court held
that the report of the administrator did not contain the real income of the property devoted to rice cultivation, which was fixed at
1,000 cavanes every year — for 1941, 1942, 1945, 1946, 1947, 1948, 1949 and 1950, or a total of 8,000 cavanes valued at P73,000.
But as the administrator accounted for the sum of P11,155 collected from rice harvests and if to this amount we add the sum of
P8,739.20 for expenses, this will make a total of P19,894.20, thus leaving a deficit of P53,105.80, ¼ of which will be P13,276.45 which
the administrator is held liable to pay the heirs of Quintin de Borja.

It was also proved during the hearing that the forest land of this property yields considerable amount of marketable firewoods.
Taking into consideration the testimonies of witnesses for both parties, the Court arrived at the conclusion that the administrator
sold to Gregorio Santos firewoods worth P600 in 1941, P3,500 in 1945 and P4,200 in 1946 or a total of P8,300. As the report
included only the amount of P625, there was a balance of P7,675 in favor of the estate. The oppositors were not able to present any
proof of sales made after these years, if there were any and the administrator was held accountable to the oppositors for only
P1,918.75.

(d) The estate also, owned ricefields in Cainta, Rizal, with a total area of 22 hectares, 76 ares and 66 centares. Of this particular item,
the administrator reported an income of P12,104 from 1945 to 1951. The oppositors protested against this report and presented
witnesses to disprove the same.
Basilio Javier worked as a tenant in the land of Juliana de Borja which is near the land belonging to the Intestate, the 2 properties
being separated only by a river. As tenant of Juliana de Borja, he knew the tenants working on the property and also knows that
both lands are of the same class, and that an area accommodating one cavan of seedlings yields at most 100 cavanes and 60 cavanes
at the least. The administrator failed to overcome this testimony. The lower Court considering the facts testified to by this witness
made a finding that the property belonging to this Intestate was actually occupied by several persons accommodating 13 ½ cavanes
of seedlings; that as for every cavan of seedlings, the land produces 60 cavanes of palay, the whole area under cultivation would
have yielded 810 cavanes a year and under the 50-50 sharing system (which was testified by witness Javier), the estate would have
received no less than 405 cavanes every year. Now, for the period of 7 years — from 1941 to 1950, excluding the 3 years of war —
the corresponding earning of the estate should be 2,835 cavanes, out of which the 405 cavanes from the harvest of 1941 is valued at
P1,215 and the rest 2,430 cavanes at P10 is valued at P24,300, or all in all P25,515. If from this amount the reported income of
P12,104 is deducted, there will be a balance of P13,411.10 1/4 of which or P3,352.75 the administrator is held liable to pay to the
oppositors.

(e) The records show that the administrator paid surcharges and penalties with a total of P988.75 for his failure to pay on time the
taxes imposed on the properties under his administration. He advanced the reason that he lagged in the payment of those tax
obligations because of lack of cash balance for the estate. The oppositors, however, presented evidence that on October 29, 1939,
the administrator received from Juliana de Borja the sum of P20,475.17 together with certain papers pertaining to the intestate
(Exh. 4),aside from the checks in the name of Quintin de Borja. Likewise, for his failure to pay the taxes on the building at Azcarraga
for 1947, 1948 and 1949, said property was sold at public auction and the administrator had to redeem the same at P3,295.48,
although the amount that should have been paid was only P2,917.26. The estate therefore suffered a loss ofP378.22. Attributing
these surcharges and penalties to the negligence of the administrator, the lower Court adjudged him liable to pay the oppositors ¼
of P1,366.97, the total loss suffered by the Intestate, or P341.74.

(f) Sometime in 1942, a big fire razed numerous houses in Pateros, Rizal, including that of Dr. Crisanto de Borja. Thereafter, he
claimed that among the properties burned therein was his safe containing P15,000 belonging to the estate under his administration.
The administrator contended that this loss was already proved to the satisfaction of the Court who, approved the same by order of
January 8, 1943, purportedly issued by Judge Servillano Platon(Exh. B). The oppositors contested the genuineness of this order and
presented on April 21, 1950, an expert witness who conducted several tests to determine the probable age of the questioned
document, and arrived at the conclusion that the questioned ink writing "(Fdo)" appearing at the bottom of Exhibit B cannot be
more than 4 years old (Exh. 39). However, another expert witness presented by the administrator contradicted this finding and
testified that this conclusion arrived at by expert witness Mr. Pedro Manzañares was not supported by authorities and was merely
the result of his own theory, as there was no method yet discovered that would determine the age of a document, for every
document has its own reaction to different chemicals used in the tests. There is, however, another fact that called the attention of
the lower Court: the administrator testified that the money and other papers delivered by Juliana de Borja to him on October 29,
1939, were saved from said fire. The administrator justified the existence of these valuables by asserting that these properties were
locked by Juliana de Borja in her drawer in the "casa solariega" in Pateros and hence was not in his safe when his house, together
with the safe, was burned. This line of reasoning is really subject to doubt and the lower Court opined, that it runs counter to the
ordinary course of human behaviour for an administrator to leave in the drawer of the "aparador" of Juliana de Borja the money and
other documents belonging to the estate under his administration, which delivery has receipted for, rather than to keep it in his safe
together with the alleged P15,000 also belonging to the Intestate. The subsequent orders of Judge Platon also put the defense of
appellant to bad light, for on February 6, 1943, the Court required Crisanto de Borja to appear before the Court of examination of
the other heirs in connection with the reported loss, and on March 1, 1943, authorized the lawyers for the other parties to inspect
the safe allegedly burned (Exh. 35). It is inconceivable that Judge Platon would still order the inspection of the safe if there was really
an order approving the loss of those P15,000. We must not forget, in this connection, that the records of this case were burned and
that at the time of the hearing of this incident in 1951, Judge Platon was already dead. The lower Court also found no reason why
the administrator should keep in his such amount of money, for ordinary prudence would dictate that as an administration funds
that come into his possession in a fiduciary capacity should not be mingled with his personal funds and should have been deposited
in the Bank in the name of the intestate. The administrator was held responsible for this loss and ordered to pay ¼ thereof, or the
sum of P3,750.

(g) Unauthorized expenditures —

1. The report of the administrator contained certain sums amounting to P2,130 paid to and receipted by Juanita V. Jarencio the
administrator's wife, as his private secretary. In explaining this item, the administrator alleged that he needed her services to keep
receipts and records for him, and that he did not secure first the authorization from the court before making these disbursements
because it was merely a pure administrative function.
The keeping of receipts and retaining in his custody records connected with the management of the properties under administration
is a duty that properly belongs to the administrator, necessary to support the statement of accounts that he is obliged to submit to
the court for approval. If ever his wife took charge of the safekeeping of these receipts and for which she should be compensated,
the same should be taken from his fee. This disbursement was disallowed by the Court for being unauthorized and the administrator
required to pay the oppositors ¼, thereof or P532.50.

2. The salaries of Pedro Enriquez, as collector of the Azcarraga property; of Briccio Matienzo and Leoncio Perez, as encargados, and
of Vicente Panganiban and Herminigildo Macetas as forest-guards were found justified, although un authorized, as they appear to be
reasonable and necessary for the care and preservation of the Intestate.

3. The lower Court disallowed as unjustified and unnecessary the expenses for salaries paid to special policemen amounting to
P1,509. Appellant contended that he sought for the services of Macario Kamungol and others to act as special policemen during
harvest time because most of the workers tilting the Punta property were not natives of Jalajala but of the neighboring towns and
they were likely to run away with the harvest without giving the share of the estate if they were not policed. This kind of reasoning
did not appear to be convincing to the trial judge as the cause for such fear seemed to exist only in the imagination. Granting that
such kind of situation existed, the proper thing for the administrator to do would have been to secure the previous authorization
from the Court if he failed to secure the help of the local police. He should be held liable for this unauthorized expenditure and pay
the heirs of Quintin de Borja ¼ thereof or P377.25.

4. From the year 1942 when his house was burned, the administrator and his family took shelter at the house belonging to the
Intestate known as "casa solariega" which, in the Project of Partition was adjudicated to his father, Francisco de Borja. This property,
however, remained under his administration and for its repairs he spent from 1945-1950, P1465,14, duly receipted.

None of these repairs appear to be extraordinary for the receipts were for nipa, for carpenters and thatchers. Although it is true that
Rule 85, section 2 provides that:

SEC. 2. EXECUTOR OR ADMINISTRATOR TO KEEP BUILDINGS IN REPAIR. — An executor or administrator shall maintain in
tenant able repair the houses and other structures and fences belonging to the estate, and deliver the same in such repair
to the heirs or devisees when directed so to do by the court.

yet considering that during his occupancy of the said "casa solariega" he was not paying any rental at all, it is but reasonable that he
should take care of the expenses for the ordinary repair of said house. Appellant asserted that had he and his family not occupied
the same, they would have to pay someone to watch and take care of said house. But this will not excuse him from this
responsibility for the disbursements he made in connection with the aforementioned repairs because even if he stayed in another
house, he would have had to pay rentals or else take charge also of expenses for the repairs of his residence. The administrator
should be held liable to the oppositors in the amount of P366.28.

5. Appellant reported to have incurred expenses amounting to P6,304.75 for alleged repairs on the rice mill in Pateros, also
belonging to the Intestate. Of the disbursements made therein, the items corresponding, to Exhibits I, I-1, I-21, L-26, L-15, L-64 and
L-65, in the total sum of P570.70 were rejected by the lower court on the ground that they were all unsigned although some were
dated. The lower Court, however, made an oversight in including the sum of P150 covered by Exhibit L-26 which was duly signed by
Claudio Reyes because this does not refer to the repair of the rice-mill but for the roofing of the house and another building and
shall be allowed. Consequently, the sum of P570.70 shall be reduced to P420.70 which added to the sum of P3,059 representing
expenditures rejected as unauthorized to wit:

Exhibit L-59 ............. P500.00     Yek Wing

Exhibit L-60 ............. 616.00     Yek Wing
Exhibit L-61 ............. 600.00     Yek Wing
Exhibit L-62 ............. 840.00     Yek Wing
Exhibit L-63 ............. 180.00     Yek Wing
Exhibit Q-2 .............     323.00     scale "Howe"
P3,059.0
       Total ...................... 0

will give a total of P3,479 1/4 of which is P869.92 that belongs to the oppositors.
6. On the expenses for planting in the Cainta ricefields: — In his statement of accounts, appellant reported to have incurred a total
expense of P5,977 for the planting of the ricefields in Cainta, Rizal, from the agricultural year 1945-46 to 1950-51. It was proved that
the prevailing sharing system in this part of the country was on 50-50 basis. Appellant admitted that expenses for planting were
advanced by the estate and liquidated after each harvest. But the report, except for the agricultural year 1950 contained nothing of
the payments that the tenants should have made. If the total expenses for said planting amounted to P5,977, ½ thereof or P2,988.50
should have been paid by the tenants as their share of such expenditures, and as P965 was reported by the administrator as paid
back in 1950, there still remains a balance of P2,023.50 unaccounted for. For this shortage, the administrator is responsible and
should pay the oppositors ¼ thereof or P505.87.

7. On the transportation expenses of the administrator: — It appears that from the year 1945 to 1951, the administrator charged the
estate with a total of P5,170 for transportation expenses. The un receipted disbursements were correspondingly itemized, a typical
example of which is as follows:

1950
Gastos de viaje del administrador From Pateros
To Pasig ................ 50 x P4.00 = P200.00
To Manila ............... 50 x P10.00 = P500.00
To Cainta ................ 8 x P8.00 = P64.00
To Jalajala ............... 5 x P35.00 = P175.00
= P399.00

(Exhibit W-54).

From the report of the administrator, We are being made to believe that the Intestate estate is a losing proposition and
assuming arguendo  that this is true, that precarious financial condition which he, as administrator, should know, did not deter
Crisanto de Borja from charging to the depleted funds of the estate comparatively big amounts for his transportation expenses.
Appellant tried to justify these charges by contending that he used his own car in making those trips to Manila, Pasig and Cainta and
a launch in visiting the properties in Jalajala, and they were for the gasoline consumed. This rather unreasonable spending of the
estate's fund prompted the Court to observe that one will have to spend only P0.40 for transportation in making a trip from Pateros
to Manila and practically the same amount in going to Pasig. From his report for 1949 alone, appellant made a total of 97 trips to
these places or an average of one trip for every 3 1/2 days. Yet We must not forget that it was during this period that the
administrator failed or refused to take cognizance of the prevailing rentals of commercial places in Manila that caused certain loss to
the estate and for which he was accordingly held responsible. For the reason that the alleged disbursements made for
transportation expenses cannot be said to be economical, the lower Court held that the administrator should be held liable to the
oppositors for ¼ thereof or the sum of P1,292.50, though We think that this sum should still be reduced to P500.

8. Other expenses:

The administrator also ordered 40 booklets of printed contracts of lease in the name of the Hacienda Jalajala which cost P150. As the
said hacienda was divided into 3 parts one belonging to this Intestate and the other two parts to Francisco de Boria and Bernardo de
Borja, ordinarily the Intestate should only shoulder ¹/3 of the said expense, but as the tenants who testified during the hearing of the
matter testified that those printed forms were not being used, the Court adjudged the administrator personally responsible for this
amount. The records reveal, that this printed form was not utilized because the tenants refused to sign any, and We can presume
that when the administrator ordered for the printing of the same, he did not foresee this situation. As there is no showing that said
printed contracts were used by another and that they are still in the possession of the administrator which could be utilized anytime,
this disbursement may be allowed.

The report also contains a receipt of payment made to Mr. Severo Abellera in the sum of P375 for his transportation expenses as
one of the two commissioners who prepared the Project of Partition. The oppositors were able to prove that on May 24, 1941, the
Court authorized the administrator to withdraw from the funds of the intestate the sum of P300 to defray the transportation
expenses of the commissioners. The administrator, however, alleged that he used this amount for the payment of certain fees
necessary in connection with the approval of the proposed plan of the Azcarraga property which was then being processed in the
City Engineer's Office. From that testimony, it would seem that appellant could even go to the extent of disobeying the order of the
Court specifying for what purpose that amount should be appropriated and took upon himself the task of judging for what it will
serve best. Since he was not able to show or prove that the money intended and ordered by the Court to be paid for the
transportation expenses of the commissioners was spent for the benefit of the estate as claimed, the administrator should be held
responsible therefor and pay to the oppositors ¼ of P375 or the sum of P93.75.

The records reveal that for the service of summons to the defendants in Civil Case No. 84 of the Court of First Instance of Rizal, P104
was paid to the Provincial Sheriff of the same province (Exhibit H-7). However, an item for P40 appeared to have been paid to the
Chief of Police on Jalajala allegedly for the service of the same summons. Appellant claimed that as the defendants in said civil case
lived in remote barrios, the services of the Chief of Police as delegate or agent of the Provincial Sheriff were necessary. He forgot
probably the fact that the local chiefs of police are deputy sheriffs  ex-officio. The administrator was therefore ordered by the lower
Court to pay ¼ of said amount or P10 to the oppositors.

The administrator included in his Report the sum of P550 paid to Atty. Filamor for his professional services rendered for the defense
of the administrator in G.R. No. L-4179, which was decided against him, with costs. The lower Court disallowed this disbursement on
the ground that this Court provided that the costs of that litigation should not be borne by the estate but by the administrator
himself, personally.

Costs of a litigation in the Supreme Court taxed by the Clerk of Court, after a verified petition has been filed by the prevailing party,
shall be awarded to said party and will only include his fee and that of his attorney for their appearance which shall not be more
than P40; expenses for the printing and the copies of the record on appeal; all lawful charges imposed by the Clerk of Court; fees for
the taking of depositions and other expenses connected with the appearance of witnesses or for lawful fees of a commissioner (De
la Cruz, Philippine Supreme Court Practice, p. 70-71). If the costs provided for in that case, which this Court ordered to be chargeable
personally against the administrator are not recoverable by the latter, with more reason this item could not be charged against the
Intestate. Consequently, the administrator should pay the oppositors ¼ of the sum of P550 or P137.50.

(e) The lower Court in its decision required appellant to pay the oppositors the sum of P1,395 out of the funds still in the possession
of the administrator.

In the statement of accounts submitted by the administrator, there appeared a cash balance of P5,851.17 as of August 31, 1961.
From this amount, the sum of P1,002.96 representing the Certificate of Deposit No. 21619 and Check No. 57338, both of the
Philippine National Bank and in the name of Quintin de Borja, was deducted leaving a balance of P4,848. As Judge Zulueta ordered
the delivery to the oppositors of the amount of P1,890 in his order of October 8, 1951; the delivery of the amount of P810 to the
estate of Juliana de Borja in his order of October 23, 1951, and the sum of P932.32 to the same estate of Juliana de Borja by order of
the Court of February 29, 1952, or a total of P3,632.32 after deducting the same from the cash in the possession of the
administrator, there will only be a remainder of P134.98.

The Intestate is also the creditor of Miguel B. Dayco, heir and administrator of the estate of Crisanta de Borja, in the sum of P900
(Exhibits S and S-1). Adding this credit to the actual cash on hand, there will be a total of P1,034.98, ¼, of which or P258.74 properly
belongs to the oppositors. However, as there is only a residue of P134.98 in the hands of the administrator and dividing it among the
3 groups of heirs who are not indebted to the Intestate, each group will receive P44.99, and Miguel B. Dayco is under obligation to
reimburse P213.76 to each of them.

The lower Court ordered the administrator to deliver to the oppositors the amount of P1,395.90 and P314.99 each to Francisco de
Borja and the estate of Juliana de Borja, but as We have arrived at the computation that the three heirs not idebted to the Intestate
ought to receive P44.99 each out of the amount of P134.98, the oppositors are entitled to the sum of P1,080.91 — the amount
deducted from them as taxes but which the Court ordered to be returned to them — plus P44.99 or a total of P1,125.90. It
appearing however, that ina Joint Motion dated November 27, 1952, duly approved by the Court, the parties agreed to fix the
amount at P1,125.58, as the amount due and said heirs have already received this amount in satisfaction of this item, no other sum
can be chargeable against the administrator.

(f) The probate Court also ordered the administrator to render an accounting of his administration during the Japanese occupation
on the ground that although appellant maintained that whatever money he received during that period is worthless, same having
been declared without any value, yet during the early years of the war, or during 1942-43, the Philippine peso was still in circulation,
and articles of prime necessity as rice and firewood commanded high prices and were paid with jewels or other valuables.

But We must not forget that in his order of December 11, 1945, Judge Peña required the administrator to render an accounting of
his administration only from March 1, 1945, to December of the same year without ordering said administrator to include therein
the occupation period. Although the Court below mentioned the condition then prevailing during the war-years, We cannot simply
presume, in the absence of proof to that effect, that the administrator received such valuables or properties for the use or in
exchange of any asset or produce of the Intestate, and in view of the aforementioned order of Judge Peña, which We find no reason
to disturb, We see no practical reason for requiring appellant to account for those occupation years when everything was affected
by the abnormal conditions created by the war. The records of the Philippine National Bank show that there was a current account
jointly in the names of Crisanto de Borja and Juanita V. Jarencio, his wife, with a balance of P36,750.35 in Japanese military notes
and admittedly belonging to the Intestate and We do not believe that the oppositors or any of the heirs would be interested in an
accounting for the purpose of dividing or distributing this deposit.

(g) On the sum of P13,294 for administrator's fees:

It is not disputed that the administrator set aside for himself and collected from the estate the sum of P13,294 as his fees from 1945
to 1951 at the rate of P2,400 a year. There is no controversy as to the fact that this appropriated amount was taken without the
order or previous approval by the probate Court. Neither is there any doubt that the administration of the Intestate estate by
Crisanto de Borja is far from satisfactory.

Yet it is a fact that Crisanto de Borja exercised the functions of an administrator and is entitled also to a certain amount as
compensation for the work and services he has rendered as such. Now, considering the extent and size of the estate, the amount
involved and the nature of the properties under administration, the amount collected by the administrator for his compensation at
P200 a month is not unreasonable and should therefore be allowed.

It might be argued against this disbursement that the records are replete with instances of highly irregular practices of the
administrator, such as the pretended ignorance of the necessity of a book or ledger or at least a list of chronological and dated
entries of money or produce the Intestate acquired and the amount of disbursements made for the same properties; that admittedly
he did not have even a list of the names of the lessees to the properties under his administration, nor even a list of those who owed
back rentals, and although We certainly agree with the probate Court in finding appellant guilty of acts of maladministration,
specifically in mixing the funds of the estate under his administration with his personal funds instead of keeping a current account
for the Intestate in his capacity as administrator, We are of the opinion that despite these irregular practices for which he was held
already liable and made in some instances to reimburse the Intestate for amounts that were not properly accounted for, his claim
for compensation as administrator's fees shall be as they are hereby allowed.

Recapitulation. — Taking all the matters threshed herein together, the administrator is held liable to pay to the heirs of Quintin de
Borja the following:

Under Paragraphs III and IV:

(a) ................................................................. P7,084.2

.............. 7
(b) ................................................................. 12,175.0
.............. 0
(c) ................................................................. 16,113.9
.............. 5
(d) ................................................................. 3,352.75
..............
(e) ................................................................. 341.74
..............
(f) .................................................................. 3,750.00
..............
(g) 532.50
1 ...................................................................
..
    377.25
2 ...................................................................
..
    366.28
3 ...................................................................
..
     869.92
4 ...................................................................
..
    505.87
5 ...................................................................
..
    500.00
6 ...................................................................
..
      7-a
      93.75
b ..................................................................
      10.00
c ..................................................................
         
d ................................................................... 137.50
P46,210.
00

In view of the foregoing, the decision appealed from is modified by reducing the amount that the administrator was sentenced to
pay the oppositors to the sum of P46,210.78 (instead of P83,337.31), plus legal interests on this amount from the date of the
decision appealed from, which is hereby affirmed in all other respects. Without pronouncement as to costs. It is so ordered.
G.R. No. L-10099            January 27, 1916

TEOFILA DEL ROSARIO DE COSTA and BERNARDO COSTA, plaintiffs-appellants, 

vs.
LA BADENIA, a corporation, defendant-appellee.

Albert E. Somersille for appellant.

Williams, Ferrier and SyCip for appellee.

CARSON, J.:

The plaintiffs, Teofila del Rosario de Costa and her husband, Bernardino Costa, brought this action to recover from the defendant
corporation the sum of P1,795.25 a balance alleged to be due Teofila del Rosario de Costa as the agent of the defendant corporation
for services rendered and expenses incurred in the sale of its products. The defendant denied the claim and set up counterclaim for
P55.43. Judgment having been rendered in favor of the defendant, the record is now before us on plaintiff's bill of exceptions.

The plaintiffs are residents of Legaspi, Albay, and the defendant corporation is engaged in the manufacture and sale of tobacco
products with its head office in the city of Manila. The record shows that in the year 1911 the defendant corporation, a new concern,
inaugurated an extensive selling campaign for the purpose of introducing its products to the retail trade. Celestino Aragon, a general
agent of the defendant corporation, was in charged of this campaign in Albay, Sorsogon, and other provinces in the southern end of
Luzon. He established a central distributing agency or depot at Legaspi with the plaintiff, Teofila del Rosario de Costa, nominally in
charge, though her husband, Bernardino de Costa appears to have been the actual manager of the agency. The business relations
between the plaintiffs and the defendant extended from February 1, 1911, to March 24, 1912, and during this time no settlement of
their accounts was ever had. When Aragon, the general agent, came to Legaspi in 1911 he established his headquarters there and
took up his residence with the plaintiffs, using the lower part of their house as a store room or depository for large quantities of
cigarettes and cigars. He employed a number of persons as solicitors and paid their salaries; he paid the internal revenue fees
incident to the conduct of the business in Legaspi, and also the rent of the building in which he lived with the plaintiffs and which he
made use of as the general headquarters for the agency. The record shows that business amounting to more than P24,000
(wholesale) was done by the Legaspi agency from February 1, 1911, to March 24, 1912. All goods sent to Legaspi were charged by
the head office at Manila against the general agent, Aragon, while on the books kept by Aragon these goods were charged against
the plaintiffs, and as goods were withdrawn by himself, he credited the amount of the withdrawals to the account of the plaintiffs.
The business at Legaspi appears to have been that of a distributing agency actively in charge of the plaintiffs but over which the
general agent maintained a close supervision. Goods were withdrawn from the depository at Legaspi from time to time by the
general agent for shipment to other points; goods were likewise withdrawn by plaintiffs and shipped to neighboring towns without
any intervention on the part of the general agent. All accounts incident to the business were carried on the books of Aragon. The
plaintiffs do not appear to have kept a separate set of books. The account as carried on the books of Aragon, the general agent, was
between Teofila del Rosario de Costa and La Badenia, the defendant corporation. On March 24, 1912, the general agent had a
settlement with the plaintiffs and acknowledged over his signature that these books showed a balance in favor of the plaintiffs
amounting to P1,795.25.

Plaintiffs' Exhibit B is a tabulated statement taken from the books of account kept by Aragon and shows in detail the whole course of
the business at Legaspi from February 1, 1911, to March 24, 1912. In this statement goods received by the Legaspi agency from the
factory in Manila are charged against Teofila del Rosario de Costa, while credits are given on various items, such as, withdrawals of
goods from the depository at Legaspi shipped to other towns, remittances made to the head office in Manila, money paid over to
the general agent, advertising expenses, commissions on sales, salaries of employees, and other expenses incident to the conduct of
the business.

When this final settlement of accounts was had on the 24th of March, 1912, both Aragon and the plaintiff, Teofila del Rosario de
Costa, confirmed it as a true statement of the account. The defendant corporation however, refused to pay over to plaintiffs the
balance of P1,795.25, claiming that plaintiffs had been improperly allowed a credit of P1,850.68 which represented unpaid accounts
due the business in Legaspi for cigars and cigarettes sold by it. If these uncollected claims are charged to the defendant corporation a
balance is left in favor of plaintiffs amounting to P1,795.25; and if charged to plaintiffs there remains a balance in favor of the
defendant corporation amounting to P55.43.

It is the contention of the defendant corporation that the plaintiffs were simply merchants who purchased the goods at fixed
wholesale prices and sold them on their own account, and that they were never employed as their agents. On the other hand
plaintiffs contend that they were the agents of the defendant corporation; that they received commissions on the sales made by the
agency; and that they were authorized to extend a reasonable credit under the supervision of the general agent.

It is not clear from the record just what were the precise terms of the arrangement made by Aragon with the plaintiffs. It is not
denied however, that Aragon was acting as the general agent of the defendant corporation and that as such he was invested with
authority to inaugurate and carry out a selling campaign with a view of interesting the sale of the defendant's products in the
territory assigned to him. The record does not show what limitations, if any, were placed upon his powers to act for the corporation.
The general conduct of the selling campaign intrusted to him was approved and commended by the head office, and judging from
the amount of the sales the business appears to have been a very prosperous one for the corporation.

It appears further that the head office at Manila was fully informed of plaintiffs' relations with the general agent in extending the
sales of its products. Plaintiffs made direct remittances to the head office in Manila and these remittances were credited to the
account of the agency at Legaspi, and acknowledgment was made directly to the plaintiffs. Neither the head office nor Aragon
appear to have made any distinction between the business done by Aragon and that done by the plaintiffs. The purchases, sales and
remittances made by the plaintiffs do not seem to have been considered as those of an independent business concern, but rather as
a part of the work of the Legaspi agency under the control and supervision of Aragon. The fact that the defendant corporation
carried the Legaspi account in the name of the general agent, Aragon, and carried no account with the plaintiffs, would seem to
negative the contention that plaintiffs were simply merchants purchasing their goods in Manila at wholesale and selling them locally
on their own account.

The active management and participation of the plaintiffs in the conduct of the business at Legaspi are fully recognized in the
following letters written by the assistant manager of the defendant corporation to one of the plaintiffs.

EXHIBIT A.

MANILA, P.I., October 9, 1911.

Mr. BERNARDINO COSTA, Legaspi, Albay.

DEAR SIR: We have the pleasure of hereby acknowledging receipt of your two letters dated the 4th instant, in which we
found enclosed two drafts, to wit:

No. 528________________c/ Ang Siliong P200

No. 1240_______________c/ Smith, Bell & Co     980

1,180

Which sum of one thousand one hundred and eighty pesos we have duly credited on the account current of Mr. Celestino
Aragon.

We also acknowledge receipt of the bill of lading for the eight packages you have forwarded to us, but to date we have not
received said packages. As soon as we get then we will send you timely notice.

We are, yours very sincerely,

LA BADENIA, INC.,
__________ __________, Assistant Manager.

EXHIBIT B.
 MANILA, P. I., Sept. 19, 1911.

Mr. BERNARDINO COSTA, Legaspi, Albay.

DEAR SIR: We have the pleasure of hereby acknowledging receipt of your letter dated the 12th instant, of which we have
made note.

By the steamer Cebu we are sending, according to the attached invoice, 3 boxes of small cigars (cajas de tabaquitos) for the
agency in your charge.

We are, yours very sincerely,

LA BADENIA, INC.,
__________ __________, Assistant Manager.

Several other letters received by the plaintiffs from the defendant corporation were offered in evidence, but the two letters just
quoted are sufficient to show that the defendant was fully aware of plaintiffs' connection with the agency at Legaspi, and recognized
them as agents of the company, and clearly did not consider them as independent merchants buying solely on their own account,
but rather as subagents working under the supervision of the general agent, Aragon.

It seems equally clear that Aragon did not consider the plaintiffs as independent merchants operating on their own account, but
rather as agents cooperating with him and working under his supervision. This fact is clearly borne out by the nature of the entries
made in his books of account. A reference to that statement taken from the books of account shows that the plaintiffs were given
credit on various items, such as advertising expenses, the free distribution of cigars and cigarettes for advertising purposes, freight
and carriage charges on shipments to neighboring towns, and the like, and it does not seem at all likely that plaintiffs would have
been allowed credit on such items if they had been conducting the business solely on their own account.

Aragon extended credit to certain purchasers of cigars and cigarettes and the entries made by him on his books of account show that
he knew that the plaintiffs were also extending credit to some of the purchasers of the goods shipped from Legaspi. He approved the
very items now questioned when as general agent of the defendant corporation he signed the statement of account showing a
balance of P1,795.25 in favor of the plaintiffs. Aragon thereby admitted that he, at least, considered these outstanding claims as
properly chargeable against the defendant corporation, and unless the plaintiffs had been specifically authorized by him to extend
credit it seems certain that he would never have approved this balance in their favor.

It is contended that it is unreasonable that plaintiffs would have so large a balance in their favor, and that they are now merely
seeking to saddle upon the defendant corporation a lot of unpaid accounts. In view of the fact that plaintiffs are only seeking to
enforce the payment of a balance admitted by the general agent of the defendant corporation to be rightly due them, we fail to see
how it can be reasonably urged that plaintiffs are attempting to saddle these unpaid claims on the defendant. The general agent who
was in control of the Legaspi business, and who was fully conversant with all of its details, clearly recognized the right of the
plaintiffs to have credit on their account for the amount of these unpaid claims. This agent had employed the plaintiffs to assist him
in extending the sale of the defendant's products, and the defendant was well aware of this fact. Certainly the only reliable source of
information as to what plaintiffs' account with the defendant corporation was, is to be found in the books kept by the general agent,
Aragon. The defendant carried no account whatever with the plaintiffs, and having intrusted the entire management of the Legaspi
business to Aragon, it can not now come into court and repudiate the account confirmed by him, unless it can show that he acted
beyond the scope of his authority in making the arrangement he did with the plaintiffs. Aragon's powers as a selling agent appear to
have been very broad, and there is no evidence in the record to indicate that he acted beyond his powers in conducting the business
at Legaspi as he did; and there can be no doubt that plaintiffs had been authorized by him to extend credit on behalf of the agency.
There is no other reasonable explanation of the entries made by Aragon in his books of account, and his approval of the balance in
favor of the plaintiffs.

The lower court was of the opinion that the specific goods sold to the delinquent debtors, whose unpaid accounts form the basis of
this litigation, had already been paid for by the plaintiffs and that this was conclusive evidence that the plaintiffs were not acting as
the agents of the defendant corporation, and that in effect, the purpose of this suit was to recover back money already paid for the
goods purchased and sold by the plaintiffs. We find ourselves unable to agree with the conclusions of the trial court in this respect.
It appears that the plan under which the business was conducted was as follows: a shipment of cigars and cigarettes was made from
the Manila office and charged against the account of the general agent, Aragon; these goods were deposited in the store room at
Legaspi, and in the account carried by Aragon were charged against the plaintiffs. Withdrawals were made from the Legaspi stock by
Aragon and the plaintiffs, and credit was given the plaintiffs for the amount of the withdrawals by Aragon. Both Aragon and the
plaintiffs drew on the Legaspi stock for advertising purposes, such as the free distribution of cigars and cigarettes, and plaintiffs were
credited with the value of the goods so withdrawn. The stock on hand was being replenished from time to time by new shipments
received from Manila. The plaintiffs made remittances to Manila which were credited to the account of the Legaspi agency and this
account included not only the goods sold and withdrawn from stock by the plaintiffs, but also the goods withdrawn by Aragon. Thus
evidently these remittances were not in payment of any particular shipments, but were simply payments on account and covered
goods sold by Aragon as well as those sold by the plaintiffs. Remittances were doubtless made to Manila by Aragon and credited on
the agency account in the same manner. Under this method of conducting the business a balance for or against the plaintiffs might
well remain at any time, and such a balance would not be determined solely by the value of the goods withdrawn from stock by the
plaintiffs, and the amount of the remittances made by them, but would be determined by the total value of the stock of the Legaspi
agency charged against the plaintiffs and the amounts allowed them as credits; these credits would include not only the remittances
made to Manila, but also goods withdrawn by Aragon, and such other items as might constitute proper credits on the account. We
do not therefore think it at all unreasonable that a balance should have remained in favor of the plaintiffs when the settlement was
made, nor do we see that the existence of such a balance would necessarily indicate that the plaintiffs had overpaid their account
with the defendant corporation.

It is further contended that the goods were charged to plaintiffs at wholesale prices, and that they were to have as profits any
amounts received over and above the wholesale cost price on the goods sold by them, and it is urged that such an arrangement
indicates that they were independent merchants doing business on their own account. Even granting that such was the arrangement
made with the plaintiffs by Aragon, it does not necessarily follow that they were conducting an independent business on their own
account. As already stated, the record does not disclose what were the precise terms of arrangement made with the plaintiffs. The
record does show however, that in many instances the plaintiffs were allowed commissions on sales made by them, but whether or
not these were in addition to other profits allowed them the record does not show. Upon a careful examination of the whole record
we are satisfied that plaintiffs were not conducting an independent business but were the agents of the defendant corporation
operating under the supervision of the general agent, Aragon.

For the reasons set out we are of the opinion, and so hold, that plaintiffs are entitled to the reversal of the judgment appealed from
and to a judgment against La Badenia, the defendant corporation, for the sum of P1,795.25, with legal interest thereon from August
5, 1914, the date of filing the complaint, until paid, and under their costs in both instances.

Let judgment be entered in accordance herewith. So ordered.

G.R. No. 136433             December 6, 2006

ANTONIO B. BALTAZAR, petitioner, 
vs.
HONORABLE OMBUDSMAN, EULOGIO M. MARIANO, JOSE D. JIMENEZ, JR., TORIBIO E. ILAO, JR. and ERNESTO R.
SALENGA, respondents.

DECISION

VELASCO, JR., J.:

The Case

Ascribing grave abuse of discretion to respondent Ombudsman, this Petition for Review on Certiorari,1 under Rule 45 pursuant to
Section 27 of RA 6770,2 seeks to reverse and set aside the November 26, 1997 Order3 of the Office of the Special Prosecutor (OSP) in
OMB-1-94-3425 duly approved by then Ombudsman Aniano Desierto on August 21, 1998, which recommended the dismissal of the
Information4 in Criminal Case No. 23661 filed before the Sandiganbayan against respondents Pampanga Provincial Adjudicator
Toribio E. Ilao, Jr., Chief Legal Officer Eulogio M. Mariano and Legal Officer Jose D. Jimenez, Jr. (both of the DAR Legal Division in San
Fernando, Pampanga), and Ernesto R. Salenga. The petition likewise seeks to set aside the October 30, 1998 Memorandum5 of the
OSP duly approved by the Ombudsman on November 27, 1998 which denied petitioner's Motion for Reconsideration.6 Previously,
the filing of the Information against said respondents was authorized by the May 10, 1996 Resolution7 and October 3, 1996 Order8 of
the Ombudsman which found probable cause that they granted unwarranted benefits, advantage, and preference to respondent
Salenga in violation of Section 3 (e) of RA 3019.9

The Facts

Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan, Pampanga. Her Attorney-in-Fact Faustino R. Mercado
leased the fishpond for PhP 230,000.00 to Eduardo Lapid for a three (3)-year period, that is, from August 7, 1990 to August 7,
1993.10 Lessee Eduardo Lapid in turn sub-leased the fishpond to Rafael Lopez for PhP 50,000.00 during the last seven (7) months of
the original lease, that is, from January 10, 1993 to August 7, 1993.11 Respondent Ernesto Salenga was hired by Eduardo Lapid as
fishpond watchman (bante-encargado). In the sub-lease, Rafael Lopez rehired respondent Salenga.

Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis Lagman, sent his January 28, 1993 demand letter12 to
Rafael Lopez and Lourdes Lapid for unpaid salaries and non-payment of the 10% share in the harvest.

On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga informing the latter that for the last two (2) months
of the sub-lease, he had given the rights over the fishpond to Mario Palad and Ambit Perez for PhP 20,000.00.13 This prompted
respondent Salenga to file a Complaint14 before the Provincial Agrarian Reform Adjudication Board (PARAB), Region III, San
Fernando, Pampanga docketed as DARAB Case No. 552-P’93 entitled Ernesto R. Salenga v. Rafael L. Lopez and Lourdes L. Lapid for
Maintenance of Peaceful Possession, Collection of Sum of Money and Supervision of Harvest. The Complaint was signed by
respondent Jose D. Jimenez, Jr., Legal Officer of the Department of Agrarian Reform (DAR) Region III Office in San Fernando,
Pampanga, as counsel for respondent Salenga; whereas respondent Eulogio M. Mariano was the Chief Legal Officer of DAR Region
III. The case was assigned to respondent Toribio E. Ilao, Jr., Provincial Adjudicator of DARAB, Pampanga.

On May 10, 1993, respondent Salenga amended his complaint.15 The amendments included a prayer for the issuance of a temporary
restraining order (TRO) and preliminary injunction. However, before the prayer for the issuance of a TRO could be acted upon, on
June 16, 1993, respondent Salenga filed a Motion to Maintain Status Quo and to Issue Restraining Order16 which was set for hearing
on June 22, 1993. In the hearing, however, only respondent Salenga with his counsel appeared despite notice to the other parties.
Consequently, the ex-partepresentation of respondent Salenga’s evidence in support of the prayer for the issuance of a restraining
order was allowed, since the motion was unopposed, and on July 21, 1993, respondent Ilao, Jr. issued a TRO.17

Thereafter, respondent Salenga asked for supervision of the harvest, which the board sheriff did. Accordingly, defendants Lopez and
Lapid received their respective shares while respondent Salenga was given his share under protest. In the subsequent hearing for the
issuance of a preliminary injunction, again, only respondent Salenga appeared and presented his evidence for the issuance of the
writ.

Pending resolution of the case, Faustino Mercado, as Attorney-in-Fact of the fishpond owner Paciencia Regala, filed a motion to
intervene which was granted by respondent Ilao, Jr. through the November 15, 1993 Order. After the trial, respondent Ilao, Jr.
rendered a Decision on May 29, 1995 dismissing the Complaint for lack of merit; but losing plaintiff, respondent Salenga, appealed
the decision before the DARAB Appellate Board.

Complaint Before the Ombudsman

On November 24, 1994, pending resolution of the agrarian case, the instant case was instituted by petitioner Antonio Baltazar, an
alleged nephew of Faustino Mercado, through a Complaint-Affidavit18 against private respondents before the Office of the
Ombudsman which was docketed as OMB-1-94-3425 entitled Antonio B. Baltazar v. Eulogio Mariano, Jose Jimenez, Jr., Toribio Ilao,
Jr. and Ernesto Salenga for violation of RA 3019. Petitioner charged private respondents of conspiracy through the issuance of the
TRO in allowing respondent Salenga to retain possession of the fishpond, operate it, harvest the produce, and keep the sales under
the safekeeping of other private respondents. Moreover, petitioner maintains that respondent Ilao, Jr. had no jurisdiction to hear
and act on DARAB Case No. 552-P’93 filed by respondent Salenga as there was no tenancy relation between respondent Salenga and
Rafael L. Lopez, and thus, the complaint was dismissible on its face.

Through the December 14, 1994 Order,19 the Ombudsman required private respondents to file their counter-affidavits, affidavits of
their witnesses, and other controverting evidence. While the other respondents submitted their counter-affidavits, respondent Ilao,
Jr. instead filed his February 9, 1995 motion to dismiss, February 21, 1995 Reply, and March 24, 1995 Rejoinder.

Ombudsman’s Determination of Probable Cause

On May 10, 1996, the Ombudsman issued a Resolution20 finding cause to bring respondents to court, denying the motion to dismiss
of respondent Ilao, Jr., and recommending the filing of an Information for violation of Section 3 (e) of RA 3019. Subsequently,
respondent Ilao, Jr. filed his September 16, 1996 Motion for Reconsideration and/or Re-investigation21 which was denied through
the October 3, 1996 Order.22Consequently, the March 17, 1997 Information23 was filed against all the private respondents before the
Sandiganbayan which was docketed as Criminal Case No. 23661.

Before the graft court, respondent Ilao, Jr. filed his May 19, 1997 Motion for Reconsideration and/or Re-investigation which was
granted through the August 29, 1997 Order.24 On September 8, 1997, respondent Ilao, Jr. subsequently filed his Counter-
Affidavit25 with attachments while petitioner did not file any reply-affidavit despite notice to him. The OSP of the Ombudsman
conducted the re-investigation; and the result of the re-investigation was embodied in the assailed November 26, 1997
Order26 which recommended the dismissal of the complaint in OMB-1-94-3425 against all private respondents. Upon review, the
Ombudsman approved the OSP’s recommendation on August 21, 1998.

Petitioner’s Motion for Reconsideration27 was likewise denied by the OSP through the October 30, 1998 Memorandum28 which was
approved by the Ombudsman on November 27, 1998. Consequently, the trial prosecutor moved orally before the Sandiganbayan for
the dismissal of Criminal Case No. 23661 which was granted through the December 11, 1998 Order.29

Thus, the instant petition is before us.

The Issues

Petitioner raises two assignments of errors, to wit:

THE HONORABLE OMBUDSMAN ERRED IN GIVING DUE COURSE A MISPLACED COUNTER-AFFIDAVIT FILED AFTER THE
TERMINATION OF THE PRELIMINARY INVESTIGATION AND/OR THE CASE WAS ALREADY FILED BEFORE THE
SANDIGANBAYAN.
 ASSUMING OTHERWISE, THE HONORABLE OMBUDSMAN LIKEWISE ERRED IN REVERSING HIS OWN RESOLUTION WHERE IT
WAS RESOLVED THAT ACCUSED AS PROVINCIAL AGRARIAN ADJUDICATOR HAS NO JURISDICTION OVER A COMPLAINT
WHERE THERE EXIST [sic] NO TENANCY RELATIONSHIP CONSIDERING [sic] COMPLAINANT IS NOT A TENANT BUT A "BANTE-
ENCARGADO" OR WATCHMAN-OVERSEER HIRED FOR A SALARY OF P3,000.00 PER MONTH AS ALLEGED IN HIS OWN
COMPLAINT.30

Before delving into the errors raised by petitioner, we first address the preliminary procedural issue of the authority and locus
standi of petitioner to pursue the instant petition.

Preliminary Issue: Legal Standing

Locus standi is defined as "a right of appearance in a court of justice x x x on a given question."31 In private suits, standing is governed
by the "real-parties-in interest" rule found in Section 2, Rule 3 of the 1997 Rules of Civil Procedure which provides that "every action
must be prosecuted or defended in the name of the real party in interest." Accordingly, the "real-party-in interest" is "the party who
stands to be benefited or injured by the judgment in the suit or the party entitled to the avails of the suit."32 Succinctly put, the
plaintiffs’ standing is based on their own right to the relief sought.

The records show that petitioner is a non-lawyer appearing for himself and conducting litigation in person. Petitioner instituted the
instant case before the Ombudsman in his own name. In so far as the Complaint-Affidavit filed before the Office of the Ombudsman
is concerned, there is no question on his authority and legal standing. Indeed, the Office of the Ombudsman is mandated to
"investigate and prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or
agency, when such act or omission appears to be illegal, unjust, improper or inefficient (emphasis supplied)."33 The Ombudsman can
act on anonymous complaints and motu proprio inquire into alleged improper official acts or omissions from whatever source, e.g., a
newspaper.34 Thus, any complainant may be entertained by the Ombudsman for the latter to initiate an inquiry and investigation for
alleged irregularities.

However, filing the petition in person before this Court is another matter. The Rules allow a non-lawyer to conduct litigation in
person and appear for oneself only when he is a party to a legal controversy. Section 34 of Rule 138 pertinently provides, thus:

SEC. 34. By whom litigation conducted. – In the court of a justice of the peace a party may conduct his litigation in person,
with the aid of an agent or friend appointed by him for that purpose, or with the aid of an attorney. In any other court,
a party may conduct his litigation personally or by aid of an attorney, and hisappearance must be either personal or by a
duly authorized member of the bar (emphases supplied).

Petitioner has no legal standing

Is petitioner a party or a real party in interest to have the locus standi to pursue the instant petition? We answer in the negative.

While petitioner may be the complainant in OMB-1-94-3425, he is not a real party in interest. Section 2, Rule 3 of the 1997 Rules of
Civil Procedure stipulates, thus:

SEC. 2. Parties in interest.  – A real party in interest is the party who stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.

The same concept is applied in criminal and administrative cases.

In the case at bar which involves a criminal proceeding stemming from a civil (agrarian) case, it is clear that petitioner is not a real
party in interest. Except being the complainant, the records show that petitioner is a stranger to the agrarian case. It must be
recalled that the undisputed owner of the fishpond is Paciencia Regala, who intervened in DARAB Case No. 552-P’93 through her
Attorney-in-Fact Faustino Mercado in order to protect her interest. The motion for intervention filed by Faustino Mercado, as agent
of Paciencia Regala, was granted by respondent Provincial Adjudicator Ilao, Jr. through the November 15, 1993 Order in DARAB Case
No. 552-P’93.

Agency cannot be further delegated

Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit and presented a Special Power of
Attorney35 (SPA) from Faustino Mercado. However, such SPA is unavailing for petitioner. For one, petitioner’s principal, Faustino
Mercado, is an agent himself and as such cannot further delegate his agency to another. Otherwise put, an agent cannot delegate to
another the same agency. The legal maxim potestas delegata non delegare potest; a power once delegated cannot be re-delegated,
while applied primarily in political law to the exercise of legislative power, is a principle of agency.36 For another, a re-delegation of
the agency would be detrimental to the principal as the second agent has no privity of contract with the former. In the instant case,
petitioner has no privity of contract with Paciencia Regala, owner of the fishpond and principal of Faustino Mercado.

Moreover, while the Civil Code under Article 189237 allows the agent to appoint a substitute, such is not the situation in the instant
case. The SPA clearly delegates the agency to petitioner to pursue the case and not merely as a substitute. Besides, it is clear in the
aforecited Article that what is allowed is a substitute and not a delegation of the agency.

Clearly, petitioner is neither a real party in interest with regard to the agrarian case, nor is he a real party in interest in the criminal
proceedings conducted by the Ombudsman as elevated to the Sandiganbayan. He is not a party who will be benefited or injured by
the results of both cases.

Petitioner: a stranger and not an injured private complainant

Petitioner only surfaced in November 1994 as complainant before the Ombudsman. Aside from that, not being an agent of the
parties in the agrarian case, he has no locus standi to pursue this petition. He cannot be likened to an injured private complainant in
a criminal complaint who has direct interest in the outcome of the criminal case.

More so, we note that the petition is not pursued as a public suit with petitioner asserting a "public right" in assailing an allegedly
illegal official action, and doing so as a representative of the general public. He is pursuing the instant case as an agent of an
ineffective agency.

Petitioner has not shown entitlement to judicial protection

Even if we consider the instant petition as a public suit, where we may consider petitioner suing as a "stranger," or in the category of
a "citizen," or "taxpayer," still petitioner has not adequately shown that he is entitled to seek judicial protection. In other words,
petitioner has not made out a sufficient interest in the vindication of the public order and the securing of relief as a "citizen" or
"taxpayer"; more so when there is no showing that he was injured by the dismissal of the criminal complaint before the
Sandiganbayan.

Based on the foregoing discussion, petitioner indubitably does not have locus standi to pursue this action and the instant petition
must be forthwith dismissed on that score. Even granting arguendo that he has locus standi, nonetheless, petitioner fails to show
grave abuse of discretion of respondent Ombudsman to warrant a reversal of the assailed November 26, 1997 Order and the
October 30, 1998 Memorandum.

First Issue: Submission of Counter-Affidavit

The Sandiganbayan, not the Ombudsman, ordered re-investigation

On the substantive aspect, in the first assignment of error, petitioner imputes grave abuse of discretion on public respondent
Ombudsman for allowing respondent Ilao, Jr. to submit his Counter-Affidavit when the preliminary investigation was already
concluded and an Information filed with the Sandiganbayan which assumed jurisdiction over the criminal case. This contention is
utterly erroneous.

The facts clearly show that it was not the Ombudsman through the OSP who allowed respondent Ilao, Jr. to submit his Counter-
Affidavit. It was the Sandiganbayan who granted the prayed for re-investigation and ordered the OSP to conduct the re-investigation
through its August 29, 1997 Order, as follows:

Considering the manifestation of Prosecutor Cicero Jurado, Jr. that accused Toribio E. Ilao, Jr. was not able to file his
counter-affidavit in the preliminary investigation, there appears to be some basis for granting the motion of said accused
for reinvestigation.
 WHEREFORE, accused Toribio E. Ilao, Jr. may file his counter-affidavit, with documentary evidence attached, if any, with the
Office of the Special Prosecutor within then (10) days from today. Theprosecution is ordered to conduct a
reinvestigation within a period of thirty (30) days.38 (Emphases supplied.)

As it is, public respondent Ombudsman through the OSP did not exercise any discretion in allowing respondent Ilao, Jr. to submit his
Counter-Affidavit. The OSP simply followed the graft court’s directive to conduct the re-investigation after the Counter-Affidavit of
respondent Ilao, Jr. was filed. Indeed, petitioner did not contest nor question the August 29, 1997 Order of the graft court.
Moreover, petitioner did not file any reply-affidavit in the re-investigation despite notice.

Re-investigation upon sound discretion of graft court

Furthermore, neither can we fault the graft court in granting the prayed for re-investigation as it can readily be seen from the
antecedent facts that respondent Ilao, Jr. was not given the opportunity to file his Counter-Affidavit. Respondent Ilao, Jr. filed a
motion to dismiss with the Ombudsman but such was not resolved before the Resolution—finding cause to bring respondents to
trial—was issued. In fact, respondent Ilao, Jr.’s motion to dismiss was resolved only through the May 10, 1996 Resolution which
recommended the filing of an Information. Respondent Ilao, Jr.’s Motion for Reconsideration and/or Re-investigation was denied
and the Information was filed with the graft court.

Verily, courts are given wide latitude to accord the accused ample opportunity to present controverting evidence even before trial as
demanded by due process. Thus, we held in Villaflor v. Vivar that "[a] component part of due process in criminal justice, preliminary
investigation is a statutory and substantive right accorded to the accused before trial. To deny their claim to a preliminary
investigation would be to deprive them of the full measure of their right to due process."39

Second Issue: Agrarian Dispute

Anent the second assignment of error, petitioner contends that DARAB Case No. 552-P’93 is not an agrarian dispute and therefore
outside the jurisdiction of the DARAB. He maintains that respondent Salenga is not an agricultural tenant but a mere watchman of
the fishpond owned by Paciencia Regala. Moreover, petitioner further argues that Rafael Lopez and Lourdes Lapid, the respondents
in the DARAB case, are not the owners of the fishpond.

Nature of the case determined by allegations in the complaint

This argument is likewise bereft of merit. Indeed, as aptly pointed out by respondents and as borne out by the antecedent facts,
respondent Ilao, Jr. could not have acted otherwise. It is a settled rule that jurisdiction over the subject matter is determined by the
allegations of the complaint.40 The nature of an action is determined by the material averments in the complaint and the character
of the relief sought,41 not by the defenses asserted in the answer or motion to dismiss.42 Given that respondent Salenga’s complaint
and its attachment clearly spells out the jurisdictional allegations that he is an agricultural tenant in possession of the fishpond and is
about to be ejected from it, clearly, respondent Ilao, Jr. could not be faulted in assuming jurisdiction as said allegations characterize
an agricultural dispute. Besides, whatever defense asserted in an answer or motion to dismiss is not to be considered in resolving
the issue on jurisdiction as it cannot be made dependent upon the allegations of the defendant.

Issuance of TRO upon the sound discretion of hearing officer

As regards the issuance of the TRO, considering the proper assumption of jurisdiction by respondent Ilao, Jr., it can be readily culled
from the antecedent facts that his issuance of the TRO was a proper exercise of discretion. Firstly, the averments with evidence as to
the existence of the need for the issuance of the restraining order were manifest in respondent Salenga’s Motion to Maintain Status
Quo and to Issue Restraining Order,43 the attached Police Investigation Report,44 and Medical Certificate.45 Secondly, only respondent
Salenga attended the June 22, 1993 hearing despite notice to parties. Hence, Salenga’s motion was not only unopposed but his
evidence adduced ex-parte also adequately supported the issuance of the restraining order.

Premises considered, respondent Ilao, Jr. has correctly assumed jurisdiction and properly exercised his discretion in issuing the TRO
—as respondent Ilao, Jr. aptly maintained that giving due course to the complaint and issuing the TRO do not reflect the final
determination of the merits of the case. Indeed, after hearing the case, respondent Ilao, Jr. rendered a Decision on May 29, 1995
dismissing DARAB Case No. 552-P’93 for lack of merit.

Court will not review prosecutor’s determination of probable cause

Finally, we will not delve into the merits of the Ombudsman’s reversal of its initial finding of probable cause or cause to bring
respondents to trial. Firstly, petitioner has not shown that the Ombudsman committed grave abuse of discretion in rendering such
reversal. Secondly, it is clear from the records that the initial finding embodied in the May 10, 1996 Resolution was arrived at before
the filing of respondent Ilao, Jr.’s Counter-Affidavit. Thirdly, it is the responsibility of the public prosecutor, in this case the
Ombudsman, to uphold the law, to prosecute the guilty, and to protect the innocent. Lastly, the function of determining the
existence of probable cause is proper for the Ombudsman in this case and we will not tread on the realm of this executive function
to examine and assess evidence supplied by the parties, which is supposed to be exercised at the start of criminal proceedings.
In Perez v. Hagonoy Rural Bank, Inc.,46 as cited in Longos Rural Waterworks and Sanitation Association, Inc. v. Hon. Desierto,47 we had
occasion to rule that we cannot pass upon the sufficiency or insufficiency of evidence to determine the existence of probable
cause.48

WHEREFORE, the instant petition is DENIED for lack of merit, and the November 26, 1997 Order and the October 30, 1998
Memorandum of the Office of the Special Prosecutor in Criminal Case No. 23661 (OMB-1-94-3425) are hereby AFFIRMED IN TOTO,
with costs against petitioner.
G.R. No. 137162             January 24, 2007

CORAZON L. ESCUETA, assisted by her husband EDGAR ESCUETA, IGNACIO E. RUBIO, THE HEIRS OF LUZ R. BALOLOY, namely,
ALEJANDRINO R. BALOLOY and BAYANI R. BALOLOY, Petitioners, 
vs.
RUFINA LIM, Respondent.

DECISION

AZCUNA, J.:

This is an appeal by certiorari1 to annul and set aside the Decision and Resolution of the Court of Appeals (CA) dated October 26,
1998 and January 11, 1999, respectively, in CA-G.R. CV No. 48282, entitled "Rufina Lim v. Corazon L. Escueta, etc., et. al."

The facts2 appear as follows:

Respondent Rufina Lim filed an action to remove cloud on, or quiet title to, real property, with preliminary injunction and issuance of
[a hold-departure order] from the Philippines against Ignacio E. Rubio. Respondent amended her complaint to include specific
performance and damages.

In her amended complaint, respondent averred inter alia that she bought the hereditary shares (consisting of 10 lots) of Ignacio
Rubio [and] the heirs of Luz Baloloy, namely: Alejandrino, Bayani, and other co-heirs; that said vendors executed a contract of sale
dated April 10, 1990 in her favor; that Ignacio Rubio and the heirs of Luz Baloloy received [a down payment] or earnest money in the
amount of P102,169.86 and P450,000, respectively; that it was agreed in the contract of sale that the vendors would secure
certificates of title covering their respective hereditary shares; that the balance of the purchase price would be paid to each heir
upon presentation of their individual certificate[s] of [title]; that Ignacio Rubio refused to receive the other half of the down
payment which is P[100,000]; that Ignacio Rubio refused and still refuses to deliver to [respondent] the certificates of title covering
his share on the two lots; that with respect to the heirs of Luz Baloloy, they also refused and still refuse to perform the delivery of
the two certificates of title covering their share in the disputed lots; that respondent was and is ready and willing to pay Ignacio
Rubio and the heirs of Luz Baloloy upon presentation of their individual certificates of title, free from whatever lien and
encumbrance;

As to petitioner Corazon Escueta, in spite of her knowledge that the disputed lots have already been sold by Ignacio Rubio to
respondent, it is alleged that a simulated deed of sale involving said lots was effected by Ignacio Rubio in her favor; and that the
simulated deed of sale by Rubio to Escueta has raised doubts and clouds over respondent’s title.

In their separate amended answers, petitioners denied the material allegations of the complaint and alleged inter alia the following:

For the heirs of Luz Baloloy (Baloloys for brevity):

Respondent has no cause of action, because the subject contract of sale has no more force and effect as far as the Baloloys are
concerned, since they have withdrawn their offer to sell for the reason that respondent failed to pay the balance of the purchase
price as orally promised on or before May 1, 1990.

For petitioners Ignacio Rubio (Rubio for brevity) and Corazon Escueta (Escueta for brevity):

Respondent has no cause of action, because Rubio has not entered into a contract of sale with her; that he has appointed his
daughter Patricia Llamas to be his attorney-in-fact and not in favor of Virginia Rubio Laygo Lim (Lim for brevity) who was the one
who represented him in the sale of the disputed lots in favor of respondent; that theP100,000 respondent claimed he received as
down payment for the lots is a simple transaction by way of a loan with Lim.

The Baloloys failed to appear at the pre-trial. Upon motion of respondent, the trial court declared the Baloloys in default. They then
filed a motion to lift the order declaring them in default, which was denied by the trial court in an order dated November 27, 1991.
Consequently, respondent was allowed to adduce evidence ex parte. Thereafter, the trial court rendered a partial decision dated July
23, 1993 against the Baloloys, the dispositive portion of which reads as follows:
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of [respondent] and against [petitioners, heirs] of Luz R.
Balolo[y], namely: Alejandrino Baloloy and Bayani Baloloy. The [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to
immediately execute an [Absolute] Deed of Sale over their hereditary share in the properties covered by TCT No. 74392 and TCT No.
74394, after payment to them by [respondent] the amount of P[1,050,000] or consignation of said amount in Court. [For] failure of
[petitioners] Alejandrino Baloloy and Bayani Baloloy to execute the Absolute Deed of Sale over their hereditary share in the property
covered by TCT No. T-74392 and TCT No. T-74394 in favor of [respondent], the Clerk of Court is ordered to execute the necessary
Absolute Deed of Sale in behalf of the Baloloys in favor of [respondent,] with a consideration ofP[1,500,000]. Further[,] [petitioners]
Alejandrino Baloloy and Bayani Baloloy are ordered to jointly and severally pay [respondent] moral damages in the amount
of P[50,000] and P[20,000] for attorney’s fees. The adverse claim annotated at the back of TCT No. T-74392 and TCT No. T-74394[,]
insofar as the shares of Alejandrino Baloloy and Bayani Baloloy are concerned[,] [is] ordered cancelled.

With costs against [petitioners] Alejandrino Baloloy and Bayani Baloloy.

SO ORDERED.3

The Baloloys filed a petition for relief from judgment and order dated July 4, 1994 and supplemental petition dated July 7, 1994. This
was denied by the trial court in an order dated September 16, 1994. Hence, appeal to the Court of Appeals was taken challenging
the order denying the petition for relief.

Trial on the merits ensued between respondent and Rubio and Escueta. After trial, the trial court rendered its assailed Decision, as
follows:

IN VIEW OF THE FOREGOING, the complaint [and] amended complaint are dismissed against [petitioners] Corazon L. Escueta, Ignacio
E. Rubio[,] and the Register of Deeds. The counterclaim of [petitioners] [is] also dismissed. However, [petitioner] Ignacio E. Rubio is
ordered to return to the [respondent], Rufina Lim[,] the amount of P102,169.80[,] with interest at the rate of six percent (6%) per
annum from April 10, [1990] until the same is fully paid. Without pronouncement as to costs.

SO ORDERED.4

On appeal, the CA affirmed the trial court’s order and partial decision, but reversed the later decision. The dispositive portion of its
assailed Decision reads:

WHEREFORE, upon all the foregoing premises considered, this Court rules:

1. the appeal of the Baloloys from the Order denying the Petition for Relief from Judgment and Orders dated July 4, 1994
and Supplemental Petition dated July 7, 1994 is DISMISSED. The Order appealed from is AFFIRMED.

2. the Decision dismissing [respondent’s] complaint is REVERSED and SET ASIDE and a new one is entered. Accordingly,

a. the validity of the subject contract of sale in favor of [respondent] is upheld.

b. Rubio is directed to execute a Deed of Absolute Sale conditioned upon the payment of the balance of the
purchase price by [respondent] within 30 days from the receipt of the entry of judgment of this Decision.

c. the contracts of sale between Rubio and Escueta involving Rubio’s share in the disputed properties is declared
NULL and VOID.

d. Rubio and Escueta are ordered to pay jointly and severally the [respondent] the amount ofP[20,000] as moral
damages and P[20,000] as attorney’s fees.

3. the appeal of Rubio and Escueta on the denial of their counterclaim is DISMISSED.

SO ORDERED.5

Petitioners’ Motion for Reconsideration of the CA Decision was denied. Hence, this petition.
The issues are:

THE HONORABLE COURT OF APPEALS ERRED IN DENYING THE PETITION FOR RELIEF FROM JUDGMENT FILED BY THE BALOLOYS.

II

THE HONORABLE COURT OF APPEALS ERRED IN REINSTATING THE COMPLAINT AND IN AWARDING MORAL DAMAGES AND
ATTORNEY’S FEES IN FAVOR OF RESPONDENT RUFINA L. LIM CONSIDERING THAT:

A. IGNACIO E. RUBIO IS NOT BOUND BY THE CONTRACT OF SALE BETWEEN VIRGINIA LAYGO-LIM AND RUFINA LIM.

B. THE CONTRACT ENTERED INTO BETWEEN RUFINA LIM AND VIRGINIA LAYGO-LIM IS A CONTRACT TO SELL AND NOT A
CONTRACT OF SALE.

C. RUFINA LIM FAILED TO FAITHFULLY COMPLY WITH HER OBLIGATIONS UNDER THE CONTRACT TO SELL THEREBY
WARRANTING THE CANCELLATION THEREOF.

D. CORAZON L. ESCUETA ACTED IN UTMOST GOOD FAITH IN ENTERING INTO THE CONTRACT OF SALE WITH IGNACIO E.
RUBIO.

III

THE CONTRACT OF SALE EXECUTED BETWEEN IGNACIO E. RUBIO AND CORAZON L. ESCUETA IS VALID.

IV

THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS’ COUNTERCLAIMS.

Briefly, the issue is whether the contract of sale between petitioners and respondent is valid.

Petitioners argue, as follows:

First, the CA did not consider the circumstances surrounding petitioners’ failure to appear at the pre-trial and to file the petition for
relief on time.

As to the failure to appear at the pre-trial, there was fraud, accident and/or excusable neglect, because petitioner Bayani was in the
United States. There was no service of the notice of pre-trial or order. Neither did the former counsel of record inform him.
Consequently, the order declaring him in default is void, and all subsequent proceedings, orders, or decision are void.

Furthermore, petitioner Alejandrino was not clothed with a power of attorney to appear on behalf of Bayani at the pre-trial
conference.

Second, the sale by Virginia to respondent is not binding. Petitioner Rubio did not authorize Virginia to transact business in his behalf
pertaining to the property. The Special Power of Attorney was constituted in favor of Llamas, and the latter was not empowered to
designate a substitute attorney-in-fact. Llamas even disowned her signature appearing on the "Joint Special Power of Attorney,"
which constituted Virginia as her true and lawful attorney-in-fact in selling Rubio’s properties.

Dealing with an assumed agent, respondent should ascertain not only the fact of agency, but also the nature and extent of the
former’s authority. Besides, Virginia exceeded the authority for failing to comply with her obligations under the "Joint Special Power
of Attorney."

The amount encashed by Rubio represented not the down payment, but the payment of respondent’s debt. His acceptance and
encashment of the check was not a ratification of the contract of sale.
Third, the contract between respondent and Virginia is a contract to sell, not a contract of sale. The real character of the contract is
not the title given, but the intention of the parties. They intended to reserve ownership of the property to petitioners pending full
payment of the purchase price. Together with taxes and other fees due on the properties, these are conditions precedent for the
perfection of the sale. Even assuming that the contract is ambiguous, the same must be resolved against respondent, the party who
caused the same.

Fourth, Respondent failed to faithfully fulfill her part of the obligation. Thus, Rubio had the right to sell his properties to Escueta who
exercised due diligence in ascertaining ownership of the properties sold to her. Besides, a purchaser need not inquire beyond what
appears in a Torrens title.

The petition lacks merit. The contract of sale between petitioners and respondent is valid.lawphil.net

Bayani Baloloy was represented by his attorney-in-fact, Alejandrino Baloloy. In the Baloloys’ answer to the original complaint and
amended complaint, the allegations relating to the personal circumstances of the Baloloys are clearly admitted.

"An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof."6 The
"factual admission in the pleadings on record [dispenses] with the need x x x to present evidence to prove the admitted fact."7 It
cannot, therefore, "be controverted by the party making such admission, and [is] conclusive"8 as to them. All proofs submitted by
them "contrary thereto or inconsistent therewith should be ignored whether objection is interposed by a party or not."9 Besides,
there is no showing that a palpable mistake has been committed in their admission or that no admission has been made by them.

Pre-trial is mandatory.10 The notices of pre-trial had been sent to both the Baloloys and their former counsel of record. Being served
with notice, he is "charged with the duty of notifying the party represented by him."11 He must "see to it that his client receives such
notice and attends the pre-trial."12 What the Baloloys and their former counsel have alleged instead in their Motion to Lift Order of
As In Default dated December 11, 1991 is the belated receipt of Bayani Baloloy’s special power of attorney in favor of their former
counsel, not that they have not received the notice or been informed of the scheduled pre-trial. Not having raised the ground of lack
of a special power of attorney in their motion, they are now deemed to have waived it. Certainly, they cannot raise it at this late
stage of the proceedings. For lack of representation, Bayani Baloloy was properly declared in default.

Section 3 of Rule 38 of the Rules of Court states:

SEC. 3. Time for filing petition; contents and verification. – A petition provided for in either of the preceding sections of this Rule
must be verified, filed within sixty (60) days after the petitioner learns of the judgment, final order, or other proceeding to be set
aside, and not more than six (6) months after such judgment or final order was entered, or such proceeding was taken; and must be
accompanied with affidavits showing the fraud, accident, mistake, or excusable negligence relied upon, and the facts constituting the
petitioner’s good and substantial cause of action or defense, as the case may be.

There is no reason for the Baloloys to ignore the effects of the above-cited rule. "The 60-day period is reckoned from the time the
party acquired knowledge of the order, judgment or proceedings and not from the date he actually read the same."13 As aptly put by
the appellate court:

The evidence on record as far as this issue is concerned shows that Atty. Arsenio Villalon, Jr., the former counsel of record of the
Baloloys received a copy of the partial decision dated June 23, 1993 on April 5, 1994. At that time, said former counsel is still their
counsel of record. The reckoning of the 60 day period therefore is the date when the said counsel of record received a copy of the
partial decision which was on April 5, 1994. The petition for relief was filed by the new counsel on July 4, 1994 which means that 90
days have already lapsed or 30 days beyond the 60 day period. Moreover, the records further show that the Baloloys received the
partial decision on September 13, 1993 as evidenced by Registry return cards which bear the numbers 02597 and 02598 signed by
Mr. Alejandrino Baloloy.

The Baloloys[,] apparently in an attempt to cure the lapse of the aforesaid reglementary period to file a petition for relief from
judgment[,] included in its petition the two Orders dated May 6, 1994 and June 29, 1994. The first Order denied Baloloys’ motion to
fix the period within which plaintiffs-appellants pay the balance of the purchase price. The second Order refers to the grant of partial
execution, i.e. on the aspect of damages. These Orders are only consequences of the partial decision subject of the petition for relief,
and thus, cannot be considered in the determination of the reglementary period within which to file the said petition for relief.

Furthermore, no fraud, accident, mistake, or excusable negligence exists in order that the petition for relief may be granted.14 There
is no proof of extrinsic fraud that "prevents a party from having a trial x x x or from presenting all of his case to the court"15 or an
"accident x x x which ordinary prudence could not have guarded against, and by reason of which the party applying has probably
been impaired in his rights."16 There is also no proof of either a "mistake x x x of law"17 or an excusable negligence "caused by failure
to receive notice of x x x the trial x x x that it would not be necessary for him to take an active part in the case x x x by relying on
another person to attend to the case for him, when such other person x x x was chargeable with that duty x x x, or by other
circumstances not involving fault of the moving party."18

Article 1892 of the Civil Code provides:

Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for
the acts of the substitute:

(1) When he was not given the power to appoint one x x x.

Applying the above-quoted provision to the special power of attorney executed by Ignacio Rubio in favor of his daughter Patricia
Llamas, it is clear that she is not prohibited from appointing a substitute. By authorizing Virginia Lim to sell the subject properties,
Patricia merely acted within the limits of the authority given by her father, but she will have to be "responsible for the acts of the
sub-agent,"19 among which is precisely the sale of the subject properties in favor of respondent.

Even assuming that Virginia Lim has no authority to sell the subject properties, the contract she executed in favor of respondent is
not void, but simply unenforceable, under the second paragraph of Article 1317 of the Civil Code which reads:

Art. 1317. x x x

A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his
powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.

Ignacio Rubio merely denies the contract of sale. He claims, without substantiation, that what he received was a loan, not the down
payment for the sale of the subject properties. His acceptance and encashment of the check, however, constitute ratification of the
contract of sale and "produce the effects of an express power of agency."20"[H]is action necessarily implies that he waived his right
of action to avoid the contract, and, consequently, it also implies the tacit, if not express, confirmation of the said sale effected" by
Virginia Lim in favor of respondent.

Similarly, the Baloloys have ratified the contract of sale when they accepted and enjoyed its benefits. "The doctrine of estoppel
applicable to petitioners here is not only that which prohibits a party from assuming inconsistent positions, based on the principle of
election, but that which precludes him from repudiating an obligation voluntarily assumed after having accepted benefits therefrom.
To countenance such repudiation would be contrary to equity, and would put a premium on fraud or misrepresentation."21

Indeed, Virginia Lim and respondent have entered into a contract of sale. Not only has the title to the subject properties passed to
the latter upon delivery of the thing sold, but there is also no stipulation in the contract that states the ownership is to be reserved in
or "retained by the vendor until full payment of the price."22

Applying Article 1544 of the Civil Code, a second buyer of the property who may have had actual or constructive knowledge of such
defect in the seller’s title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith.
Such second buyer cannot defeat the first buyer’s title. In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.23 Even the argument that a purchaser need not inquire beyond what appears in a
Torrens title does not hold water. A perusal of the certificates of title alone will reveal that the subject properties are registered in
common, not in the individual names of the heirs.

Nothing in the contract "prevents the obligation of the vendor to convey title from becoming effective"24 or gives "the vendor the
right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period."25Petitioners themselves have failed
to deliver their individual certificates of title, for which reason it is obvious that respondent cannot be expected to pay the stipulated
taxes, fees, and expenses.

"[A]ll the elements of a valid contract of sale under Article 1458 of the Civil Code are present, such as: (1) consent or meeting of the
minds; (2) determinate subject matter; and (3) price certain in money or its equivalent."26Ignacio Rubio, the Baloloys, and their co-
heirs sold their hereditary shares for a price certain to which respondent agreed to buy and pay for the subject properties. "The offer
and the acceptance are concurrent, since the minds of the contracting parties meet in the terms of the agreement."27

In fact, earnest money has been given by respondent. "[I]t shall be considered as part of the price and as proof of the perfection of
the contract.28 It constitutes an advance payment to "be deducted from the total price."29

Article 1477 of the same Code also states that "[t]he ownership of the thing sold shall be transferred to the vendee upon actual or
constructive delivery thereof."30 In the present case, there is actual delivery as manifested by acts simultaneous with and subsequent
to the contract of sale when respondent not only took possession of the subject properties but also allowed their use as parking
terminal for jeepneys and buses. Moreover, the execution itself of the contract of sale is constructive delivery.

Consequently, Ignacio Rubio could no longer sell the subject properties to Corazon Escueta, after having sold them to respondent.
"[I]n a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved
or rescinded x x x."31 The records do not show that Ignacio Rubio asked for a rescission of the contract. What he adduced was a
belated revocation of the special power of attorney he executed in favor of Patricia Llamas. "In the sale of immovable property, even
though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of
right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has
been made upon him either judicially or by a notarial act."32

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 48282, dated
G.R. No. L-42465             November 19, 1936

INTERNATIONAL FILMS (CHINA), LTD., plaintiff-appellant, 

vs.
THE LYRIC FILM EXCHANGE, INC., defendant-appellee.

J. W. Ferrier for appellant.

Juan T. Santos and Arsenio Solidum for appellee.

VILLA-REAL, J.:

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

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

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

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

The first question to be decided in this appeal, which is raised in the first assignment of alleged error, is whether or not the court a
quo erred in allowing the defendant company to amend its answer after both parties had already rested their respective cases.
In Torres Viuda de Nery vs. Tomacruz (49 Phil., 913, 915), this court, through Justice Malcolm, said:

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

In the case of Gould vs. Stafford (101 Cal., 32, 34), the Supreme Court of California, interpreting section 473 of the Code of Civil
Procedure of said State, from which section 110 of our Code was taken, stated as follows:

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

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

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

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

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

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

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

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

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

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

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

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

Wherefore, and although on a different ground, the appealed judgment is affirmed, with the costs to the appellant. So ordered.
G.R. No. L-24543             July 12, 1926

ROSA VILLA MONNA, plaintiff-appellee, 

vs.
GUILLERMO GARCIA BOSQUE, ET AL., defendants. 
GUILLERMO GARCIA BOSQUE, F. H. GOULETTE, and R. G. FRANCE, appellants.

STREET, J.:

This action was instituted in the Court of First Instance of Manila by Rosa Villa y Monna, widow of Enrique Bota, for the purpose of
recovering from the defendants, Guillermo Garcia Bosque and Jose Romar Ruiz, as principals, and from the defendants R. G. France
and F. H. Goulette, as solidary sureties for said principals, the sum of P20,509.71, with interest, as a balance alleged to be due to the
plaintiff upon the purchase price of a printing establishment and bookstore located at 89 Escolta, Manila, which had been sold to
Bosque and Ruiz by the plaintiff, acting through her attorney in fact, one Manuel Pirretas y Monros. The defendant Ruiz put in no
appearance, and after publication judgment by default was entered against him. The other defendants answered with a general
denial and various special defenses. Upon hearing the cause the trial judge gave judgment in favor of the plaintiff, requiring all of the
defendants, jointly and severally, to pay to the plaintiff the sum of P19,230.01, as capital, with stipulated interest at the rate of 7 per
centum per annum, plus the further sum of P1,279.70 as interest already accrued and unpaid upon the date of the institution of the
action, with interest upon the latter amount at the rate of 6 per centum per annum. From this judgment Guillermo Garcia Bosque, as
principal, and R. G. France and F.H. Goulette, as sureties. appealed.

It appears that prior to September 17, 1919, the plaintiff, Rosa Villa y Monna, viuda de E. Bota, was the owner of a printing
establishment and bookstore located at 89 Escolta, Manila, and known as La Flor de Cataluna, Viuda de E. Bota,  with the machinery,
motors, bindery, type material furniture, and stock appurtenant thereto. Upon the date stated, the plaintiff, then and now a resident
of Barcelona, Spain, acting through Manuel Pirretas, as attorney in fact, sold the establishment above-mentioned to the defendants
Guillermo Garcia Bosque and Jose Pomar Ruiz, residents of the City of Manila, for the stipulated sum of P55,000, payable as follows:
Fifteen thousand pesos (P15,000) on November 1, next ensuing upon the execution of the contract, being the date when the
purchasers were to take possession; ten thousand pesos (P10,000) at one year from the same date; fifteen thousand pesos
(P15,000) at two years; and the remaining fifteen thousand pesos (P15,000) at the end of three years. By the contract of sale the
deferred installments bear interest at the rate of 7 per centum per annum. In the same document the defendants France and
Goulette obligated themselves as solidary sureties with the principals Bosque and Ruiz, to answer for any balance, including interest,
which should remain due and unpaid after the dates stipulated for payment of said installments, expressly renouncing the benefit of
exhaustion of the property of the principals. The first installment of P15,000 was paid conformably to agreement.

In the year 1920, Manuel Pirretas y Monros, the attorney in fact of the plaintiff, absented himself from the Philippine Islands on a
prolonged visit to Spain; and in contemplation of his departure he executed a document, dated January 22, 1920, purporting to be a
partial substitution of agency, whereby he transferred to "the mercantile entity Figueras Hermanos, or the person, or persons,
having legal representation of the same," the powers that had been previously conferred on Pirretas by the plaintiff "in order that,"
so the document runs, "they may be able to effect the collection of such sums of money as may be due to the plaintiff by reason of
the sale of the bookstore and printing establishment already mentioned, issuing for such purpose the receipts, vouchers, letters of
payment, and other necessary documents for whatever they shall have received and collected of the character indicated."

When the time came for the payment of the second installment and accrued interest due at the time, the purchasers were unable to
comply with their obligation, and after certain negotiations between said purchasers and one Alfredo Rocha, representative of
Figueras Hermanos, acting as attorney in fact for the plaintiff, an agreement was reached, whereby Figueras Hermanos accepted the
payment of P5,800 on November 10, 1920, and received for the balance five promissory notes payable, respectively, on December 1,
1920, January 1, 1921, February 1, 1921, March 1, 1921, and April 1, 1921. The first three of these notes were in the amount of
P1,000 each, and the last two for P2,000 each, making a total of P7,000. It was furthermore agreed that the debtors should pay 9 per
centum per annum on said deferred installments, instead of the 7 per centum mentioned in the contract of sale. These notes were
not paid promptly at maturity but the balance due upon them was finally paid in full by Bosque on December 24, 1921.

About this time the owners of the business La Flor de Cataluña, appear to have converted it into a limited partnership under the
style of Guillermo Garcia Bosque, S. en C.;" and presently a corporation was formed to take over the business under the name "Bota
Printing Company, Inc." By a document executed on April 21, 1922, the partnership appears to have conveyed all its assets to this
corporation for the purported consideration of P15,000, Meanwhile the seven notes representing the unpaid balance of the second
installment and interest were failing due without being paid. Induced by this dilatoriness on the part the debtor and supposedly
animated by a desire to get the matter into better shape, M. T. Figueras entered into the agreement attached as Exhibit 1 to the
answer of Bosque. In this document it is recited that Guillermo Garcia Bosque. S. en C., is indebted to Rosa Villa, viuda de E. Bota, in
the amount of P32,000 for which R. G. France and F. H. Goulette are bound as joint and several sureties, and that the partnership
mentioned had transferred all its assets to the Bota Printing Company, Inc., of which one George Andrews was a principal
stockholder. It is then stipulated that France and Goulette shall be relieved from all liability on their contract as sureties and that in
lieu thereof the creditor, Doña Rosa Villa y Monna, accepts the Bota Printing Company, Inc., as debtor to the extent of P20,000,
which indebtedness was expressly assumed by it, and George Andrews as debtor to the extent of P12,000, which he undertook to
pay at the rate of P200 per month thereafter. To this contract the name of the partnership Guillermo Garcia Bosque, S. en C., was
affixed by Guillermo Garcia Bosque while the name of the Bota Printing Company, Inc., was signed by G. Andrews, the latter also
signing in his individual capacity. The name of the plaintiff was affixed by M.T. Figueras in the following style: "p.p. Rosa Villa, viuda
de E. Bota, M. T. Figueras, party of the second part."

No question is made as to the authenticity of this document or as to the intention of Figueras to release the sureties; and the latter
rely upon the discharge as complete defense to the action. The defendant Bosque also relies upon the same agreement as
constituting a novation such as to relieve him from personal liability. All of the defendants furthermore maintain that even
supposing that M. T. Figueras authority to novate the original contract and discharge the sureties therefrom, nevertheless the
plaintiff has ratified the agreement by accepting part payment of the amount due thereunder with full knowledge of its terms. In her
amended complaint the plaintiff asserts that Figueras had no authority to execute the contract containing the release (Exhibit 1) and
that the same had never been ratified by her.

The question thus raised as to whether the plaintiff is bound by Exhibit 1 constitutes the main controversy in the case, since if this
point should be determined in the affirmative the plaintiff obviously has no right of action against any of the defendants. We
accordingly address ourselves to this point first.

The partial substitution of agency (Exhibit B to amended complaint) purports to confer on Figueras Hermanos or the person or
persons exercising legal representation of the same all of the powers that had been conferred on Pirretas by the plaintiff in the
original power of attorney. This original power of attorney is not before us, but assuming, as is stated in Exhibit B, that this document
contained a general power to Pirretas to sell the business known as La Flor de Cataluña upon conditions to be fixed by him and
power to collect money due to the plaintiff upon any account, with a further power of substitution, yet it is obvious upon the face of
the act of substitution (Exhibit B) that the sole purpose was to authorize Figueras Hermanos to collect the balance due to the
plaintiff upon the price of La Flor de Cataluña, the sale of which had already been affected by Pirretas. The words of Exhibit B on this
point are quite explicit ("to the end that the said lady may be able to collect the balance of the selling price of the Printing
Establishment and Bookstore above-mentioned, which has been sold to Messrs. Bosque and Pomar"). There is nothing here that can
be construed to authorize Figueras Hermanos to discharge any of the debtors without payment or to novate the contract by which
their obligation was created. On the contrary the terms of the substitution shows the limited extent of the power. A further
noteworthy feature of the contract Exhibit 1 has reference to the personality of the purported attorney in fact and the manner in
which the contract was signed. Under the Exhibit B the substituted authority should be exercised by the mercantile entity Figueras
Hermanos or the person duly authorized to represent the same. In the actual execution of Exhibit 1, M. T. Figueras intervenes as
purpoted attorney in fact without anything whatever to show that he is in fact the legal representative of Figueras Hermanos or that
he is there acting in such capacity. The act of substitution conferred no authority whatever on M. T. Figueras as an individual. In view
of these defects in the granting and exercise of the substituted power, we agree with the trial judge that the Exhibit 1 is not binding
on the plaintiff. Figueras had no authority to execute the contract of release and novation in the manner attempted; and apart from
this it is shown that in releasing the sureties Figueras acted contrary to instructions. For instance, in a letter from Figueras in Manila,
dated March 4, 1922, to Pirretas, then in Barcelona, the former stated that he was attempting to settle the affair to the best
advantage and expected to put through an arrangement whereby Doña Rosa would receive P20,000 in cash, the balance to be paid
in installments, "with the guaranty of France and Goulette." In his reply of April 29 to this letter, Pirretas expresses the conformity of
Doña Rosa in any adjustment of the claim that Figueras should see fit to make, based upon payment of P20,000 in cash, the balance
in installments, payable in the shortest practicable periods, it being understood, however, that the guaranty of Messrs. France and
Goulette should remain intact. Again, on May 9, Pirretas repeats his assurance that the plaintiff would be willing to accept P20,000
down with the balance in interest-bearing installments "with the guaranty of France and Goulette." From this it is obvious that
Figueras had no actual authority whatever to release the sureties or to make a novation of the contract without their additional
guaranty.

But it is asserted that the plaintiff ratified the contract (Exhibit 1) by accepting and retaining the sum of P14,000 which, it is asserted,
was paid by the Bota Printing Co., Inc., under that contract. In this connection it should be noted that when the firm of Guillermo
Garcia Bosque, S. en C., conveyed all it assets on April 21, 1922 to the newly formed corporation, Bota Printing Co., Inc., the latter
obligated itself to pay al the debts of the partnership, including the sum of P32,000 due to the plaintiff. On April 23, thereafter,
Bosque, acting for the Bota Printing Co., Inc., paid to Figueras the sum of P8,000 upon the third installment due to the plaintiff under
the original contract of sale, and the same was credited by Figueras accordingly. On May 16 a further sum of P5,000 was similarly
paid and credited; and on May 25, a further sum of P200 was likewise paid, making P14,000 in all. Now, it will be remembered that
in the contract (Exhibit 1), executed on May 17, 1922, the Bota Printing Co., Inc., undertook to pay the sum of P20,00; and the
parties to the agreement considered that the sum of P13,800 then already paid by the Bota Printing Co., Inc., should be treated as a
partial satisfaction of the larger sum of P20,000 which the Bota Printing Co., Inc., had obligated itself to pay. In the light of these
facts the proposition of the defendants to the effect that the plaintiff has ratified Exhibit 1 by retaining the sum of P14,000, paid by
the Bota Printing Co., Inc., as above stated, is untenable. By the assumption of the debts of its predecessor the Bota Printing Co.,
Inc., had become a primary debtor to the plaintiff; and she therefore had a right to accept the payments made by the latter and to
apply the same to the satisfaction of the third installment of the original indebtedness. Nearly all of this money was so paid prior to
the execution of Exhibit 1 and although the sum of P200 was paid a few days later, we are of the opinion that the plaintiff was
entitled to accept and retain the whole, applying it in the manner above stated. In other words the plaintiff may lawfully retain that
money notwithstanding her refusal to be bound by Exhibit 1.

A contention submitted exclusively in behalf of France and Goulette, the appellant sureties, is that they were discharged by the
agreement between the principal debtor and Figueras Hermanos, as attorney in fact for the plaintiff, whereby the period for the
payment of the second installment was extended, without the assent of the sureties, and new promissory notes for unpaid balance
were executed in the manner already mentioned in this opinion. The execution of these new promissory notes undoubtedly
constituted and extension of time as to the obligation included therein, such as would release a surety, even though of the solidary
type, under article 1851 of the Civil Code. Nevertheless it is to be borne in mind that said extension and novation related only to the
second installment of the original obligation and interest accrued up to that time. Furthermore, the total amount of these notes was
afterwards paid in full, and they are not now the subject of controversy. It results that the extension thus effected could not
discharge the sureties from their liability as to other installments upon which alone they have been sued in this action. The rule that
an extension of time granted to the debtor by the creditor, without the consent of the sureties, extinguishes the latter's liability is
common both to Spanish jurisprudence and the common law; and it is well settled in English and American jurisprudence that where
a surety is liable for different payments, such as installments of rent, or upon a series of promissory notes, an extension of time as to
one or more will not affect the liability of the surety for the others. (32 Cyc., 196; Hopkirk vs. McConico, 1 Brock., 220; 12 Fed. Cas.,
No. 6696; Coe vs. Cassidy, 72 N. Y., 133; Cohn vs. Spitzer, 129 N. Y. Supp., 104; Shephard Land Co. vs. Banigan, 36 R. I., 1; I. J. Cooper
Rubber Co. vs. Johnson, 133 Tenn., 562; Bleeker vs. Johnson, 190, N. W. 1010.) The contention of the sureties on this point is
therefore untenable.

There is one stipulation in the contract (Exhibit A) which, at first suggests a doubt as to propriety of applying the doctrine above
stated to the case before us. We refer to cause (f) which declares that the non-fulfillment on the part of the debtors of the
stipulation with respect to the payment of any installment of the indebtedness, with interest, will give to the creditor the right to
treat and declare all of said installments as immediately due. If the stipulation had been to the effect that the failure to pay any
installment when due would ipso facto cause to other installments to fall due at once, it might be plausibly contended that after
default of the payment of one installment the act of the creditor in extending the time as to such installment would interfere with
the right of the surety to exercise his legal rights against the debtor, and that the surety would in such case be discharged by the
extension of time, in conformity with articles 1851 and 1852 of the Civil Code. But it will be noted that in the contract now under
consideration the stipulation is not that the maturity of the later installments shall be ipso facto  accelerated by default in the
payment of a prior installment, but only that it shall give the creditor a right to treat the subsequent installments as due, and in this
case it does not appear that the creditor has exercised this election. On the contrary, this action was not instituted until after all of
the installments had fallen due in conformity with the original contract. It results that the stipulation contained in paragraph (f) does
not affect the application of the doctrine above enunciated to the case before us.

Finally, it is contended by the appellant sureties that they were discharged by a fraud practiced upon them by the plaintiff in failing
to require the debtor to execute a mortgage upon the printing establishment to secure the debt which is the subject of this suit. In
this connection t is insisted that at the time France and Goulette entered into the contract of suretyship, it was represented to them
that they would be protected by the execution of a mortgage upon the printing establishment by the purchasers Bosque and Pomar.
No such mortgage was in fact executed and in the end another creditor appears to have obtained a mortgage upon the plant which
is admitted to be superior to the claim of the plaintiff. The failure of the creditor to require a mortgage is alleged to operate as a
discharge of the sureties. With this insistence we are unable to agree, for the reason that the proof does not show, in our opinion,
that the creditor, on her attorney in fact, was a party to any such agreement. On the other hand it is to be collected from the
evidence that the suggestion that a mortgage would be executed on the plant to secure the purchase price and that this mortgage
would operate for the protection of the sureties came from the principal and not from any representative of the plaintiff.

As a result of our examination of the case we find no error in the record prejudicial to any of the appellants, and the judgment
appealed from will be affirmed, So ordered, with costs against the appellants.
G.R. No. 130423             November 18, 2002

VIRGIE SERONA, petitioner, 
vs.
HON. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.

DECISION

YNARES-SANTIAGO, J.:

During the period from July 1992 to September 1992, Leonida Quilatan delivered pieces of jewelry to petitioner Virgie Serona to be
sold on commission basis. By oral agreement of the parties, petitioner shall remit payment or return the pieces of jewelry if not sold
to Quilatan, both within 30 days from receipt of the items.

Upon petitioner’s failure to pay on September 24, 1992, Quilatan required her to execute an acknowledgment receipt (Exhibit B)
indicating their agreement and the total amount due, to wit:

Ako, si Virginia Serona, nakatira sa Mother Earth Subd., Las Pinas, ay kumuha ng mga alahas kay Gng. Leonida Quilatan na may
kabuohang halaga na P567,750.00 para ipagbili para ako magkakomisyon at ibibigay ang benta kung mabibili o ibabalik sa kanya ang
mga nasabing alahas kung hindi mabibili sa loob ng 30 araw.

Las Pinas, September 24, 1992.1

The receipt was signed by petitioner and a witness, Rufina G. Navarette.

Unknown to Quilatan, petitioner had earlier entrusted the jewelry to one Marichu Labrador for the latter to sell on commission
basis. Petitioner was not able to collect payment from Labrador, which caused her to likewise fail to pay her obligation to Quilatan.

Subsequently, Quilatan, through counsel, sent a formal letter of demand2 to petitioner for failure to settle her obligation. Quilatan
executed a complaint affidavit3 against petitioner before the Office of the Assistant Provincial Prosecutor. Thereafter, an information
for estafa under Article 315, paragraph 1(b)4 of the Revised Penal Code was filed against petitioner, which was raffled to Branch 255
of the Regional Trial Court of Las Pinas. The information alleged:

That on or about and sometime during the period from July 1992 up to September 1992, in the Municipality of Las Pinas, Metro
Manila, Philippines, and within the jurisdiction of this Honorable Court, the said accused received in trust from the complainant
Leonida E. Quilatan various pieces of jewelry in the total value of P567,750.00 to be sold on commission basis under the express duty
and obligation of remitting the proceeds thereof to the said complainant if sold or returning the same to the latter if unsold but the
said accused once in possession of said various pieces of jewelry, with unfaithfulness and abuse of confidence and with intent to
defraud, did then and there willfully, unlawfully and feloniously misappropriate and convert the same for her own personal use and
benefit and despite oral and written demands, she failed and refused to account for said jewelry or the proceeds of sale thereof, to
the damage and prejudice of complainant Leonida E. Quilatan in the aforestated total amount of P567,750.00.

CONTRARY TO LAW.5

Petitioner pleaded not guilty to the charge upon arraignment.6 Trial on the merits thereafter ensued.

Quilatan testified that petitioner was able to remit P100,000.00 and returned P43,000.00 worth of jewelriy;7 that at the start,
petitioner was prompt in settling her obligation; however, subsequently the payments were remitted late;8 that petitioner still owed
her in the amount of P424,750.00.9

On the other hand, petitioner admitted that she received several pieces of jewelry from Quilatan and that she indeed failed to pay
for the same. She claimed that she entrusted the pieces of jewelry to Marichu Labrador who failed to pay for the same, thereby
causing her to default in paying Quilatan.10 She presented handwritten receipts (Exhibits 1 & 2)11 evidencing payments made to
Quilatan prior to the filing of the criminal case.
Marichu Labrador confirmed that she received pieces of jewelry from petitioner worth P441,035.00. She identified an
acknowledgment receipt (Exhibit 3)12 signed by her dated July 5, 1992 and testified that she sold the jewelry to a person who
absconded without paying her. Labrador also explained that in the past, she too had directly transacted with Quilatan for the sale of
jewelry on commission basis; however, due to her outstanding account with the latter, she got jewelry from petitioner instead.13

On November 17, 1994, the trial court rendered a decision finding petitioner guilty of estafa, the dispositive portion of which reads:

WHEREFORE, in the light of the foregoing, the court finds the accused Virgie Serona guilty beyond reasonable doubt, and as the
amount misappropriated is P424,750.00 the penalty provided under the first paragraph of Article 315 of the Revised Penal Code has
to be imposed which shall be in the maximum period plus one (1) year for every additional P10,000.00.

Applying the Indeterminate Sentence Law, the said accused is hereby sentenced to suffer the penalty of imprisonment ranging from
FOUR (4) YEARS and ONE (1) DAY of prision correccional as minimum to TEN (10) YEARS and ONE (1) DAY of prision mayor as
maximum; to pay the sum of P424,750.00 as cost for the unreturned jewelries; to suffer the accessory penalties provided by law;
and to pay the costs.

SO ORDERED.14

Petitioner appealed to the Court of Appeals, which affirmed the judgment of conviction but modified the penalty as follows:

WHEREFORE, the appealed decision finding the accused-appellant guilty beyond reasonable doubt of the crime of estafa is hereby
AFFIRMED with the following MODIFICATION:

Considering that the amount involved is P424,750.00, the penalty should be imposed in its maximum period adding one (1) year for
each additional P10,000.00 albeit the total penalty should not exceed Twenty (20) Years (Art. 315). Hence, accused-appellant is
hereby SENTENCED to suffer the penalty of imprisonment ranging from Four (4) Years and One (1) Day of Prision Correccional as
minimum to Twenty (20) Years of Reclusion Temporal.

SO ORDERED.15

Upon denial of her motion for reconsideration,16 petitioner filed the instant petition under Rule 45, alleging that:

RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS AN ABUSE OF CONFIDENCE ON THE PART
OF PETITIONER IN ENTRUSTING THE SUBJECT JEWELRIES (sic) TO HER SUB-AGENT FOR SALE ON COMMISSION TO PROSPECTIVE
BUYERS.

II

RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS MISAPPROPRIATION OR CONVERSION ON
THE PART OF PETITIONER WHEN SHE FAILED TO RETURN THE SUBJECT JEWELRIES (sic) TO PRIVATE COMPLAINANT.17

Petitioner argues that the prosecution failed to establish the elements of estafa as penalized under Article 315, par. 1(b) of the
Revised Penal Code. In particular, she submits that she neither abused the confidence reposed upon her by Quilatan nor converted
or misappropriated the subject jewelry; that her giving the pieces of jewelry to a sub-agent for sale on commission basis did not
violate her undertaking with Quilatan. Moreover, petitioner delivered the jewelry to Labrador under the same terms upon which it
was originally entrusted to her. It was established that petitioner had not derived any personal benefit from the loss of the jewelry.
Consequently, it cannot be said that she misappropriated or converted the same.

We find merit in the petition.

The elements of estafa through misappropriation or conversion as defined in Article 315, par. 1(b) of the Revised Penal Code are: (1)
that the money, good or other personal property is received by the offender in trust, or on commission, or for administration, or
under any other obligation involving the duty to make delivery of, or to return, the same; (2) that there be misappropriation or
conversion of such money or property by the offender or denial on his part of such receipt; (3) that such misappropriation or
conversion or denial is to the prejudice of another; and (4) that there is a demand made by the offended party on the
offender.18 While the first, third and fourth elements are concededly present, we find the second element of misappropriation or
conversion to be lacking in the case at bar.

Petitioner did not ipso facto commit the crime of estafa through conversion or misappropriation by delivering the jewelry to a sub-
agent for sale on commission basis. We are unable to agree with the lower courts’ conclusion that this fact alone is sufficient ground
for holding that petitioner disposed of the jewelry "as if it were hers, thereby committing conversion and a clear breach of trust."19

It must be pointed out that the law on agency in our jurisdiction allows the appointment by an agent of a substitute or sub-agent in
the absence of an express agreement to the contrary between the agent and the principal.20 In the case at bar, the appointment of
Labrador as petitioner’s sub-agent was not expressly prohibited by Quilatan, as the acknowledgment receipt, Exhibit B, does not
contain any such limitation. Neither does it appear that petitioner was verbally forbidden by Quilatan from passing on the jewelry to
another person before the acknowledgment receipt was executed or at any other time. Thus, it cannot be said that petitioner’s act
of entrusting the jewelry to Labrador is characterized by abuse of confidence because such an act was not proscribed and is, in fact,
legally sanctioned.

The essence of estafa under Article 315, par. 1(b) is the appropriation or conversion of money or property received to the prejudice
of the owner. The words "convert" and "misappropriated" connote an act of using or disposing of another’s property as if it were
one’s own, or of devoting it to a purpose or use different from that agreed upon. To misappropriate for one’s own use includes not
only conversion to one’s personal advantage, but also every attempt to dispose of the property of another without right.21

In the case at bar, it was established that the inability of petitioner as agent to comply with her duty to return either the pieces of
jewelry or the proceeds of its sale to her principal Quilatan was due, in turn, to the failure of Labrador to abide by her agreement
with petitioner. Notably, Labrador testified that she obligated herself to sell the jewelry in behalf of petitioner also on commission
basis or to return the same if not sold. In other words, the pieces of jewelry were given by petitioner to Labrador to achieve the very
same end for which they were delivered to her in the first place. Consequently, there is no conversion since the pieces of jewelry
were not devoted to a purpose or use different from that agreed upon.

Similarly, it cannot be said that petitioner misappropriated the jewelry or delivered them to Labrador "without right." Aside from the
fact that no condition or limitation was imposed on the mode or manner by which petitioner was to effect the sale, it is also
consistent with usual practice for the seller to necessarily part with the valuables in order to find a buyer and allow inspection of the
items for sale.

In People v. Nepomuceno,22 the accused-appellant was acquitted of estafa on facts similar to the instant case. Accused-appellant
therein undertook to sell two diamond rings in behalf of the complainant on commission basis, with the obligation to return the
same in a few days if not sold. However, by reason of the fact that the rings were delivered also for sale on commission to sub-
agents who failed to account for the rings or the proceeds of its sale, accused-appellant likewise failed to make good his obligation
to the complainant thereby giving rise to the charge of estafa. In absolving the accused-appellant of the crime charged, we held:

Where, as in the present case, the agents to whom personal property was entrusted for sale, conclusively proves the inability to
return the same is solely due to malfeasance of a subagent to whom the first agent had actually entrusted the property in good
faith, and for the same purpose for which it was received; there being no prohibition to do so and the chattel being delivered to the
subagent before the owner demands its return or before such return becomes due, we hold that the first agent can not be held
guilty of estafa by either misappropriation or conversion. The abuse of confidence that is characteristic of this offense is missing
under the circumstances.23

Accordingly, petitioner herein must be acquitted. The lower courts’ reliance on People v. Flores24 and U.S. v. Panes25 to justify
petitioner’s conviction is misplaced, considering that the factual background of the cited cases differ from those which obtain in the
case at bar. In Flores, the accused received a ring to sell under the condition that she would return it the following day if not sold and
without authority to retain the ring or to give it to a sub-agent. The accused in Panes, meanwhile, was obliged to return the jewelry
he received upon demand, but passed on the same to a sub-agent even after demand for its return had already been made. In the
foregoing cases, it was held that there was conversion or misappropriation.

Furthermore, in Lim v. Court of Appeals,26 the Court, citing Nepomuceno and the case of People v. Trinidad,27held that:

In cases of estafa the profit or gain must be obtained by the accused personally, through his own acts, and his mere negligence in
permitting another to take advantage or benefit from the entrusted chattel cannot constitute estafa under Article 315, paragraph 1-
b, of the Revised Penal Code; unless of course the evidence should disclose that the agent acted in conspiracy or connivance with
the one who carried out the actual misappropriation, then the accused would be answerable for the acts of his co-conspirators. If
there is no such evidence, direct or circumstantial, and if the proof is clear that the accused herself was the innocent victim of her
sub-agent’s faithlessness, her acquittal is in order.28 (Italics copied)

Labrador admitted that she received the jewelry from petitioner and sold the same to a third person. She further acknowledged that
she owed petitioner P441,035.00, thereby negating any criminal intent on the part of petitioner. There is no showing that petitioner
derived personal benefit from or conspired with Labrador to deprive Quilatan of the jewelry or its value. Consequently, there is no
estafa within contemplation of the law.

Notwithstanding the above, however, petitioner is not entirely free from any liability towards Quilatan. The rule is that an accused
acquitted of estafa may nevertheless be held civilly liable where the facts established by the evidence so warrant. Then too, an agent
who is not prohibited from appointing a sub-agent but does so without express authority is responsible for the acts of the sub-
agent.29 Considering that the civil action for the recovery of civil liability arising from the offense is deemed instituted with the
criminal action,30 petitioner is liable to pay complainant Quilatan the value of the unpaid pieces of jewelry.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CR No. 17222 dated April 30,1997 and its
resolution dated August 28, 1997 are REVERSED and SET ASIDE. Petitioner Virgie Serona is ACQUITTED of the crime charged, but is
held civilly liable in the amount of P424,750.00 as actual damages, plus legal interest, without subsidiary imprisonment in case of
insolvency.
G.R. No. L-23181             March 16, 1925

THE BANK OF THE PHILIPPINE ISLANDS, plaintiff-appellee, 

vs.
GABRIELA ANDREA DE COSTER Y ROXAS, ET AL., defendants. 
LA ORDEN DE DOMINICOS or PP. PREDICADORES DE LA PROVINCIA DEL SANTISIMO ROSARIO,defendants-appellees; 
GABRIELA ANDREA DE COSTER Y ROXAS, defendant-appellant.

STATEMENT

March 10, 1924, the plaintiff filed a complaint in which it was alleged that it was a domestic banking corporation with its principal
office and place of business in the City of Manila; that the defendant Gabriela Andrea de Coster y Roxas was the wife of the
defendant Jean M. Poizat, both of whom were residents of the City of Manila; that the defendant J. M. Poizat and Co. was a duly
registered partnership with its principal office and place of business in the City of Manila; that the defendant La Orden de Dominicos
or PP. Predicadores de la Provincia del Santisimo Rosario was a religious corporation duly organized and existing under the laws of
the Philippine Islands with its principal office and place of business in the City of Manila; that on December 29, 1921, for value, the
defendant Gabriela Andrea de Coster y Roxas, having the consent and permission of her husband, and he acting as her agent, said
defendants made to the plaintiff a certain promissory note for P292,000, payable one year after date, with interest of 9 per cent per
annum, payable monthly, in which, among other things, it is provided that in the event of a suit or action, the defendants should pay
the further sum of P10,000, as attorney's fees; that the note in question was a joint and several note; that to secure the payment
thereof, the defendants Jean M. Poizat and J. M. Poizat and Co. executed a chattel mortgage to the plaintiff on the steamers Roger
Poizat and Gabrielle Poizat, with the machinery and materials belonging to the Poizat Vegetable Oil Mills and certain merchandise;
that at the same time and for the same purpose, the defendant Gabriela Andrea de Coster y Roxas, having the consent and
permission of her husband, and he acting as her agent, they acknowledged and delivered to this plaintiff a mortgage on certain real
property lying and being situated in the City of Manila, which is specifically described in the mortgage; that the real property was
subject to a prior mortgage in favor of La Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario, hence it is
made a party defendant; that the note in question is long past due and owing. The plaintiff having brought action against the
defendants on the note in the Court of First Instance of the City of Manila, civil case No. 25218; that in such case the court rendered
judgment against the defendants Gabriela Andrea de Coster y Roxas, Jean M. Poizat and J. M. Poizat and Co. jointly and severally for
P292,000, with interest at the rate of 9 per cent per annum from the 31st of August, 1923, P10,000 as attorney's fees, and P2,500 for
and in account of insurance upon the steamer Gabrielle Poizat, with interest on that amount from February 9, 1924, at the rate of 9
per cent per annum, and costs; that the said defendants have not paid the judgment or any part thereof, and that the full amount of
the debt secured by the mortgaged on the property described in the complaint is now due and owing. Wherefore, plaintiff prays for
an order of the court to direct the sheriff of the City of Manila to take immediate possession of the property described in the chattel
mortgage and sell the same according to the Chattel Mortgage Law; that the property described in the real mortgage or so much
thereof as may be required to pay the amount due the plaintiff be sold according to law; that out of such sales plaintiff shall be paid
the amount due and owing it; and that such defendants be adjudged to pay any remaining deficiency.

Copies of the chattel and real mortgage are attached to, and made a part of, the complaint and marked, respectively, Exhibits A and
B.

On April 24, 1924, the La Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario appeared in the suit and filed
the following plea:

The defendant corporation, La Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario, for answer to
the complaint, shows:

I. That the encumbrance above-mentioned, but not determined in paragraph V of the complaint, consisting of a first
mortgage in favor of the aforesaid religious corporation on the property described in paragraph IV of the same complaint is
P125,000 with interest of 10 per cent per annum;

II. That the mortgagors Jean M. Poizat and Gabriela Andrea de Coster y Roxas, have not paid the principal or the interest
stipulated and agreed upon from the 16th of December, 1921 up to the present date;

III. The interest due up to the 30th of April of the present year 1924 amounts to a total sum of P27,925.34.
 Wherefore, it is prayed that the credit above-mentioned be taken into account when the second mortgage is foreclosed.

May 3, 1924, on motion of the plaintiff, for failure to appear or answer, the defendants Gabriela Andrea de Coster y Roxas and Jean
M. Poizat and J.M. Poizat & Co. were declared in default.

Without giving any notice of the defendants Jean M. Poizat, J.M. Poizat & Co. and Gabriela Andrea de Coster y Roxas, and after the
introduction of evidence on the part of the plaintiff and the defendant Dominican Fathers, on June 24, 1924, the court rendered an
opinion in substance and to the effect that the plaintiff should have judgment as prayed for in its complaint, and that the Dominican
Fathers should have judgment for the amount of their claim, and that the property should be sold and the proceeds applied to
satisfy the respective judgments.

About August 26, although her attorney, the defendant Gabriela Andrea de Coster y Roxas filed a motion in which she recites that
she is the legitimate wife of the defendant Jean M. Poizat; that she had been absent from the Philippine Islands and residing in the
City of Paris from the year 1908 to April 30, 1924, when she returned to Manila; that at that time of the filing of the complaint and
the issuance of the summons, she was absent from the Philippine Islands; that the summons was delivered by the sheriff of the City
of Manila to her husband, and that through his malicious negligence, default was taken and judgment entered for the respective
amounts; that she never had any knowledge of the actual facts until the latter part of July, 1924, when, through the local
newspapers, she learned that a default judgment had been rendered against her on July 28, 1924; that when she first knew of that
fact, she was unable to obtain the rendition of accounts, because her husband had left the Philippine Islands two days previous and
gone to Hongkong; that she then went to Hongkong and learned that her husband had left there under a false name and had gone
to the port of Singapore from whence he went to other places unknown to thus defendant; that she then returned to Manila, and
that in August, 1924, she came into possession of documents showing the illegally of the notes and mortgage in question; that she
has a good and legal defense to the action, which involves the validity of the order of the Dominican Fathers in this, that their
mortgage does not guarantee any loan made to this defendant; that it is a security only given for a credit of a third person; that the
mortgage was executed without the marital consent of the wife; and that he did not have nay authority to make her liable as surety
on the debt of a third person; that as regards the notes to the plaintiff: First, it does not represent any money paid to the defendant
by the bank; second, that it is exclusively the personal debt of the defendants Jean M. Poizat and J.M. Poizat & Co., third, that it was
executed by her husband, because the bank desired more security for the payment of her husband's debt to the bank; fourth, that it
was executed by her husband in excess of the powers given to him under his power of attorney; fifth, that it was executed as the
result of collusion between the bank and the defendant liable for the obligation of a third person. That as to the mortgage: First, it
was executed to secure a void obligation; second, it does not guarantee any loan made to this defendant; third, it was executed to
secure a void litigation; second, it does not guarantee any loan made to third defendant; third, it was executed without the express
marital consent which the law requires; fourth, it was executed through collusion. That if the judgment is not set aside, the
defendant will suffer irreparable injury; that through surprise and negligence, for which she was not responsible, this defendant was
prevented from defending herself in this action; that this is a case which comes under section 113 of the Code of Civil Procedure. She
prays that the judgment annulled and set aside and the case be reopened, and that she be permitted to file an answer, and that the
case be tried on its merits, and that a final judgment be rendered, absolving her from all liability.

The motion was based upon, and supported by, the affidavit of the defendant wife, to which was attached a large number of exhibits
all of which tended to support the motion.

After counter showings by the bank and the Dominican Fathers and the arguments of respective counsel, the motion to set aside
and vacate the judgment was denied. A motion for a reconsideration was then made, and the motion of the defendant to file an
answer and make a defense was again denied. The defendant Gabriela Andrea de Coster y Roxas appeals, assigning the following
errors;

PART I
AS TO THE JURISDICTION

I. The lower court erred in holding that it had acquired jurisdiction on the defendant Gabriela Andrea de Coster y Roxas,

(1) There having been no service of the summons on her in the manner required by section 396 of the Code of Civil
Procedure, she being absent from the Philippine Islands at the time of the filing of the complaint and of the
issuance of the summons in this case, and a resident of Paris, France, where she had lived permanently and
continuously for fifteen years prior thereof, and
 (2) There having been no se rive by publication in the manner required by section 398 of the Code of Civil
Procedure.

II. The lower court erred in considering that in a case where the wife is the only necessary party, service of the summons on
the husband, at a place which is not "the usual place of residence" of the wife and where the wife has never lived or
resided, is sufficient to give the court jurisdiction on the person and property of the wife and to render judgment by default
against her.

III. The court erred in admitting and considering evidence, outside of the sheriff's return, of the fact that the husband of the
defendant Gabriela Andrea de Coster y Roxas was her attorney in fact with power to appear for the defendant in court.

IV. The court erred in holding that the non-appearance of an agent of the defendant when service of the summons has
been made on him not as the agent of the defendant but in other capacity, will entitle the plaintiff who has misstated the
material jurisdictional facts of the complaint to a judgment by default against the principal.

V. The lower court erred in refusing to vacate a judgment by default against the defendant Gabriela Andrea de Coster y
Roxas rendered on a defective summons, served in a manner not provided for by the law, and in a case where the
complaint shows that plaintiff has no right of action.

PART II
AS TO THE MERITS OF THE DEFENSE

I. The lower court erred, with abuse of discretion, in holding that the negligence, if any, of J.M. Poizat in not appearing on
behalf of the defendant Gabriela Andrea de Coster y Roxas, can be imputed to this defendant, without redress, and to the
advantage of the plaintiff bank who in collusion with said J.M. Poizat caused the latter to contract beyond the scope of his
powers as agent of this defendant the obligation which is the subject matter of this case.

II. The lower court erred in holding that the relief on the part of J.M. Poizat that there was no defense against the claim of
the plaintiff on an obligation contracted by said J.M. Poizat apparently as agent of the defendant Gabriela Andrea de Coster
y Roxas, but in truth beyond the scope of his authority, and with knowledge on the part of the plaintiff bank that he was so
acting beyond his powers, was such an error was can be imputed to this defendant, and against which she can obtain no
redress.

III. The lower court erred in not holding that a principal is not liable for an obligation contracted by his agent beyond his
power even when both the creditor and the agent believed that the latter was acting within the scope of his powers.

IV. The lower court erred in holding that because the agent of the defendant Gabriela Andrea de Coster y Roxas had power
to appear for her in court, his non-appearance could render this defendant liable to a judgment by default, when the record
shows that there was no service of the summons in accordance with any of the forms of service provided by law.

V. The lower court erred in holding that J.M. Poizat was summoned as agent of hi wife, the defendant Gabriela Andrea de
Coster y Roxas, and was, in that capacity, notified of all the decisions rendered in this case, there being nothing in the
record to support the truth of such finding.

VI. The lower court erred in holding that in contracting the obligations in favor of the plaintiff Bank of the Philippine Islands
and of the defendant Orden de PP. Predicadores de la Provincia del Santisimo Rosario, the agent of the defendant Gabriela
Andrea de Coster y Roxas acted within the scope of his powers.

VII. The lower court erred in not holding that the plaintiff Bank of the Philippine Islands and the defendant Orden de PP.
Predicadores de la Provincia del Santisimo Rosario had knowledge of the fact that J.M. Poizat in contracting the respective
obligations in their favor, pretending to act as agent of the defendant Gabriela Andrea de Coster y Roxas, was acting beyond
the scope of his powers as such agent.

VIII. The lower court erred in making the following statement:

 "It is however alleged, by the petitioner, that these loans were obtained to pay debts, of strangers. Even so, this
would not render the loan obtained by the attorney in fact null and void. The circumstance that the agent used the
money, borrowed by him within the scope of his powers, to purposes for which he was not authorized by his
principal, may entitle the latter to demand from him the corresponding liability for the damages suffered, but it
cannot prejudice the creditor and cause the nullity of the loan. But, even admitting that the money borrowed was
used by Poizat to pay debts which did not belong to his principal, even then, he would have acted within his
powers, since his principal, together with the power to borrow money, had given her agent power to loan any
amount of money, and the payment of the debts of a stranger would amount to a loan made by the agent on
behalf of his principal to the person or entity whose debt was paid with the money obtained from the creditors."

IX. The lower court erred in applying to this case the principle involved in the case of Palanca vs. Smith, Bell and Co., 9 Phil.,
131.

X. The court erred in supplying from its own imagination facts which did not take place, of which there is no evidence in the
record, and which the parties never claimed to have existed, and then draw the conclusion that if under those hypothetical
facts the transaction between J.M. Poizat and the Bank of the Philippine Islands might have been legal, then the transaction
as it actually took place was also legal.

XI. The lower court erred in holding that defendant has not alleged any of the grounds enumerated in section 113 of the
Code of Civil Procedure.

XII. The lower court erred in holding that this defendant-appellant has no meritorious defense against the Dominican Order
and the Bank of the Philippine Islands.

XIII. The lower court erred in taking into consideration Exhibit A appearing at pages 156-165 of the bill of exceptions.

XIV. The lower court erred in denying the motion filed by this defendant-appellant.

XV. The lower court has acted throughout these proceedings with a clear abuse of discretion.

JOHNS, J.:

We will decide the case of the bank first

The petition of the appellant states under oath:

II. That this defendant has been absent from the Philippine Islands and residing in the City of Paris, France, since the year
1908 (1909), up to April 30, 1924, on which date she arrived in this City of Manila, Philippine Islands.

III. That at the time when the complaint in this case was filed and the summons issued, she was still absent from the
Philippine Islands and had no knowledge either of the filing of this action or of the facts which led to it.

Under oath the plaintiff, through its acting president, says:

I-II. That it admits the allegations contained in paragraphs I and II of the aforesaid motion.

III. That it admits the first part of this paragraph, to wit: That at the time that the complaint in the above entitled case was
filed, the defendant Gabriela Andrea de Coster y Roxas was absent from the Philippine Islands.

Paragraph 6 of section 396 of the Code of Civil Procedure provides:

In all other cases, to the defendant personally, or by leaving a copy at his usual place of residence, in the hands of some
person resident therein of sufficient discretion to receive the same. But service upon a corporation, as provided in
 subsections one and two, may be made by leaving the copy at the office of the proper officer thereof if such officer cannot
be found.

The return of the sheriff as to the service is as follows:

On this date I have served a copy of the within summons, and of the complaint attached, upon Jean M. Poizat, personally,
and the copies corresponding to J.M. Poizat and Co., a company duly organized under the laws of the Philippine Islands, by
delivering said copies to its President Mr. Jean M. Poizat, personally, and the copies corresponding to Gabriela Andrea de
Coster y Roxas, by leaving the same in the place of her usual residence in the City of Manila and in the hands of her
husband, Mr. J.M. Poizat, a person residing therein and of sufficient discretion to receive it, personally.

Done at Manila, P.I., this 13th day of March, 1924.

RICARDO SUMMERS
Sheriff of Manila
By GREGORIO GARCIA

I hereby certify that on this date I have delivered a copy of this summons and of the complaint corresponding to the "La
Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario," through Father Pedro Pratt, Procurador
General of said Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario, personally.

Manila, P.I., April 1, 1924.

RICARDO SUMMERS
Sheriff of Manila
By SIMEON D. SERDEÑA

It will be noted that the service of summons and complaint was made on this defendant on the 13th day of March, 1924, and that it
is a stipulated fact that since the year 1908 and up to April 30, 1924, she was "residing in the City of Paris, France." Even so, it is
contended that the service was valid by reason of the fact that it was made at the usual place of residence and abode of the
defendant husband, and that legally the residence of the wife is that of the husband. That contention is in direct conflict with the
admission of the plaintiff that since the year 1908 and up to April 30, 1924, the wife was residing in the City of Paris. The residence of
the wife in the City of Paris covered a period of sixteen years.

It may be that where in the ordinary course of business the wife is absent from the residence of husband on a pleasure trip or for
business reasons or to visit friends or relatives that, in the nature of such things, the residence of the wife would continue and
remain to be that of the husband. That is not this case. For sixteen years the residence of the husband was in the City of Manila, and
the residence of the wife was in the City of Paris.

Upon the admitted facts, we are clearly of the opinion that the residence of the husband was not the usual place of residence of the
wife. Giving full force and effect to the legal presumption that the usual place of residence of the wife is that of her husband, that
presumption is overcome by the admitted fact that the wife was "residing in the City of Paris, France, since the year 1908 up to April
30, 1924."

Without placing a limitation upon the length of time sufficient to overcome the legal presumption, suffice it to say that sixteen years
is amply sufficient.

It follows that the substituted service attempted to be made under the provisions of section 396 of the Code of Civil Procedure is null
and void, and that by such service the court never acquired jurisdiction of the person of the defendant wife. In that event the
plaintiff contends that under his power of attorney, the husband was the general agent of the wife with authority to accept service
of process for her and in her name, and that by reason of the fact that the husband was duly served and that he failed or neglected
to appear or answer, his actions and conduct were binding on the defendant wife. Be that as it may, there is nothing in the record
tending to show that the husband accepted service of any process for or on account of his wife or as her agent, or that he was acting
for or representing her in his failure and neglect to appear or answer.

The first appearance in court of the defendant wife was made when she filed the motion of August 26, 1924, in which she prays in
legal effect that the judgment against her be annulled and set aside and the case reopened, and that she be permitted to file an
answer and to have the case tried on its merits. That was a general appearance as distinguished from a special appearance. When
she filed that motion asking to be relieved from the legal force and effect of the judgment, she submitted herself to the jurisdiction
of the court. If, in the first instance, she had made a special appearance to question only the jurisdiction of the court, and had not
appeared for any other or different purpose, another and a different question would have been presented. Having made a general
appearance for one purpose, she is now in court for all purposes.

It is an elementary rule of law that as a condition precedent, to entitle a party to relief from a judgment "taken against him through
his mistake, inadvertence, surprise or excusable neglect," that, among other things, he must show to the court that he has a
meritorious defense. Based upon that legal principle the bank contends that no such a showing has been made by the defendant
wife. That involves the legal construction of the power of attorney which, it is admitted, the wife gave to her husband on August 25,
1903, which, among other things material to this opinion, recites that she gave to him:

Such full and ample power as required or necessary, to the end that he may perform on my behalf, and in my name and
availing himself of all my rights and actions, the following acts:

5. Loan or borrow any sums of money or fungible things at the rate of interest and for the time and under the conditions
which he might deem convenient, collecting or paying the capital or the interest on their respective due dates; executing
and signing the corresponding public or private documents related thereto, and making all these transactions with or
without mortgages, pledges or personal guaranty.

6. Enter into any kind of contracts whether civil or mercantile, giving due form thereof either by private documents or
public deeds with all clauses and requisites provided by law for their validity and effect, having due regard to the nature of
each contract.

7. Draw, endorse, accept, issue and negotiate any drafts, bills of exchange, letters of credit, letters of payment, bills, vales,
promissory notes and all kinds of documents representative of value; paying or collecting the value thereof on their
respective due dates, or protesting them for non-acceptance or non-payment, utilizing in this case the rights granted by the
Code of Commerce now in force, in order to collect the value thereof, interests, expenses and damages against
whomsoever should be liable therefor.

8. Institute before the competent courts the corresponding action in justification of the possession which I have or might
have over any real estate, filing the necessary pleadings, evidencing them by means of documentary or oral testimony
admissible by law; accepting notices and summons, and instituting all necessary proceedings for the termination thereof
and the consequent inscription of said action in the corresponding office of the Register of Deeds, in the same manner in
which I might do if personally present and acting.

9. Represent me in all cases before the municipal courts, justice of the peace courts, courts of first instance, supreme court
and all other courts of regular or any other special jurisdiction, appearing before them in any civil or criminal proceedings,
instituting and filing criminal and ordinary civil actions, claims in intestate and testamentary proceedings, insolvencies and
other actions provided by law; filing complaints, answers, counterclaims, cross complaints, criminal complaints and such
other pleadings as might be necessary; filing demurrers, taking and offering judicial admissions, documentary, expert, oral
evidence, and others provided by law, objecting to and opposing whatever contrary actions are taken, offered and
presented; accepting notices, citations and summons and acknowledging their receipt to the proper judicial officials.

10. For to the end stated above and the incidents related thereto, I confer on him ample and complete power, binding
myself in the most solemn manner as required by law to recognize as existing and valid all that he might do by virtue
hereof.

It is admitted that on December 29, 1921, the defendant husband signed the name of the defendant wife to the promissory note in
question, and that to secure the payment of the note, upon the same date and as attorney in fact for his wife, the husband signed
the real mortgage in question in favor of the bank, and that the mortgage was duly executed.

Based upon such admissions, the bank vigorously contends that the defendant wife has not shown a meritorious defense. In fact
that it appears from her own showing that she does not have a legal defense. It must be admitted that upon the face of the
instruments, that fact appears to be true. To meet that contention, the defendant wife points out, first, that the note in question is a
joint and several note, and, second, that it appears from the evidence, which she submitted, that she is nothing more than an
accommodation maker of the note. She also submits evidence which tends to show:
 First. That prior to July 25, 1921, Jean M. Poizat was personally indebted to the Bank of the Philippine Islands in the sum of
P290,050.02 (Exhibit H, page 66, bill of exceptions);

Second. That on July 25, 1921, the personal indebtedness of Jean M. Poizat was converted into six promissory notes
aggregating the sum of P308,458.58 of which P16,180 were paid, leaving an outstanding balance of P292,278.58 (Exhibits D,
E, F, G, H and I, pages 75-80, bill of exceptions);

Third. That on December 29, 1921, the above promissory notes were cancelled and substituted by a joint and several note
signed by Jean M. Poizat in his personal capacity and as agent of Gabriela Andrea de Coster y Roxas and as member of the
firm J.M. Poizat and Co.

In other words, that under the power of attorney, the husband had no authority for and on behalf of the wife to execute a joint and
several note or to make her liable as an accommodation maker. That the debt in question was a preexisting debt of her husband and
of the firm of J.M. Poizat and Co., to which she was not a party, and for which she was under no legal obligation to pay. That she
never borrowed any money from the bank, and that previous to the signing of the note, she never had any dealings with the bank
and was not indebted to the bank in any amount. That the old, original debts of her husband and J.M. Poizat and Co. to the bank, to
which she was not a party, were all taken up and merged in the new note of December 29, 1921, in question, and that at the time
the note was signed, she did not borrow any money, and that no money was loaned by the bank to the makers of the note.

Assuming such facts to be true, it would be a valid defense by the defendant wife to the payment of the note. There is no claim or
pretense that the bank was misled or deceived. If it had made an actual loan of P292,000 at the time the note was executed, another
and a different question would be presented. In the ordinary course of its business, the bank knew that not a dollar was loaned or
borrowed on the strength of the note. It was given at the urgent and pressing demand of the bank to obtain security for the six
different notes which it held against J.M. Poizat and Co. and Jean M. Poizat of date July 25, 1921, aggregating about P292,000, and at
the time it was given, those notes were taken up and merged in the note of December 29, 1921, now in question. Upon the record
before us, there is no evidence that the defendant wife was a party to the notes of July 25, 1921, or that she was under any legal
liability to pay them.

The note and mortgage in question show upon their face that at the time they were executed, the husband was attorney in fact for
the defendant wife, and the bank knew or should have known the nature and extent of his authority and the limitations upon his
power.

You will search the terms and provisions of the power of attorney in vain to find any authority for the husband to make his wife
liable as a surety for the payment of the preexisting debt of a third person.

Paragraph 5 of the power of attorney above quoted authorizes the husband for in the name of his wife to "loan or borrow any sums
of money or fungible things, etc." This should be construed to mean that the husband had power only to loan his wife's money and
to borrow money for or on account of his wife as her agent and attorney in fact. That does not carry with it or imply that he had the
legal right to make his wife liable as a surety for the preexisting debt of a third person.

Paragraph 6 authorizes him to "enter into any kind of contracts whether civil or mercantile, giving due form thereof either by private
documents or public deeds, etc."

Paragraph 7 authorizes him to "draw, endorse, accept, issue and negotiate any drafts, bills of exchange, letters of credit, letters of
payment, bills, vales, promissory notes, etc."

The foregoing are the clauses in the power of attorney upon which the bank relies for the authority of the husband to execute
promissory notes for and on behalf of his wife and as her agent.

It will be noted that there is no provision in either of them which authorizes or empowers him to sign anything or to do anything
which would make his wife liable as a surety for a preexisting debt.

It is fundamental rule of construction that where in an instrument powers and duties are specified and defined, that all of such
powers and duties are limited and confined to those which are specified and defined, and that all other powers and duties are
excluded.
Paragraph 8 of the power of attorney authorizes the husband to institute, prosecute and defend all actions or proceedings in a court
of justice, including "accepting notices and summons."

There is nothing in the record tending to show that the husband accepted the service of any notice or summons in the action on
behalf of the bank, and even so, if he had, it would not be a defense to open up and vacate a judgment under section 113 of the
Code of Civil Procedure. The same thing is true as to paragraph 9 of the power of attorney.

The fact that an agent failed and neglected to perform his duties and to represent the interests of his principal is not a bar to the
principal obtaining legal relief for the negligence of her agent, provided that the application for such a relief is duly and properly
made under the provisions of section 113.

It is very apparent from the face of the instrument that the whole purpose and intent of the power of attorney was to empower and
authorize the husband to look after and protect the interests of the wife and for her and in her name to transact any and all of her
business. But nowhere does it provide or authorize him to make her liable as a surety for the payment of the preexisting debt of a
third person.

Hence, it follows that the husband was not authorized or empowered to sign the note in question for and on behalf of the wife as
her act and deed, and that as to her the note is void for want of power of her husband to execute it.

The same thing is true as to the real mortgage to the bank. It was given to secure the note in question and was not given for any
other purpose. The real property described in the mortgage to the bank was and is the property of the wife. The note being void as
to her, it follows that as to her the real mortgage to the bank is also void for want of power to execute it.

It appears that before the motion in question was filed, there were certain negotiations between the bank and the attorney for the
wife with a view of a compromise or settlement of the bank's claim against her, and that during such negotiations, there was some
evidence or admissions on the part of her attorney that she was liable for the bank's claim. It now contends that as a result of such
negotiations and admissions, the wife is estopped to deny her liability. but it also appears that during such negotiations, both the
wife and her attorney did not have any knowledge of the actual facts, and that she was then ignorant of the defense upon which she
now relies. Be that as it may, such negotiations were more or less in the nature of a compromise which was rejected by the bank,
and it appears that in any event both the wife and her attorney did not have any knowledge of the facts upon which they now rely as
a defense.

There is no claim or pretense that the debt in question was contracted for or on account of the "usual daily expenses of the family,
incurred by the wife or by her order, with the tacit consent of the husband," as provided for in article 1362 of the Civil Code. Neither
is there any evidence tending to show that the wife was legally liable for any portion of the original debt evidence by the note in
question.

This decision as to the bank on this motion is based on the assumption that the facts are true as set forth and alleged in the petition
to set aside and vacate the judgment as to the wife, but we are not making any finding as to the actual truth of such facts. That
remains for the defendant wife to prove such alleged facts when the case is tried on its merits.

It follows that the opinion of the lower court in refusing to set aside and vacate the judgment of the plaintiff bank against the
defendant wife is reversed, and that judgment is vacated and set aside, and as to the bank the case is remanded to the lower court,
with leave for the wife to file an answer to plaintiff's cause of action, and to have the case tried on its merits and for any further
proceedings not inconsistent with this opinion.

As to the judgment in favor of the Dominican Fathers, it appears that their plea above quoted in the statement of facts was filed on
April 24, 1924. In that plea they say that they have a first mortgage on the property described in paragraph IV of the complaint for
P125,000 with interest at 10 per cent per annum. That the mortgagors Jean M. Poizat and Gabriela Andrea de Coster y Roxas have
not paid the principal or the stipulated interest from December 16, 1921, to date, which up to the 30th day of April, 1924, amounts
to P27,925.34. Wherefore, it is prayed that the credit above-mentioned be taken into account when the second mortgage is
foreclosed.

No other plea of any kind, nature or description was filed by it. The record shows that a copy of this alleged plea was served upon
the attorneys for the plaintiff bank. There is nothing in the record which shows or tends to show that a copy of it was ever served on
either one of the defendants. Neither is there any evidence that either of the defendants ever appeared in the original action. In
fact, judgment was rendered against them by default.
Under such a state of facts, the judgment in favor of the Dominican Fathers cannot be sustained. In the first place, the plea above
quoted filed on April 24, 1924, would not be sufficient to sustain a judgment. It does not even ask for a judgment of the foreclosure
of its mortgage. In the second place, no copy of the plea was ever served upon either of the defendants, who were the real parties in
interest, and against whom a judgment was rendered for the full amount of the note and the foreclosure of the mortgage. Such a
proceeding cannot be sustained on any legal principle.

Unless waived, a defendant has a legal right to service of process, to his day in court and to be heard in his defense.

From what has been said, it follows that, if the transaction between the Dominican Fathers and Jean M. Poizat as attorney in fact for
his wife was an original one and the P125,000 was actually loaned at the time the note and mortgage were executed and the money
was in good faith delivered to the husband as the agent and attorney in fact of the wife, it would then be a valid exercise of the
power given to the husband, regardless of the question as to what he may have done with the money.

Paragraph 5 of the power of attorney specifically authorizes him to borrow money for and on account of his wife and her name, "and
making all these transactions with or without mortgages, pledges or personal guaranty."

It follows that the judgment of the lower court in favor of La Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo
Rosario is reversed, without prejudice to its right to either file an original suit to foreclose its mortgage or to file a good and sufficient
plea as intervenor in the instant suit, setting forth the facts upon which it relies for a judgment on its note and the foreclosure of its
mortgage, copies of which should be served upon the defendants.

Neither party to recover costs. So ordered.

G.R. No. 103737 December 15, 1994

NORA S. EUGENIO and ALFREDO Y. EUGENIO, petitioners, 

vs.
HON. COURT OF APPEALS and PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC.,respondents.

REGALADO, J.:

Private respondent Pepsi-Cola Bottling Company of the Philippines, Inc. is engaged in the business of manufacturing, making bottling
and selling soft drinks and beverages to the general public. Petitioner Nora S. Eugenio was a dealer of the soft drink products of
private respondent corporation. Although she had only one store located at 27 Diamond Street, Emerald Village, Marikina, Metro
Manila, Eugenio had a regular charge account in both the Quezon City plant (under the name "Abigail Minimart" *) as well as in the
Muntinlupa plant (under the name "Nora Store") of respondent corporation. Her husband and co-petitioner, Alfredo Y. Eugenio,
used to be a route manager of private respondent in its Quezon City plant.

On March 17, 1982, private respondent filed a complaint for a sum of money against petitioners Nora S. Eugenio and Alfredo Y.
Eugenio, docketed as Civil Case No. Q-34718 of the then Court of First Instance of Quezon City, Branch 9 (now Regional Trial Court,
Quezon City, Branch 97). In its complaint, respondent corporation alleged that on several occasions in 1979 and 1980, petitioners
purchased and received on credit various products from its Quezon City plant. As of December 31, 1980, petitioners allegedly had an
outstanding balance of P20,437.40 therein. Likewise, on various occasions in 1980, petitioners also purchased and received on credit
various products from respondent's Muntinlupa plant and, as of December 31, 1989, petitioners supposedly had an outstanding
balance of P38,357.20 there. In addition, it was claimed that petitioners had an unpaid obligation for the loaned "empties" from the
same plant in the amount of P35,856.40 as of July 11, 1980. Altogether, petitioners had an outstanding account of P94,651.00 which,
so the complaint alleged, they failed to pay despite oral and written demands. 1

In their defense, petitioners presented four trade provisional receipts (TPRs) allegedly issued to and received by them from private
respondent's Route Manager Jovencio Estrada of its Malate Warehouse (Division 57), showing payments in the total sum of
P80,500.00 made by Abigail's Store. Petitioners contended that had the amounts in the TPRs been credited in their favor, they would
not be indebted to Pepsi-Cola. The details of said receipts are as follows:

TPR No. Date of Issue Amount

500320 600 Fulls returned 5/6/80 P23,520.00

500326 600 Fulls returned 5/10/80 23,520.00
500344 600 Fulls returned 5/14/80 23,520.00
500346 Cash 5/15/80 10,000.00 2

—————
Total P80,560.00

Further, petitioners maintain that the signature purporting to be that of petitioner Nora S. Eugenio in Sales Invoice No. 85366 dated
May 15, 1980 in the amount of P5,631.00, 3 which was included in the computation of their alleged debt, is a falsification. In sum,
petitioners argue that if the aforementioned amounts were credited in their favor, it would be respondent corporation which would
be indebted to them in the sum of P3,546.02 representing overpayment.

After trial on the merits, the court a quo rendered a decision on February 17, 1986, ordering petitioners, as defendants therein to
jointly and severally pay private respondent the amount of P74,849.00, plus 12% interestper annum until the principal amount shall
have been fully paid, as well as P20,000.00 as attorney's fees. 4 On appeal in CA-G.R. CV No. 10623, the Court of Appeals declared
said decision a nullity for failure to comply with the requirement in Section 14, Article VIII of the 1987 Constitution that decisions of
courts should clearly and distinctly state the facts and the law on which they are based. The Court of Appeals accordingly remanded
the records of the case to the trial court, directing it to render another decision in accordance with the requirements of the
Constitution. 5

In compliance with the directive of the Court of Appeals, the lower court rendered a second decision on September 29, 1989. In this
new decision, petitioners were this time ordered to pay, jointly and severally, the reduced amount of P64,188.60, plus legal interest
of 6%  per annum from the filing of the action until full payment of the amount adjudged. 6 On appeal therefrom, the Court of
Appeals affirmed the judgment of the trial court in a decision promulgated on September 27, 1991. 7 A motion for the
reconsideration of said judgment of respondent court was subsequently denied in a resolution dated January 23, 1992. 8

We agree with petitioners and respondent court that the crux of the dispute in the case at bar is whether or not the amounts in the
aforementioned trade provisional receipts should be credited in favor of herein petitioner spouses.

In a so-called encyclopedic sense, however, our course of action in this case and the denouement of the controversy therein takes
into account the jurisprudential rule that in the present recourse we would normally have restricted ourselves to questions of law
and eschewed questions of fact were it not for our perception that the lower courts manifestly overlooked certain relevant factual
considerations resulting in a misapprehension thereof. Consequentially, that position shall necessarily affect our analysis of the rules
on the burden of proof and the burden of evidence, and ultimately, whether the proponent of the corresponding claim has
preponderated or rested on an equipoise or fallen short of preponderance.

First, the backdrop. It appears that on August 1, 1981, private respondent through the head of its Legal Department, Atty. Antonio N.
Rosario, sent an inter-office correspondence to petitioner Alfredo Eugenio inviting him for an interview/interrogation on August 3,
1981 regarding alleged "non-payment of debts to the company, inefficiency, and loss of trust and confidence." 9 The interview was
reset to August 4, 1981 to enable said petitioner to bring along with him their union president, Luis Isip. On said date, a statement of
overdue accounts were prepared showing that petitioners owed respondent corporation the following amounts:

Muntinlupa Plant
Nora's Store
Trade Account P38,357.20 (as of 12/3/80) 10
Loaned Empties P35,856.40 (as of 7/11/81) 11

Quezon City Plant

Abigail Minimart
Regular Account P20,437.40 (as of 1980) 12
—————
Total P94,651.00

A reconciliation of petitioners' account was then conducted. The liability of petitioners as to the loaned empties (Muntinlupa plant,
Nora Store) was reduced to P21,686.00 after a reevaluation of the value of the loaned empties.13 Likewise, the amount of P5,631.00
under Invoice No. 85366, which was a spurious document, was deducted from their liability in their trade account with the
Muntinlupa plant. 14 Thereafter, Eugenio and Isip signed the reconciliation sheets reflecting these items:

Muntinlupa Plant
Nora Store
Trade Account P32,726.20 15
Loaned Empties P21,686.00 16

Quezon City Plant

Abigail Minimart
Trade Account P20,437.20 17
——————
Total P74,849.40

After the meeting, private respondent alleged that petitioner Alfredo Y. Eugenio requested that he be allowed to retire and the
existing accounts be deducted from his retirement pay, but that he later withdrew his retirement plan. Said petitioner disputed that
allegation and, in fact, he subsequently filed a complaint for illegal dismissal. The finding of labor arbiter, later affirmed by the
Supreme Court, showed that this petitioner was indeed illegally dismissed, and that he never filed an application for retirement. In
fact, this Court made a finding that the retirement papers allegedly filed in the name of this petitioner were forged. 18 This makes two
falsified documents to be foisted against petitioners.

With their aforesaid accounts still unpaid, petitioner Alfredo Y. Eugenio submitted to Atty. Rosario the aforementioned four TPRs.
Thereafter, Atty. Rosario ordered Daniel Azurin, assistant personnel manager, to conduct an investigation to verify this claim of
petitioners. According to Azurin, during the investigation on December 4, 1981, Estrada allegedly denied that he issued and signed
the aforesaid TPRs. 19 He also presented a supposed affidavit which Estrada allegedly executed during that investigation to affirm his
verbal statements therein. Surprisingly, however, said supposed affidavit is inexplicably dated February 5, 1982. 20 At this point, it
should be noted that Estrada never testified thereafter in court and what he is supposed to have done or said was merely related by
Azurin.

Now, on this point, respondent court disagreed with herein petitioners that the testimony on the alleged denial of Jovencio Estrada
regarding his signatures on the disputed TPRs, as well as his affidavit dated February 5, 198221 wherein he affirmed his denial, are
hearsay evidence because Estrada was not presented as a witness to testify and be cross-examined thereon. Except for the terse
statement of respondent court that since petitioner Alfredo Eugenio was supposedly present on December 4, 1981, "(t)he testimony
of Jovencio Estrada at the aforementioned investigation categorically denying that he issued and signed the disputed TPRs is,
therefore, not hearsay," 22 there was no further explanation on this unusual doctrinal departure.

The rule is clear and explicit. Under the hearsay evidence rule, a witness can testify only to those facts which he knows of his
personal knowledge; that is, which are derived from his own perception, except as otherwise provided in the Rules. 23 In the present
case, Estrada failed to appear as a witness at the trial. It was only Azurin who testified that during the investigation he conducted,
Estrada supposedly denied having signed the TPRs. It is elementary that under the measure on hearsay evidence, Azurin's testimony
cannot constitute legal proof as to the truth of Estrada's denial. For that matter, it is not admissible in evidence, petitioners' counsel
having seasonably objected at the trial to such testimony of Azurin as hearsay. And, even if not objected to and thereby admissible,
such hearsay evidence has no probative value whatsoever. 24

It is true that the testimony or deposition of a witness deceased or unable to testify, given in a former case or proceeding, judicial or
administrative, involving the same parties and subject matter, may be given in evidence against the adverse party who had the
opportunity to cross-examine him. 25 Private respondent cannot, however, seek sanctuary in this exception to the hearsay evidence
rule.

Firstly, the supposed investigation conducted by Azurin was neither a judicial trial nor an administrative hearing under statutory
regulations and safeguards. It was merely an inter-office interview conducted by a personnel officer through an  ad
hoc arrangement. Secondly, a perusal of the alleged stenographic notes, assumingarguendo that these notes are admissible in
evidence, would show that the "investigation" was more of a free-flowing question and answer type of discussion wherein Estrada
was asked some questions, after which Eugenio was likewise asked other questions. Indeed, there was no opportunity for Eugenio to
object, much less to cross-examine Estrada. Even in a formal prior trial itself, if the opportunity for
cross-examination did not exist therein or if the accused was not afforded opportunity to fully cross-examine the witness when the
testimony was offered, evidence relating to the testimony given therein is thereafter inadmissible in another proceeding, absent any
conduct on the part of the accused amounting to a waiver of his right to cross-examine. 26

Thirdly, the stenographer was not even presented to authenticate the stenographic notes submitted to the trial court. A copy of the
stenographic report of the entire testimony at the former trial must be supported by the oath of the stenographer that it is a correct
transcript of his notes of the testimony of the witness as a sine qua non for its competency and admissibility in evidence. 27 The
supposed stenographic notes on which respondent corporation relies is unauthenticated and necessarily inadmissible for the
purpose intended.

Lastly, although herein private respondent insinuated that Estrada was not presented as a witness because he had disappeared, no
evidence whatsoever was offered to show or even intimate that this was due to any machination or instigation of petitioners. There
is no showing that his absence was procured, or that he was eloigned, through acts imputable to petitioners. In the case at bar,
except for the self-serving statement that Estrada had disappeared, no plausible explanation was given by respondent corporation.
Estrada was an employee of private respondent, hence it can be assumed that it could easily trace or ascertain his whereabouts. It
had the resources to do so, in contradistinction to petitioners who even had to seek the help of the Public Attorney's Office to
defend them here. Private respondent could not have been unaware of the importance of Estrada's testimony and the consequent
legal necessity for presenting him in the trial court, through coercive process if necessary.

Obviously, neither is the affidavit of Estrada admissible; it is likewise barred as evidence by the hearsay evidence rule. 28 This is aside
from the fact that, by their nature, affidavits are generally not prepared by the affiants themselves but by another who uses his own
language in writing the affiant's statements, which may thus be either omitted or misunderstood by the one writing them. 29 The
dubiety of that affidavit, as earlier explained, is further underscored by the fact that it was executed more than two months after the
investigation, presumably for curative purposes as it were.

Now, the authenticity of a handwriting may be proven, among other means, by its comparison made by the witness or the court
with writings admitted or treated as genuine by the party against whom the evidence is offered or proved to be genuine to the
satisfaction of the judge. 30 The alleged affidavit of Estrada states". . . that the comparison that was made as to the authenticity of
the signature appearing in the TPRs and that of my signature showed that there was an apparent dissimilarity between the two
signatures, xerox copy of my 201 File is attached hereto as Annex 'F' of this affidavit. 31 However, a search of the Folder of Exhibits in
this case does not reveal that private respondent ever submitted any document, not even the aforementioned 201 File, containing a
specimen of the signature of Estrada which the Court can use as a basis for comparison. Neither was any document containing a
specimen of Estrada's signature presented by private respondent in the formal offer of its exhibits. 32

Respondent court made the further observation that "Estrada was even asked by Atty. Azurin at said investigation to sign three
times to provide specimens of his genuine signature." 33 There is, however, no showing that he did, but assuming that Estrada signed
the stenographic notes, the Court would still be unable to make the necessary comparison because two signatures appear on the
right margin of each and every page of the stenographic notes, without any indication whatsoever as to which of the signatures is
Estrada's. The whole document was marked for identification but the signatures were not. In fact, although formally offered, it was
merely introduced by the private respondent "in order to show that Jovencio Estrada had been investigated and categorically denied
having collected from Abigail Minimart and denying having signed the receipts claimed by Alfredo Eugenio to be his payment," 34 and
not for the purpose of presenting any alleged signature of Estrada on the document as a basis for comparison.

This is a situation that irresistibly arouses judicial curiosity, if not suspicion. Respondent corporation was fully aware that its case
rested, as it were, on the issue of whether the TPRs were authentic and which issue, in turn, turned on the genuineness of Estrada's
signatures thereon. Yet, aside from cursorily dismissing the non-presentation of Estrada in court by the glib assertion that he could
not be found, and necessarily aware that his alleged denial of his signatures on said TPRs and his affidavit rendered the same
vulnerable to the challenge that they are hearsay and inadmissible, respondent corporation did nothing more. In fact, Estrada's
disappearance has not been explained up to the present.

The next inquiry then would be as to what exactly is the nature of the TPRs insofar as they are used in the day-to-day business
transactions of the company. These trade provisional receipts are bound and given in booklets to the company sales representatives,
under proper acknowledgment by them and with a record of the distribution thereof. After every transaction, when a collection is
made the customer is given by the sales representative a copy of the trade provisional receipt, that is, the triplicate copy or
customer's copy, properly filled up to reflect the completed transaction. All unused TPRs, as well as the collections made, are turned
over by the sales representative to the appropriate company officer. 35

According to respondent court, "the questioned TPR's are merely 'provisional' and were, as printed at the bottom of said receipts, to
be officially confirmed by plaintiff within fifteen (15) days by delivering the original copy thereof stamped paid and signed by its
cashier to the customer. . . . Defendants-appellants (herein petitioners) failed to present the original copies of the TPRs in question,
showing that they were never confirmed by the plaintiff, nor did they demand from plaintiff the confirmed original copies
thereof." 36

We do not agree with the strained implication intended to be adverse to petitioners. The TPRs presented in evidence by petitioners
are disputably presumed as evidentiary of payments made on account of petitioners. There are presumptions juris tantum in law
that private transactions have been fair and regular and that the ordinary course of business has been followed. 37 The role of
presumptions in the law on evidence is to relieve the party enjoying the same of the evidential burden to prove the proposition that
he contends for, and to shift the burden of evidence to the adverse party. Private respondent having failed to rebut the aforestated
presumptions in favor of valid payment by petitioners, these would necessarily continue to stand in their favor in this case.

Besides, even assuming arguendo  that herein private respondent's cashier never received the amounts reflected in the TPRs, still
private respondent failed to prove that Estrada, who is its duly authorized agent with respect to petitioners, did not receive those
amounts from the latter. As correctly explained by petitioners, "in so far as the private respondent's customers are concerned, for as
long as they pay their obligations to the sales representative of the private respondent using the latter's official receipt, said
payment extinguishes their obligations." 38 Otherwise, it would unreasonably cast the burden of supervision over its employees from
respondent corporation to its customers.

The substantive law is that payment shall be made to the person in whose favor the obligation has been constituted, or his
successor-in-interest or any person authorized to receive it. 39 As far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such is within the terms of the power of attorney, as written, even if the
agent has in fact exceeded the limits of his authority according to an understanding between the principal and his agent. 40 In fact,
Atty. Rosario, private respondent's own witness, admitted that "it is the responsibility of the collector to turn over the collection." 41

Still pursuing its ruling in favor of respondent corporation, the Court of Appeals makes the following observation:
 . . . Having allegedly returned 600 Fulls to the plaintiff's representative on May 6, 10, and 14, 1980, appellant-wife's
Abigail Store must have received more than 1,800 cases of soft drinks from plaintiff before those dates. Yet the
Statement of Overdue Account pertaining to Abigail Minimart (Exhs. "D", "D-1" to "D-3") which appellant-husband
and his representative Luis Isip signed on August 3, 1981 does now show more than 1,800 cases of soft drinks were
delivered to Abigail Minimart by plaintiff's Quezon City Plant (which supposedly issued the disputed TPRs) in May,
1980 or the month before."42

We regret the inaccuracy in said theory of respondent court which was impelled by its sole and limited reliance on a mere statement
of overdue amounts. Unlike a statement of account which truly reflects the day-to-day movement of an account, a statement of an
overdue amount is only a summary of the account, simply reflecting the balance due thereon. A statement of account, being more
specific and detailed in nature, allows one to readily see and verify if indeed deliveries were made during a specific period of time,
unlike a bare statement of overdue payments. Respondent court cannot make its aforequoted categorical deduction unless
supporting documents accompanying the statement of overdue amounts were submitted to enable easy and accurate verification of
the facts.

A perusal of the statement of overdue accounts shows that, except for a reference number given for each entry, no further details
were volunteered nor offered. It is entirely possible that the statement of overdue account merely reflects the outstanding debt of a
particular client, and not the specific particulars, such as deliveries made, particularly since the entries therein were surprisingly
entered irrespective of their chronological order. Obviously, therefore, one can not use the statement of overdue amounts as
conclusive proof of deliveries done within a particular time frame.

Except for its speculation that petitioner Alfredo Y. Eugenio could have had easy access to blank forms of the TPRs because he was a
former route manager no evidence whatsoever was presented by private respondent in support of that theory. We are accordingly
intrigued by such an unkind assertion of respondent corporation since Azurin himself admitted that their accounting department
could not even inform them regarding the persons to whom the TPRs were issued. 43 In addition, it is significant that respondent
corporation did not take proper action if indeed some receipts were actually lost, such as the publication of the fact of loss of the
receipts, with the corresponding investigation into the matter.

We, therefore, reject as attenuated the comment of the trial court that the TPRs, which Eugenio submitted after the reconciliation
meeting, "smacks too much of an afterthought." 44 The reconciliation meeting was held on August 4, 1981. Three months later, on
November, 1981, petitioner Alfredo Y. Eugenio submitted the four TPRs. He explained, and this was not disputed, that at the time
the reconciliation meeting was held, his daughter Nanette, who was helping his wife manage the store, had eloped and she had
possession of the TPRs. 45 It was only in November, 1981 when petitioners were able to talk to Nanette that they were able to find
and retrieve said TPRs. He added that during the reconciliation meeting, Atty. Rosario assured him that any receipt he may submit
later will be credited in his favor, hence he signed the reconciliation documents. Accordingly, when he presented the TPRs to private
respondent, Atty. Rosario directed Mr. Azurin to verify the TPRs. Thus, the amount stated in the reconciliation sheet was not final, as
it was still subject to such receipts as may thereafter be presented by petitioners.

On the other hand, petitioners claimed that the signature of petitioner Nora S. Eugenio in Sales Invoice No. 85366, in the amount of
P5,631.00 is spurious and should accordingly be deducted from the disputed amount of P74,849.40. A scrutiny of the reconciliation
sheet shows that said amount had already been deducted upon the instruction of one Mr. Coloma, Plant Controller of Pepsi-Cola ,
Muntinlupa Plant. 46 That amount is not disputed by respondent corporation and should no longer be deducted from the total
liability of petitioner in the sum of P74,849.40. Since petitioners had made a payment of P80,560.00, there was consequently an
overpayment of P5,710.60.

All told, we are constrained to hold that respondent corporation has dismally failed to comply with the pertinent rules for the
admission of the evidence by which it sought to prove its contentions. Furthermore, there are questions left unanswered and
begging for cogent explanations why said respondent did not or could not comply with the evidentiary rules. Its default inevitably
depletes the weight of its evidence which cannot just be taken in vacuo, with the result that for lack of the requisite quantum of
evidence, it has not discharged the burden of preponderant proof necessary to prevail in this case.

WHEREFORE, the judgment of respondent Court of Appeals in C.A. G.R. CV No. 26901, affirming that of the trial court in Civil Case
No. Q-34718, is ANNULLED and SET ASIDE. Private respondent Pepsi-Cola Bottling Company of the Philippines, Inc. is hereby
ORDERED to pay petitioners Nora and Alfredo Eugenio the amount of P5,710.60 representing overpayment made to the former.
G.R. No. 114091 June 29, 1995

BACALTOS COAL MINES and GERMAN A. BACALTOS, petitioners, vs.

HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents. DAVIDE, JR., J.:

Petitioners seek the reversal of the decision of 30 September 1993 of the Court of Appeals in CA-G.R. CV No. 35180, 1 entitled "San
Miguel Corporation vs. Bacaltos Coal Mines, German A. Bacaltos and Rene R. Savellon," which affirmed the decision of 19 August
1991 of the Regional Trial Court (RTC) of Cebu, Branch 9, in Civil Case No. CEB-8187 2holding petitioners Bacaltos Coal Mines and
German A. Bacaltos and their co-defendant Rene R. Savellon jointly and severally liable to private respondent San Miguel
Corporation under a Trip Charter Party.

The paramount issue raised is whether Savellon was duly authorized by the petitioners to enter into the Trip Charter Party (Exhibit
"A") 3 under and by virtue of an Authorization (Exhibit "C" and Exhibit "1"), 4 dated 1 March 1988, the pertinent portions of which
read as follows:

I. GERMAN A. BACALTOS, of legal age, Filipino, widower, and residing at second street, Espina Village, Cebu City,
province of Cebu, Philippines, do hereby authorize RENE R. SAVELLON, of legal age, Filipino and residing at 376-R
Osmeña Blvd., Cebu City, Province of Cebu, Philippines, to use the coal operating contract of BACALTOS COAL
MINES of which I am the proprietor, for any legitimate purpose that it may serve. Namely, but not by way of
limitation, as follows:

(1) To acquire purchase orders for and in behalf of BACALTOS COAL MINES;

(2) To engage in trading under the style of BACALTOS COAL MINES/RENE SAVELLON;

(3) To collect all receivables due or in arrears from people or companies having dealings under
BACALTOS COAL MINES/RENE SAVELLON;

(4) To extend to any person or company by substitution the same extent of authority that is
granted to Rene Savellon;

(5) In connection with the preceeding paragraphs to execute and sign documents, contracts, and
other pertinent papers.

Further, I hereby give and grant to RENE SAVELLON full authority to do and perform all and every lawful act
requisite or necessary to carry into effect the foregoing stipulations as fully to all intents and purposes as I might or
would lawfully do if personally present, with full power of substitution and revocation.

The Trip Charter Party was executed on 19 October 1988 "by and between BACALTOS COAL MINES, represented by its Chief
Operating Officer, RENE ROSEL SAVELLON" and private respondent San Miguel Corporation (hereinafter SMC), represented by
Francisco B. Manzon, Jr., its "SAVP and Director, Plant Operations-Mandaue" Thereunder, Savellon claims that Bacaltos Coal Mines is
the owner of the vessel M/V Premship II and that for P650,000.00 to be paid within seven days after the execution of the contract, it
"lets, demises" the vessel to charterer SMC "for three round trips to Davao."

As payment of the aforesaid consideration, SMC issued a check (Exhibit "B") 5 payable to "RENE SAVELLON IN TRUST FOR BACALTOS
COAL MINES" for which Savellon issued a receipt under the heading of BACALTOS COAL MINES with the address at No 376-R Osmeña
Blvd., Cebu City (Exhibit "B-1"). 6

The vessel was able to make only one trip. Its demands to comply with the contract having been unheeded, SMC filed against the
petitioners and Rene Savellon the complaint in Civil Case No. CEB-8187 for specific performance and damages. In their Answer, 7 the
petitioners alleged that Savellon was not their Chief Operating Officer and that the powers granted to him are only those clearly
expressed in the Authorization which do not include the power to enter into any contract with SMC. They further claimed that if it is
true that SMC entered into a contract with them, it should have issued the check in their favor. They setup counterclaims for moral
and exemplary damages and attorney's fees.
Savellon did not file his Answer and was declared in default on 17 July 1990. 8

At the pre-trial conference on 1 February 1991, the petitioners and SMC agreed to submit the following issues for resolution:

Plaintiff —

1. Whether or not defendants are jointly liable to plaintiff for damages on account of breach of contract;

2. Whether or not the defendants acted in good faith in its representations to the plaintiff;

3. Whether or not defendant Bacaltos was duly enriched on the payment made by the plaintiff for the use of the
vessel;

4. Whether or not defendant Bacaltos is estopped to deny the authorization given to defendant Savellon;

Defendants —

1. Whether or not the plaintiff should have first investigated the ownership of vessel M/V PREM [SHIP] II before
entering into any contract with defendant Savellon;

2. Whether or not defendant Savellon was authorized to enter into a shipping contract with the [plaintiff]
corporation;

3. Whether or not the plaintiff was correct and not mistaken in issuing the checks in payment of the contract in the
name of defendant Savellon and not in the name of defendant Bacaltos Coal Mines;

4. Whether or not the plaintiff is liable on defendants'

counterclaim. 9

After trial, the lower court rendered the assailed decision in favor of SMC and against the petitioners and Savellon as follows:

WHEREFORE, by preponderance of evidence, the Court hereby renders judgment in favor of plaintiff and against
defendants, ordering defendants Rene Savellon, Bacaltos Coal Mines and German A. Bacaltos, jointly and severally,
to pay to plaintiff:

1. The amount of P433,000.00 by way of reimbursement of the consideration paid by plaintiff, plus 12% interest to
start from date of written demand, which is June 14, 1989;

2. The amount of P20,000.00 by way of exemplary damages;

3. The amount of P20,000.00 as attorney's fees and P5,000.00 as Litigation expenses. Plus costs. 10

It ruled that the Authorization given by German Bacaltos to Savellon necessarily included the power to enter into the Trip Charter
Party. It did not give credence to the petitioners' claim that the authorization refers only to coal or coal mining and not to shipping
because, according to it, "the business of coal mining may also involve the shipping of products" and "a company such as a coal
mining company is not prohibited to engage in entering into a Trip Charter Party contract." It further reasoned out that even
assuming that the petitioners did not intend to authorize Savellon to enter into the Trip Charter Party, they are still liable because:
(a) SMC appears to be an innocent party which has no knowledge of the real intent of the parties to the Authorization and has
reason to rely on the written Authorization submitted by Savellon pursuant to Articles 1900 and 1902 of the Civil Code; (b) Savellon
issued an official receipt of Bacaltos Coal Mines (Exhibit "B-1") for the consideration of the Trip Charter Party, and the petitioners
denial that they caused the printing of such official receipt is "lame" because they submitted only a cash voucher and not their
official receipt; (c) the "Notice of Readiness" (Exhibit "A-1") is written on a paper with the letterhead "Bacaltos Coal Mines" and the
logo therein is the same as that appearing in their voucher; (d) the petitioners were benefited by the payment because the real
payee in the check is actually Bacaltos Coal Mines and since in the Authorization they authorized Savellon to collect receivables due
or in arrears, the check was then properly delivered to Savellon; and, (e) if indeed Savellon had not been authorized or if indeed he
exceeded his authority or if the Trip Charter Party was personal to him and the petitioners have nothing to do with it, then Savellon
should have "bother[ed] to answer" the complaint and the petitioners should have filed "a cross-claim" against him.

In their appeal to the Court of Appeals in CA-G.R. CV No. 35180, the petitioners asserted that the trial court erred in: (a) not holding
that SMC was negligent in (1) not verifying the credentials of Savellon and the ownership of the vessel, (2) issuing the check in the
name of Savellon in trust for Bacaltos Coal Mines thereby allowing Savellon to encash the check, and, (3) making full payment of
P650,000.00 after the vessel made only one trip and before it completed three trips as required in the Trip Charter Party; (b) holding
that under the authority given to him Savellon was authorized to enter into the Trip Charter Party; and, (c) holding German Bacaltos
jointly and severally liable with Savellon and Bacaltos Coal Mines. 11

As stated at the beginning, the Court of Appeals affirmed in toto the judgment of the trial court. It held that: (a) the credentials of
Savellon is not an issue since the petitioners impliedly admitted the agency while the ownership of the vessel was warranted on the
face of the Trip Charter Party; (b) SMC was not negligent when it issued the check in the name of Savellon in trust for Bacaltos Coal
Mines since the Authorization clearly provides that collectibles of the petitioners can be coursed through Savellon as the agent; (c)
the Authorization includes the power to enter into the Trip Charter Party because the "five prerogatives" enumerated in the former
is prefaced by the phrase "but not by way of limitation"; (d) the petitioners' statement that the check should have been issued in the
name of Bacaltos Coal Mines is another implicit admission that the Trip Charter Party is part and parcel of the petitioners' business
notwithstanding German Bacaltos's contrary interpretation when he testified, and in any event, the construction of obscure words
should not favor him since he prepared the Authorization in favor of Savellon; and, (e) German Bacaltos admitted in the Answer that
he is the proprietor of Bacaltos Coal Mines and he likewise represented himself to be so in the Authorization itself, hence he should
not now be permitted to disavow what he initially stated to be true and to interpose the defense that Bacaltos Coal Mines has a
distinct legal personality.

Their motion for a reconsideration of the above decision having been denied, the petitioners filed the instant petition wherein they
raise the following errors:

I. THE RESPONDENT COURT ERRED IN HOLDING THAT RENE SAVELLON WAS AUTHORIZED TO
ENTER INTO A TRIP CHARTER PARTY CONTRACT WITH PRIVATE RESPONDENT INSPITE OF ITS
FINDING THAT SUCH AUTHORITY CANNOT BE FOUND IN THE FOUR CORNERS OF THE
AUTHORIZATION;

II. THE RESPONDENT COURT ERRED IN NOT HOLDING THAT BY ISSUING THE CHECK IN THE NAME
OF RENE SAVELLON IN TRUST FOR BACALTOS COAL MINES, THE PRIVATE RESPONDENT WAS THE
AUTHOR OF ITS OWN DAMAGE; AND

III. THE RESPONDENT COURT ERRED IN HOLDING PETITIONER GERMAN BACALTOS JOINTLY AND
SEVERALLY LIABLE WITH RENE SAVELLON AND CO-PETITIONER BACALTOS COAL MINES IN SPITE
OF THE FINDING OF THE COURT A QUO THAT PETITIONER BACALTOS COAL MINES AND
PETITIONER BACALTOS ARE TWO DISTINCT AND SEPARATE LEGAL PERSONALITIES. 12

After due deliberations on the allegations, issues raised, and arguments adduced in the petition, and the comment thereto and reply
to the comment, the Court resolved to give due course to the petition.

Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not
make such inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of that authority will not be any
excuse. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if
they would hold the principal, to ascertain not only the fact of the agency but also the nature and extent of the authority, and in
case either is controverted, the burden of proof is upon them to establish it. 13 American jurisprudence 14 summarizes the rule in
dealing with an agent as follows:

A third person dealing with a known agent may not act negligently with regard to the extent of the agent's
authority or blindly trust the agent's statements in such respect. Rather, he must use reasonable diligence and
prudence to ascertain whether the agent is acting and dealing with him within the scope of his powers. The mere
opinion of an agent as to the extent of his powers, or his mere assumption of authority without foundation, will
not bind the principal; and a third person dealing with a known agent must bear the burden of determining for
himself, by the exercise of reasonable diligence and prudence, the existence or nonexistence of the agent's
authority to act in the premises. In other words, whether the agency is general or special, the third person is bound
 to ascertain not only the fact of agency, but the nature and extent of the authority. 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.

Or, as stated in Harry E.  Keller Electric Co. vs.  Rodriguez, 15 quoting Mechem on Agency:

The person dealing with the agent must also act with ordinary prudence and reasonable diligence. Obviously, if he
knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection. So if the
suggestions of probable limitations be of such a clear and reasonable quality, or if the character assumed by the
agent is of such a suspicious or unreasonable nature, or if the authority which he seeks to exercise is of such an
unusual or improbable character, as would suffice to put an ordinarily prudent man upon his guard, the party
dealing with him may not shut his eyes to the real estate of the case, but should either refuse to deal with the
agent at all, or should ascertain from the principal the true condition of affairs. [emphasis supplied].

In the instant case, since the agency of Savellon is based on a written document, the Authorization of 1 March 1988 (Exhibits "C" and
"1"), the extent and scope of his powers must be determined on the basis thereof. The language of the Authorization is clear. It
pertinently states as follows:

I. GERMAN A. BACALTOS do hereby authorize RENE R. SAVELLON . . . to use the coal operating contract of BACALTOS COAL MINES, of
which I am the proprietor,  for any legitimate purpose that it may serve. Namely, but not by way of limitation, as follows  . . .
[emphasis supplied].

There is only one express power granted to Savellon, viz., to use the coal operating contract for anylegitimate purpose it
may serve. The enumerated "five prerogatives" — to employ the term used by the Court of Appeals — are nothing but the
specific prerogatives subsumed under or classified as part of or as examples of the power to use the coal operating
contract. The clause "but not by way of limitation" which precedes the enumeration could only refer to or contemplate
other prerogatives which must exclusively pertain or relate or be germane to the power to use the coal operating contract.
The conclusion then of the Court of Appeals that the Authorization includes the power to enter into the Trip Chapter Party
because the "five prerogatives" are prefaced by such clause, is seriously flawed. It fails to note that the broadest scope of
Savellon's authority is limited to the use of the coal operating contract and the clause cannot contemplate any other power
not included in the enumeration or which are unrelated either to the power to use the coal operating contract or to those
already enumerated. In short, while the clause allows some room for flexibility, it can comprehend only additional
prerogatives falling within the primary power and within the same class as those enumerated. The trial court, however,
went further by hastily making a sweeping conclusion that "a company such as a coal mining company is not prohibited to
engage in entering into a Trip Charter Party contract." 16 But what the trial court failed to consider was that there is no
evidence at all that Bacaltos Coal Mines as a coal mining company owns and operates vessels, and even if it owned any such
vessels, that it was allowed to charter or lease them. The trial court also failed to note that the Authorization is not a
general power of attorney. It is a special power of attorney  for it refers to a clear mandate specifically authorizing the
performance of a specific power and of express acts subsumed therein. 17 In short, both courts below unreasonably
expanded the express terms of or otherwise gave unrestricted meaning to a clause which was precisely intended to prevent
unwarranted and unlimited expansion of the powers entrusted to Savellon. The suggestion of the Court of Appeals that
there is obscurity in the Authorization which must be construed against German Bacaltos because he prepared the
Authorization has no leg to stand on inasmuch as there is no obscurity or ambiguity in the instrument. If any obscurity or
ambiguity indeed existed, then there will be more reason to place SMC on guard and for it to exercise due diligence in
seeking clarification or enlightenment thereon, for that was part of its duty to discover upon its peril the nature and extent
of Savellon's written agency. Unfortunately, it did not.

Howsoever viewed, the foregoing conclusions of the Court of Appeals and the trial court are tenuous and farfetched, bringing to
unreasonable limits the clear parameters of the powers granted in the Authorization.

Furthermore, had SMC exercised due diligence and prudence, it should have known in no time that there is absolutely nothing on
the face of the Authorization that confers upon Savellon the authority to enter into any Trip Charter Party. Its conclusion to the
contrary is based solely on the second prerogative under the Authorization, to wit:

(2) To engage in trading under the style of BACALTOS COAL MINES/RENE SAVELLON;
 unmindful that such is but a part of the primary authority to use the coal operating contract which it did not even require
Savellon to produce. Its principal witness, Mr. Valdescona, expressly so admitted on cross-examination, thus:

Atty. Zosa (to witness — ON CROSS)

Q You said that in your office Mr. Rene Savellon presented to you this authorization marked
Exhibit "C" and Exhibit "1" for the defendant?

A Yes, sir.

Q Did you read in the first part[y] of this authorization Mr. Valdescona that Mr. Rene Savellon
was authorized as the coal operating contract of Bacaltos Coal Mines?

A Yes, sir.

Q Did it not occur to you that you should have examined further the authorization of Mr. Rene
Savellon, whether or not this coal operating contract allows Mr. Savellon to enter into a trip
charter party?

A Yes, sir. We discussed about the extent of his authorization and he referred us to the number 2
provision of this authorization which is to engage in trading under the style of Bacaltos Coal
Mines/Rene Savellon, which we followed up to the check preparation because it is part of the
authority.

Q In other words, you examined this and you found out that Mr. Savellon is authorized to use the
coal operating contract of Bacaltos Coal Mines?

A Yes, sir.

Q You doubted his authority but you found out in paragraph 2 that he is authorized that's why
you agreed and entered into that trip charter party?

A We did not doubt his authority but we were questioning as to the extent of his operating
contract.

Q Did you not require Mr. Savellon to produce that coal operating contract of Bacaltos Coal
Mines?

A No sir. We did not. 18

Since the principal subject of the Authorization is the coal operating contract, SMC should have required its presentation to
determine what it is and how it may be used by Savellon. Such a determination is indispensable to an inquiry into the extent or
scope of his authority. For this reason, we now deem it necessary to examine the nature of a coal operating contract.

A coal operating contract is governed by P.D. No. 972 (The Coal Development Act of 1976), as amended by P.D. No. 1174. It is one of
the authorized ways of active exploration, development, and production of coal resources 19in a specified contract area. 20 Section 9
of the decree prescribes the obligation of the contractor, thus:

Sec. 9. Obligations of Operator in Coal Operating Contract. — The operator under a coal operating contract shall
undertake, manage and execute the coal operations which shall include:

(a) The examination and investigation of lands supposed to contain coal, by detailed surface geologic mapping,
core drilling, trenching, test pitting and other appropriate means, for the purpose of probing the presence of coal
deposits and the extent thereof;
 (b) Steps necessary to reach the coal deposit so that it can be mined, including but not limited to shaft sinking and
tunneling; and

(c) The extraction and utilization of coal deposits.

The Government shall oversee the management of the operation contemplated in a coal operating contract and in
this connection, shall require the operator to:

(a) Provide all the necessary service and technology;

(b) Provide the requisite financing;

(c) Perform the work obligations and program prescribed in the coal operating contract which shall not be less than
those prescribed in this Decree;

(d) Operate the area on behalf of the Government in accordance with good coal mining practices using modern
methods appropriate for the geological conditions of the area to enable maximum economic production of coal,
avoiding hazards to life, health and property, avoiding pollution of air, lands and waters, and pursuant to an
efficient and economic program of operation;

(e) Furnish the Energy Development Board promptly with all information, data and reports which it may require;.

(f) Maintain detailed technical records and account of its expenditures;

(g) Conform to regulations regarding, among others, safety demarcation of agreement acreage and work areas,
non-interference
with the rights of the other petroleum, mineral and natural resources operators; —

(h) Maintain all necessary equipment in good order and allow access to these as well as to the exploration,
development and production sites and operations to inspectors authorized by the Energy Development Board;

(i) Allow representatives authorized by the Energy Development Board full access to their accounts, books and
records for tax and other fiscal purposes.

Section 11 thereof provides for the minimum terms and conditions of a coal operating contract.

From the foregoing, it is obvious that a scrutiny of the coal operating contract of Bacaltos Coal Mines would have provided SMC
knowledge of the activities which are germane, related, or incident to the power to use it. But it did not even require Savellon to
produce the same.

SMC's negligence was further compounded by its failure to verify if Bacaltos Coal Mines owned a vessel. A party desiring to charter a
vessel must satisfy itself that the other party is the owner of the vessel or is at least entitled to its possession with power to lease or
charter the vessel. In the instant case, SMC made no such attempt. It merely satisfied itself with the claim of Savellon that the vessel
it was leasing is owned by Bacaltos Coal Mines and relied on the presentation of the Authorization as well as its test on the sea
worthiness of the vessel. Valdescona thus declared on direct examination as follows:

A In October, a certain Rene Savellon called our office offering us shipping services. So I told him
to give us a formal proposal and also for him to come to our office so that we can go over his
proposal and formally discuss his offer.

Q Did Mr. Rene Savellon go to your office?

A Few days later he came to our office and gave us his proposal verbally offering a vessel for us to
use for our cargo.

Q Did he mention the owner of that vessel?

 A Yes, sir. That it is Bacaltos.

Q Did he present a document to you?

A Yes, sir. He presented to us the authorization.

Q When Mr. Rene Savellon presented to you the authorization what did you do?.

A On the strength of that authorization we initially asked him for us to check the vessel to see its
sea worthiness, and we assigned our in-house surveyor to check the sea worthiness of the vessel
which was on dry dock that time in Danao.

Q What was the result of your inspection?

A We found out the vessel's sea worthiness to be our cargo carrier.

Q After that what did you do?

A After that we were discussing the condition of the contract.

Q Were you able to execute that contract?

A Yes, sir . 21

He further declared as follows:

Q When you entered into a trip charter contract did you check the ownership of M/V Premship?

A The representation made by Mr. Rene Savellon was that Bacaltos Coal Mines operates the
vessel and on the strength of the authorization he showed us we were made to believe that it
was Bacaltos Coal Mines that owned it.

COURT: (to witness)

Q In other words, you just believed Rene Savellon?

A Yes, sir.

COURT: (to witness)

Q You did not check with Bacaltos Coal Mines?

A That is the representation he made.

Q Did he show you document regarding this M/V Premship II?

A No document shown. 22

The Authorization itself does not state that Bacaltos Coal Mines owns any vessel, and since it is clear therefrom that it is not engaged
in shipping but in coal mining or in coal business, SMC should have required the presentation of pertinent documentary proof of
ownership of the vessel to be chartered. Its in-house surveyor who saw the vessel while drydocked in Danao and thereafter
conducted a sea worthiness test could not have failed to ascertain the registered owner of the vessel. The petitioners themselves
declared in open court that they have not leased any vessel for they do not need it in their coal operations 23 thereby implying that
they do not even own one.
The Court of Appeals' asseveration that there was no need to verify the ownership of the vessel because such ownership is
warranted on the face of the trip charter party begs the question since Savellon's authority to enter into that contract is the very
heart of the controversy.

We are not prepared to accept SMC's contention that the petitioners' claim that they are not engaged in shipping and do not own
any ship is belied by the fact that they maintained a pre-printed business form known as a "Notice of Readiness" (Exhibit "A-
1"). 24 This paper is only a photocopy and, despite its reservation to present the original for purposes of comparison at the next
hearing, 25 SMC failed to produce the latter. This "Notice of Readiness" is not, therefore, the best evidence, hence inadmissible under
Section 3, Rule 130 of the Rules of Court. It is true that when SMC made a formal offer of its exhibits, the petitioners did not object
to the admission of Exhibit "A-1," the "Notice of Readiness," under the best evidence rule but on the ground that Savellon was not
authorized to enter into the Trip Charter Party and that the party who signed it, one Elmer Baliquig, is not the petitioners' employee
but of Premier Shipping Lines, the owner of the vessel in question. 26 The petitioners raised the issue of inadmissibility under the best
evidence rule only belatedly in this petition. But although Exhibit "A-1" remains admissible for not having been timely objected to, it
has no probative value as to the ownership of the vessel.

There is likewise no proof that the petitioners received the consideration of the Trip Charter Party. The petitioners denied having
received it. 27 The evidence for SMC established beyond doubt that it was Savellon who requested in writing on 19 October 1988 that
the check in payment therefor be drawn in favor of BACALTOS COAL MINES/RENE SAVELLON (Exhibit "B-3") and that SMC drew the
check in favor of RENE SAVELLON IN TRUST FOR BACALTOS COALMINES (Exhibit "B") and delivered it to Savellon who there upon
issued a receipt (Exhibit "B-1"). We agree with the petitioners that SMC committed negligence in drawing the check in the manner
aforestated. It even disregarded the request of Savellon that it be drawn in favor of BACALTOS COAL MINES/RENE SAVELLON.
Furthermore, assuming that the transaction was permitted in the Authorization, the check should still have been drawn in favor of
the principal. SMC then made possible the wrong done. There is an equitable maxim that between two innocent parties, the one
who made it possible for the wrong to be done should be the one to bear the resulting loss. 28 For this rule to apply, the condition
precedent is that both parties must be innocent. In the present case, however, SMC is guilty of not ascertaining the extent and limits
of the authority of Savellon. In not doing so, SMC dealt with Savellon at its own peril.

Having thus found that SMC was the author of its own damage and that the petitioners are, therefore, free from any liability, it has
become unnecessary to discuss the issue of whether Bacaltos Coal Mines is a corporation with a personality distinct and separate
from German Bacaltos.

WHEREFORE, the instant petition is GRANTED and the challenged decision of 30 September 1993 of the Court of Appeals in CA-G.R.
CV No. 35180 is hereby REVERSED and SET ASIDE and another judgment is hereby rendered MODIFYING the judgment of the
Regional Trial Court of Cebu, Branch 9, in Civil Case No. CEB-8187 by setting aside the declaration of solidary liability, holding
defendant RENE R. SAVELLON solely liable for the amounts adjudged, and ordering the dismissal of the case as against herein
petitioners.

G.R. No. 148116             April 14, 2004

ANTONIO K. LITONJUA and AURELIO K. LITONJUA, JR., petitioners, 

vs.
MARY ANN GRACE FERNANDEZ, HEIRS OF PAZ TICZON ELEOSIDA, represented by GREGORIO T. ELEOSIDA, HEIRS OF DOMINGO B.
TICZON, represented by MARY MEDIATRIX T. FERNANDEZ, CRISTETA TICZON, EVANGELINE JILL R. TICZON, ERLINDA T. BENITEZ,
DOMINIC TICZON, JOSEFINA LUISA PIAMONTE, JOHN DOES and JANE DOES, respondents.

DECISION

CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. CV No. 64940, which reversed and set
aside the June 23, 1999 Decision2 of the Regional Trial Court of Pasig City, Branch 68, in Civil Case No. 65629, as well as its Resolution
dated April 30, 2001 denying the petitioners’ motion for reconsideration of the aforesaid decision.

The heirs of Domingo B. Ticzon3 are the owners of a parcel of land located in San Pablo City, covered by Transfer Certificate of Title
(TCT) No. T-36766 of the Register of Deeds of San Pablo City.4 On the other hand, the heirs of Paz Ticzon Eleosida, represented by
Gregorio T. Eleosida, are the owners of a parcel of land located in San Pablo City, covered by TCT No. 36754, also of the Register of
Deeds of San Pablo City.5

The Case for the Petitioners

Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico who worked as brokers, offered to sell to the petitioners,
Antonio K. Litonjua and Aurelio K. Litonjua, Jr., the parcels of land covered by TCT Nos. 36754 and 36766. The petitioners were
shown a locator plan and copies of the titles showing that the owners of the properties were represented by Mary Mediatrix
Fernandez and Gregorio T. Eleosida, respectively. The brokers told the petitioners that they were authorized by respondent
Fernandez to offer the property for sale. The petitioners, thereafter, made two ocular inspections of the property, in the course of
which they saw some people gathering coconuts.

In the afternoon of November 27, 1995, the petitioners met with respondent Fernandez and the two brokers at the petitioners’
office in Mandaluyong City.6 The petitioners and respondent Fernandez agreed that the petitioners would buy the property
consisting of 36,742 square meters, for the price of P150 per square meter, or the total sum of P5,098,500. They also agreed that the
owners would shoulder the capital gains tax, transfer tax and the expenses for the documentation of the sale. The petitioners and
respondent Fernandez also agreed to meet on December 8, 1995 to finalize the sale. It was also agreed upon that on the said date,
respondent Fernandez would present a special power of attorney executed by the owners of the property, authorizing her to sell the
property for and in their behalf, and to execute a deed of absolute sale thereon. The petitioners would also remit the purchase price
to the owners, through respondent Fernandez. However, only Agapito Fisico attended the meeting. He informed the petitioners that
respondent Fernandez was encountering some problems with the tenants and was trying to work out a settlement with them.7 After
a few weeks of waiting, the petitioners wrote respondent Fernandez on January 5, 1995, demanding that their transaction be
finalized by January 30, 1996.8

When the petitioners received no response from respondent Fernandez, the petitioners sent her another Letter9dated February 1,
1996, asking that the Deed of Absolute Sale covering the property be executed in accordance with their verbal agreement dated
November 27, 1995. The petitioners also demanded the turnover of the subject properties to them within fifteen days from receipt
of the said letter; otherwise, they would have no option but to protect their interest through legal means.

Upon receipt of the above letter, respondent Fernandez wrote the petitioners on February 14, 199610 and clarified her stand on the
matter in this wise:

1) It is not true I agreed to shoulder registration fees and other miscellaneous expenses, etc. I do not recall we ever
discussed about them. Nonetheless, I made an assurance at that time that there was no liens/encumbrances and tenants
on my property (TCT – 36755).

2) It is not true that we agreed to meet on December 8, 1995 in order to sign the Deed of Absolute Sale. The truth of the
matter is that you were the one who emphatically stated that you would prepare a Contract to Sell and requested us to
come back first week of December as you would be leaving the country then. In fact, what you were demanding from us
was to apprise you of the status of the property, whether we would be able to ascertain that there are really no tenants.
Ms. Alimario and I left your office, but we did not assure you that we would be back on the first week of December.

Unfortunately, some people suddenly appeared and claiming to be "tenants" for the entire properties (including those
belonging to my other relatives.) Another thing, the Barangay Captain now refuses to give a certification that our properties
are not tenanted.

Thereafter, I informed my broker, Ms. Lulu Alimario, to relay to Mr. Agapito that due to the appearance of "alleged tenants"
who are demanding for a one-hectare share, my cousin and I have thereby changed our mind and that the sale will no
longer push through. I specifically instructed her to inform you thru your broker that we will not be attending the meeting
to be held sometime first week of December.
 In view thereof, I regret to formally inform you now that we are no longer selling the property until all problems are fully
settled. We have not demanded and received from you any earnest money, thereby, no obligations exist. In the meantime,
we hope that in the future we will eventually be able to transact business since we still have other properties in San Pablo
City.11

Appended thereto was a copy of respondent Fernandez’ letter to the petitioners dated January 16, 1996, in response to the latter’s
January 5, 1996 letter.12

On April 12, 1996, the petitioners filed the instant Complaint for specific performance with damages13 against respondent Fernandez
and the registered owners of the property. In their complaint, the petitioners alleged, inter alia, the following:

4. On 27 November 1995, defendants offered to sell to plaintiffs two (2) parcels of land covered by Transfer Certificates of
Title Nos. 36766 and 36754 measuring a total of 36,742 square meters in Barrio Concepcion, San Pablo City. … After a brief
negotiation, defendants committed and specifically agreed to sell to plaintiffs 33,990 square meters of the two (2)
aforementioned parcels of land at P150.00 per square meter.

5. The parties also unequivocally agreed to the following:

(a) The transfer tax and all the other fees and expenses for the titling of the subject property in plaintiffs’ names would be
for defendants’ account.

(b) The plaintiffs would pay the entire purchase price of P5,098,500.00 for the aforementioned 33,990 square meters of
land in plaintiffs’ office on 8 December 1995.

6. Defendants repeatedly assured plaintiffs that the two (2) subject parcels of land were free from all liens and
encumbrances and that no squatters or tenants occupied them.

7. Plaintiffs, true to their word, and relying in good faith on the commitment of defendants, pursued the purchase of the
subject parcels of lands. On 5 January 1996, plaintiffs sent a letter of even date to defendants, … setting the date of sale and
payment on 30 January 1996.

7.1 Defendants received the letter on 12 January 1996 but did not reply to it.

8. On 1 February 1996, plaintiffs again sent a letter of even date to defendants demanding execution of the Deed of Sale.

8.1 Defendants received the same on 6 February 1996. Again, there was no reply. Defendants thus reneged on
their commitment a second time.

9. On 14 February 1996, defendant Fernandez sent a written communication of the same date to plaintiffs enclosing therein
a copy of her 16 January 1996 letter to plaintiffs which plaintiffs never received before. Defendant Fernandez stated in her
16 January 1996 letter that despite the meeting of minds among the parties over the 33,990 square meters of land for
P150.00 per square meter on 27 November 1995, defendants suddenly had a change of heart and no longer wished to sell
the same. Paragraph 6 thereof unquestionably shows defendants’ previous agreement as above-mentioned and their
unjustified breach of their obligations under it. …

10. Defendants cannot unilaterally, whimsically and capriciously cancel a perfected contract to sell. …

11. Plaintiffs intended to use the subject property for their subdivision project to support plaintiffs’ quarry operations,
processing of aggregate products and manufacture of construction materials. Consequently, by reason of defendants’
failure to honor their just obligations, plaintiffs suffered, and continue to suffer, actual damages, consisting in unrealized
profits and cost of money, in the amount of at least P5 Million.

12. Plaintiffs also suffered sleepless nights and mental anxiety on account of defendants’ fraudulent actuations for which
reason defendants are liable to plaintiffs for moral damages in the amount of at least P1.5 Million.
 13. By reason of defendants’ above-described fraudulent actuations, plaintiffs, despite their willingness and ability to pay
the agreed purchase price, have to date been unable to take delivery of the title to the subject property. Defendants acted
in a wanton, fraudulent and malevolent manner in violating the contract to sell. By way of example or correction for the
public good, defendants are liable to plaintiff for exemplary damages in the amount of P500,000.00.

14. Defendants’ bad faith and refusal to honor their just obligations to plaintiffs constrained the latter to litigate and to
engage the services of undersigned counsel for a fee in the amount of at least P250,000.00.14

The petitioners prayed that, after due hearing, judgment be rendered in their favor ordering the respondents to –

(a) Secure at defendants’ expense all clearances from the appropriate government agencies that will enable defendants to
comply with their obligations under the Contract to Sell;

(b) Execute a Contract to Sell with terms agreed upon by the parties;

(c) Solidarily pay the plaintiffs the following amounts:

1. P5,000,000.00 in actual damages;

2. P1,500,000.00 in moral damages;

3. P500,000.00 in exemplary damages;

4. P250,000.00 in attorney’s fees.15

On July 5, 1996, respondent Fernandez filed her Answer to the complaint.16 She claimed that while the petitioners offered to buy the
property during the meeting of November 27, 1995, she did not accept the offer; thus, no verbal contract to sell was ever perfected.
She specifically alleged that the said contract to sell was unenforceable for failure to comply with the statute of frauds. She also
maintained that even assuming arguendothat she had, indeed, made a commitment or promise to sell the property to the
petitioners, the same was not binding upon her in the absence of any consideration distinct and separate from the price. She, thus,
prayed that judgment be rendered as follows:

1. Dismissing the Complaint, with costs against the plaintiffs;

2. On the COUNTERCLAIM, ordering plaintiffs to pay defendant moral damages in the amount of not less than
P2,000,000.00 and exemplary damages in the amount of not less than P500,000.00 and attorney’s fees and reimbursement
expenses of litigation in the amount of P300,000.00.17

On September 24, 1997, the trial court, upon motion of the petitioners, declared the other respondents in default for failure to file
their responsive pleading within the reglementary period.18 At the pre-trial conference held on March 2, 1998, the parties agreed
that the following issues were to be resolved by the trial court: (1) whether or not there was a perfected contract to sell; (2) in the
event that there was, indeed, a perfected contract to sell, whether or not the respondents breached the said contract to sell; and (3)
the corollary issue of damages.19

Respondent Fernandez testified that she requested Lourdes Alimario to look for a buyer of the properties in San Pablo City "on a
best offer basis." She was later informed by Alimario that the petitioners were interested to buy the properties. On November 27,
1995, along with Alimario and another person, she met with the petitioners in the latter’s office and told them that she was at the
conference merely to hear their offer, that she could not bind the owners of the properties as she had no written authority to sell
the same. The petitioners offered to buy the property at P150 per square meter. After the meeting, respondent Fernandez
requested Joy Marquez to secure a barangay clearance stating that the property was free of any tenants. She was surprised to learn
that the clearance could not be secured. She contacted a cousin of hers, also one of the owners of the property, and informed him
that there was a prospective buyer of the property but that there were tenants thereon. Her cousin told her that he was not selling
his share of the property and that he was not agreeable to the price of P150 per square meter. She no longer informed the other
owners of the petitioners’ offer. Respondent Fernandez then asked Alimario to apprise the petitioners of the foregoing
developments, through their agent, Agapito Fisico. She was surprised to receive a letter from the petitioners dated January 5, 1996.
Nonetheless, she informed the petitioners that she had changed her mind in pursuing the negotiations in a Letter dated January 18,
1996. When she received petitioners’ February 1, 1996 Letter, she sent a Reply-Letter dated February 14, 1996.

After trial on the merits, the trial court rendered judgment in favor of the petitioners on June 23, 1999,20 the dispositive portion of
which reads:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of plaintiffs ANTONIO K. LITONJUA and
AURELIO K. LITONJUA and against defendants MARY MEDIATRIX T. FERNANDEZ, HEIRS OF PAZ TICZON ELEOSIDA,
represented by GREGORIO T. ELEOSIDA, JOHN DOES and JANE DOES; HEIRS OF DOMINGO B. TICZON, represented by MARY
MEDIATRIX T. FERNANDEZ, CRISTETA TICZON, EVANGELINE JILL R. TICZON, ERLINDA T. BENITEZ, DOMINIC TICZON, JOSEFINA
LUISA PIAMONTE, JOHN DOES and JANE DOES, ordering defendants to:

1. execute a Contract of Sale and/or Absolute Deed of Sale with the terms agreed upon by the parties and to
secure all clearances from the concerned government agencies and removal of any tenants from the subject
property at their expense to enable defendants to comply with their obligations under the perfected agreement to
sell; and

2. pay to plaintiffs the sum of Two Hundred Thousand (P200,000.00) Pesos as and by way of attorney’s fees.21

On appeal to the Court of Appeals, the respondents ascribed the following errors to the court a quo:

I. THE LOWER COURT ERRED IN HOLDING THAT THERE WAS A PERFECTED CONTRACT OF SALE OF THE TWO LOTS ON
NOVEMBER 27, 1995.

II. THE LOWER COURT ERRED IN NOT HOLDING THAT THE VERBAL CONTRACT OF SALE AS CLAIMED BY PLAINTIFFS-
APPELLEES ANTONIO LITONJUA AND AURELIO LITONJUA WAS UNENFORCEABLE.

III. THE LOWER COURT ERRED IN HOLDING THAT THE LETTER OF DEFENDANT-APPELLANT FERNANDEZ DATED JANUARY 16,
1996 WAS A CONFIRMATION OF THE PERFECTED SALE AND CONSTITUTED AS WRITTEN EVIDENCE THEREOF.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT A SPECIAL POWER OF ATTORNEY WAS REQUIRED IN ORDER THAT
DEFENDANT-APPELLANT FERNANDEZ COULD NEGOTIATE THE SALE ON BEHALF OF THE OTHER REGISTERED CO-OWNERS OF
THE TWO LOTS.

V. THE LOWER COURT ERRED IN AWARDING ATTORNEY’S FEES IN THE DISPOSITIVE PORTION OF THE DECISION WITHOUT
STATING THE BASIS IN THE TEXT OF SAID DECISION.22

On February 28, 2001, the appellate court promulgated its decision reversing and setting aside the judgment of the trial court and
dismissing the petitioners’ complaint, as well as the respondents’ counterclaim.23 The appellate court ruled that the petitioners failed
to prove that a sale or a contract to sell over the property between the petitioners and the private respondent had been perfected.

Hence, the instant petition for review on certiorari under Rule 45 of the Revised Rules of Court.

The petitioners submit the following issues for the Court’s resolution:

A. WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES.

B. WHETHER OR NOT THE CONTRACT FALLS UNDER THE COVERAGE OF THE STATUTE OF FRAUDS.

C. WHETHER OR NOT THE DEFENDANTS DECLARED IN DEFAULT ARE BENEFITED BY THE ASSAILED DECISION OF THE COURT
OF APPEALS.24

The petition has no merit.

The general rule is that the Court’s jurisdiction under Rule 45 of the Rules of Court is limited to the review of errors of law committed
by the appellate court. As the findings of fact of the appellate court are deemed continued, this Court is not duty-bound to analyze
and calibrate all over again the evidence adduced by the parties in the court a quo.25 This rule, however, is not without exceptions,
such as where the factual findings of the Court of Appeals and the trial court are conflicting or contradictory.26 Indeed, in this case,
the findings of the trial court and its conclusion based on the said findings contradict those of the appellate court. However, upon
careful review of the records of this case, we find no justification to grant the petition. We, thus, affirm the decision of the appellate
court.

On the first and second assignment of errors, the petitioners assert that there was a perfected contract of sale between the
petitioners as buyers and the respondents-owners, through respondent Fernandez, as sellers. The petitioners contend that the
perfection of the said contract is evidenced by the January 16, 1996 Letter of respondent Fernandez.27 The pertinent portions of the
said letter are as follows:

… [M]y cousin and I have thereby changed our mind and that the sale will no longer push through. I specifically instructed
her to inform you thru your broker that we will not be attending the meeting to be held sometime first week of December.

In view thereof, I regret to formally inform you now that we are no longer selling the property until all problems are fully
settled. We have not demanded and received from you any earnest money, thereby, no obligations exist…28

The petitioners argue that the letter is a sufficient note or memorandum of the perfected contract, thus, removing it from the
coverage of the statute of frauds. The letter specifically makes reference to a sale which respondent Fernandez agreed to initially,
but which the latter withdrew because of the emergence of some people who claimed to be tenants on both parcels of land.
According to the petitioners, the respondents-owners, in their answer to the complaint, as well as respondent Fernandez when she
testified, admitted the authenticity and due execution of the said letter. Besides, when the petitioner Antonio Litonjua testified on
the contract of sale entered into between themselves and the respondents-owners, the latter did not object thereto. Consequently,
the respondents-owners thereby ratified the said contract of sale. The petitioners thus contend that the appellate court’s
declaration that there was no perfected contract of sale between the petitioners and the respondents-owners is belied by the
evidence, the pleadings of the parties, and the law.

The petitioners’ contention is bereft of merit. In its decision, the appellate court ruled that the Letter of respondent Fernandez dated
January 16, 1996 is hardly the note or memorandum contemplated under Article 1403(2)(e) of the New Civil Code, which reads:

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing,
and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the
writing, or secondary evidence of its contents:

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest
therein.29

The appellate court based its ruling on the following disquisitions:

In the case at bar, the letter dated January 16, 1996 of defendant-appellant can hardly be said to constitute the note or
memorandum evidencing the agreement of the parties to enter into a contract of sale as it is very clear that defendant-
appellant as seller did not accept the condition that she will be the one to pay the registration fees and miscellaneous
expenses and therein also categorically denied she had already committed to execute the deed of sale as claimed by the
plaintiffs-appellees. The letter, in fact, stated the reasons beyond the control of the defendant-appellant, why the sale could
no longer push through – because of the problem with tenants. The trial court zeroed in on the statement of the defendant-
appellant that she and her cousin changed their minds, thereby concluding that defendant-appellant had unilaterally
cancelled the sale or backed out of her previous commitment. However, the tenor of the letter actually reveals a consistent
denial that there was any such commitment on the part of defendant-appellant to sell the subject lands to plaintiffs-
appellees. When defendant-appellant used the words "changed our mind," she was clearly referring to the decision to sell
the property at all (not necessarily to plaintiffs-appellees) and not in selling the property to herein plaintiffs-appellees as
 defendant-appellant had not yet made the final decision to sell the property to said plaintiffs-appellees. This conclusion is
buttressed by the last paragraph of the subject letter stating that "we are no longer selling the property until all problems
are fully settled." To read a definite previous agreement for the sale of the property in favor of plaintiffs-appellees into the
contents of this letter is to unduly restrict the freedom of the contracting parties to negotiate and prejudice the right of
every property owner to secure the best possible offer and terms in such sale transactions. We believe, therefore, that the
trial court committed a reversible error in finding that there was a perfected contract of sale or contract to sell under the
foregoing circumstances. Hence, the defendant-appellant may not be held liable in this action for specific performance with
damages.30

In Rosencor Development Corporation vs. Court of Appeals,31 the term "statute of frauds" is descriptive of statutes which require
certain classes of contracts to be in writing. The statute does not deprive the parties of the right to contract with respect to the
matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable. The purpose of the
statute is to prevent fraud and perjury in the enforcement of obligations, depending for their existence on the unassisted memory of
witnesses, by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be
charged. The statute is satisfied or, as it is often stated, a contract or bargain is taken within the statute by making and executing a
note or memorandum of the contract which is sufficient to state the requirements of the statute.32The application of such statute
presupposes the existence of a perfected contract. However, for a note or memorandum to satisfy the statute, it must be complete
in itself and cannot rest partly in writing and partly in parol. The note or memorandum must contain the names of the parties, the
terms and conditions of the contract and a description of the property sufficient to render it capable of identification.33 Such note or
memorandum must contain the essential elements of the contract expressed with certainty that may be ascertained from the note
or memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to parol
evidence.34 To be binding on the persons to be charged, such note or memorandum must be signed by the said party or by his agent
duly authorized in writing.35

In City of Cebu v. Heirs of Rubi,36 we held that the exchange of written correspondence between the parties may constitute sufficient
writing to evidence the agreement for purposes of complying with the statute of frauds.

In this case, we agree with the findings of the appellate court that there was no perfected contract of sale between the respondents-
owners, as sellers, and the petitioners, as buyers.

There is no documentary evidence on record that the respondents-owners specifically authorized respondent Fernandez to sell their
properties to another, including the petitioners. Article 1878 of the New Civil Code provides that a special power of attorney is
necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a
valuable consideration,37 or to create or convey real rights over immovable property,38 or for any other act of strict dominion.39 Any
sale of real property by one purporting to be the agent of the registered owner without any authority therefor in writing from the
said owner is null and void.40The declarations of the agent alone are generally insufficient to establish the fact or extent of her
authority.41 In this case, the only evidence adduced by the petitioners to prove that respondent Fernandez was authorized by the
respondents-owners is the testimony of petitioner Antonio Litonjua that respondent Fernandez openly represented herself to be the
representative of the respondents-owners,42 and that she promised to present to the petitioners on December 8, 1996 a written
authority to sell the properties.43 However, the petitioners’ claim was belied by respondent Fernandez when she testified, thus:

Q Madam Witness, what else did you tell to the plaintiffs?

A I told them that I was there representing myself as one of the owners of the properties, and I was just there to listen to
his proposal because that time, we were just looking for the best offer and I did not have yet any written authorities from
my brother and sisters and relatives. I cannot agree on anything yet since it is just a preliminary meeting, and so, I have to
secure authorities and relate the matters to my relatives, brother and sisters, sir.

Q And what else was taken up?

A Mr. Antonio Litonjua told me that they will be leaving for another country and he requested me to come back on the first
week of December and in the meantime, I should make an assurance that there are no tenants in our properties, sir.44

The petitioners cannot feign ignorance of respondent Fernandez’ lack of authority to sell the properties for the respondents-owners.
It must be stressed that the petitioners are noted businessmen who ought to be very familiar with the intricacies of business
transactions, such as the sale of real property.
The settled rule is that persons dealing with an assumed agent are bound at their peril, and 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 prove it.45 In this case, respondent Fernandez specifically denied that she was authorized by the respondents-
owners to sell the properties, both in her answer to the complaint and when she testified. The Letter dated January 16, 1996 relied
upon by the petitioners was signed by respondent Fernandez alone, without any authority from the respondents-owners. There is
no evidence on record that the respondents-owners ratified all the actuations of respondent Fernandez in connection with her
dealings with the petitioners. As such, said letter is not binding on the respondents as owners of the subject properties.

Contrary to the petitioners’ contention, the letter of January 16, 199646 is not a note or memorandum within the context of Article
1403(2) because it does not contain the following: (a) all the essential terms and conditions of the sale of the properties; (b) an
accurate description of the property subject of the sale; and, (c) the names of the respondents-owners of the properties.
Furthermore, the letter made reference to only one property, that covered by TCT No. T-36755.

We note that the petitioners themselves were uncertain as to the specific area of the properties they were seeking to buy. In their
complaint, they alleged to have agreed to buy from the respondents-owners 33,990 square meters of the total acreage of the two
lots consisting of 36,742 square meters. In their Letter to respondent Fernandez dated January 5, 1996, the petitioners stated that
they agreed to buy the two lots, with a total area of 36,742 square meters.47 However, in their Letter dated February 1, 1996, the
petitioners declared that they agreed to buy a portion of the properties consisting of 33,990 square meters.48 When he testified,
petitioner Antonio Litonjua declared that the petitioners agreed to buy from the respondents-owners 36,742 square meters at P150
per square meter or for the total price of P5,098,500.49

The failure of respondent Fernandez to object to parol evidence to prove (a) the essential terms and conditions of the contract
asserted by the petitioners and, (b) her authority to sell the properties for the respondents-registered owners did not and should not
prejudice the respondents-owners who had been declared in default.50

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the appellate court is AFFIRMEDIN TOTO. Costs against the
petitioners.
G.R. No. 153839              June 29, 2007

ISAAC VILLEGAS, petitioner, 
vs.
VICTOR LINGAN and ATTY. ERNESTO CARREON, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision1dated November 28,
2001 promulgated by the Court of Appeals (CA) in CA-G.R. CV No. 55837, which affirmed in toto the Decision dated December 19,
1996 of the Regional Trial Court (RTC), Branch 4, Tuguegarao, Cagayan in Civil Case No. 5036; and the CA Resolution2 dated June 10,
2002, denying the Motion for Reconsideration filed by Isaac Villegas (petitioner).

This case originated from a Complaint for Annulment of Title and Instrument with Damages filed by the petitioner against Victor
Lingan (respondent) and Atty. Ernesto Carreon as the Register of Deeds of Cagayan. The respondent filed his Answer and pre-trial
ensued. The RTC issued a Pre-Trial Order wherein it declared that no factual issue exists and that the sole legal issue to be resolved
is:

Whether or not the power of attorney is a general power of attorney or a special power of attorney. Corrolarily, whether upon the
terms thereof, the attorney-in-fact Gloria Roa Catral, had authority, or none at all, to execute the deed of sale in favor of
[respondent] Victor Lingan.3

On the basis of the pre-trial order and upon motion of counsel for petitioner, without any objections from respondent, the case was
submitted for summary judgment.

As found by the RTC and confirmed by the CA, the undisputed facts are as follows:

[Petitioner] Isaac Villegas was the registered owner of a parcel of land in Tuguegarao, Cagayan, known as Lot 2637-C of the
Subdivision plan Psd.2-01-019664, being a portion of Lot 2637, Cad. 151, containing an area of 1,267 square meters, more or less,
situated at Bgy. Pengue, Tuguegarao, Cagayan, covered by Transfer Certificate of Title No. T-63809 of the Register of Deeds of
Cagayan. In order to secure the payment of a loan from the Development Bank of the Philippines (DBP) the [petitioner] constituted a
real estate mortgage over the said parcel of land in favor of DBP. The said loan and mortgage was subsequently transferred by the
DBP to the Home Mutual Development Fund (HMDF). When the [petitioner] failed to settle his loan, the real estate mortgage he
constituted over the property was foreclosed, the property was sold at public auction and, as the HMDF was itself the highest bidder
at such public auction, a certificate of sheriff’s sale was issued and, thereafter, registered with the Register of Deeds on March 8,
1996. By virtue of a power of attorney executed by [petitioner’s] wife, Marilou C. Villegas in favor of Gloria Roa Catral, the latter
redeemed the property from the HMDF. x x x4

On May 17, 1996, Gloria R. Catral (Catral), by virtue of the same power of attorney, executed a Deed of Sale in favor of respondent.5

Petitioner claims that the power of attorney executed in favor of Catral, petitioner’s mother-in-law, created a principal-agent
relationship only between his wife, Marilou Catral-Villegas (Marilou) as principal, and Catral, as agent, and then only for the latter to
administer the properties of the former; that he never authorized Catral to administer his properties, particularly, herein subject
property; and that Catral had no authority to execute the Deed of Absolute Sale in favor of the respondent, since from the very
wordings of the power of attorney, she had no special authority to sell or convey any specific real property.6

On December 19, 1996, the RTC dismissed the Complaint, ruling that the tenor of the power of attorney in question is broad enough
to include the authority to sell any property of the principal, who, in this case, is the petitioner; that the act of the agent, Catral, in
executing the Deed of Absolute Sale in favor of respondent was within her power or authority; that the power "to enter into any and
all contracts and agreements" qualified the said power of attorney as a special power of attorney; that the Deed of Absolute Sale is
valid and binds the principal, herein petitioner; that the authority to sell came from both the petitioner and his wife, Marilou, since
the petitioner himself signed the power of attorney affirming the authority of the agent, Catral; and that even if Catral in fact
exceeded her authority, the act is deemed to have been performed within the scope of the agent’s authority if such is within the
terms of the power of attorney as written.
Dissatisfied, the petitioner appealed the adverse judgment to the CA claiming that the trial court erred in finding that there was a
principal-agent relationship between petitioner and Catral; and that the trial court erred in concluding that the power of attorney is
a special power of attorney with an authority to sell.7

On November 28, 2001, the CA rendered the herein assailed Decision, affirming in toto the RTC Judgment and dismissing the appeal
for lack of merit.8

The CA held that when the redemption of the property had been made by Catral by virtue of a General Power of Attorney executed
in her favor by Marilou, it follows that the petitioner is no longer the owner of the subject property but his wife, Marilou; that the
issue as to whether the power of attorney was a special or general one is of no moment, because the petitioner was no longer the
owner of the property when it was sold; in other words, any disposition of the property needs no power of attorney from the
petitioner himself; that the petitioner signed the General Power of Attorney above the word "conforme," connoting an implied
admission that he was not anymore the owner of the said property; and, finally, that the Deed of Sale between Marilou (through
Catral) and respondent is valid.

Hence, herein Petition, on the following grounds:

I.

It is submitted that the Court of Appeals disregarded the law and applicable decisions of the Honorable Court when it dismissed the
complaint on the ground that petitioner was no longer the owner of the property subject of the case. As a consequence, it did not
matter whether or not the general power of attorney or a special power of attorney was issued in this instant case.

II.

It is further submitted that the Court of Appeals disregarded the law and the applicable decisionS of the Honorable Court when it
upheld the validity of the Deed of Absolute Sale executed in favor OF Victor Lingan.9

In his Memorandum, petitioner argues that the general power of attorney of Catral did not clothe her with authority to sell the
property of petitioner; and that the Deed of Absolute Sale executed between the respondent and Catral was not valid.10

On the other hand, respondent, in his Memoranda, contends that the petitioner has no cause of action against him. He maintains
that petitioner lost his ownership of the property after it was extra-judicially foreclosed and sold to HMDF; that what was left for
petitioner was only the right of redemption, a right he shared with his wife; that if there was really a legal defect in the sale, the
person who has the legal standing and the right to question the validity of the sale in his name is Marilou, the person who exercised
the right of redemption and the person in whom the right to dispose legally resides; and that Marilou has all this time remained
passive.11

The petition must fail.

There are two principal issues raised by the pleadings in the present petition that must be resolved: First, whether Marilou, the wife
of the petitioner, as successor-in-interest, may validly redeem the property in question; and second, whether the petitioner has a
cause of action against the respondent.

Was there a valid redemption effected by Marilou?

The answer is in the affirmative.

Section 6 of Act No. 3135 provides:

Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his
successors-in-interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of
one year from and after the date of sale; and such redemption shall be governed by the provisions of section four hundred and sixty-
four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions
of this Act. (emphasis supplied)
Section 27, Rule 39 of the 1997 Rules of Civil Procedure, provides:

SEC. 27. Who may redeem real property so sold. –Real property sold as provided in the last preceding section, or any part thereof
sold separately, may be redeemed in the manner hereinafter provided, by the following persons:

(a) The judgment obligor, or his successor-in-interest in the whole or any part of the property;

xxxx

The "successor-in-interest" of the judgment debtor referred to in the above provision includes a person who succeeds to his
property by operation of law, or a person with a joint interest in the property, or his spouse or heirs.12

Section 33, Rule 39, Rules of Court, states:

SEC. 33. Deed and possession to be given at expiration of redemption period; by whom executed or given. – If no redemption be
made within one (1) year from the date of the registration of the certificate of sale, the purchaser is entitled to a conveyance and
possession of the property; or, if so redeemed whenever sixty (60) days have elapsed and no other redemption has been made, and
notice thereof given, and the time for redemption has expired, the last redemptioner is entitled to the conveyance and possession;
but in all cases the judgment obligor shall have the entire period of one (1) year from the date of the registration of the sale to
redeem the property. The deed shall be executed by the officer making the sale or by his successor in office, and in the latter case
shall have the same validity as though the officer making the sale had continued in office and executed it.

Upon the expiration of the right of redemption, the purchaser or redemptioner shall be substituted to and acquire all the rights,
title, interest and claim of the judgment obligor to the property at the time of the levy. The possession of the property shall be
given to the purchaser or last redemptioner by the same officer unless a third party is actually holding the property adversely to
the judgment obligor.(emphasis supplied)

Under the above provision, petitioner could have redeemed the property from Marilou after she had redeemed it. The pleadings
filed and the records of this case do not show that petitioner exercised said right. Consequently, as correctly held by the CA, Marilou
acquired ownership of the subject property. All rights and title of the judgment obligor are transferred upon the expiration of the
right of redemption.13

And where the redemption is made under a property regime governed by the conjugal partnership of gains, Article 109 of the Family
Code provides that property acquired by right of redemption is the exclusive property of the spouses redeeming the property.

Clearly, therefore, Marilou, as owner, had the right to sell the property to another.

This brings us to the resolution of the second issue -- whether petitioner has a cause of action against respondent -- and the answer
is in the negative.

A cause of action is an act or omission of the defendant in violation of the legal right of the plaintiff. A complaint states a cause of
action when it contains three essential elements: (1) a right in favor of the plaintiff by whatever means and under whatever law it
arises; (2) an obligation of the defendant to respect such right; and (3) the act or omission of the defendant violates the right of the
plaintiff.14

In the present case, there is no property right that exists in favor of the petitioner, and, with more reason, no such obligation arises
in behalf of the defendant, herein respondent, to respect such right. There was no violation of a legal right of the petitioner.

It must be stressed that there is no allegation or proof that Marilou redeemed the property in behalf of the petitioner—Marilou did
not act as agent of the petitioner. Rather, she exercised the right of redemption in her own right as successor-in-interest of the
petitioner. Under the circumstances, should there be any right violated, the aggrieved party is Marilou, petitioner’s wife. The
property in question was the exclusive property of Marilou by virtue of her redemption. Thus, petitioner has no valid cause of action
against the respondent.
Consequently, the question whether Catral had validly sold the subject property to respondent by virtue of the General Power of
Attorney executed by Marilou, is not within the realm of the Court’s jurisdiction to resolve in this case as said issue is not properly
raised by the right person, Marilou.

Divested of all interest over the property, the petitioner has ceased to be the proper party who may challenge the validity of the
sale. Moreover, since, as a rule, the agency, as a contract, is binding only between the contracting parties,15 then only the parties, as
well as the third person who transacts with the parties themselves, may question the validity of the agency or the violation of the
terms and conditions found therein. This rule is a corollary of the foregoing doctrine on the rights of real parties in interest.

The Court cannot grant the relief prayed for in petitioner’s Complaint as to damages, considering that the issue on damages was
deemed waived when the parties limited themselves to the legal issue arrived at during the pre-trial in the RTC.16

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals are AFFIRMED.
G.R. No. L-15862             July 31, 1961

PAULO ANG and SALLY C. ANG, plaintiffs-appellees, 

vs.
FULTON FIRE INSURANCE CO., ET AL., defendants.
FULTON FIRE INSURANCE CO., defendant-appellant.

LABRADOR, J.:

The present action was instituted by the spouses Paulo Ang and Sally C. Ang against the Fulton Fire Insurance Company and the
Paramount Surety and Insurance Company, Inc. to recover from them the face value of a fire insurance policy issued in plaintiffs'
favor covering a store owned and operated by them in Laoag, Ilocos Norte. From a judgment of the court ordering the defendant
Fulton Fire Insurance Co. to pay the plaintiffs the sum of P10,000.00, with interest, and an additional sum of P2,000.00 as attorney's
fees, and costs, the defendants have appealed directly to this Court.

On September 9, 1953, defendant Fulton Fire Insurance Company issued a policy No. F-4730340, in favor of P. & S Department Store
(Sally C. Ang) over stocks of general merchandise, consisting principally of dry goods, contained in a building occupied by the
plaintiffs at Laoag, Ilocos Norte. The premium is P500.00 annually. The insurance was issued for one year, but the same was renewed
for another year on September 31, 1954. On December 17, 1954, the store containing the goods insured was destroyed by fire. On
December 30, following, plaintiffs executed the first claim form. The claim together with all the necessary papers relating thereto,
were forwarded to he Manila Adjustment Company, the defendants' adjusters and received by the latter on Jane 8, 1955. On
January 12, 1955, the Manila Adjustment Company accepted receipt of the claim and requested the submission of the books of
accounts of the insured for the year 1953-1954 and a clearance from the Philippine Constabulary and the police. On April 6, 1956,
the Fulton Fire Insurance Company wrote the plaintiffs that their claim was denied. This denial of the claim was received by the
plaintiffs on April 19, 1956. On January 13, 1955, plaintiff Paulo Ang and ten others were charged for arson in Criminal Case No. 1429
in the Justice of the Peace Court of Laoag, Ilocos Norte. The case was remanded for trial to the Court of First Instance of Ilocos Norte
and there docketed as Criminal Case No. 2017. The said court in a decision dated December 9, 1957, acquitted plaintiff Paulo Ang of
the crime of arson.

The present action was instituted on May 5, 1958. The action was originally instituted against both the Fulton Fire Insurance
Company and the Paramount Surety and Insurance Company, Inc., but on June 16, 1958, upon motion of the Paramount Surety, the
latter was dropped from the complaint.

On May 26, 1958, the defendant Fulton Fire Insurance Company filed an answer to the complaint, admitting the existence of the
contract of insurance, its renewal and the loss by fire of the department store and the merchandise contained therein, but denying
that the loss by the fire was accidental, alleging that it was occasioned by the willful act of the plaintiff Paulo Ang himself. It claims
that under paragraph 13 of the policy, if the loss or damage is occasioned by the willful act of the insured, or if the claim is made and
rejected but no action is commenced within 12 months after such rejection, all benefits under the policy would be forfeited, and that
since the claim of the plaintiffs was denied and plaintiffs received notice of denial on April 18, 1956, and they brought the action only
on May 5, 1958, all the benefits under the policy have been forfeited.

On February 12, 1959, plaintiffs filed a reply to the above answer of the Fulton Fire Insurance, alleging that on May 11, 1956,
plaintiffs had instituted Civil Case No. 2949 in the Court of First Instance of Manila, to assert the claim; that this case was dismissed
without prejudice on September 3, 1957 and that deducting the period within which said action was pending, the present action was
still within the 12 month period from April 12, 1956. The court below held that the bringing of the action in the Court of First
Instance of Manila on May 11, 1956, tolled the running of the 12 month period within which the action must be filed. Said the court
on this point:

True, indeed, plaintiffs committed a procedural mistake in first suing the agent instead of its principal, the herein
defendant, as correctly pointed out by counsel for the defendant, for 'Un agente residente de una compania de seguros
extranjera que comercia en las Islas Filipinos no es responsable como mandante ni como mandatario, en virtud de contratas
de seguro expendidos a nombre de la compania', (Macias & Co. vs. Warner, Barnes & Co., 43 Phil. 161). But the mistake
being merely procedural, and the defendant not having been misled by the error, 'There is nothing sacred about process or
pleadings, their forms or contents. Their sole purpose is to facilitate the application of justice to the rival claims of
contending parties. They were created not to hinder and delay, but to facilitate and promote the administration of justice
(Alonso vs. Villamor, 16 Phil 578.)
 The complaint, Exh. 'C', was dismissed by the Court without prejudice (Exh. 'H-1') on September 3, 1957, and motion for
reconsideration dated September 21, 1957. The instant complaint was filed on May 8, 1958. The Rules of Court (See 132
thereof) is applicable in the computation of time. Now, as correctly pointed out by the plaintiffs' counsel, by simple
mathematical computation, the present action was filed leas thin nine (9) months after the notice of rejection received by
plaintiffs on April 19, 1956, because the filing of the original complaint stopped the running of the period." (Decision, pp.
42-43, R.O.A.)

In view of the reasons thus above quoted, the court rendered decision in favor of the plaintiffs.

On the appeal before this Court, defendant-appellant argues that the court below erred in holding that the filing of the previous suit
tolled or suspended the running of the prescriptive period.

The clause subject of the issue is paragraph 13 of the policy, which reads as follows:

13. If the claim be in any respect fraudulent, or if any false declaration is made or used in support thereof, or if any
fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under this Policy,
or, if the loss or damage be occasioned by the willful act or with connivance of the Insured, or, if the claim be made and
rejected and an action or suit be not commenced within twelve months after such rejection or (in case of arbitration place
in pursuance of the 18th condition of this Policy) within twelve months after the arbitrator or arbitrators or umpire shall
have made their award, all benefits under this Policy shall be forfeited. (Emphasis supplied). (Decision. p. 10, R.O.A.).

The appellant cites in support of its contention the cases of E. Macias & Co. vs. Warner, Barnes & Co., Ltd., 43 Phil 155; E. Macias &
Co. vs. China Fire Insurance Co., 46 Phil. 345 and Castillo etc. vs. Metropolitan Insurance Co., 47 O.G. (September, 1951).

In answer to appellant's contention, counsel for appellees contend that the action of the plaintiffs against the defendant had not yet
prescribed at the time of the bringing of the action, because the period of prescription was interrupted by the filing of the first action
against the Paramount Surety & Insurance Co., in accordance with Article 1155 of the Civil Code. Counsel further argues that the
basis of prescription of an action is the abandonment by a person of his right of action or claim, so that any act of said person
tending to show his intention not to abandon his right of action or claim, as the filing of the previous action in the case at bar,
interrupts the period of prescription. Furthermore, counsel argues, the dismissal of the previous action is without prejudice, which
means that plaintiffs have the right to file another complaint against the principal.

The basic error committed by the trial court is its view that the filing of the action against the agent of the defendant company was
"merely a procedural mistake of no significance or consequence, which may be overlooked." The condition contained in the
insurance policy that claims must be presented within one year after rejection is not merely a procedural requirement. The condition
is an important matter, 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. It is in the nature
of a condition precedent to the liability of the insurer, or in other terms, a resolutory cause, the purpose of which is to terminate all
liabilities in case the action is not filed by the insured within the period stipulated.

The bringing of the action against the Paramount Surety & Insurance Company, the agent of the defendant Company cannot have
any legal effect except that of notifying the agent of the claim. Beyond such notification, the filing of the action can serve no other
purpose. There is no law giving any effect to such action upon the principal. Besides, there is no condition in the policy that the
action must be filed against the agent, and this Court can not by interpretation, extend the clear scope of the agreement beyond
what is agreed upon by the parties.

The case of E. Macias & Co. vs. China Fire Insurance Co. has settled the issue presented by the appellees in the case at bar definitely
against their claim. In that case, We declared that the contractual station in an insurance policy prevails over the statutory limitation,
as well as over the exceptions to the statutory limitations that the contract necessarily supersedes the statute (of limitations) and
the limitation is in all phases governed by the former. (E. Macias & Co. vs. China Fire Insurance & Co., 46 Phil. pp. 345-353). As stated
in said case and in accordance with the decision of the Supreme Court of the United States in Riddlesbarger vs. Hartford Fire
Insurance Co. (7 Wall., 386), the rights of the parties flow from the contract of insurance, hence they are not bound by the statute of
limitations nor by exemptions thereto. In the words of our own law, their contract is the law between the parties, and their
agreement that an action on a claim denied by the insurer must be brought within one year from the denial, governs, not the rules
on the prescription of actions.

The judgment appealed from is hereby set aside and the case dismissed, with costs against the plaintiffs-appellees.
G.R. No. 3298            February 27, 1907

FELISA NEPOMUCENO AND MARCIANA CANON, plaintiffs-appellees, 

vs.
GENARO HEREDIA, defendant-appellant.

Ramon Salinas for appellant. 

Hartigan, Rohde & Gutierrez for appellees.

CARSON, J.:

The complaint alleges that on the 24th of September, 1904, the defendant had in his possession for administration 500 pesos, the
property of Felisa Nepomuceno, and 1,500 pesos, the property of Marciana Canon; that on that day he entered into an agreement
with them, in accordance with which he was to invest this money in a mortgage, or conditional purchase of good real estate, the
investment to bring in 1 per centum per month, and the principal to be payable in one year; and that the defendant has failed to
make the investment in accordance with his agreement and has refused, and continues to refuse, to return the money.

The following facts are fully established by the evidence of record, and are substantially uncontroverted: That the defendant is the
business adviser of the plaintiff, Marciana Canon, and as such had in his hands 1,500 pesos paid to him on her account on the 22d of
September, 1904; that about the same time Felisa Nepomuceno, the other plaintiff, had an unsecured debt due her of 500 pesos
from one Marcelo Leaño; that on demand for security her debtor proposed to give her a deed of conditional sale (venta con pacto
de retro) to a certain tract of land, together with the buildings and improvements thereon, in consideration of 2,000 pesos, she to be
credited with 500 pesos on the purchase price and that to advance the balance of 1,500 pesos; that knowing that the defendant had
in his hands that amount of money, the property of her coplaintiff, Marciana Canon, she proposed to the said Marciana Canon that
they make a joint investment in the land; that together they discussed the proposition with the defendant and later directed him to
draw up the necessary documents; that a deed of conditional sale of the land was executed on the 24th of September, 1904, the
vendor reserving the privilege of repurchasing the land at the end of one year and obligating himself to make monthly payments in
considerations of the right to retain the land in possession in sufficient amount to bring the plaintiffs' interest on their money at the
rate of 17 per centum per annum, and the vendees, the plaintiffs in this action, paying to the vendor the sum of 1,500 pesos, cash,
and discharging the above mentioned credit of 500 pesos due the plaintiff, Felisa Nepomuceno; that the title to the land under the
deed was placed in the name of the defendant, Genaro Heredia; and that a few days thereafter the defendant, at the request of the
plaintiffs, executed before a notary public a formal memorandum of the fact that the plaintiff had furnished the money with which
the land had been purchased, said memorandum setting forth the amount furnished by each and their proportionate interest in the
investment.

The plaintiffs insists that the defendant took the deed to the land in his own name without their knowledge or consent, but we think
that the weight of the evidence sustains the defendant's claim that he did so by their express direction as their agent, and for their
convenience, and that in any event his action in this regard was ratified and approved by their request for and acceptance of the
memorandum setting out the facts and by their continuance in the enjoyment of the profits of the transaction after the purchase
and without making any effort to have the title transferred in their own names.

The plaintiffs also allege that the defendant, without express authority from them, undertook to extend, and did extend, the period
within which the vendor had the privilege or repurchase, but we think that this action in this contention was also ratified, approved,
and acquiesced in by the plaintiffs and that in any event it can have no bearing on the merits of the question submitted on appeal.

More than a year after the transactions above set out, during which time the vendor of the land continued to pay, and the plaintiff
to receive, the stipulated payments in consideration of the right to retain possession, a cloud was cast on the title to the land by the
institution of proceedings for the recovery of possession by third parties, which proceedings are still pending on appeal from the
judgment of the Court of First Instance, and the plaintiffs thereupon brought this action in which they are seeking to recover from
the defendant the whole of the amount of money invested, with interest from the date of the investment, alleging with that
purchase of the land was not made in accordance with their instructions, or on their account.

The trial court gave judgment in favor of the plaintiffs for the full amount claimed on the ground that while acting as their agent the
defendant invested their money in land to which the vendor had not a good and sufficient title, contrary to the tenor of his
instructions. On appeal the plaintiffs ask that this judgment be affirmed, not on the grounds assigned by the trial judge, but because,
as they insists, their money was invested by the defendant in his own name and on his account, and not as their agent, or on behalf.
The judgment can not be sustained on either ground.
It was clearly established at the trial that the defendant was acting merely as the agent for the plaintiffs throughout the entire
transaction; that the purchase of the land was made not only with their full knowledge and consent, but at their suggestion; and that
after the purchase had been effected, the plaintiffs, with full knowledge of the facts, approved and ratified the actions of their agent
in the premises. There is nothing in the record which would indicate that the defendant failed to exercise reasonable care and
diligence in the performance of his duty as such agent, or that he undertook to guarantee the vendors title to the land purchased by
direction of the plaintiffs.

The judgment of the lower court should be, and is hereby, reversed, with the costs against the plaintiffs in the first instance and
without special condemnation of costs in this instance. After the expiration of twenty days let judgment be entered in accordance
herewith, and ten days thereafter let the record be returned to the court wherein it originated for execution. So ordered.
G.R. No. L-28237 August 31, 1982

BAY VIEW HOTEL., INC., plaintiff-appellant, 

vs.
KER & CO., LTD., and PHOENIX ASSURANCE CO., LTD., defendants-appellees.

Mariano V. Ampil, Jr. for plaintiff-appellant.

Alfonso Felix, Jr. for defendants-appellants.

&

TEEHANKEE, J.:1äwphï1.ñët

This appeal was originally brought before the Court of Appeals but was certified to this Court pursuant to the appellate court's
resolution of October 13, 1967 since it involved purely questions of law.

Sometime in January, 1958, plaintiff-appellant Bay View Hotel, Inc., then the lessee arid operator of the Manila Hotel, secured a
fidelity guarantee bond from defendant-appellee Ker & Co., Ltd., for its accountable employees against acts of fraud and dishonesty.
Said defendant-appellee Ker & Co., Ltd., is the Philippine general agent of Phoenix Assurance Co., Ltd. a foreign corporation duly
licensed to do insurance business in the Philippines.

When one of the bonded employees, Tomas E. Ablaza, while acting in his capacity as cashier, was discovered by plaintiff-appellant to
have had a cash shortage and unremitted collections in the total amount of P42,490.95, it filed claims for payments on the said
fidelity guarantee bond but defendant-appellee Ker & Co. denied and refused indemnification and payment. To enforce its claims,
plaintiff-appellant instituted its complaint, dated August 30, 1965 docketed as Civil Case No. 63181 of the Court of First Instance of
Manila.

In its answer, defendant-appellee Ker & Co. justified its denial of the claims of plaintiff-appellant on various reasns, such as non-
compliance with the conditions stipulated in the insurance policy; non-presentation of evidence regarding the various charges of
dishonesty and misrepresentation against Tomas E. Ablaza and non-production of the documents to prove the alleged loss. Ker & Co.
likewise averred that it was merely an agent and- as such it was not liable under the policy.

On June 22, 1966, counsel for Ker & Co. filed a request for admission, furnishing plaintiff-appellant's counsel with a copy thereof
requesting admission of the following facts: 1äwphï1.ñët

1. On February 14, 1967, the Bay View Hotel, Inc., applied to the Phoenix Assurance Co., Ltd., for a fidelity
guarantee bond through a proposal form, a true copy of which is annexed to our answer as Annex "A" thereof.

2. Such a policy was actually issued on January 22, 1958 by the Phoenix Assurance Co., Ltd., in favor of the Bay
View Hotel, Inc., and was renewed from time to time with amendments. A true copy of the policy as it finally stood
at the time of the alleged defalcation is annexed to our answer as Annex 'B ' thereof.

3. This claim filed by the Bay View Hotel, Inc., under this policy was denied on behalf of the Phoenix Assurance Co.,
Ltd., by a letter dated 18th June, 1965 sent by registered mail to the Bay View Hotel, Inc. on June 22, 1965. A true
copy of this letter of denial is annexed to the present request as Annex "C" hereof. "

When plaintiff-appellant failed to make any answer to the request for admission within the period prescribed by the rules,
defendant-appellee Ker & Co. filed a Motion to Dismiss on Affirmative Defense, dated July 6, 1966, insisting that since under Sec. 2,
Rule 26 of the Rules of Court, plaintiff-appellant was deemed to have impliedly admitted each of the matters enumerated in the
request for admission, it followed that the proper party in interest against whom plaintiff-appellant might have a claim was the
principal Phoenix Assurance Co. (Phoenix) and not the agent Ker & Co.

Plaintiff-appellant filed an opposition, dated July 19, 1966 arguing that the proper remedy, under the circumstances was not to
dismiss the complaint but to amend it in order to bring the necessary or indispensable parties to the suit. Defendant-appellee Ker &
Co. filed a reply to the opposition reiterating its stand that since it merely acted as an agent, the case should be dismissed and
plaintiff-appellant should file the necessary action against the principal Phoenix.

On August 1, 1966, plaintiff-appellant filed a Motion for Leave to Admit Amended Complaint, attaching copy of the complaint, as
amended, this time impleading Phoenix as party defendant. On August 16, 1966, defendants- appellees filed their joint answer to
the amended complaint. Again, Ker & Co., Ltd., argued that it was merely an agent and therefore not liable under the policy. On the
other hand, Phoenix, averred that under Condition 8 of the insurance policy, plaintiff-appellant was deemed to have abandoned its
claim in view of the fact that it did not ask for an arbitration of its claim within twelve (12) months from June 22, 1965 the date of
receipt of the denial of the claim.

On August 24, 1966, defendants-appellees filed a motion for summary judgment which the trial court granted in its decision of
November 4, 1966, ordering the dismissal of the case. After denial of its motion for reconsideration, plaintiff-appellant filed the
present appeal, raising the following assignment of errors: 1äwphï1.ñët

The lower court erred and acted with grave abuse of discretion in extending the legal effects, if any, of the request
for admission filed by Ker & Co., Ltd. to the Phoenix Assurance Co., Ltd., which was not a party-defendant at the
time said request was filed and for whom no similar request was ever filed.

II

The lower court erred and acted with grave abuse of discretion in giving legal effects to a request for admission by
the defendant-appellee under the original complaint after the said original complaint was, with leave of court,
amended.

III

The lower court erred and acted with grave abuse of discretion in holding that "Condition No. 8 of the Policy No.
FGC-5018-P requires that should there be a controversy in the payment of the claims, it should be submitted to an
arbitration" despite the admissions by the parties and the established fact that Condition No. 8 of said Policy No.
FGC-5018-P provides for Arbitration if any dispute shall arise as to the amount of company's liability."

IV

The lower court erred and acted with grave abuse of discretion in granting the Motion for Summary Judgment and
dismissing the complaint.

The first two errors assigned may be taken jointly. Plaintiff-appellant argues that since the implied admission was made before the
amendment of its complaint so as to include Phoenix, it follows that Phoenix has no right to avail of these admissions, and that the
trial court committed a grave abuse of discretion in extending to Phoenix the legal effects of the request for admission filed solely by
Ker & Co.

The argument is untenable, Admission is in the nature of evidence and its legal effects were already part of the records of the case
and therefore could be availed of by any party even by one subsequently impleaded. The amendment of the complaint per se
cannot set aside the legal effects of the request for admission since its materiality has not been affected by the amendment. If a fact
is admitted to be true at any stage of the proceedings, it is not stricken out through the amendment of the complaint. To allow a
party to alter the legal effects of the request for admission by the mere amendment of a pleading would constitute a dangerous and
undesirable precedent. The legal effects of plaintiff- appellant's failure to answer the request for admission could and should have
been corrected below by its filing a motion to be relieved of the consequences of the implied admission with respect to respondent
Phoenix.

Moreover, since an agent may do such acts as may be conducive to the accomplishment of the purpose of the agency, admissions
secured by the agent within the scope of the agency ought to favor the principal. This has to be the rule, for the act or declarations
of an agent of the party within the scope of the agency and during its existence are considered and treated in turn as the
declarations, acts and representations of his principal 1 and may be given in evidence against such party.
Plaintiff-appellant insists that since the motion for summary judgment was filed on behalf of defendant-appellee Ker & Co. alone,
there was no motion for summary judgment as far as Phoenix was concerned and the trial court's decision dismissing the case
should not have included the principal Phoenix.

But the motion for summary judgment was filed after the complaint had been amended and answer thereto had been filed. The
issues, therefore, with respect to Phoenix had already been likewise joined. Moreover, a reading of the said motion for summary
judgment, more particularly the prayer thereof, shows that Phoenix did join Ker & Co. in moving for the dismissal of the case and
prayed "that the present action be dismissed as against Ker & Co., Ltd., because being purely and simply the agent of the insurer, it is
not liable under the policy and as against the Phoenix Assurance Co., Ltd. because by failing to seek an arbitration within twelve
months from the date of its receipt of the denial of its claim on June 22, 1965, plaintiff Bay View Hotel, Inc., is deemed under
condition 8 of ,, tie policy, to have abandoned its claim against said defendant phoenix Assurance Co., Ltd."

The main issue raised by plaintiff-appellant is with respect to Condition No. 8 of the insurance policy, photostatic copy of which was
submitted to the trial court and reproduced as follows: 1äwphï1.ñët

If any dispute shall arise as to the amount of company's liability under this Policy the matter shall if required by
either party be to the decision of two neutral persons as arbitrators one of, whom shall be named by each party or
of an umpire who shall be appointed by the said arbitrators before entering on the reference and in case either
party or his representative shall neglect or refuse for the space of two months after request in writing from the
other party so to do to name an arbitrator the arbitrator of the other party may proceed alone. And it is hereby
expressly agreed and declared that it shag be a condition precedent to any right of action or upon this Policy that
the award by such arbitrators, arbitrator or umpire of the amount of the loss shall first be obtained. The costs of
and connected with the arbitration shag be in the discretion of the arbitrators, arbitrator or umpire. 2

Plaintiff-appellant maintains that Condition No. 8 of the policy provides for arbitration only "if any dispute should arise as to the
amount of company's liability" consequently, the reference to arbitration is not a condition precedent to the filing of the suit
contrary to the insurer company's posture. Plaintiff-appellant points out that in the instant case, there is a total and complete
negation of liability. There is no dispute as to the amount of company's liability because this presupposes an admission of
responsibility although not to the extent of the cost thereof, while here the insurer denies liability wholly and totally.

We find in favor of plaintiff-appellant. The provisions of Condition No. 8, more specifically the portion thereof which reads, "if any
dispute shall arise as to the amount of company's liability under this policy ...," do not appear to require any extended
interpretation. Condition No. 8 requires arbitration only as to disputes regarding the amountof the insurer's liability but not as to any
dispute as to the existence or non- existence of liability. Thus, Condition No. 8 comes into play only if the insurer admits liability but
cannot agree with the insured as to the amount thereof and cannot be invoked in cases like that at bar where the insurer completely
denies any liability. Defendants-appellees' contention that plaintiff-appellant's failure to request arbitration proceedings is a bar to
its filing of the suit at bar against the insurer company cannot be sustained, specially considering the established principle that
contracts of adhesion such as the insurance policy in question are to be strictly construed in case of doubt against the insurer.

As to appellee Ker & Co., Ltd., however, there appears to be no serious contradiction as to the fact that it merely acted as the agent
of its principal, Phoenix. Considering that there was full disclosure of such agency since the insurance policy was actually issued by
Phoenix, We find no error in the dismissal of the case against said defendant Ker & Co., Ltd.

Accordingly, the dismissal of the case against Ker & Co., Ltd., is hereby affirmed and maintained, while the dismissal of the case
against Phoenix Assurance Co., Ltd. is hereby set aside and the case is remanded to the court of origin for further proceedings and
determination on the merits. No costs.

Makasiar, Melencio-Herrera, Plana, Relova and Gutierrez, JJ., concur.1äwphï1.ñët

&

&

Separate Opinions

&
VASQUEZ, J.,  concurring:

I concur in the resolution of the issues in regard to the respective liabilities of Ker & Co., Ltd. and Phoenix Assurance Co., Ltd.
However, I do not subscribe to the view expressed in the following paragraph of the main opinion: 1äwphï1.ñët

Moreover, since an agent may do such acts as may be conducive to the accomplishment of the purpose of the
agency, admissions secured by the agent within the scope of the agency ought to favor the principal. This has to be
the rule, for the act or declarations of an agent of the party within the scope of the agency and during its existence
are considered and treated in turn as the declarations, acts and representations of his principal and may be given
in evidence against such party.

The authority cited for this view, to wit, Section 26, Rule 130 of the Rules of Court, reveals that the same is being justified under one
of the recognized exceptions to the rule of res inter alios acta. To my mind, this rule of evidence finds no application herein.

Section 26 of Rule 130 allows the admission against the principal of any act or declaration of the agent within the scope of his
authority during its existence. It has no reference to a principal using in his favor an admission secured by the agent from a third
party. In the case at bar, Phoenix is not being held bound or made liable by any act or declarations of Ker Instead, Phoenix seeks to
profit from something done by Ker. While this may be correct, its justification must be based on some legal ground other than
Section 26 of Rule 130. The act or declaration involved herein is that of petitioner Bay View. The question is not whether such act or
declaration is admissible in evidence against some other entity with which Bay View is in privity, but rather, whether it may be
utilized by Phoenix against Bay View itself. Clearly, res inter alios acta  does not come into play herein.

Case against Ker & Co., Ltd., affirmed and maintained, while case against Phoenix Assurance Co., Ltd set aside and case remanded to
court of origin for further proceedings and determination on the merits.

&

&

Separate Opinions

VASQUEZ, J.,  concurring:

I concur in the resolution of the issues in regard to the respective liabilities of Ker & Co., Ltd. and Phoenix Assurance Co., Ltd.
However, I do not subscribe to the view expressed in the following paragraph of the main opinion: 1äwphï1.ñët

Moreover, since an agent may do such acts as may be conducive to the accomplishment of the purpose of the
agency, admissions secured by the agent within the scope of the agency ought to favor the principal. This has to be
the rule, for the act or declarations of an agent of the party within the scope of the agency and during its existence
are considered and treated in turn as the declarations, acts and representations of his principal and may be given
in evidence against such party.

The authority cited for this view, to wit, Section 26, Rule 130 of the Rules of Court, reveals that the same is being justified under one
of the recognized exceptions to the rule of res inter alios acta. To my mind, this rule of evidence finds no application herein.

Section 26 of Rule 130 allows the admission against the principal of any act or declaration of the agent within the scope of his
authority during its existence. It has no reference to a principal using in his favor an admission secured by the agent from a third
party. In the case at bar, Phoenix is not being held bound or made liable by any act or declarations of Ker Instead, Phoenix seeks to
profit from something done by Ker. While this may be correct, its justification must be based on some legal ground other than
Section 26 of Rule 130. The act or declaration involved herein is that of petitioner Bay View.ït¢@lFº  The question is not whether
such act or declaration is admissible in evidence against some other entity with which Bay View is in privity, but rather, whether it
may be utilized by Phoenix against Bay View itself. Clearly, res inter alios acta does not come into play herein.

Case against Ker & Co., Ltd., affirmed and maintained, while case against Phoenix Assurance Co., Ltd set aside and case remanded to
court of origin for further proceedings and determination on the merits.
G.R. No. 102726 May 27, 1994

TSHIATE L. UY and RAMON UY, petitioners, 

vs.
THE COURT OF APPEALS, NATIVIDAD CALAUNAN-UY, and THE ESTATE OF MENILO B. UY, SR., REPRESENTED BY MENILO C. UY, JR.,
NILDA C. UY, MELVIN C. UY and MERLITO C. UY, respondents.

VITUG, J.:

This petition for review on certiorari assails the decision, dated 

23 September 1991, of respondent Court of Appeals, which has reversed the questioned order of the Regional Trial Court, Branch
58, Makati, Metro Manila.

The facts, hereunder recited, are culled from the findings of the Court of Appeals.

Private respondent Natividad Calaunan-Uy was the common-law wife of the late Menilo B. Uy, Sr., for about thirty-six (36) years.
Their union bore four children — Melito, Jr., Nilda, Melvin and Merlito — all surnamed Uy. On 
31 October 1990, soon after the death of Menilo Uy, Sr., herein petitioners Tshiate Uy and Ramon Uy initiated before the Regional
Trial Court (RTC), Branch 65, Makati, Metro Manila. Special Proceedings No. M-2606, entitled "In the Matter of the Petition for
Letters of Administration of the Estate of Menilo B. Uy, Sr." On 28 February 1991, private respondent filed a motion to hold the
special proceedings in abeyance. The day before, or on 27 February 1991, private respondent filed with the RTC, Branch 58, Makati,
Civil Case No. 91-573 for "Partition of Properties Under Co-ownership," against the Estate of Menilo Uy, Sr. (supposedly represented
by their four children).

On the day of trial in Civil Case No. 91-573, or on 23 April 1991, the parties, upon the suggestion of the trial court, submitted a
Compromise Agreement. On 24 April 1991, a judgment, based on that compromise, was rendered, and a writ of execution was
issued on 15 May 1991. On 24 May 1991, petitioner Tshiate Uy filed an omnibusmotion, alleging that by virtue of a Hong Kong
marriage, she was the surviving legal spouse of Menilo, Sr. She prayed that she and her son Ramon Uy be allowed to intervene in the
civil case, submitting at the same time their answer in intervention. The intervenors contended, among other things, that the
judgment upon the compromise was a patent nullity. On 10 June 1991, the trial court issued an order allowing the intervention and
setting aside the "compromise judgment." Private respondent filed a motion for reconsideration; it was denied by the trial court in
its order of 08 July 1991. A petition for certiorari was filed with respondent appellate court, which, on 23 September 1991,
promulgated its decision, the dispositive portion of which read:

WHEREFORE, the petition is hereby granted and the orders of respondent court dated June 10, 1991 and July 8,
1991 are hereby SET ASIDE. No costs.

SO ORDERED. 1

A motion for reconsideration filed by petitioners was denied by the appellate court in its resolution of 06 November 1991.

On 02 January 1992, the instant petition for review on certiorari was filed with this Court, asserting that:

The finding and the conclusion of the respondent Court of Appeals that Judge Zosimo Angeles of the Regional Trial
Court of Makati, Branch 58, erred in setting aside the Judgment by Compromise in Civil Case 
No. 91-573 because the same was already final and in fact partly executed is contrary to law and jurisprudence to
the effect that a Judgment void 
ab initio is non-existent and cannot acquire finality; and

The finding and conclusion of the respondent Court of Appeals to the effect that the intervention of petitioner in
Civil Case No. 91-573 came too late is contrary to the ruling of this Honorable Court in the case of Director of Lands
vs.  Court of Appeals, et al., 93 SCRA 238. 2

The appeal has merit.

The action for partition in Civil Case No. 91-573 is predicated on an alleged co-ownership between private respondent Natividad
Calaunan-Uy and deceased Menilo, Sr., of property evidently acquired during the period of their common-law relationship. The
governing provisions, applicable to their case, are now found in Article 147 and Article 148 of the Family Code, considering that
Menilo Uy, Sr., died on 27 September 1990, well after the effectivity of Executive Order No. 209 (The Family Code of the Philippines)
on 03 August 1988. Hence —

Art. 147. When a man and a woman who are capacitated to marry each other, live exclusively with each other as
husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be
owned by them in equal shares and the property acquired by both of them through their work or industry shall be
governed by the rules on co-ownership.

In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have
been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of
this Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to
have contributed jointly in the acquisition thereof if the former's efforts consisted in the care and maintenance of
the family and of the household.

Neither party can encumber or dispose by acts inter vivos of his or her share in the property acquired during
cohabitation and owned in common, without the consent of the other, until after the termination of their
cohabitation.

When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-
ownership shall be forfeited in favor of their common children. In case of default of or waiver by any or all of the
common children or their descendants, each vacant share shall belong to the respective surviving descendants. In
the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take
place upon termination of the cohabitation.

Art. 148. In cases of cohabitation not falling under the preceding Article, only the properties acquired by both of
the parties through their actual joint contribution of money, property, or industry shall be owned by them in
common in proportion to their respective contributions. In the absence of proof to the contrary, their
contributions and corresponding shares are presumed to be equal. The same rule and presumption shall apply to
joint deposits of money and evidences of credit.

If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute
community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly
married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the
preceding Article.

The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.

Parenthetically, closely intertwined with the legal questions posed by the parties are factual issues which are yet to be determined in
Special Proceedings No. 
M-2606 filed by herein petitioners.

Respondent Court of Appeals set aside the orders of the trial court on two points: That —

(1) The intervention came too late, citing Section 2, Rule 12, of the Revised Rules of Court; and

(2) The court a quo ignored the rule on finality of judgments.

Section 2, Rule 12 of the Revised Rules of Court provides:

Sec. 2. Intervention. — A person may, before or during a trial, be permitted by the court, in its discretion, to
intervene in an action, if he has legal interest in the matter in litigation, or in the success of either of the parties, or
an interest against both, or when he is so situated as to be adversely affected by a distribution or other disposition
of property in the custody of the court or of an officer thereof.
 The case Director of Lands vs.  Court of Appeals, 3 may not be on all fours to the case at bench but the rationalebehind the
decision can well be applicable. Citing Manila Railroad Co. vs. Attorney-General, 4 this Court held:

It is quite clear and patent that the motion for intervention filed by the movants at this stage of the proceedings
where trial has already been concluded, a judgment thereon had been promulgated in favor of private respondent
and on appeal by the losing party, the Director of Lands, the same was affirmed by the Court of Appeals and the
instant petition for certiorari to review said judgment is already submitted for decision by the Supreme Court, are
obviously and manifestly late, beyond the period prescribed under the aforecoded Section 2, Rule 12 of the Rules
of Court.

But Rule 12 of the Rules of Court like all other Rules therein promulgated, is simply a rule of procedure, the whole
purpose and object of which is to make the powers of the court fully and completely available for justice. The
purpose of procedure is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival
claims of contending parties. It was created not to hinder and delay but to facilitate and promote the
administration of justice. It does not constitute the thing itself which courts are always striving to secure to
litigants. It is designed as the means best adopted to obtain that thing. In other words, it is a means to an end.

The denial of the motions for intervention arising from the strict application of the Rule due to alleged lack of
notice to, or the alleged failure of, movants to act seasonably will lead the Court to commit an act of injustice to
the movants, to their successors-in-interest and to all purchasers for value and in good faith and thereby open the
door to fraud, falsehood and misrepresentation, should intervenors' claims be proven to be true. For it cannot be
gainsaid that if the petition for reconstitution is finally granted, the chaos and confusion arising from a situation
where the certificates of title of the movants covering large areas of land overlap or encroach on properties the
title to which is being sought to be reconstituted by private respondent, who herself indicates in her Opposition
that, according to the Director of Lands, the overlapping embraces some 87 hectares only, is certain and inevitable.
The aggregate area of the property claimed by respondent covering Lot 1 and Lot 2 is 1,435,062 sq. meters which
is situated in a fast-growing, highly residential sector of Metro Manila where growth and development are in rapid
progress to meet the demands of an urbanized, exploding population. Industries, factories, warehouses, plants,
and other commercial infrastructures are rising and spreading within the area and the owners of these lands and
the valuable improvements thereon will not simply fold their hands but certainly will seek judicial protection of
their property rights or may even take the law into their own hands, resulting to multiplicity of suits.

Section 7, Rule 3, of the Revised Rules of Court defines indispensable parties to be "(p)arties in interest without whom no final
determination can be had of an action . . . ." Even private respondents, in their complaint in Civil Case No. 91-573, have
acknowledged that petitioners "claim some interest in the Estate of Menilo B. Uy, Sr." 5The trial court itself, in setting aside its
previous judgment upon compromise, has expressed "that the intervenors have legal interest in the matter in litigation," a
statement which we find hard to brush aside. In the interest of adjudicating the whole controversy, petitioners' inclusion in the
action for partition, given the circumstances, not only is preferable but rightly essential in the proper disposition of the case. It is a
settled rule that without the presence of indispensable parties to a suit or proceeding, a judgment of the court cannot attain real
finality. 6

Private respondents argue that their failure to implead petitioners in the complaint for partition has been cured by the filing of
petitioners' omnibus motion asking leave to intervene and attaching thereto an answer in intervention. Private respondents overlook
the fact that the motion has been filed subsequent to the judgment based upon the compromise agreement (among private
respondents themselves) that did not include, and thereby cannot be held to bind, petitioners 7

WHEREFORE, the decision of respondent Court of Appeals is SET ASIDE and a new one is entered REINSTATING the order, dated 10
June 1991, of the trial court.
G.R. No. 153057 August 7, 2006

MR. & MRS. GEORGE R. TAN, Petitioners,

vs.
G.V.T. ENGINEERING SERVICES, Acting through its Owner/ Manager GERINO V. TACTAQUIN, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court is the June 29, 2001 Decision 1 of the
Court of Appeals (CA) in CA-G.R. CV No. 59699 affirming with modification the Decision of the Regional Trial Court (RTC) of Quezon
City, Branch 81 in Civil Case No. Q-90-7405; and its Resolution 2promulgated on April 10, 2002 denying petitioners’ Motion for Partial
Reconsideration.

The facts are as follows:

On October 18, 1989, the spouses George and Susan Tan (spouses Tan) entered into a contract with G.V.T. Engineering Services
(G.V.T.), through its owner/manager Gerino Tactaquin (Tactaquin) for the construction of their residential house at Ifugao St., La
Vista, Quezon City. The contract price was P1,700,000.00. Since the spouses Tan have no knowledge about building construction,
they hired the services of Engineer Rudy Cadag (Cadag) to supervise the said construction. In the course of the construction, the
spouses Tan caused several changes in the plans and specifications and ordered the deletion of some items in G.V.T.’s scope of work.
This brought about differences between the spouses Tan and Cadag, on one hand, and Tactaquin, on the other. Subsequently, the
latter stopped the construction of the subject house.

On December 4, 1990, G.V.T., through Tactaquin, filed a Complaint for specific performance and damages against the spouses Tan
and Cadag with the RTC of Quezon City contending that by reason of the changes in the plans and specifications of the construction
project ordered by Cadag and the spouses Tan, it was forced to borrow money from third persons at exorbitant interest; that several
portions of their contract were deleted but only to be awarded later to other contractors; that it suffered tremendous delay in the
completion of the project brought about by the spouses Tan’s delay in the delivery of construction materials on the jobsite; that all
the aforementioned acts caused undue prejudice and damage to it.

In their Answer with Counterclaims, the spouses Tan and Cadag alleged, among others, that G.V.T. performed several defective
works; that to avert further losses, the spouses Tan deleted some portions of the project covered by G.V.T.’s contract and awarded
other portions to another contractor; that the changes ordered by the spouses Tan were agreed upon by the parties; that G.V.T.,
being a mere single proprietorship has no legal personality and cannot be a party in a civil action.

Trial ensued and the court a quo made the following factual findings:

To begin with, it is not disputed that there was delay in the delivery of the needed construction materials which in turn caused
tremendous delay in project completion. The documentary evidence on record shows that plaintiff, practically during the entire
period that he was working on the project, complained to defendants about the non-delivery on time of the materials on the project
site (Exhs. D, G, H, H-1, H-2, H-3, H-4, and H-5). Plaintiff’s request for prompt delivery of materials fell on deaf ears.

xxxx

Plaintiff’s losses as a result of the delay were aggravated by cancellation by defendants of major portions of the project such as
skylight roofing, installation of cement tiles, soil poisoning and finishing among others, which were all included in the construction
agreement but were assigned to other contractors (TSN, 9/6/91); Exh. I).

In his testimony, defendant Cadag declared that thirteen (13) items in the construction agreement were deleted mainly due to the
lack of technical know-how of the plaintiff, coupled with lack of qualified personnel; that he immediately notified the plaintiff upon
discovering the defective workmanship (TSN, 5/26/93); and that he became aware of the imperfection in plaintiff’s work as early as
during the plastering of the walls (TSN, 10/12/97). The evidence is clear however that plaintiff’s attention about the alleged faulty
work was called for the first time only on November 16, 1990 when plaintiff was furnished with defendants’ letter bearing date of
November 10, 1990 (Exh. 20) as their reply to plaintiff’s letter of even date.

xxxx

It bears pointing out that defendant Cadag testified that during the construction of the house of defendant spouses he was at the
job site everyday to see to it that the construction was being done according to the plans and specifications (TSN, 9/31/94). He was
assisted in the project by the other supervising representatives of defendants spouses, namely, Engr. Rogelio Menguito, Engr.
Armando Menguito and Arch. Hans Palma who went to the project site to attend the weekly meetings. It thus appears that there
was a close monitoring by the defendant of the construction by the plaintiff. 3

On the basis of the foregoing findings, the trial court concluded thus:

It is therefore the finding of this Court that defendants’ conclusions as to the workmanship and competence of plaintiff are
unsupported and without basis and that their act of deleting several major items from plaintiff’s scope of work was uncalled for, if
not done in bad faith. Defendants’s [sic] acts forced plaintiff to withdraw from the project. 4

Accordingly, the RTC rendered a Decision 5 with the following dispositive portion:

WHEREFORE, judgment is hereby rendered as follows:

1. Ordering defendants Rodovaldo Cadag and spouses George and Susan Tan to pay plaintiff, jointly and severally:

a) the sum of P366,340.00 representing the balance of the contract price;

b) the amount of P49,578.56 representing the 5% retention fee;

c) the amount of P45,000.00 as moral damages;

d) the amount of P100,000.00 for and as attorney’s fees; and

e) the amount of P17,000.00 as litigation expenses.

2. Dismissing defendants’ counterclaims.

Costs against defendants.

IT IS ORDERED. 6

Aggrieved by the trial court’s decision, the spouses Tan filed an appeal with the CA contending that the trial court erred in not
dismissing the complaint on the ground that G.V.T. has no legal capacity to sue; in not finding that it was G.V.T. which caused the
delay in the construction of the subject residential house; in awarding amounts in favor of G.V.T. representing the balance of the
contract price, retention fee, moral damages and attorney’s fees; and in finding Cadag jointly and severally liable with the spouses
Tan.

In its Decision of June 29, 2001, the CA affirmed with modification the judgment of the trial court, to wit:

IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby MODIFIED by deleting the awards for moral damages, attorney’s
fees and litigation expenses and dismissing the case against appellant Rodovaldo Cadag. In all other respect, the challenged
judgment is AFFIRMED. Costs against the appellant-spouses George and Susan Tan.

SO ORDERED. 7

Both parties filed their respective Motions for Partial Reconsideration but these were denied by the CA in its Resolution of April 10,
2002. 8
Hence, herein petition by the spouses Tan based on the following assignments of errors:

1. RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONERS DID NOT VIOLATE THEIR CONSTRUCTION
AGREEMENT WITH THE PRIVATE RESPONDENT; HENCE, THEY CANNOT BE REQUIRED TO PAY THE AMOUNTS OF P366,340.00
REPRESENTING THE BALANCE OF THE CONTRACT PRICE OF P1,700,000.00 AND P49,578.56 REPRESENTING 5 PERCENT RETENTION
FEE.

xxxx

2. RESPONDENT COURT OF APPEALS LIKEWISE ERRED IN NOT ABSOLVING THE PETITIONERS FROM LIABILITY TO PRIVATE
RESPONDENT.

xxxx

3. RESPONDENT COURT OF APPEALS ALSO ERRED IN NOT ORDERING THE DISMISSAL OF CIVIL CASE NO. Q-90-7405 FOR LACK OF
JURISDICTION ON THE PART OF THE LOWER COURT. 9

Petitioners contend that since Tactaquin consented and acquiesced to the changes and alterations made in the plan of the subject
house he cannot complain and discontinue the construction of the said house. Petitioners assert that it would be highly unfair and
unjust for them to be required to pay the amount representing the cost of the remaining unfinished portion of the house after it was
abandoned by Tactaquin, for to do so would enable the latter to unjustly enrich himself at their expense. With respect to the
retention fee, petitioners argue that this amount is payable only after the house is completed and turned over to them. Since
respondent never completed the construction of the subject house, petitioners claim that they should not be required to pay the
retention fee. Petitioners also contend that respondent failed to prove that it is entitled to actual damages.

As to the second assigned error, petitioners contend that since the CA dismissed the complaint against Cadag it follows that they
should not also be held liable because they merely relied upon and followed the advice and instructions of Cadag whom they hired
to supervise the construction of their house.

Anent the last assigned error, petitioners argue that G.V.T., being a sole proprietorship, is not a juridical person and, hence, has no
legal personality to institute the complaint with the trial court. Consequently, the trial court did not acquire jurisdiction over the case
and all proceedings conducted by it are null and void. Petitioners contend that they raised this issue in their Answer to the Complaint
and in their appeal to the CA.

In their Supplemental Petition, petitioners contend that under their contract with G.V.T., the latter agreed to employ only labor in
the construction of the subject house and that petitioners shall supply the materials; that it was error on the part of the CA and the
trial court to award the remaining balance of the contract price in favor of respondent despite the fact that some items from the
latter’s scope of work were deleted with its consent. Petitioners argue that since the above-mentioned items were deleted, it follows
that respondent should not be compensated for the work which it has not accomplished. Petitioners went further to claim that the
value of the deleted items should, in fact, be deducted from the original contract price. As to the delay in the construction of the
subject house, petitioners assert that said delay was attributable to respondent which failed to pay the wages of its workers who, in
turn, refused to continue working; that petitioners were even forced to pay the workers’ wages for the construction to continue.

In its Comment, respondent contends that the CA and the trial court are one in finding that petitioners are the ones responsible for
breach of contract, for unjustifiably deleting items agreed upon and delaying delivery of construction materials, and that these
findings were never rebutted by contrary evidence. Respondent asserts that findings of fact of the trial court especially when
affirmed by the CA are conclusive on the Supreme Court when supported by the evidence on record and that the Supreme Court’s
jurisdiction in cases brought before it from the CA via Rule 45 of the Rules of Court is limited to reviewing errors of law.

As to the second assigned error, respondent asserts that petitioners’ argument is fallacious because the court’s ruling absolving
Cadag from liability is based on the fact that the there is no privity of contract between him and respondent. This, respondent
argues, cannot be said with respect to it and petitioners.

As to the last assigned error, respondent quoted portions of this Court’s ruling in the case of Yao Ka Sin Trading v. Court of
Appeals [10], as cited by the CA in its challenged Decision. In the said case, the Court basically held that no one has been misled by
the error in the name of the party plaintiff and to send the case back to the trial court for amendment and new trial for the simple
purpose of changing the name of the plaintiff is not justified considering that there would be, on re-trial, the same complaint,
answer, defense, interests, witnesses and evidence.

The Court finds the petition without merit.

The Court finds it proper to discuss first the issue regarding G.V.T.’s lack of legal personality to sue.

Petitioners raised the issue of G.V.T.’s lack of legal personality to be a party in a civil action as a defense in their Answer with
Counterclaims and, thus, are not estopped from raising this issue before the CA or this Court. 11 It is true that G.V.T. Engineering
Services, being a sole proprietorship, is not vested with a legal personality to bring suit or defend an action in court. A perusal of the
records of the present case shows that respondent’s complaint filed with the trial court as well as its Appellee’s Brief submitted to
the CA and its Comment filed before this Court are all captioned as "G.V.T. Engineering Services acting through its owner/manager
Gerino V. Tactaquin". In fact, the first paragraph of the complaint refers to G.V.T. as the plaintiff. On this basis, it can be inferred that
G.V.T. was the one which filed the complaint and that it is only acting through its proprietor. However, subsequent allegations in the
complaint show that the suit is actually brought by Tactaquin. Averments therein refer to the plaintiff as a natural person. In fact,
one of the prayers in the complaint is for the recovery of moral damages by reason of "his sufferings, mental anguish, moral shock,
sleepless nights, serious anxiety and besmirch[ed] reputation as an Engineer and Contractor." It is settled that, as a rule, juridical
persons are not entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such
sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. 12 From these, it can be inferred that it was actually
Tactaquin who is the complainant. As such, the proper caption should have been "Gerino Tactaquin doing business under the name
and style of G.V.T. Engineering Services", as is usually done in cases filed involving sole proprietorships. Nonetheless, these are
matters of form and the Court finds the defect merely technical, which does not, in any way, affect its jurisdiction.

This Court has held time and again that rules of procedure should be viewed as mere tools designed to aid the courts in the speedy,
just and inexpensive determination of the cases before them. 13 Liberal construction of the rules and the pleadings is the controlling
principle to effect substantial justice. 14 In fact, this Court is not impervious to instances when rules of procedure must yield to the
loftier demands of substantial justice and equity. 15 Citing Aguam v. Court of Appeals [16], this Court held in Barnes v.
Quijano [17] that:

The law abhors technicalities that impede the cause of justice. The court's primary duty is to render or dispense justice. "A litigation
is not a game of technicalities." "Lawsuits unlike duels are not to be won by a rapier's thrust. Technicality, when it deserts its proper
office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts." Litigations
must be decided on their merits and not on technicality. Every party litigant must be afforded the amplest opportunity for the
proper and just determination of his cause, free from the unacceptable plea of technicalities. Thus, dismissal of appeals purely on
technical grounds is frowned upon where the policy of the court is to encourage hearings of appeals on their merits and the rules of
procedure ought not to be applied in a very rigid, technical sense; rules of procedure are used only to help secure, not override
substantial justice. It is a far better and more prudent course of action for the court to excuse a technical lapse and afford the parties
a review of the case on appeal to attain the ends of justice rather than dispose of the case on technicality and cause a grave injustice
to the parties, giving a false impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of
justice. 18

More importantly, there is no showing that respondent’s failure to place the correct caption in the complaint or to amend the same
later resulted in any prejudice on the part of petitioners. Thus, this Court held as early as the case of Alonso v. Villamor, 19 that:

No one has been misled by the error in the name of the party plaintiff. If we should by reason of this error send this case back for
amendment and new trial, there would be on the retrial the same complaint, the same answer, the same defense, the same
interests, the same witnesses, and the same evidence. The name of the plaintiff would constitute the only difference between the
old trial and the new. In our judgment there is not enough in a name to justify such action. 20

In the same manner, it would be an unjustifiable abandonment of the principles laid down in the above-mentioned cases if the Court
would nullify the proceedings had in the present case by the lower and appellate courts on the simple ground that the complaint
filed with the trial court was not properly captioned.

Coming to the merits of the case, the Court finds for the respondent.

As to the first assigned error, respondent did not refute petitioners’ contention that he gave his consent and acquiesced to the
decision of petitioners to change or alter the construction plan of the subject house. However, respondent contends that he did not
agree to the deletions made by petitioners of some of the items of work covered by their contract. Both the trial and appellate
courts gave credence to respondent’s contention when they ruled that petitioners were guilty of "deleting several major items from
plaintiff’s (herein respondent’s) scope of work" 21 or "of unjustifiably deleting items agreed upon in the construction agreement and
delaying the delivery of construction materials" 22 thereby forcing respondent to withdraw from the project. From these acts of
petitioners, both the trial and appellate courts made categorical findings that petitioners are the ones guilty of breach of contract.

The Court upholds the factual findings of the trial and appellate courts with respect to petitioners’ liability for breach of their
contract with respondent. Questions of facts are beyond the pale of Rule 45 of the Rules of Court as a petition for review may only
raise questions of law. 23 Moreover, factual findings of the trial court, particularly when affirmed by the Court of Appeals, are
generally binding on this Court. 24 More so, as in this case, where petitioners have failed to show that the courts below overlooked or
disregarded certain facts or circumstances of such import as would have altered the outcome of the case. 25 The Court, thus, finds no
reason to set aside the lower courts’ factual findings.

An examination of the records shows that respondent, indeed, refused to give his consent to the abovementioned deletions as
evidenced by his letters dated November 10, 1990 26 and November 23, 1990 27 addressed to the spouses Tan. Moreover,
petitioners’ delay in the delivery of construction materials is also evidenced by the minutes of the meeting held among the
representatives of petitioners and respondent on May 5, 1990 28 as well as the letter of respondent to petitioners dated June 15,
1990. 29

Having resolved that petitioners are guilty of breach of contract, the next question is whether they are liable to pay the amounts
of P366,340.00 and P49,578.56, which supposedly represent the balance of the price of their contract with respondent and 5%
retention fee, respectively.

There is no question that petitioners are liable for damages for having breached their contract with respondent. Article 1170 of the
Civil Code provides that those who in the performance of their obligations are guilty of fraud, negligence or delay and those who in
any manner contravene the tenor thereof are liable for damages. Moreover, the Court agrees with the trial court that under Article
1234 of the Civil Code, if the obligation has been substantially performed in good faith, the obligor may recover as though there had
been a strict and complete fulfillment less damages suffered by the obligee. In the present case, it is not disputed that respondent
withdrew from the project on November 23, 1990. Prior to such withdrawal, respondents gave to petitioners its 22nd Billing, dated
October 29, 1990, where the approximated percentage of work completed as of that date was 74% and the portion of the contract
paid by petitioners so far was P1,265,660.60. 30 This was not disputed by petitioners. Hence, respondent was able to establish that
he has substantially performed his obligation in good faith.

It is also established that a substantial part of the remaining items of work which were supposed to be done by respondent were
deleted by petitioners from his scope of work and awarded to other contractors, thus, forcing him to withdraw from the contract.
These works include the following: 1) soil poisoning; 2) T & G ceiling and flooring; 3) wood parquet; 4) vitrified floor tiles; 5) glazed
and unglazed tiles; 6) washout; 7) marble flooring; 8) vinyl flooring; 9) plywood sheeting; 10) plain GI sheets; 11) cement tiles; 12)
skylights; 13) Fixtures electrical works; and, 14) Fixtures and accessories and plumbing works. 31

The Court finds no cogent reason to depart from the ruling of the trial court, as affirmed by the CA, that since petitioners are guilty
of breach of contract by deleting the above-mentioned items from respondent’s scope of work, the value of the said items should be
credited in respondent’s favor. It is established that if the above-mentioned deleted items would have been performed by
respondent, as it should have been pursuant to their contract, the construction is already 96% completed. 32 Hence, respondent
should be paid 96% of the total contract price of P1,700,000, or P1,632,000.00. The Court agrees with the trial court that since
petitioners already paid respondent the total amount of P1,265,660.00, the former should be held liable to pay the balance
ofP366,340.00.

As to the 5% retention fee which respondent seeks to recover, petitioners do not deny that they have retained the same in their
custody. The only contention petitioners advance is that respondent is not entitled to recover this fee because it is stipulated under
their contract that petitioners shall only give them to respondent upon completion of the project and the same is turned over to
them. In the present case, respondent was not able to complete the project. However, his failure to complete his obligation under
the contract was not due to his fault but because he was forced to withdraw therefrom by reason of the breach committed by
petitioners. Nonetheless, as earlier discussed, at the time that respondent withdrew from the contract, he has already performed in
good faith a substantial portion of his obligation. Considering that he was not at fault, the law provides that he is entitled to recover
as though there has been a strict and complete fulfillment of his obligation. 33 On this basis, the Court finds no error in the ruling of
the trial and appellate courts that respondent is entitled to the recovery of 5% retention fee.
The Court finds that respondent was only able to establish the amount of P20,772.05, which is the sum of all the retention fees
appearing in the bills presented by respondent in evidence. 34 Settled is the rule that actual or compensatory damages cannot be
presumed but must be proved with reasonable degree of certainty. 35 A court cannot rely on speculations, conjectures or guesswork
as to the fact of damage but must depend upon competent proof that they have indeed been suffered by the injured party and on
the basis of the best evidence obtainable as to the actual amount thereof. 36 It must point out specific facts that could provide the
gauge for measuring whatever compensatory or actual damages were borne. 37 Considering that the documentary evidence
presented by respondent to prove the sum of retention fees sought to be recovered totals an amount which is less than that granted
by the trial court, it is only proper to reduce such award in accordance with the evidence presented.

As to the second assigned error, it is wrong for petitioners to argue that since Cadag, whom they hired to supervise the construction
of their house, was absolved by the court from liability, they should not also be held liable.

The Court finds no error on the part of the CA in ruling that it is a basic principle in civil law, on relativity of contracts, that contracts
can only bind the parties who had entered into it and it cannot favor or prejudice third persons. Contracts take effect only between
the parties, their successors in interest, heirs and assigns. 38Moreover, every cause of action ex contractu must be founded upon a
contract, oral or written, either express or implied. 39 In the present case, the complaint for specific performance filed by herein
respondent with the trial court was based on the failure of the spouses Tan to faithfully comply with the provisions of their contract.
In other words, respondent’s cause of action was the breach of contract committed by the spouses Tan. Cadag is not a party to this
contract. Neither did he enter into any contract with respondent regarding the construction of the subject house. Hence, considering
that respondent’s cause of action was breach of contract and since there is no privity of contract between him and Cadag, there is
no obligation or liability to speak about and thus no cause of action arises. Clearly, Cadag, not being privy to the transaction between
respondent and the spouses Tan, should not be made to answer for the latter’s default.

Furthermore, Cadag was employed by the spouses Tan to supervise the construction of their house. Acting as such, his role is merely
that of an agent. The essence of agency being the representation of another, it is evident that the obligations contracted are for and
on behalf of the principal. 40 A consequence of this representation is the liability of the principal for the acts of his agent performed
within the limits of his authority that is equivalent to the performance by the principal himself who should answer therefor. 41 In the
present case, since there is neither allegation nor evidence that Cadag exceeded his authority, all his acts are considered as those of
his principal, the spouses Tan, who are, therefore, the ones answerable for such acts.

WHEREFORE, the petition is partly GRANTED. The appealed Decision and Resolution of the Court of Appeals
are AFFIRMED with MODIFICATION whereby the amount of retention fee which petitioners are ordered to pay is reduced
from P49,578.56 to P20,772.05.
G.R. No. 174610               July 14, 2009

SORIAMONT STEAMSHIP AGENCIES, INC., and PATRICK RONAS, Petitioners, 

vs.
SPRINT TRANSPORT SERVICES, INC., RICARDO CRUZ PAPA, doing business under the style PAPA TRANSPORT
SERVICES, Respondents.

DECISION

CHICO-NAZARIO, J.:

Assailed in this Petition for Review on Certiorari, under Rule 45 of the Revised Rules of Court, is the Decision1dated 22 June 2006 and
Resolution2 dated 7 September 2006 of the Court of Appeals in CA-G.R. CV No. 74987. The appellate court affirmed with
modification the Decision3 dated 22 April 2002 of the Regional Trial Court (RTC), Branch 46, of Manila, in Civil Case No. 98-89047,
granting the Complaint for Sum of Money of herein respondent Sprint Transport Services, Inc. (Sprint) after the alleged failure of
herein petitioner Soriamont Steamship Agencies, Inc. (Soriamont) to return the chassis units it leased from Sprint and pay the
accumulated rentals for the same.

The following are the factual and procedural antecedents:

Soriamont is a domestic corporation providing services as a receiving agent for line load contractor vessels. Patrick Ronas (Ronas) is
its general manager.

On the other hand, Sprint is a domestic corporation engaged in transport services. Its co-respondent Ricardo Cruz Papa (Papa) is
engaged in the trucking business under the business name "Papa Transport Services" (PTS).

Sprint filed with the RTC on 2 June 1998 a Complaint4 for Sum of Money against Soriamont and Ronas, docketed as Civil Case No. 98-
89047. Sprint alleged in its Complaint that: (a) on 17 December 1993, it entered into a lease agreement, denominated as Equipment
Lease Agreement (ELA) with Soriamont, wherein the former agreed to lease a number of chassis units to the latter for the transport
of container vans; (b) with authorization letters dated 19 June 1996 issued by Ronas on behalf of Soriamont, PTS and another
trucker, Rebson Trucking, were able to withdraw on 22 and 25 June 1996, from the container yard of Sprint, two chassis units
(subject equipment),5evidenced by Equipment Interchange Receipts No. 14215 and No. 14222; (c) Soriamont and Ronas failed to pay
rental fees for the subject equipment since 15 January 1997; (d) Sprint was subsequently informed by Ronas, through a letter dated
17 June 1997, of the purported loss of the subject equipment sometime in June 1997; and (e) despite demands, Soriamont and
Ronas failed to pay the rental fees for the subject equipment, and to replace or return the same to Sprint.

Sprint, thus, prayed for the RTC to render judgment:

1. Ordering [Soriamont and Ronas] to pay [Sprint], jointly and severally, actual damages, in the amount of Five Hundred
Thirty-Seven Thousand Eight Hundred Pesos (P537,800.00) representing unpaid rentals and the replacement cost for the
lost chassis units.

2. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount of Fifty-Three Thousand Five Hundred
Four Pesos and Forty-Two centavos (P53,504.42) as interest and penalties accrued as of March 31, 1998 and until full
satisfaction thereof.

3. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount equivalent to twenty-five percent (25%)
of the total amount claimed for and as attorney’s fees plus Two Thousand Pesos (P2,000.00) per court appearance.

4. Ordering [Soriamont and Ronas] to pay the cost of the suit.6

Soriamont and Ronas filed with the RTC their Answer with Compulsory Counterclaim.7 Soriamont admitted therein to having a lease
agreement with Sprint, but only for the period 21 October 1993 to 21 January 1994. It denied entering into an ELA with respondent
Sprint on 17 December 1993 as alleged in the Complaint. Soriamont further argued that it was not a party-in-interest in Civil Case
No. 98-89047, since it was PTS and Rebson Trucking that withdrew the subject equipment from the container yard of Sprint. Ronas
was likewise not a party-in-interest in the case since his actions, assailed in the Complaint, were executed as part of his regular
functions as an officer of Soriamont.

Consistent with their stance, Soriamont and Ronas filed a Third-Party Complaint8 against Papa, who was doing business under the
name PTS. Soriamont and Ronas averred in their Third-Party Complaint that it was PTS and Rebson Trucking that withdrew the
subject equipments from the container yard of Sprint, and failed to return the same. Since Papa failed to file an answer to the Third-
Party Complaint, he was declared by the RTC to be in default.9

After trial, the RTC rendered its Decision in Civil Case No. 98-89047 on 22 April 2002, finding Soriamont liable for the claim of Sprint,
while absolving Ronas and Papa from any liability. According to the RTC, Soriamont authorized PTS to withdraw the subject
equipment. The dispositive portion of the RTC Decision reads:

WHEREFORE, judgment is hereby rendered in favor of [herein respondent] Sprint Transport Services, Inc. and against [herein
petitioner] Soriamont Steamship Agencies, Inc., ordering the latter to pay the former the following:

 Three hundred twenty thousand pesos (P320,000) representing the value of the two chassis units with interest at the legal
rate from the filing of the complaint;
 Two hundred seventy thousand one hundred twenty four & 42/100 pesos (P270,124.42) representing unpaid rentals with
interest at the legal rate from the filing of the complaint;
 P20,000.00 as attorney’s fees.

The rate of interest shall be increased to 12% per annum once this decision becomes final and executory.

Defendant Patrick Ronas and [herein respondent] Ricardo Cruz Papa are absolved from liability.10

Soriamont filed an appeal of the foregoing RTC Decision to the Court of Appeals, docketed as CA-G.R. CV No. 74987.

The Court of Appeals, in its Decision dated 22 June 2006, found the following facts to be borne out by the records: (1) Sprint and
Soriamont entered into an ELA whereby the former leased chassis units to the latter for the specified daily rates. The ELA covered
the period 21 October 1993 to 21 January 1994, but it contained an "automatic" renewal clause; (2) on 22 and 25 June 1996,
Soriamont, through PTS and Rebson Trucking, withdrew Sprint Chassis 2-07 with Plate No. NUP-261 Serial No. ICAZ-165118, and
Sprint Chassis 2-55 with Plate No. NUP-533 Serial MOTZ-160080, from the container yard of Sprint; (3) Soriamont authorized the
withdrawal by PTS and Rebson Trucking of the subject equipment from the container yard of Sprint; and (4) the subject pieces of
equipment were never returned to Sprint. In a letter to Sprint dated 19 June 1997, Soriamont relayed that it was still trying to locate
the subject equipment, and requested the former to refrain from releasing more equipment to respondent PTS and Rebson
Trucking.

Hence, the Court of Appeals decreed:

WHEREFORE, the appealed Decision dated April 22, 2002 of the trial court is affirmed, subject to the modification that the specific
rate of legal interest per annum on both the P320,000.00 representing the value of the two chassis units, and on the P270,124.42
representing the unpaid rentals, is six percent (6%), to be increased to twelve percent (12%) from the finality of this Decision until its
full satisfaction.11

In a Resolution dated 7 September 2006, the Court of Appeals denied the Motion for Reconsideration of Soriamont for failing to
present any cogent and substantial matter that would warrant a reversal or modification of its earlier Decision.

Aggrieved, Soriamont12 filed the present Petition for Review with the following assignment of errors:

I.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN LIMITING AS SOLE ISSUE FOR RESOLUTION OF WHETHER OR
NOT AN AGENCY RELATIONSHIP EXISTED BETWEEN PRIVATE RESPONDENT SPRINT TRANSPORT AND HEREIN PETITIONERS
SORIAMONT STEAMSHIP AGENCIES AND PRIVATE RESPONDENT PAPA TRUCKING BUT TOTALLY DISREGARDING AND FAILING TO
RULE ON THE LIABILITY OF PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS. THE LIABILITY OF PRIVATE RESPONDENT
PAPA TRUCKING TO HEREIN PETITIONERS SUBJECT OF THE THIRD-PARTY COMPLAINT WAS TOTALLY IGNORED;
 II.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING HEREIN PETITIONERS STEAMSHIP AGENCIES SOLELY
LIABLE. EVIDENCE ON RECORD SHOW THAT IT WAS PRIVATE RESPONDENT PAPA TRUCKING WHICH WITHDREW THE SUBJECT
CHASSIS. PRIVATE RESPONDENT PAPA TRUCKING WAS THE LAST IN POSSESSION OF THE SAID SUBJECT CHASSIS AND IT SHOULD BE
HELD SOLELY LIABLE FOR THE LOSS THEREOF;

III.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT IGNORED A MATERIAL INCONSISTENCY IN THE
TESTIMONY OF PRIVATE RESPONDENT SPRINT TRANSPORT’S WITNESS, MR. ENRICO G. VALENCIA. THE TESTIMONY OF MR.
VALENCIA WAS ERRONEOUSLY MADE THE BASIS FOR HOLDING HEREIN PETITIONERS LIABLE FOR THE LOSS OF THE SUBJECT CHASSIS.

We find the Petition to be without merit.

The Court of Appeals and the RTC sustained the contention of Sprint that PTS was authorized by Soriamont to secure possession of
the subject equipment from Sprint, pursuant to the existing ELA between Soriamont and Sprint. The authorization issued by
Soriamont to PTS established an agency relationship, with Soriamont as the principal and PTS as an agent. Resultantly, the actions
taken by PTS as regards the subject equipment were binding on Soriamont, making the latter liable to Sprint for the unpaid rentals
for the use, and damages for the subsequent loss, of the subject equipment.

Soriamont anchors its defense on its denial that it issued an authorization to PTS to withdraw the subject equipment from the
container yard of Sprint. Although Soriamont admits that the authorization letter dated 19 June 1996 was under its letterhead, said
letter was actually meant for and sent to Harman Foods as shipper. It was then Harman Foods that tasked PTS to withdraw the
subject equipment from Sprint. Soriamont insists that the Court of Appeals merely presumed that an agency relationship existed
between Soriamont and PTS, since there was nothing in the records to evidence the same. Meanwhile, there is undisputed evidence
that it was PTS that withdrew and was last in possession of the subject equipment. Soriamont further calls attention to the
testimony of Enrico Valencia (Valencia), a witness for Sprint, actually supporting the position of Soriamont that PTS did not present
any authorization from Soriamont when it withdrew the subject equipment from the container yard of Sprint. Assuming, for the sake
of argument that an agency relationship did exist between Soriamont and PTS, the latter should not have been exonerated from any
liability. The acts of PTS that resulted in the loss of the subject equipment were beyond the scope of its authority as supposed agent
of Soriamont. Soriamont never ratified, expressly or impliedly, such acts of PTS.

Soriamont is essentially challenging the sufficiency of the evidence on which the Court of Appeals based its conclusion that PTS
withdrew the subject equipment from the container yard of Sprint as an agent of Soriamont. In effect, Soriamont is raising questions
of fact, the resolution of which requires us to re-examine and re-evaluate the evidence presented by the parties below.

Basic is the rule in this jurisdiction that only questions of law may be raised in a petition for review 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 errors of
law, the findings of fact of the appellate court being conclusive. We have emphatically declared that it is not the function of this
Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that may have been
committed by the lower court.13

These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to hear the parties’
conflicting claims and to carefully weigh their respective sets of evidence. The findings of the trial court were subsequently affirmed
by the Court of Appeals. Where the factual findings of both the trial court and the Court of Appeals coincide, the same are binding
on this Court. We stress that, subject to some exceptional instances, only questions of law – not questions of fact – may be raised
before this Court in a petition for review under Rule 45 of the Revised Rules of Court.14

Given that Soriamont is precisely asserting in the instant Petition that the findings of fact of the Court of Appeals are premised on
the absence of evidence and are contradicted by the evidence on record,15 we accommodate Soriamont by going over the same
evidence considered by the Court of Appeals and the RTC.

In Republic v. Court of Appeals,16 we explained that:

In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. Stated differently, the
general rule in civil cases is that a party having the burden of proof of an essential fact must produce a preponderance of evidence
thereon (I Moore on Facts, 4, cited in Vicente J. Francisco, The Revised Rules of Court in the Philippines, Vol. VII, Part II, p. 542, 1973
Edition). By preponderance of evidence is meant simply evidence which is of greater weight, or more convincing than that which is
offered in opposition to it (32 C.J.S., 1051), The term 'preponderance of evidence' means the weight, credit and value of the
aggregate evidence on either side and is usually considered to be synonymous with the terms `greater weight of evidence' or
'greater weight, of the credible evidence.' Preponderance of the evidence is a phrase which, in the last analysis, means probability of
the truth. Preponderance of the evidence means evidence which is more convincing to the court as worthy of belief than that which
is offered in opposition thereto. x x x." (20 Am. Jur., 1100-1101)

After a review of the evidence on record, we rule that the preponderance of evidence indeed supports the existence of an agency
relationship between Soriamont and PTS.

It is true that a person dealing with an agent is not authorized, under any circumstances, to trust blindly the agent’s statements as to
the extent of his powers. Such person must not act negligently but must use reasonable diligence and prudence to ascertain whether
the agent acts within the scope of his authority. The settled rule is that persons dealing with an assumed agent are bound at their
peril; and if they would hold the principal liable, they must 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 prove it. Sprint has successfully discharged this
burden.

The ELA executed on 17 December 1993 between Sprint, as lessor, and Soriamont, as lessee, of chassis units, explicitly authorized
the latter to appoint a representative who shall withdraw and return the leased chassis units to Sprint, to wit:

EQUIPMENT LEASE AGREEMENT

between
SPRINT TRANSPORT SERVICES, INC. (LESSOR)
And
SORIAMONT STEAMSHIP AGENCIES, INC.
(LESSEE)
TERMS and CONDITIONS

xxxx

4. Equipment Interchange Receipt (EIR) as mentioned herein is a document accomplished every time a chassis is withdrawn and
returned to a designated depot. The EIR relates the condition of the chassis at the point of on-hire/off-hire duly acknowledged by
the LESSOR, Property Custodian and the LESSEE’S authorized representative.

xxxx

5. Chassis Withdrawal/Return Slip as mentioned herein is that document where the LESSEE authorizes his representative to
withdraw/return the chassis on his behalf. Only persons with a duly accomplished and signed authorization slip shall be entertained
by the LESSOR for purposes of withdrawal/return of the chassis. The signatory in the Withdrawal/Return Slip has to be the signatory
of the corresponding Lease Agreement or the LESSEE’s duly authorized representative(s).17(Emphases ours.)

Soriamont, though, avers that the aforequoted ELA was only for 21 October 1993 to 21 January 1994, and no longer in effect at the
time the subject pieces of equipment were reportedly withdrawn and lost by PTS. This contention of Soriamont is without merit,
given that the same ELA expressly provides for the "automatic" renewal thereof in paragraph 24, which reads:

There shall be an automatic renewal of the contract subject to the same terms and conditions as stipulated in the original contract
unless terminated by either party in accordance with paragraph no. 23 hereof. However, in this case, termination will take effect
immediately.18

There being no showing that the ELA was terminated by either party, then it was being automatically renewed in accordance with
the afore-quoted paragraph 24.

It was, therefore, totally regular and in conformity with the ELA that PTS and Rebson Trucking should appear before Sprint in June
1996 with authorization letters, issued by Soriamont, for the withdrawal of the subject equipment.19 On the witness stand, Valencia
testified, as the operations manager of Sprint, as follows:
Atty. Porciuncula:

Q. Mr. Witness, as operation manager, are you aware of any transactions between Sprint Transport Services, Inc. and the
defendant Soriamont Steamship Agencies, Inc.?

A. Yes, Sir.

Q. What transactions are these, Mr. Witness?

A. They got from us chassis, Sir.

Court:

Q. Who among the two, who withdrew?

A. The representative of Soriamont Steamship Agencies, Inc., Your Honor.

Atty. Porciuncula:

Q. And when were these chassis withdrawn, Mr. Witness?

A. June 1996, Sir.

Q. Will you kindly tell this Honorable Court what do you mean by withdrawing the chassis units from your container yard?

Witness:

Before they can withdraw the chassis they have to present withdrawal authority, Sir.

Atty. Porciuncula:

And what is this withdrawal authority?

A. This is to prove that they are authorizing their representative to get from us a chassis unit.

Q. And who is this authorization send to you, Mr. Witness?

A. Sometime a representative bring to our office the letter or the authorization or sometime thru fax, Sir.

Q. In this particular incident, Mr. Witness, how was it sent?

A. By fax, Sir.

Q. Is this standard operating procedure of Sprint Transport Services, Inc.?

A. Yes, Sir, if the trucking could not bring to our office the original copy of the authorization they have to send us thru fax,
but the original copy of the authorization will be followed.

Atty. Porciuncula:

Q. Mr. Witness, I am showing to you two documents of Soriamont Steamship Agencies, Inc. letter head with the headings
Authorization, are these the same withdrawal authority that you mentioned awhile ago?

A. Yes, Sir.
Atty. Porciuncula:

Your Honor, at this point may we request that these documents identified by the witness be marked as Exhibits JJ and KK,
Your Honor.

Court:

Mark them.

xxxx

Q. Way back Mr. Witness, who withdrew the chassis units 2-07 and 2-55?

A. The representative of Soriamont Steamship Agencies, Inc., the Papa Trucking, Sir.

Q. And are these trucking companies authorized to withdraw these chassis units?

A. Yes, Sir, it was stated in the withdrawal authority.

Atty. Porciuncula:

Q. Showing you again Mr. Witness, this authorization previously marked as Exhibits JJ and KK, could you please go over the
same and tell this Honorable Court where states there that the trucking companies which you mentioned awhile ago
authorized to withdraw?

A. Yes, Sir, it is stated in this withdrawal authority.

Atty. Porciuncula:

At this juncture, Your Honor, may we request that the Papa trucking and Rebson trucking identified by the witness be
bracketed and mark as our Exhibits JJ-1 and KK-1, Your Honor.

Court:

Mark them. Are these documents have dates?

Atty. Porciuncula:

Yes, Your Honor, both documents are dated June 19, 1996.

Q. Mr. Witness, after this what happened next?

A. After they presented to us the withdrawal authority, we called up Soriamont Steamship Agencies, Inc. to verify whether
the one sent to us through truck and the one sent to us through fax are one and the same.

Q. Then what happened next, Mr. Witness?

A. Then after the verification whether it is true, then we asked them to choose the chassis units then my checker would see
to it whether the chassis units are in good condition, then after that we prepared the outgoing Equipment Interchange
Receipt, Sir.

Q. Mr. Witness, could you tell this Honorable Court what an outgoing Equipment Interchange Receipt means?

A. This is a document proving that the representative of Soriamont Steamship Agencies, Inc. really withdraw (sic) the
chassis units, Sir.
 xxxx

Atty. Porciuncula:

Q. Going back Mr. Witness, you mentioned awhile ago that your company issued outgoing Equipment Interchange Receipt?

A. Yes, Sir.

Q. Are there incoming Equipment Interchange Receipt Mr. Witness?

A. We have not made Incoming Equipment Interchange Receipt with respect to Soriamont Steamship Agencies, Inc., Sir.

Q. And why not, Mr. Witness?

A. Because they have not returned to us the two chassis units.20

In his candid and straightforward testimony, Valencia was able to clearly describe the standard operating procedure followed in the
withdrawal by Soriamont or its authorized representative of the leased chassis units from the container yard of Sprint. In the
transaction involved herein, authorization letters dated 19 June 1996 in favor of PTS and Rebson Trucking were faxed by Sprint to
Soriamont, and were further verified by Sprint through a telephone call to Soriamont. Valencia’s testimony established that Sprint
exercised due diligence in its dealings with PTS, as the agent of Soriamont.

Soriamont cannot rely on the outgoing Equipment Interchange Receipts as proof that the withdrawal of the subject equipment was
not authorized by it, but by the shipper/consignee, Harman Foods, which actually designated PTS and Rebson Trucking as truckers.
However, a scrutiny of the Equipment Interchange Receipts will show that these documents merely identified Harman Foods as the
shipper/consignee, and the location of said shipping line. It bears to stress that it was Soriamont that had an existing ELA with Sprint,
not Harman Foods, for the lease of the subject equipment. Moreover, as stated in the ELA, the outgoing Equipment Interchange
Receipts shall be signed, upon the withdrawal of the leased chassis units, by the lessee, Soriamont, or its authorized representative.
In this case, we can only hold that the driver of PTS signed the receipts for the subject equipment as the authorized representative of
Soriamont, and no other.

Finally, the letter21 dated 17 June 1997, sent to Sprint by Ronas, on behalf of Soriamont, which stated:

As we are currently having a problem with regards to the whereabouts of the subject trailers, may we request your kind assistance in
refraining from issuing any equipment to the above trucking companies.

reveals that PTS did have previous authority from Soriamont to withdraw the leased chassis units from Sprint, hence, necessitating
an express request from Soriamont for Sprint to discontinue recognizing said authority.1avvphi1

Alternatively, if PTS is found to be its agent, Soriamont argues that PTS is liable for the loss of the subject equipment, since PTS acted
beyond its authority as agent. Soriamont cites Article 1897 of the Civil Code, which provides:

Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself
or exceeds the limits of his authority without giving such party sufficient notice of his powers.

The burden falls upon Soriamont to prove its affirmative allegation that PTS acted in any manner in excess of its authority as agent,
thus, resulting in the loss of the subject equipment. To recall, the subject equipment was withdrawn and used by PTS with the
authority of Soriamont. And for PTS to be personally liable, as agent, it is vital that Soriamont be able to prove that PTS damaged or
lost the said equipment because it acted contrary to or in excess of the authority granted to it by Soriamont. As the Court of Appeals
and the RTC found, however, Soriamont did not adduce any evidence at all to prove said allegation. Given the lack of evidence that
PTS was in any way responsible for the loss of the subject equipment, then, it cannot be held liable to Sprint, or even to Soriamont as
its agent. In the absence of evidence showing that PTS acted contrary to or in excess of the authority granted to it by its principal,
Soriamont, this Court cannot merely presume PTS liable to Soriamont as its agent. The only thing proven was that Soriamont,
through PTS, withdrew the two chassis units from Sprint, and that these have never been returned to Sprint.
Considering our preceding discussion, there is no reason for us to depart from the general rule that the findings of fact of the Court
of Appeals and the RTC are already conclusive and binding upon us.

Finally, the adjustment by the Court of Appeals with respect to the applicable rate of legal interest on theP320,000.00, representing
the value of the subject equipment, and on the P270,124.42, representing the unpaid rentals awarded in favor of Sprint, is proper
and with legal basis. Under Article 2209 of the Civil Code, when an obligation not constituting a loan or forbearance of money is
breached, then an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. Clearly, the monetary judgment in favor of Sprint does not involve a loan or forbearance of money; hence, the proper
imposable rate of interest is six (6%) percent. Further, as declared in Eastern Shipping Lines, Inc. v. Court of Appeals,22 the interim
period from the finality of the judgment awarding a monetary claim until payment thereof is deemed to be equivalent to a
forbearance of credit. Eastern Shipping Lines, Inc. v. Court of Appeals23 explained, to wit:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in
determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest,
as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin
to run only from the date the judgment of the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit.

Consistent with the foregoing jurisprudence, and later on affirmed in more recent cases,24 when the judgment awarding a sum of
money becomes final and executory, the rate of legal interest shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent of a forbearance of credit. Thus, from the time the judgment becomes final
until its full satisfaction, the applicable rate of legal interest shall be twelve percent (12%).

WHEREFORE, premises considered, the instant Petition for Review on Certiorari is hereby DENIED. The Decision dated 22 June 2006
and Resolution dated 7 September 2006 of the Court of Appeals in CA-G.R. CV No. 74987 are hereby AFFIRMED. Costs against
petitioner Soriamont Steamship Agencies, Inc.
G.R. No. L-2344            February 10, 1906

GONZALO TUASON, plaintiff-appellee, 
vs.
DOLORES OROZCO, defendant-appellant.

Hartigan, Marple, Rohde and Gutierrez for appellant.

Ledesma, Sumulong and Quintos for appellee.

MAPA, J.:

On November 19, 1888, Juan de Vargas y Amaya, the defendant's husband, executed a power of attorney to Enrique Grupe,
authorizing him, among other things, to dispose of all his property, and particularly of a certain house and lot known as No. 24 Calle
Nueva, Malate, in the city of Manila, for the price at which it was actually sold. He was also authorized to mortgage the house for the
purpose of securing the payment of any amount advanced to his wife, Dolores Orozco de Rivero, who, inasmuch as the property had
been acquired with funds belonging to the conjugal partnership, was a necessary party to its sale or incumbrance.

On the 21st of January, 1890, Enrique Grupe and Dolores Orozco de Rivero obtained a loan from the plaintiff secured by a mortgage
on the property referred to in the power of attorney. In the caption of the instrument evidencing the debt it is stated that Grupe and
Dolores Orozco appeared as the parties of the first part and Gonzalo Tuason, the plaintiff, as the party of the second part; that Grupe
acted for himself and also in behalf of Juan Vargas by virtue of the power granted him by the latter, and that Dolores Orozco
appeared merely for the purpose of complying with the requirement contained in the power of attorney. In the body of the
instrument the following appears:

1. Enrique Grupe acknowledges to have this day received from Gonzalo Tuason as a loan, after deducting therefrom the
interest agreed upon, the sum of 3,500 pesos in cash, to his entire satisfaction, which sum he promises to pay within one
year from the date hereof.

2. Grupe also declares that of the 3,500 pesos, he has delivered to Dolores Orozco the sum of 2,200 pesos, having retained
the remaining 1,300 pesos for use in his business; that notwithstanding this distribution of the amount borrowed, he
assumes liability for the whole sum of 3,500 pesos, which he promises to repay in current gold or silver coin, without
discount, in this city on the date of the maturity of the loan, he otherwise to be liable for all expenses incurred and damages
suffered by his creditor by reason of his failure to comply with any or all of the conditions stipulated herein, and to pay
further interest at the rate of 1 per cent per month from the date of default until the debt is fully paid.

3. Grupe pledges as special security for the payment of the debt 13 shares of stock in the "Compañia de los Tranvias de
Filipinas," which shares he has delivered to his creditor duly indorsed so that the latter in case of his insolvency may dispose
of the same without any further formalities.

4. To secure the payment of the 2,200 pesos delivered to Dolores Orozco as aforesaid he specially mortgages the house and
lot No. 24, Calle Nueva, Malate, in the city of Manila (the same house referred to in the power at attorney executed by
Vargas to Grupe).

5. Dolores Orozco states that, in accordance with the requirement contained in the power of attorney executed by Vargas
to Grupe, she appears for the purpose of confirming the mortgage created upon the property in question.

6. Gonzalo Tuason does hereby accept all rights and actions accruing to him under his contract.

This instrument was duly recorded in the Registry of Property, and it appears therefrom that Enrique Grupe, as attorney in fact for
Vargas, received from the plaintiff a loan of 2,200 pesos and delivered the same to the defendant; that to secure its payment he
mortgaged the property of his principal with defendant's consent as required in the power of attorney. He also received 1,300 pesos.
This amount he borrowed for his own use. The recovery of this sum not being involved in this action, it will not be necessary to refer
to it in this decision. The complaint refers only to the 2,200 pesos delivered to the defendant under the terms of the agreement.
The defendant denies having received this sum, but her denial can not overcome the proof to the contrary contained in the
agreement. She was one of the parties to that instrument and signed it. This necessarily implies an admission on her part that the
statements in the agreement relating to her are true. She executed another act which corroborates the delivery to her of the money
in question — that is, her personal intervention in the execution of the mortgage and her statement in the deed that the mortgage
had been created with her knowledge and consent. The lien was created precisely upon the assumption that she had received that
amount and for the purpose of securing its payment.

In addition to this the defendant wrote a letter on October 23, 1903, to the attorneys for the plaintiff promising to pay the debt on or
before the 5th day of November following. The defendant admits the authenticity of this letter, which is a further evidence of the
fact that she had received the amount in question. Thirteen years had elapsed since she signed the mortgage deed. During all this
time she never denied having received the money. On the contrary, she promised to settle within a short time. The only explanation
that we can find for this is that she actually received the money as set forth in the instrument.

The fact that the defendant received the money from her husband's agent and not from the creditor does not affect the validity of
the mortgage in view of the conditions contained in the power of attorney under which the mortgage was created. Nowhere does it
appear in this power that the money was to be delivered to her by the creditor himself and not through the agent or any other
person. The important thing was that she should have received the money. This we think is fully established by the record.

This being an action for the recovery of the debt referred to, the court below properly admitted the instrument executed January 21,
1890, evidencing the debt.

The appellant claims that the instrument is evidence of a debt personally incurred by Enrique Grupe for his own benefit, and not
incurred for the benefit of his principal, Vargas, as alleged in the complaint. As a matter of fact, Grupe, by the terms of the
agreement, bound himself personally to pay the debt. The appellant's contention however, can not be sustained. The agreement, so
far as that amount is concerned, was signed by Grupe as attorney in fact for Vargas. Pursuant to instructions contained in the power
of attorney the money was delivered to Varga's wife, the defendant in this case. To secure the payment of the debt, Varga's property
was mortgaged. His wife took part in the execution of the mortgage as required in the power of attorney. A debt thus incurred by
the agent is binding directly upon the principal, provided the former acted, as in the present case, within the scope of his authority.
(Art. 1727 of the Civil Code.) The fact that the agent has also bound himself to pay the debt does not relieve from liability the
principal for whose benefit the debt was incurred. The individual liability of the agent constitutes in the present case a further
security in favor of the creditor and does not affect or preclude the liability of the principal. In the present case the latter's liability
was further guaranteed by a mortgage upon his property. The law does not provide that the agent can not bind himself personally to
the fulfillment of an obligation incurred by him in the name and on behalf of his principal. On the contrary, it provides that such act
on the part of an agent would be valid. (Art. 1725 of the Civil Code.)

The above mortgage being valid and having been duly recorded in the Register of Property, directly subjects the property thus
encumbered, whoever its possessor may be, to the fulfillment of the obligation for the security of which it was created. (Art. 1876 of
the Civil Code and art. 105 of the Mortgage Law.) This presents another phase of the question. Under the view we have taken of the
case it is practically of no importance whether or not Enrique Grupe bound himself personally to pay the debt in question. Be this as
it may and assuming that Vargas, though principal in the agency, was not the principal debtor, the right in rem arising from the
mortgage would have justified the creditor in bringing his action directly against the property encumbered had he chosen to
foreclose the mortgage rather than to sue Grupe, the alleged principal debtor. This would be true irrespective of the personal
liability incurred by Grupe. The result would be practically the same even though it were admitted that appellant's contention is
correct.

The appellant also alleges that Enrique Grupe pledged to the plaintiff thirteen shares of stock in the "Compañia de los Tranvias de
Filipinas" to secure the payment of the entire debt, and contends that it must be shown what has become of these shares, the value
of which might be amply sufficient to pay the debt, before proceeding to foreclose the mortgage. This contention can not be
sustained in the face of the law above quoted to the effect that a mortgage directly subjects the property encumbered, whoever its
possessor may be, to the fulfillment of the obligation for the security of which it was created. Moreover it was incumbent upon the
appellant to show that the debt had been paid with those shares. Payment is not presumed but must be proved. It is a defense
which the defendant may interpose. It was therefore her duty to show this fact affirmatively. She failed, however, to do so.

The appellant's final contention is that in order to render judgment against the mortgaged property it would be necessary that the
minor children of Juan de Vargas be made parties defendant in this action, they having an interest in the property. Under article 154
of the Civil Code, which was in force at the time of the death of Vargas, the defendant had the parental authority over her children
and consequently the legal representation of their persons and property. (Arts. 155 and 159 of the Civil Code.) It can not be said,
therefore, that they were not properly represented at the trial. Furthermore this action was brought against the defendant in her
capacity as administratrix of the estate of the deceased Vargas. She did not deny in her answer that she was such administratix.

Vargas having incurred this debt during his marriage, the same should not be paid out of property belonging to the defendant
exclusively but from that pertaining to the conjugal partnership. This fact should be borne in mind in case the proceeds of the
mortgaged property be not sufficient to ay the debt and interest thereon. The judgment of the court below should be modified in so
far as it holds the defendant personally liable for the payment of the debt.

The judgment thus modified is affirmed and the defendant is hereby ordered to pay to the plaintiff the sum of 2,200 pesos as
principal, together with interest thereon from the 21st day of January, 1891, until the debt shall have been fully discharged. The
appellant shall pay the costs of this appeal.

After the expiration of ten days let judgment be entered in accordance herewith and let the case be remanded to the court below
for execution. So ordered.
G.R. No. 16492             March 9, 1922

E. MACIAS & CO., importers and exporters, plaintiff-appellant, 

vs.
WARNER, BARNES & CO., in its capacity as agents of "The China Fire Insurance Co.," of "The Yang-Tsze" and of "The State
Assurance Co., Ltd.," defendant-appellant.

Ramon Sotelo for plaintiff-appellant.

Cohn, Fisher & DeWitt for defendant-appellant.

STATEMENT

The plaintiff is a corporation duly registered and domiciled in Manila. The defendant is a corporation duly licensed to do business in
the Philippine Islands, and is the resident agent of insurance companies "The China Fire Insurance Company, Limited, of Hongkong,"
"The Yang-Tsze Insurance Association Limited, of Shanghai," and "The State Assurance Company, Limited, of Liverpool. The plaintiff
is an importer of textures and commercial articles for wholesale.

In the ordinary course of business, it applied for, and obtained, the following policies against loss by fire:

Policy No. 4143, issued by The China Fire Insurance 

Co., Ltd., for ....................................................................... P12,000

Policy No. 4382, issued by The China Fire Insurance 

Co., Ltd., for .......................................................................... 15,000

Policy No. 326, issued by The Yang-Tsze Insurance 

Ass'n., Ltd., for ..................................................................... 10,000

Policy No. 796111, issued by The State Assurance 

Co., Ltd., for ............................................................................ 8,000

Policy No. 4143, of P12,000, recites that Mrs. Rosario Vizcarra, having paid to the China Fire Insurance Company, Limited, P102 for
insuring against or damage by fire certain merchandise the description of which follows, "the company agrees with the insured that,
if the property above described, or any party thereof, shall be destroyed or damaged by fire between September 16, 1918, and
September 16, 1919," etc., "The company will, out of its capital, stock and funds, pay or make good all such loss or damage, not
exceeding" the amount of the policy. This policy was later duly assigned to the plaintiff.

Policy No. 4382, for P15,000, was issued by the same company to, and in the name of, plaintiff.

Policy No. 326, for P10,000, was issued to, and in the name of policy No. 326, for P10,000, was issued to, and in the name of the
plaintiff by The Yang-Tsze Insurance Association, Limited, and recites that the premium of P125 was paid by the plaintiff to the
association, and that, in the event of loss by fire between certain dates, "the funds and property of the said association shall be
subject and liable to pay, reinstate, or make good to the said assured, their heirs, executors, or administrators, such loss or damage
as shall be occasioned by fire to the property above-mentioned and hereby insured," not exceeding the amount of the policy.

Policy No. 796111, for P8,000, was issued by The States Assurance Company, Limited, to the plaintiff for a premium of P100, which
was paid to the Assurance Company through the defendant, its authorized agent, and recites that "the company agrees with the
insured that in the event of loss by fire between certain dates, the company will, out of its capital, stock and funds, pay the amount
of such loss or damage," not exceeding the amount of the policy, and it is attested by the defendant, through its "Cashier and
Accountant and Manager, Agents, State Assurance Co., Ltd.," authorized agents of the Assurance Company.

Policy No. 4143 is attested "on behalf of The China Fire Insurance Company, Limited," by the cashier and accountant and manager of
the defendant, as agents of The China Fire Insurance Company, Limited. The same is true as to policy no. 4382.
Policy No. 326 recites the payment of a premium of P125 by the plaintiff to The Yang-Tsze Insurance Association, Limited, and that,
in the event of loss, "the funds and property of the said association shall be subject and liable to pay, reinstate, or make good to the
said assured, their heirs, executors, or administrators, such loss or damage as shall be occasioned by fire or lightning to the
property" insured, not exceeding the amount of the policy, and it is attested by the defendant, through its cashier and accountant
and manager, as agents of the association "under the authority of a Power of Attorney from The Yang-Tsze Insurance Association,
Limited," "to sign, for and on behalf of the said Association, etc."

March 25, 1919, and while the policies were in force, a loss occurred in which the insured property was more or less damaged by fire
and the use of water resulting from the fire.

The plaintiff made a claim for damages under its policies, but could not agree as to the amount of loss sustained. It sold the insured
property in its then damaged condition, and brought this action against Warner, Barnes & Co., in its capacity as agents, to recover
the difference between the amount of the policies and the amount realized from the sale of the property, and in the first cause of
action, it prayed for judgment for P23,052.99, and in the second cause of action P9,857.15.

The numbers and amounts of the policies and the names of the insurance companies are set forth and alleged in the complaint.

The answer admits that the defendants is the resident agent of the insurance companies, the issuance of the policies, and that a fire
occurred on March 25, 1919, in the building in which the goods covered by the insurance policies were stored, and that to extinguish
the fire three packages of goods were damage by water not to exceed P500, and denies generally all other material allegations of
the complaint.

As a further and separate defense, the defendant pleads certain provisions in the policies, among which was a written notice of loss,
and all other insurance and certain detailed information. It is then alleged —

That although frequently requested to do so, plaintiff failed and refused to deliver to defendant or to any other person
authorized to receive it, any claim in writing specifying the articles or items of property damaged or destroyed and of the
alleged amount of the loss or damage caused thereto.

That defendant was at all times ready and willing to pay, on behalf of the insurance companies by whom said policies were
issued, and to the extent for which each was proportionately liable, the actual damage to plaintiff's goods covered by the
risks insured against, upon compliance within the time limited, with the terms of the clause of the contracts of insurance
above set forth.

Defendants prays judgment for costs.

Before the trial, counsel for the defendant objected to the introduction of any evidence in the case, and moved "that judgment be
entered for the defendant on the pleadings upon the ground that it appears from the averment of the complaint that the plaintiff
has had no contractual relations with the defendant, and that the action has not been brought against the real party in interest." The
objection and motion was overruled and exception duly taken. After trial the court found that there was due the plaintiff from the
three insurance companies p18,493.29 with interest thereon at the rate of 6 per cent per annum, from the date of the
commencement of the action, and costs, and rendered the following judgment:

It is, therefore, ordered that judgment be entered against Warner, Barnes & Co., Ltd., in its capacity as agent and
representative in the Philippine Islands for The China fire Insurance Company, Ltd., The Yang-Tsze Insurance Association,
Ltd., and The State Assurance Co., Ltd., for the payment to the plaintiff, E. Macias & Co., of the sum of P18,493.29, the
amount of this judgment to be prorated by Warner, Barnes & Co., among the three insurance companies above-mentioned
by it represented, in proportion to the interest insured by each of said three insurance companies, according to the policies
issued by them in favor of the plaintiff, and sued upon in this action.

The defendant then filed a motion to set aside the judgment and for a new trial, which was overruled and exception taken. From this
judgment the defendant appealed, claiming that "the court erred in overruling defendant's motion for judgment on the pleadings;
that the court erred in giving judgment for the plaintiff; that the court erred in denying defendants motion for a new trial," and
specifying other assignments which are not material to this opinion, Plaintiff also appealed.

 
JOHNS, J.:

The material facts are not in dispute it must be conceded that the policies in question were issued by the different insurance
companies, through the defendant as their respective agent; that they were issued in consideration of a premium which was paid by
the insured to the respective companies for the amount of the policies, as alleged; that the defendant was, and is now, the resident
agent in Manila of the companies, and was authorized to solicit and do business for them as such agent; that each company is a
foreign corporation. The principal office and place business of the The China Fire Insurance Company is at Hongkong; of The Yang-
Tsze Insurance Association is at Shanghai; and of The State Assurance Company is at Liverpool. As such foreign corporations they
were duly authorized and licensed to do insurance business in the Philippine Islands, and, to that end and for that purpose, the
defendant corporation, Warner, Barnes & Co., was the agent of each company.

All of the policies are in writing, and recite that the premium was paid by the insured to the insurance company which issued the
policy, and that, in the event of a loss, the insurance company which issued it will pay to the insured the amount of the policy.

This is not a case of an undisclosed agent or an undisclosed principal. It is a case of a disclosed agent and a disclosed principal.

The policies on their face shows that the defendant was the agent of the respective companies, and that it was acting as such agent
in dealing with the plaintiff. That in the issuance and delivery of the policies, the defendant was doing business in the name of, acting
for, and representing, the respective insurance companies. The different policies expressly recite that, in the event of a loss, the
respective companies agree to compensate the plaintiff for the amount of the loss. the defendant company did not insure the
property of the plaintiff, or in any manner agree to pay the plaintiff the amount of any loss. There is no contract of any kind. either
oral or written, between the plaintiff and Warner, Barnes & Co. Plaintiff's contracts are with the insurance companies, and are in
writing, and the premiums were paid to the insurance companies, and are in writing, and the premiums were paid to the insurance
companies and the policies were issued by, and in the name of, the insurance companies, and on the face of the policy itself, the
plaintiff knew that the defendant was acting as agent for, and was representing, the respective insurance companies in the issuance
and deliver of the policies. The defendant company did not contract or agree to do anything or to pay the plaintiff any money at any
time or on any condition, either as agent or principal.

There is a very important distinction between the power and duties of a resident insurance agent of a foreign company and that of
an executor, administrator, or receiver. An insurance agent as such is not responsible for, and does not have, any control over the
corpus or estate of the corporate property, as does an executor, administrator, or receiver. Subject only to the order of the court,
such officers are legal custodians and have actual possession of the corporate property. It is under their control and within their
jurisdiction.

As stated by counsel for Warner, Barnes & Co., an attorney of record for an insurance company has greater power and authority to
act for, and bind, the company than does a soliciting agent of an insurance company. Yet, no attorney would contend that a personal
action would lie against local attorneys who represent a foreign corporation to recover on a contract made by the corporation. On
the same principles by which plaintiff seeks to recover from the defendant, an action could be maintained against the cashier of any
bank on every foreign draft which he signed for, and on behalf of, the bank.

Every cause of action ex contractu must be founded upon a contract, oral or written, either express or implied.

Warner, Barnes & Co., as principal or agent, did not make any contract, either or written, with the plaintiff. The contracts were made
between the respective insurance companies and the insured, and were made by the insurance companies, through Warner, Barnes
& Co., as their agent.

As in the case of a bank draft, it is not the cashier of the bank who makes the contract to pay the money evidenced by the draft, it is
the bank, acting through its cashier, that makes the contract. So, in the instant case, it was the insurance companies, acting through
Warner, Barnes & Co., as their agent, that made the written contracts wit the insured.

The trial court attached much importance to the fact that in the further and separate answer, an admission was made "that
defendant was at all times ready and will not to pay, on behalf of the insurance companies by whom each was proportionately liable,
the actual damage" sustained by the plaintiff covered by the policies upon the terms and conditions therein stated.

When analyzed, that is nothing more than a statement that the companies were ready and willing to prorate the amount when the
losses were legally ascertained. Again, there is not claim or pretense that Warner, Barnes & Co. had any authority to act for, and
represent the insurance companies in the pending action, or to appear for them or make any admission which would bind them. As a
local agent, it could not do that without express authority. That power could only exercised by an executive officer of the company,
or a person who was duly authorized to act for, and represent, the company in legal proceedings, and there is no claim or pretense,
either express or implied, that the defendant has any such authority.

Plaintiff's cause of action, if any, is direct against the insurance companies that issued the policies and agreed to pay the losses.

The only defendant in the instant case is "Warner, Barnes & Co., in its capacity as agents of:" the insurance companies. Warner,
Barnes & Co. did not make any contract with the plaintiff, and are not liable to the plaintiff on any contract, either as principal or
agent. For such reason, plaintiff is not entitled to recover its losses from Warner, Barnes & Co., either as principal or agent. There is
no breach of any contract with the plaintiff by Warners, Barnes & Co., either as agent or principal, for the simple reason that Warner,
Barnes & Co., as agent or principal, never made any contract, oral or written, with the plaintiff. This defense was promptly raised
before the taking of the testimony, and again renewed on the motion to set aside the judgment.

Plaintiff's own evidence shows that any cause of action it may have is against the insurance companies which issued the policies.

The complaint is dismissed, and the judgment of the lower court is reversed, and one will be entered here in favor of Warner, Barnes
& Co., Ltd., against the plaintiff, for costs in both this and the lower court. So ordered.
G.R. No. L-56294             May 20, 1991

SMITH BELL AND COMPANY (PHILIPPINES), INC. and TOKYO MARINE AND FIRE INSURANCE CO., INC.,petitioners, 
vs.
THE COURT OF APPEALS and CARLOS A. GO THONG AND CO., respondents.

Bito, Misa & Lozada for petitioners.

Rodriguez, Relova & Associates for private respondent.

FELICIANO, J.:

In the early morning of 3 May 1970—at exactly 0350 hours, on the approaches to the port of Manila near Caballo Island, a collision
took place between the M/V "Don Carlos," an inter-island vessel owned and operated by private respondent Carlos A. Go Thong and
Company ("Go Thong"), and the M/S "Yotai Maru," a merchant vessel of Japanese registry. The "Don Carlos" was then sailing south
bound leaving the port of Manila for Cebu, while the "Yotai Maru" was approaching the port of Manila, coming in from Kobe, Japan.
The bow of the "Don Carlos" rammed the portside (left side) of the "Yotai Maru" inflicting a three (3) cm. gaping hole on her portside
near Hatch No. 3, through which seawater rushed in and flooded that hatch and her bottom tanks, damaging all the cargo stowed
therein.

The consignees of the damaged cargo got paid by their insurance companies. The insurance companies in turn, having been
subrogated to the interests of the consignees of the damaged cargo, commenced actions against private respondent Go Thong for
damages sustained by the various shipments in the then Court of First Instance of Manila.

Two (2) cases were filed in the Court of First Instance of Manila. The first case, Civil Case No. 82567, was commenced on 13 March
1971 by petitioner Smith Bell and Company (Philippines), Inc. and Sumitomo Marine and Fire Insurance Company Ltd., against
private respondent Go Thong, in Branch 3, which was presided over by Judge Bernardo P. Fernandez. The second case, Civil Case No.
82556, was filed on 15 March 1971 by petitioners Smith Bell and Company (Philippines), Inc. and Tokyo Marine and Fire Insurance
Company, Inc. against private respondent Go Thong in Branch 4, which was presided over by then Judge, later Associate Justice of
this Court, Serafin R. Cuevas.

Civil Cases Nos. 82567 (Judge Fernandez) and 82556 (Judge Cuevas) were tried under the same issues and evidence relating to the
collision between the "Don Carlos" and the "Yotai Maru" the parties in both cases having agreed that the evidence on the collision
presented in one case would be simply adopted in the other. In both cases, the Manila Court of First Instance held that the officers
and crew of the "Don Carlos" had been negligent that such negligence was the proximate cause of the collision and accordingly held
respondent Go Thong liable for damages to the plaintiff insurance companies. Judge Fernandez awarded the insurance companies
P19,889.79 with legal interest plus P3,000.00 as attorney's fees; while Judge Cuevas awarded the plaintiff insurance companies on
two (2) claims US $ 68,640.00 or its equivalent in Philippine currency plus attorney's fees of P30,000.00, and P19,163.02 plus
P5,000.00 as attorney's fees, respectively.

The decision of Judge Fernandez in Civil Case No. 82567 was appealed by respondent Go Thong to the Court of Appeals, and the
appeal was there docketed as C.A.-G.R. No. 61320-R. The decision of Judge Cuevas in Civil Case No. 82556 was also appealed by Go
Thong to the Court of Appeals, the appeal being docketed as C.A.-G.R. No. 61206-R. Substantially identical assignments of errors
were made by Go Thong in the two (2) appealed cases before the Court of Appeals.

In C.A.-G.R. No. 61320-R, the Court of Appeals through Reyes, L.B., J., rendered a Decision on 8 August 1978 affirming the Decision of
Judge Fernandez. Private respondent Go Thong moved for reconsideration, without success. Go Thong then went to the Supreme
Court on Petition for Review, the Petition being docketed as G.R. No. L-48839 ("Carlos A. Go Thong and Company v. Smith Bell and
Company [Philippines], Inc., et al."). In its Resolution dated 6 December 1978, this Court, having considered "the allegations, issues
and arguments adduced in the Petition for Review on Certiorari, of the Decision of the Court of Appeals as well as respondent's
comment", denied the Petition for lack of merit. Go Thong filed a Motion for Reconsideration; the Motion was denied by this Court
on 24 January 1979.
In the other (Cuevas) case, C.A.-G.R. No. 61206-R, the Court of Appeals, on 26 November 1980 (or almost two [2] years after the
Decision of Reyes, L.B., J., in C.A.-G.R. No. 61320-R, had been affirmed by the Supreme Court on Petition for Review) through Sison,
P.V., J., reversed the Cuevas Decision and held the officers of the "Yotai Maru" at fault in the collision with the "Don Carlos," and
dismissed the insurance companies' complaint. Herein petitioners asked for reconsideration, to no avail.

The insurance companies are now before us on Petition for Review on Certiorari, assailing the Decision of Sison, P.V., J., in C.A.-G.R.
No. 61206-R. Petitioners' principal contentions are:

a. that the Sison Decision had disregarded the rule of  res judicata;

b. that Sison P.V., J., was in serious and reversible error in accepting Go Thong's defense that the question of fault on the
part of the "Yotai Maru" had been settled by the compromise agreement between the owner of the "Yotai Maru" and Go
Thong as owner of the "Don Carlos;" and

c. that Sison, P. V. J., was in serious and reversible error in holding that the "Yotai Maru" had been negligent and at fault in
the collision with the "Don Carlos."

The first contention of petitioners is that Sison, P. V. J. in rendering his questioned Decision, failed to apply the rule of res judicata.
Petitioners maintain that the Resolution of the Supreme Court dated 6 December 1978 in G.R. No. 48839 which dismissed Go
Thong's Petition for Review of the Decision of Reyes, L.B., J., in C.A.-G.R. No. 61320-R, had effectively settled the question of liability
on the part of the "Don Carlos." Under the doctrine of res judicata, petitioners contend, Sison, P. V. J. should have followed the
Reyes, L.B., J. Decision since the latter had been affirmed by the Supreme Court and had become final and executory long before the
Sison Decision was rendered.

Private respondent Go Thong, upon the other hand, argues that the Supreme Court, in rendering its minute Resolution in G.R. No. L-
48839, had merely dismissed Go Thong's Petition for Review of the Reyes, L.B., J. Decision for lack of merit but had not affirmed in
toto that Decision. Private respondent, in other words, purports to distinguish between denial of a Petition for Review for lack of
merit and affirmance of the Court of Appeals' Decision. Thus, Go Thong concludes, this Court did not hold that the "Don Carlos" had
been negligent in the collision.

Private respondent's argument must be rejected. That this Court denied Go Thong's Petition for Review in a minute Resolution did
not in any way diminish the legal significance of the denial so decreed by this Court. The Supreme Court is not compelled to adopt a
definite and stringent rule on how its judgment shall be framed. 1 It has long been settled that this Court has discretion to decide
whether a "minute resolution" should be used in lieu of a full-blown decision in any particular case and that a minute Resolution of
dismissal of a Petition for Review oncertiorari constitutes an adjudication on the merits of the controversy or subject matter of the
Petition. 2 It has been stressed by the Court that the grant of due course to a Petition for Review is "not a matter of right, but of
sound judicial discretion; and so there is no need to fully explain the Court's denial. For one thing, the facts and law are already
mentioned in the Court of Appeals' opinion."3 A minute Resolution denying a Petition for Review of a Decision of the Court of
Appeals can only mean that the Supreme Court agrees with or adopts the findings and conclusions of the Court of Appeals, in other
words, that the Decision sought to be reviewed and set aside is correct.4

Private respondent Go Thong argues also that the rule of res judicata cannot be invoked in the instant case whether in respect of the
Decision of Reyes, L.B., J. or in respect of the Resolution of the Supreme Court in G.R. No. L-48839, for the reason that there was no
identity of parties and no identity of cause of action between C.A.-G.R. No. 61206-R and C.A.-G.R. No. 61320-R.

The parties in C.A.-G.R. No. 61320-R Where the decision of Judge Fernandez was affirmed, involved Smith Bell and Company
(Philippines), Inc., and Sumitomo Marine and Fire Insurance Co., Ltd. while the petitioners in the instant case (plaintiffs below) are
Smith Bell and Co. (Philippines), Inc. and Tokyo Marine and Fire Insurance Co., Ltd. In other words, there was a common petitioner in
the two (2) cases, although the co-petitioner in one was an insurance company different from the insurance company co-petitioner
in the other case. It should be noted, moreover, that the co-petitioner in both cases was an insurance company arid that both
petitioners in the two (2) cases represented the same interest, i.e., the cargo owner's interest as against the hull interest or the
interest of the shipowner. More importantly, both cases had been brought against the same defendant, private respondent Go
Thong, the owner of the vessel "Don Carlos." In sum, C.A.-G.R. No. 61320R and C.A-G.R. No. 61206-R exhibited substantial identity of
parties.
It is conceded by petitioners that the subject matters of the two (2) suits were not identical, in the sense that the cargo which had
been damaged in the one case and for which indemnity was sought, was not the very same cargo which had been damaged in the
other case indemnity for which was also sought. The cause of action was, however, the same in the two (2) cases, i.e., the same right
of the cargo owners to the safety and integrity of their cargo had been violated by the same casualty, the ramming of the "Yotai
Maru" by the "Don Carlos." The judgments in both cases were final judgments on the merits rendered by the two (2) divisions of the
Court of Appeals and by the Supreme Court, the jurisdiction of which has not been questioned.

Under the circumstances, we believe that the absence of identity of subject matter, there being substantial identity of parties and
identity of cause of action, will not preclude the application of res judicata. 5

In Tingson v. Court of Appeals,6 the Court distinguished one from the other the two (2) concepts embraced in the principle of res
judicata, i.e., "bar by former judgment" and "conclusiveness of judgment:"

There is no question that where as between the first case Where the judgment is rendered and the second case where such
judgment is invoked, there is identity of parties, subject-matter and cause of action, the judgment on the merits in the first
case constitutes an absolute bar to the subsequent action not only as to every matter which was offered and received to
sustain or defeat the claim or demand, but also as to any other admissible matter which might have been offered for that
purpose and to all matters that could have been adjudged in that case. This is designated as "bar by former judgment."

But where the second action between the same parties is upon a different claim or demand, the judgment in the prior
action operates as an estoppel only as to those matters in issue or points controverted, upon the determination of which the
finding or judgment was rendered. In fine, the previous judgment is conclusive in the second case, only as those matters
actually and directly controverted and determined and not as to matters merely involved therein. This is the rule
on 'conclusiveness of judgment' embodied in subdivision (c) of Section 49 of Rule 39 of the Revised Rules of'
Court.7 (Citations omitted) (Emphases supplied)

In Lopez v. Reyes, 8 the Court elaborated further the distinction between bar by former judgment which bars the prosecution of a
second action upon the same claim, demand or cause of action, and conclusiveness of judgment which bars the relitigation of
particular facts or issues in another litigation between the same parties on a different claim or cause of action:

The doctrine of res judicata has two aspects. The first is the effect of a judgment as a bar to the prosecution of a second
action upon the same claim, demand or cause of action. The second aspect is that it precludes the relitigation of a particular
fact or issues in another action between the same parties on a different claim or cause of action.

The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in former
action are commonly applied to all matters essentially connected with the subject matter of the litigation. Thus, it extends
to questions "necessarily involved in an issue, and necessarily adjudicated, or necessarily implied in the final judgment,
although no specific finding may have been made in reference thereto, and although such matters were directly referred to
in the pleadings and were not actually or formally presented. Under this rule, if the record of the former trial shows that the
judgment could not have been rendered without deciding the particular matter it will be considered as having settled that
matter as to all future actions between the parties, and if a judgment necessarily presupposes certain premises, they are as
conclusive as the judgment itself. Reasons for the rule are that a judgment is an adjudication on all the matters which are
essential to support it, and that every proposition assumed or decided by the court leading up to the final conclusion and
upon which such conclusion is based is as effectually passed upon as the ultimate question which is finally solved. 9 (Citations
omitted) (Emphases supplied)

In the case at bar, the issue of which vessel ("Don Carlos" or "Yotai Maru") had been negligent, or so negligent as to have
proximately caused the collision between them, was an issue that was actually, directly and expressly raised, controverted and
litigated in C.A.-G.R. No. 61320-R. Reyes, L.B., J., resolved that issue in his Decision and held the "Don Carlos" to have been negligent
rather than the "Yotai Maru" and, as already noted, that Decision was affirmed by this Court in G.R. No. L-48839 in a Resolution
dated 6 December 1978. The Reyes Decision thus became final and executory approximately two (2) years before the Sison Decision,
which is assailed in the case at bar, was promulgated. Applying the rule of conclusiveness of judgment, the question of which vessel
had been negligent in the collision between the two (2) vessels, had long been settled by this Court and could no longer be
relitigated in C.A.-G.R. No. 61206- R. Private respondent Go Thong was certainly bound by the ruling or judgment of Reyes, L.B., J.
and that of this Court. The Court of Appeals fell into clear and reversible error When it disregarded the Decision of this Court
affirming the Reyes Decision. 10
Private respondent Go Thong also argues that a compromise agreement entered into between Sanyo Shipping Company as owner of
the "Yotai Maru" and Go Thong as owner of the "Don Carlos," under which the former paid P268,000.00 to the latter, effectively
settled that the "Yotai Maru" had been at fault. This argument is wanting in both factual basis and legal substance. True it is that by
virtue of the compromise agreement, the owner of the "Yotai Maru" paid a sum of money to the owner of the "Don Carlos."
Nowhere, however, in the compromise agreement did the owner of the "Yotai Maru " admit or concede that the "Yotai Maru" had
been at fault in the collision. The familiar rule is that "an offer of compromise is not an admission that anything is due, and is not
admissible in evidence against the person making the offer." 11 A compromise is an agreement between two (2) or more persons
who, in order to forestall or put an end to a law suit, adjust their differences by mutual consent, an adjustment which everyone of
them prefers to the hope of gaining more, balanced by the danger of losing more.12 An offer to compromise does not, in legal
contemplation, involve an admission on the part of a defendant that he is legally liable, nor on the part of a plaintiff that his claim or
demand is groundless or even doubtful, since the compromise is arrived at precisely with a view to avoiding further controversy and
saving the expenses of litigation. 13 It is of the very nature of an offer of compromise that it is made tentatively, hypothetically and in
contemplation of mutual concessions. 14 The above rule on compromises is anchored on public policy of the most insistent and basic
kind; that the incidence of litigation should be reduced and its duration shortened to the maximum extent feasible.

The collision between the "Yotai Maru" and the "Don Carlos" spawned not only sets of litigations but also administrative
proceedings before the Board of Marine Inquiry ("BMI"). The collision was the subject matter of an investigation by the BMI in BMI
Case No. 228. On 12 July 1971, the BMI through Commodore Leovegildo L. Gantioki, found both vessels to have been negligent in
the collision.

Both parties moved for reconsideration of the BMI's decision. The Motions for Reconsideration were resolved by the Philippine
Coast Guard ("PCG") nine (9) years later, in an order dated 19 May 1980 issued by PCG Commandant, Commodore Simeon M.
Alejandro. The dispositive portion of the PCG decision read as follows:

Premises considered, the Decision dated July 12, 1971 is hereby reconsidered and amended absolving the officers of "YOTAI
MARU" from responsibility for the collision. This Headquarters finds no reason to modify the penalties imposed upon the
officers of Don Carlos. (Annex "C", Reply, September 5, 1981).15

Go Thong filed a second Motion for Reconsideration; this was denied by the PCG in an order dated September 1980.

Go Thong sought to appeal to the then Ministry of National Defense from the orders of the PCG by filing with the PCG on 6 January
1981 a motion for a 30-day extension from 7 January 1981 within which to submit its record on appeal. On 4 February 1981, Go
Thong filed a second urgent motion for another extension of thirty (30) days from 7 February 1981. On 12 March 1981, Go Thong
filed a motion for a final extension of time and filed its record on appeal on 17 March 1981. The PCG noted that Go Thong's record
on appeal was filed late, that is, seven (7) days after the last extension granted by the PCG had expired. Nevertheless, on 1 July 1981
(after the Petition for Review on Certiorari in the case at bar had been filed with this Court), the Ministry of Defense rendered a
decision reversing and setting aside the 19 May 1980 decision of the PCG

The owners of the "Yotai Maru" then filed with the Office of the President a Motion for Reconsideration of the Defense Ministry's
decision. The Office of the President rendered a decision dated 17 April 1986 denying the Motion for Reconsideration. The decision
of the Office of the President correctly recognized that Go Thong had failed to appeal in a seasonable manner:

MV "DON CARLOS" filed her Notice of Appeal on January 5, 1981. However, the records also show beyond peradventure of
doubt that the PCG Commandant's decision of May 19, 1980, had already become final and executory When MV "DON
CARLOS"  filed her Record on Appeal on March 17, 1981, and When the motion for third extension was filed after the expiry
date.

Under Paragraphs (c), (d), (e) and (f), Chapter XVI, of the Philippine Merchant Marine Rules and Regulations, decisions of
the PCG Commandant shall be final unless, within thirty (30) days after receipt of a copy thereof, an appeal to the Minister
of National Defense is filed and perfected by the filing of a notice of appeal and a record on appeal. Such administrative
regulation has the force and effect of law, and the failure of MV "DON CARLOS" to comply therewith rendered the PCG
Commandant's decision on May 19, 1980, as final and executory, (Antique Sawmills, Inc. vs. Zayco, 17 SCRA 316; Deslata vs.
Executive Secretary, 19 SCRA 487; Macailing vs. Andrada, 31 SCRA 126.) (Annex "A", Go Thong's Manifestation and Motion
for Early Resolution, November 24, 1986).16 (Emphases supplied)

Nonetheless, acting under the misapprehension that certain "supervening" events had taken place, the Office of the President held
that the Minister of National Defense could validly modify or alter the PCG Commandant's decision:
 However, the records likewise show that, on November 26, 1980, the Court of Appeals rendered a decision in CA-G.R. No.
61206-R (Smith Bell & Co., Inc., et al. vs. Carlos A. Go Thong & Co.) holding that the proximate cause of the collision
between MV "DON CARLOS" AND MS "YOTAI MARU" was the negligence, failure and error of judgment of the officers of MS
"YOTAI MARU". Earlier, or on February 27, 1976, the Court of First Instance of Cebu rendered a decision in Civil Case No. R-
11973 (Carlos A. Go Thong vs. San-yo Marine Co.) holding that MS "YOTAI MARU" was solely responsible for the collision,
which decision was upheld by the Court of Appeals.

The foregoing judicial pronouncements rendered after the finality of the PCG Commandant's decision of May 19, 1980, were
supervening causes or reasons that rendered the PCG Commandant's decision as no longer enforceable and entitled
MV "DON CARLOS"  to request the Minister of National Defense to modify or alter the questioned decision to harmonize the
same with justice and tile facts. (De la Costa vs. Cleofas, 67 Phil. 686; City of Bututan vs. Ortiz, 3 SCRA 659; Candelario vs.
Canizares, 4 SCRA 738; Abellana vs. Dosdos, 13 SCRA 244). Under such precise circumstances, the Minister of National
Defense may validly modify or alter the PCG commandant's decision. (Sec. 37, Act 4007; Secs. 79(c) and 550, Revised
Administrative Code; Province of Pangasinan vs. Secretary of Public Works and Communications, 30 SCRA 134; Estrelia vs.
Orendain, 37 SCRA 640). 17 (Emphasis supplied)

The multiple misapprehensions under which the Office of the President labored, were the following:

It took account of the Decision of Sison, P.V., J. in C.A.-G.R. No. 61206-R, the very decision that is the subject of review in the Petition
at bar and therefore not final. At the same time, the Office of the President either ignored or was unaware of the Reyes, L.B., J.,
Decision in C.A.-G.R. No 61320-R finding the "Don Carlos" solely liable for the collision, and of the fact that that Decision had been
affirmed by the Supreme Court and had long ago become final and executory. A third misapprehension of the Office of the President
related to a decision in a Cebu Court of First Instance litigation which had been settled by the compromise agreement between the
Sanyo Marine Company and Go Thong. The Office of the President mistakenly believed that the Cebu Court of First Instance had
rendered a decision holding the "Yotai Maru" solely responsible for the collision, When in truth the Cebu court had rendered a
judgment of dismissal on the basis of the compromise agreement. The Cebu decision was not, of course, appealed to the Court of
Appeals.

It thus appears that the decision of the Office of the President upholding the belated reversal by the Ministry of National Defense of
the PCG'S decision holding the "Don Carlos" solely liable for the collision, is so deeply flawed as not to warrant any further
examination. Upon the other hand, the basic decision of the PCG holding the "Don Carlos" solely negligent in the collision remains in
effect.

II

In their Petition for Review, petitioners assail the finding and conclusion of the Sison Decision, that the "Yotai Maru" was negligent
and at fault in the collision, rather than the "Don Carlos." In view of the conclusions reached in Part I above, it may not be strictly
necessary to deal with the issue of the correctness of the Sison Decision in this respect. The Court considers, nonetheless, that in
view of the conflicting conclusions reached by Reyes, L.B.,J., on the one hand, and Sison, P.V., J., on the other, and since in affirming
the Reyes Decision, the Court did not engage in a detailed written examination of the question of which vessel had been negligent,
and in view of the importance of the issues of admiralty law involved, the Court should undertake a careful review of the record of
the case at bar and discuss those issues in extenso.

The decision of Judge Cuevas in Civil Case No. 82556 is marked by careful analysis of the evidence concerning the collision. It is worth
underscoring that the findings of fact of Judge Fernandez in Civil Case No. 82567 (which was affirmed by the Court of Appeals in the
Reyes Decision and by this Court in G.R. No. L-48839) are just about identical with the findings of Judge Cuevas. Examining the facts
as found by Judge Cuevas, the Court believes that there are three (3) principal factors which are constitutive of negligence on the
part of the "Don Carlos," which negligence was the proximate cause of the collision.

The first of these factors was the failure of the "Don Carlos" to comply with the requirements of Rule 18 (a) of the International
Rules of the Road ("Rules")," which provides as follows

(a) When two power-driven vessels are meeting end on, or nearly end on, so as to involve risk of collision, each shall alter
her course to starboard, so that each may pass on the port side of the other. This Rule only applies to cases where vessels
are meeting end on or nearly end on, in such a manner as to involve risk of collision, and does not apply to two vessels
which must, if both keep on their respective course, pass clear of each other. The only cases to which it does apply are
when each of two vessels is end on, or nearly end on, to the other; in other words, to cases in which, by day, each vessel
 sees the masts of the other in a line or nearly in a line with her own; and by night to cases in which each vessel is in such a
position as to see both the sidelights of the other. It does not apply, by day, to cases in which a vessel sees another ahead
crossing her own course; or, by night, to cases where the red light of one vessel is opposed to the red light of the other or
where the green light of one vessel is opposed to the green light of the other or where a red light without a green light or a
green light without a red light is seen ahead, or Where both green and red lights are seen anywhere but ahead. (Emphasis
supplied)

The evidence on this factor was summarized by Judge Cuevas in the following manner:

Plaintiff's and defendant's evidence seem to agree that each vessel made a visual sighting of each other ten minute before
the collision which occurred at 0350. German's version of the incident that followed, was that "Don Carlos" was proceeding
directly to [a] meeting [on an] "end-on or nearly end-on situation" (Exh. S, page 8). He also testified that "Yotai Maru's'
headlights were "nearly in line at 0340 A.M." (t.s.n., June 6, 1974) clearly indicating that both vessels were sailing on exactly
opposite paths (t.s.n. June 6, 1974, page 56). Rule 18 (a) of the International Rules of the Road provides as follows:

x x x           x x x          x x x

And yet German altered "Don Carlos"  course by five degrees to the left at 0343 hours instead of to the right (t.s.n. June 6, 1974,
pages 4445) which maneuver was the error that caused the collision in question. Why German did so is likewise explained by the
evidence on record. "Don Carlos" was overtaking another vessel, the "Don Francisco", and was then at the starboard (right side) of
the aforesaid vessel at 3:40 a.m. It was in the process of overtaking "Don Francisco" that "Don Carlos' was finally brought into a
situation where he was meeting end-on or nearly end-on "Yotai Maru, thus involving risk of collision. Hence, German in his testimony
before the Board of Marine inquiry stated:

Atty. Chung:

You said in answer to the cross-examination that you took a change of course to the left. Why did you not take a course to
the right instead?

German:

I did not take any course to the right because the other vessel was in my mind at the starboard side following me. Besides, I
don't want to get risk of the Caballo Island (Exh. 2, pages 209 and 210). 19(Emphasis supplied)

For her part, the "Yotai Maru" did comply with its obligations under Rule 18 (a). As the "Yotai Maru" found herself on an "end-on" or
a "nearly end-on" situation vis-a-vis the "Don Carlos, " and as the distance between them was rapidly shrinking, the "Yotai
Maru" turned starboard (to its right) and at the same time gave the required signal consisting of one short horn blast. The "Don
Carlos" turned to portside (to its left), instead of turning to starboard as demanded by Rule 18 (a). The "Don Carlos" also violated
Rule 28 (c) for it failed to give the required signal of two (2) short horn blasts meaning "I am altering my course to port." When the
"Yotai Maru" saw that the "Don Carlos" was turning to port, the master of the "Yotai Maru" ordered the vessel turned "hard
starboard" at 3:45 a.m. and stopped her engines; at about 3:46 a.m. the "Yotai Maru" went "full astern engine." 20 The collision
occurred at exactly 3:50 a.m.

The second circumstance constitutive of negligence on the part of the "Don Carlos" was its failure to have on board that night a
"proper look-out" as required by Rule I (B) Under Rule 29 of the same set of Rules, all consequences arising from the failure of the
"Don Carlos" to keep a "proper look-out" must be borne by the "Don Carlos." Judge Cuevas' summary of the evidence said:

The evidence on record likewise discloses very convincingly that "Don Carlos" did not have "look-out" whose sole and only
duty is only to act as Such. . . . 21

A "proper look-out" is one who has been trained as such and who is given no other duty save to act as a look-out and who is
stationed where he can see and hear best and maintain good communication with the officer in charge of the vessel, and who must,
of course, be vigilant. Judge Cuevas wrote:

The "look-out" should have no other duty to perform. (Chamberlain v. Ward, 21, N.O.W. 62, U.S. 548, 571). He has only one
duty, that which its name implies—to keep "look-out". So a deckhand who has other duties, is not a proper "look-
out" (Brooklyn Perry Co. v. U.S., 122, Fed. 696). The navigating officer is not a sufficient "look-out" (Larcen B. Myrtle, 44 Fed.
 779)—Griffin on Collision, pages 277-278).  Neither the captain nor the [helmsman] in the pilothouse can be considered to be
a "look-out"  within the meaning of the maritime law. Nor should he be stationed in the bridge. He should be as near as
practicable to the surface of the water so as to be able to see low-lying lights (Griffin on Collision, page 273).

On the strength of the foregoing authorities, which do not appear to be disputed even by the defendant, it is hardly
probable that neither German or Leo Enriquez may qualify as "look-out" in the real sense of the word.22 (Emphasis supplied)

In the case at bar, the failure of the "Don Carlos" to recognize in a timely manner the risk of collision with the "Yotai Maru" coming in
from the opposite direction, was at least in part due to the failure of the "Don Carlos" to maintain a proper look-out.

The third factor constitutive of negligence on the part of the "Don Carlos" relates to the fact that Second Mate Benito German was,
immediately before and during the collision, in command of the "Don Carlos." Judge Cuevas summed up the evidence on this point
in the following manner:

The evidence on record clearly discloses that "Don Carlos" was, at the time of the collision and immediately prior thereto,
under the command of Benito German, a second mate although its captain, Captain Rivera, was very much in the said vessel
at the time. The defendant's evidence appears bereft of any explanation as to why second mate German was at the helm of
the aforesaid vessel when Captain Rivera did not appear to be under any disability at the time. In this connection, Article
[633] of the Code of Commerce provides:

Art. [633] — The second mate shall take command of the vessel in case of the inability or disqualification of the
captain and sailing mate, assuming, in such case, their powers and liability.

The fact that second mate German was allowed to be in command of "Don Carlos" and not the chief or the sailing mate in
the absence of Captain Rivera, gives rise to no other conclusion except that said vessel [had] no chief mate. Otherwise, the
defense evidence should have at least explained why it was German, only a second mate, who was at the helm of the vessel
"Don Carlos" at the time of the fatal collision.

But that is not all.  Worst still, aside from German's being only a second mate, is his apparent lack of sufficient knowledge of
the basic and generally established rules of navigation. For instance, he appeared unaware of the necessity of employing
a "look- out" (t.s.n. June 6, 1974, page 27) which is manifest even in his testimony before the Board of Marine Inquiry on
the same subject (Exh. 2, page 209). There is, therefore, every reasonable ground to believe that his inability to grasp actual
situation and the implication brought about by inadequacy of experience and technical know-how was mainly responsible
and decidedly accounted for the collision of the vessels involved in this case.. . . 23 (Emphasis supplied)

Second Mate German simply did not have the level of experience, judgment and skill essential for recognizing and coping with the
risk of collision as it presented itself that early morning when the "Don Carlos," running at maximum speed and having just
overtaken the "Don Francisco" then approximately one mile behind to the starboard side of the "Don Carlos," found itself head-on
or nearly head on vis-a-vis the "Yotai Maru. " It is essential to point out that this situation was created by the "Don Carlos" itself.

The Court of Appeals in C.A.-G.R. No. 61206-R did not make any findings of fact which contradicted the findings of fact made by
Judge Cuevas. What Sison, P.V., J. actually did was to disregard all the facts found by Judge Cuevas, and discussed above and,
astonishingly, found a duty on the "Yotai Maru"  alone to avoid collision with and to give way to the "Don Carlos ". Sison, P.V., J.,
wrote:

At a distance of eight (8) miles and with ten (10) minutes before the impact, [Katoh] and Chonabayashi had ample time to
adopt effective precautionary measures to steer away from the Philippine vessel, particularly because both [Katoh] and
Chonabayashi also deposed that at the time they had first eyesight of the "Don Carlos" there was still "no danger at all" of a
collision.1âwphi1 Having sighted the "Don Carlos"  at a comparatively safe distance—"no danger at all" of a collision—the
Japanese ship should have observed with the highest diligence the course and movements of the Philippine interisland vessel
as to enable the former to adopt such precautions as will necessarily present a collision, or give way, and in case of a
collision, the former is prima facie at fault. In G. Urrutia & Co. vs. Baco River Plantation Co., 26 Phil. 632, the Supreme Court
held:

Nautical rules require that where a steamship and sailing vessel are approaching each other from opposite
directions, or on intersecting lines, the steamship, from the moment the sailing vessel is seen, shall watch with the
 highest diligence her course and movements so as to enable it to adopt such timely means of precaution as will
necessarily prevent the two boats from coming in contact.' (Underscoring in the original)

At 3:44 p.m., or 4 minutes after first sighting the "Don Carlos", or 6 minutes before contact time, Chonabayashi revealed
that the "Yotai Maru" gave a one-blast whistle to inform the Philippine vessel that the Japanese ship was turning to
starboard or to the right and that there was no blast or a proper signal from the "Don Carlos" (pp. 67-68. Deposition of
Chonabayashi, List of Exhibits). The absence of a reply signal from the "Don Carlos"  placed the "Yotai Maru"  in a situation of
doubt as to the course the "Don Carlos" would take. Such being the case, it was the duty of the Japanese officers "to stop,
reverse or come to a standstill until the course of the "Don Carlos" has been determined and the risk of a collision
removed(The Sabine, 21 F (2d) 121, 124, cited in Standard Vacuum, etc. vs. Cebu Stevedoring, etc., 5 C.A.R. 2d 853, 861-
862).. . . . 24 (Emphasis supplied)

The Court is unable to agree with the view thus taken by Sison, P.V., J. By imposing an exclusive obligation uponone of the vessels,
the "Yotai Maru, " to avoid the collision, the Court of Appeals not only chose to overlook all the above facts constitutive of
negligence on the part of the "Don Carlos;" it also in effect used the very negligence on the part of the "Don Carlos" to absolve it
from responsibility and to shift that responsibility exclusively onto the "Yotai Maru" the vessel which had observed carefully the
mandate of Rule 18 (a). Moreover, G. Urrutia and Company v. Baco River Plantation Company 25 invoked by the Court of Appeals
seems simply inappropriate and inapplicable. For the collision in the  Urrutia case was between a sailing vessel, on the one hand, and
a  power-driven vessel, on the other; the Rules, of course, imposed a special duty on the power-driven vessel to watch the
movements of a sailing vessel, the latter being necessarily much slower and much less maneuverable than the power-driven one. In
the case at bar, both the "Don Carlos" and the "Yotai Maru" were power-driven and both were equipped with radar; the maximum
speed of the "Yotai Maru" was thirteen (13) knots while that of the "Don Carlos" was eleven (11) knots. Moreover, as already noted,
the "Yotai Maru" precisely took last minute measures to avert collision as it saw the "Don Carlos" turning to portside: the "Yotai
Maru" turned "hard starboard" and stopped its engines and then put its engines "full astern."

Thus, the Court agrees with Judge Cuevas (just as it had agreed with Reyes, L.B., J.), with Judge Fernandez and Nocon, J., 26 that the
"Don Carlos" had been negligent and that its negligence was the sole proximate cause of the collision and of the resulting damages.

FOR ALL THE FOREGOING, the Decision of the Court of Appeals dated 26 November 1980 in C.A.-G.R. No. 61206-R is hereby
REVERSED and SET ASIDE. The decision of the trial court dated 22 September 1975 is hereby REINSTATED and AFFIRMED in its
entirety. Costs against private respondent.
G.R. No. L-19689             April 4, 1923

PHILIPPINE NATIONAL BANK, plaintiff-appellant, 

vs.
WELCH, FAIRCHILD & CO., INC., defendant-appellee.

Quintin Paredes for appellant.

Ross and Lawrence for appellee.

STREET, J.:

By this action the plaintiff, the Philippine National Bank, seeks to recover of the defendant, Welch, Fairchild & Co., Inc., the sum of
$125,000, with interest from May 17, 1918, being part of the proceeds of certain insurance effected in the year 1918 upon a ship
called the Benito Juarez and collected by the defendant after said ship had been lost at sea. Upon hearing the cause the trial judge
absolved the defendant from the complaint and the plaintiff appealed.

In the first half of the year 1918, a corporation , known as La Compañía Naviera, Inc, was organized in Manila under the laws of the
Philippine Islands, for the purpose of engaging in the business of marine shipping. Among its shareholders was Welch, Fairchild &
Co., another corporation organized under the laws of these Islands and having its principal place of business in the City of Manila. Of
the shares of La Compañía Naviera, Welch, Fairchild & Co, subscribed for 325 shares of the par value of P100 each.

As La Compañía Naviera was an entirely new enterprise in the shipping world, it was necessary for it to acquire a proper
complement of vessels and adequate equipment and as shipping values in those days were high, the company did not have sufficient
ready capital to meet all the requirements. Its officials therefore in May, 1918, applied to the Philippine National Bank for a loan of
$125,000. with which to purchase a boat called Benito Juarez, which had been found on the market in the United States. The
necessary credit appears to have been extended by the bank in the form of a loan for $125,000, to run for one year from May 17,
1918. Nevertheless, owing to delay in the delivery of the vessel, the money was not then delivered and was not actually advanced by
the bank until several months later, as will presently appear.

It appears that Welch, Fairchild & Co. Was not numbered among the original promoters of La Compañía Naviera, but its interests are
to a considerable extent involved in the general shipping conditions in the Islands and it looked with a friendly eye upon the new
enterprise. Moreover, the mercantile ramifications of Welch, Fairchild, & Co. appear to be extensive; and its friendly offices were
freely exerted in behalf of La Compañía Naviera, not only through Welch & Co., the correspondent of the defendant in San Francisco,
but also through Mr. Geo. H. Fairchild, the president of Welch, Fairchild & Co. who left Manila for the United States in March of the
year 1918 and remained in that country for more than a year. Upon this visit to the United States Mr. Fairchild was kept advised as
to certain needs of La Compañía Naviera, and he acted for it in important matters requiring attention in the United States. In
particular it was through the efforts of himself and of Judge James Ross, as attorney, that the consent of the proper authorities in
Washington, D. C., was obtained for the transfer of the Benito Juarez to Philippine registry.

In August, 1918, the Benito Juarez was on the California coast, and after the approval of its transfer to Philippine registry had been
obtained, steps were taken for the delivery of the vessel to the agents of the purchaser in San Francisco at the price of $125,000, as
agreed; and it was understood that the delivery of the purchase money would be made by the Anglo-London and Paris National
Bank, in San Francisco, as agent of the Philippine National Bank, contemporaneously with the delivery to it of the bill of sale and the
policy of insurance of the vessel. It developed, however, that the vessel needed repairs before it could be dispatched on its voyage
to the Orient; and it became impracticable to deliver the bill of sale and insurance policy to the bank in San Francisco at the time the
money was needed to effect the transfer. Being advised of this circumstance, and fearing that a hitch might thus occur in the
negotiations, Welch, Fairchild & Co., in Manila, addressed a letter on August 8, 1918, to the Philippine National Bank, requesting it to
cable its correspondent in San Francisco to release the money and make payment for the vessel upon application by Welch & Co.,
without requiring the delivery of the bill of sale or policy of insurance, "in which event," the letter continued, "the Compañía Naviera
will deliver to you here the bill of sale also the insurance policy covering the voyage to Manila." In a letter bearing date of August 10,
1918, also addressed to the Philippine National Bank, La Compañía Naviera, Inc. confirmed this request and authorized the bank to
send the cablegram necessary to give it effect.

In response to these communications the Philippine National Bank, on August 14, sent a cablegram to its correspondent in San
Francisco authorizing payment of the purchase price of the Benito Juarez, without the production of either bill of sale or insurance
policy. Under these circumstances the vessel was delivered and money paid over without the production or delivery of the
documents mentioned.

After the repair of the Benito Juarez had been accomplished it was insured by Welch & Co. to the value of $150,000 and was
dispatched, in November, 1918, on its voyage to the Philippine Islands. On December 3, 1918, the vessel encountered a storm off
the Island of Molokai, in the Hawaiian group, and became a total loss.

When the insurance was taken out to cover the voyage to Manila, no policy was issued by any insurer; but the insurance was placed
by Welch & Co. of San Francisco, upon the instructions of Welch, Fairchild & Co., as agents of the Compañía Naviera, and it was
taken out in the ordinary course of business to protect the interests of all parties concerned.

As would naturally happen in an insurance of this amount, the risk was distributed among several companies, some in remote
centers; and it was many months before Welch & Co., of San Francisco, had collected the full amount due from the insurers.
However, as the money came to the hands of Welch & Co., of San Francisco, it was remitted by draft or telegraphic transfer to
Welch, Fairchild & Co. in Manila; and in this manner practically the full amount for which the Benito Juarez had been insured was
transmitted to Manila by the last days of June, 1919.

As was perhaps but natural under the circumstances, the Philippine National Bank appears to have exhibited no concern about its
loan of $125,000 to La Compañía Naviera, or about the proceeds of the insurance on theBenito Juarez, until after the period of credit
allowed by the bank on the loan to La Compañía Naviera had expired, that is to say, after May 17, 1919. A short while after this date,
an incident occurred upon which the attorneys for the defendant in this case have placed great emphasis, and it is this: In the latter
part of the month aforesaid Welch & Co., having collected $13,000 upon account of the insurance on the Benito Juarez, attempted
to remit it by telegraphic transfer to Welch, Fairchild & Co. in Manila, but by some mistake or other, the money was remitted to the
Philippine National Bank in New York, and it was not until about a month later that authority was received by the Philippine National
Bank in Manila to pay to Welch, Fairchild & Co. the sum of $13,000 upon account of said insurance.

When the authority for the transfer of this credit reached the Philippine National Bank, the attention of the bank officials was drawn
to the fact that the transfer related to money forming part of the proceeds of the insurance on the Benito Juarez, and they at first
determined to intercept the transfer and without the credit from Welch, Fairchild & Co., on the ground that the money belonged to
the bank. This claim on the part of the bank was of course based on the letter of Welch, Fairchild & Co. dated August 8, 1918, in
which the promise had been held out that, if the bank would advance the purchase money of the Benito Juarez without requiring the
concurrent delivery of the policy of insurance, said policy would be delivered later by La Compañía Naviera in Manila. When the
determination of the bank's officials to withhold the money was communication to Welch, Fairchild & Co., a strong protest was
made, and its attorney came at once to the bank to interview its president. As a result of this interview the president of the bank
receded from his position about the matter, and an order was made that the money should be passed to the credit of Welch,
Fairchild & Co., as was done on July 23, 1919. A day or two later the bank further credited the account of Welch, Fairchild & Co. with
the sum of P119.65, as interest on the money during the time it had been withheld.

In the course of the interview above alluded to, not only did the attorney of Welch, Fairchild & Co, call the attention of the president
of the bank to the doubtful propriety of its act in intercepting a remittance of money which had been confined to its agent in San
Francisco for transmission to Welch, Fairchild & Co. in Manila, but he also pointed out that Welch, Fairchild & Co. had acted
throughout merely in the capacity of agent for La Compañía Naviera, and he therefore insisted that Welch, Fairchild & Co. was not
legally bound by the promise made by it in the letter of August 8, 1918, to the effect that the policy of insurance would be delivered
to the bank in Manila by La Compañía Naviera; and this contention was urged with such force that the president of the bank — who
was not a lawyer — acknowledged himself vanquished, and in the end said that he must have been mistaken in his contention and
that the attorney was right.

Shortly after this incident the bank which had permitted La Compañía Naviera to become indebted to it upon inadequate security to
the extent of nearly a million pesos began to take steps looking to the betterment of its position in relation with said company. To
this end, on August 28, 1919, it went through the barren formality of making demand upon La Compañía Naviera for the delivery of
the insurance policies on the Benito Juarez, but was informed by La Compañía Naviera that it had never received any policy of
insurance upon the Benito Juarezas the vessel had been insured in San Francisco by Welch, Fairchild & Co. in behalf of La Compañía
Naviera. A little later the bank caused La Compañía Naviera to execute pledges to the bank upon three steamers belonging to said
company as security for its indebtedness to the bank. Thereafter matters were permitted to drift until it became apparent that La
Compañía Naviera was insolvent; and on December 9, 1919, the bank made formal demand upon Welch, Fairchild & Co, for the
delivery of the insurance policy for $125,000 on the Benito Juarez, basing its demand on the letter of Welch, Fairchild & Co. of
August 8, 1918, already mentioned.
As the bank officials already knew that the insurance had been collected many months previously by Welch, Fairchild & Co., it is
evident that the making of demand for delivery of a policy for $125,000 was a mere formula by which the bank intended to plant a
contention that the proceeds of the insurance, to the extent of $125,000, belonged to it. To this demand Welch, Fairchild & Co.
responded with a negative.

Meanwhile, what had become of the proceeds of the insurance upon the Benito Juarez? That money, as we have already seen, came
to the hands of Welch, Fairchild & Co. in Manila and has there rested, having been applied by Welch, Fairchild & Co. in part
satisfaction of indebtedness incurred by La Compañía Naviera to it. This disposition of the insurance money was made by Welch,
Fairchild & Co. with the tacit approval of La Compañía Naviera, the credits being notified to the latter by the former as the
remittances were received to Manila and entered in the accounts of both companies accordingly.

To explain the situation which had thus arisen between the two companies, further reference is here necessary to matters that had
taken place during the preceding year. As we have already stated, Welch, Fairchild & Co. had assisted La Compañía Naviera in
effecting the purchase and transfer of the Benito Juarez to Philippine registry. In addition to this, Welch, Fairchild & Co. advanced in
San Francisco several thousands of pesos necessary for the repair and equipment of that vessel prior to its departure for the
Philippine Islands; and the incurring of these expenses explain why insurance was taken out to the extent of $150,000 instead of
$125,000, the latter sum being merely the item of cost price. But the friendly offices of Welch, Fairchild & Co. were not limited to the
foregoing matters, and said company rendered practically the same service with respect to other vessels which were purchased for
La Compañía Naviera, with the result that the advances made by Welch, Fairchild & Co., beginning in the autumn of 1918, steadily
mounted in the course of succeeding months and in the end ran up into the hundreds of thousands of pesos. One particular
incident, most disastrous to the latter company, consisted in the operation by it, during several months in 1919, of the San Pedro,
one of the vessels belonging to La Compañía Naviera, under contract with the latter company.

The result of these expenditures and advances of money by Welch, Fairchild & Co. was that the indebtedness of La Compañía
Naviera to Welch, Fairchild & Co. mounted steadily during the year 1919, and said indebtedness was by no means liquidated by the
application to it of the insurance money from the Benito Juarez. In this connection we note the following debit balances charged on
the books of Welch, Fairchild & Co. against the La Compañía Naviera as the same appear by monthly statements from November 30,
1918, to September 30, 1919; and it will be remembered that these are the balances appearing after credit had been given for the
collections of the insurance money. Said debit balances for the months stated are as follows: Upon November 30, 1918, P3,675.71;
upon December 31, 1918, P30,627; upon January 25, 1919, P93,961.49; upon February 27, 1919, P145,130.78; upon March 30, 1919,
P146,370.66; upon April 29, 1919, P148,542.25; upon May 30, 1919, P153,060.13; upon June 30, 1919, P139,531.27; upon July 31,
1919, P168,724; upon August 31, 1919, P169,932.41; upon September 30, 1919, P185,651.73.

The foregoing statement of facts makes comprehensible the contentions upon which the defense to the present action is based; and
these contentions may be stated in the following propositions: First, that, inasmuch as Welch, Fairchild & Co. acted exclusively in the
character of agent for La Compañía Naviera in the purchase of the Benito Juarez, no obligation enforcible against it was created by
the letter of August 8, 1918, and as a consequence the bank should look exclusively to La Compañía Naviera, as principal, for
indemnification for any loss resulting from the failure of said company to deliver the insurance policy, or policies, on the Benito
Juarez, or the proceeds thereof, to the bank; secondly, that, even supposing that the letter of August 8, 1918, created any obligation
that the defendant was bound to respect, nevertheless the bank waived and abandoned any right that it may have had upon the
facts stated; and, thirdly and finally, that, by reason of the delay of the bank and its abandonment of its claim against the defendant,
in relation with the prejudice thereby incurred by the defendant, the bank is estopped to assert any right that it may have had in the
premises.

We are of the opinion that all of these contentions are untenable and that the plaintiff bank has a clear right of action against the
defendant, in nowise affected adversely by any of the considerations suggested. Upon the first point, while it is true that an agent
who acts for a revealed principal in the making of a contract does not become personally bound to the other party in the sense that
an action can ordinarily be maintained upon such contract directly against the agent (art. 1725, Civ. Code), yet that rule clearly does
not control this case; for even conceding that the obligation created by the letter of August 8, 1918, was directly binding only on the
principal, and that in law the agent may stand apart therefrom. yet it is manifest upon the simplest principles of jurisprudence that
one who has intervened in the making of a contract in the character of agent cannot be permitted to intercept and appropriate the
thing which the principal is bound to deliver, and thereby make performance by the principal impossible. The agent in any event
must be precluded from doing any positive act that could prevent performance on the part of his principal. This much, ordinary good
faith towards the other contracting party requires. The situation before us in effect is one where, notwithstanding the promise held
out jointly by principal and agent in the letters of August 8 and 10, 1918, the two have conspired to make an application of the
proceeds of the insurance entirely contrary to the tenor of said letters. This cannot be permitted.
The idea on which we here proceed can perhaps be made more readily apprehensible from another point of view, which is this: By
virtue of the promise contained in the letter of August 8, 1918, the bank became the equitable owner of the insurance effected on
the Benito Juarez to the extent necessary to indemnify the bank for the money advanced by it, in reliance upon that promise, for the
purchase of said vessel; and this right of the bank must be respected by all persons having due notice thereof, and most of all by the
defendant which took out the insurance itself in the interest of the parties then concerned, including of course the bank. The
defendant therefore cannot now be permitted to ignore the right of the bank and appropriate the insurance to the prejudice of the
bank, even though the act be done with the consent of its principal.

As to the argument founded upon the delay of the bank in asserting its right to the insurance money, it is enough to say that mere
delay unaccompanied by acts sufficient to create an equitable estoppel does not destroy legal rights, but such delay as occurred here
is in part explained by the fact that the loan to La Compañía Naviera did not mature till May 17, 1919, and a demand for the
surrender of the proceeds of the insurance before that date would have seemed premature. Besides, it is to be borne in mind that
most of the insurance was not in fact collected until in June of 1919. It is true that in the month of March previous about P50,000 of
this insurance had been remitted to Manila for Welch, Fairchild & Co. through the plaintiff bank, and the bank, we assume, took
notice of the source of the remittance. However, its failure then to assert its claim to the money is not a matter of legitimate
criticism, since the loan was not then due. After May 17, 1919, the situation was somewhat different; and as we have already seen,
the bank was not slow in asserting its right to the remittance that came through the bank in June to Welch, Fairchild & Co.,
consisting of $13,000 of the proceeds of this insurance.

This brings us to consider the legal effect of the incident which culminated on July 23, 1919, when the bank abandoned its previous
position with regard to this remittance and passed the money to the credit of the defendant, with interest upon the same during the
time payment had been withheld. The most, we think, that can fairly be said about that incident is that the bank president admitted
himself to be a convert to the proposition advanced by the attorney for the defendant to the effect that as the defendant had
merely acted as agent for La Compañía Naviera in the matter, the bank must look exclusively to La Compañía Naviera for the
fulfillment of the promise about the insurance money. As a statement of legal doctrine that proposition was, as we have already
shown, a mistake; but of course it would have been a matter of indifference if La Compañía Naviera had remained solvent. One
consideration that must have operated on the mind of the president of the bank in releasing this money was that it had been
remitted in ordinary course of exchange through the bank to the defendant, which was an entirely responsible party; and even
though the bank may have had the power to intercept the remittance, the president may have considered that the commercial
integrity of the institution in matters of exchange was perhaps worth more than could be gained by an obstinate insistence on its
right to this money. There is no evidence whatever that the president of the bank assumed to release the defendant from any
obligation which might have been incurred by virtue of the letter of August 8, 1918.

From intimations contained in the testimony of some of the witnesses presented by the defendant it might be inferred that at some
time or another an understanding had been reached between the bank and the defendant company by which it was agreed that the
defendant should make advances of money to La Compañía Naviera and that it might look to the proceeds of the insurance on
the Benito Juarez to reimburse itself for those outlays. No such agreement with the bank or any official of the bank is alleged in the
defendant's answer; and as one reads the testimony submitted by the defendant this hearsay suggestion continually flits away, until
it becomes apparent that no such agreement was made. That there was some such understanding between the defendant and La
Compañía Naviera is highly probable, but to that understanding the bank clearly was not a party.

It is insisted, however, that the attitude of the bank has been such that the defendant has been misled to its prejudice, in that only
did it give large credit to La Compañía Naviera for sums to be recouped from this insurance money but that in reliance upon its right
to that money it refrained from taking the steps that it might have taken to save itself from loss; and in this connection it is
suggested that but for the incident in July, 1919, when the bank waived its claim to the $13,000 remitted through it to Welch,
Fairchild & Co., the defendant would have sought and would have been able to get additional security in the form of mortgages or
pledges of one or more vessels belonging to La Compañía Naviera.

The proof in our opinion shows little or no tangible basis for these contentions; and so far as we can see not one dollar was ever
advanced by the defendant to La Compañía Naviera upon the faith of any request, promise, or representation of the bank in that
behalf extended; and it should be noted that the large losses incurred by the defendant for advances to that concern after July 23,
1919, were mostly incurred in the desperate effort to retrieve its position by operating the San Pedro. The suggestion that, but for
the misleading attitude of the bank, the defendant would have been able to obtain additional security loses much of its force when it
is considered that upon December 31, 1921, the defendant's book still showed unsecured indebtedness against La Compañía
Naviera to the amount of nearly P50,000. The idea that, but for the attitude assumed by the bank, the defendant would have
materially bettered its position, is a speculation too remote to affect the issue of this action.
In the light of what has been said, it becomes necessary to reverse, as we hereby do reverse, the judgment appealed from; and
judgment will be entered in favor of the plaintiff to recover of the defendant the sum of P250,000, with lawful interest from May 31,
1921, the date of the filling of the complaint. No special pronouncement will be made as to costs. So ordered.

[G.R. Nos. L-33819 and L-33897. October 23, 1982.]

NATIONAL POWER CORPORATION, Plaintiff-Appellant, v. NATIONAL MERCHANDISING CORPORATION and DOMESTIC INSURANCE

COMPANY OF THE PHILIPPINES, Defendants-Appellants.

The Solicitor General, for Plaintiff-Appellant.

Sycip, Salazar, Luna Manalo & Feliciano, for Defendants-Appellants.

DECISION

AQUINO, J.:

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

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

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

On October 17, 1956, the National Power Corporation and National Merchandising Corporation (Namerco) of 3111 Nagtahan Street,
Manila, as the representative of the International Commodities Corporation of 11 Mercer Street, New York City (Exh. C), executed in
Manila a contract for the purchase by the NPC from the New York firm of four thousand long tons of crude sulfur for its Maria
Cristina Fertilizer Plant in Iligan City at a total price of (450,716 (Exh. E).

On that same date, a performance bond in the sum of P90,143.20 was executed by the Domestic Insurance Company in favor of the
NPC to guarantee the seller’s obligations (Exh. F).

It was stipulated in the contract of sale that the seller would deliver the sulfur at Iligan City within sixty days from notice of the
establishment in its favor of a letter of credit for $212,120 and that failure to effect delivery would subject the seller and its surety to
the payment of liquidated damages at the rate of two-fifth of one percent of the full contract price for the first thirty days of default
and four-fifth of one percent for every day thereafter until complete delivery is made (Art. 8, p. 111, Defendants’ Record on Appeal).

In a letter dated November 12, 1956, the NPC advised John Z. Sycip, the president of Namerco, of the opening on November 8 of a
letter of credit for $212,120 in favor of International Commodities Corporation which would expire on January 31, 1957 (Exh. I).
Notice of that letter of credit was, received by cable by the New York firm on November 15, 1956 (Exh. 80-Wallick). Thus, the
deadline for the delivery of the sulfur was January 15, 1957.

The New York supplier was not able to deliver the sulfur due to its inability to secure shipping space. During the period from January
20 to 26, 1957 there was a shutdown of the NPC’s fertilizer plant because there was no sulfur. No fertilizer was produced (Exh. K).

In a letter dated February 27, 1957, the general manager of the NPC advised Namerco and the Domestic Insurance Company that
under Article 9 of the contract of sale "non-availability of bottom or vessel" was not a fortuitous event that would excuse non-
performance and that the NPC would resort to legal remedies to enforce its rights (Exh. L and M).
The Government Corporate Counsel in his letter to Sycip dated May 8, 1957 rescinded the contract of sale due to the New York
supplier’s non-performance of its obligations (Exh. G). The same counsel in his letter of June 8, 1957 demanded from Namerco the
payment of P360,572.80 as liquidated damages. He explained that time was of the essence of the contract. A similar demand was
made upon the surety (Exh. H and H-1).

The liquidated damages were computed on the basis of the 115-day period between January 15, 1957, the deadline for the delivery
of the sulfur at Iligan City, and May 9, 1957 when Namerco was notified of the rescission of the contract, or P54,085.92 for the first
thirty days and P306,486.88 for the remaining eighty-five days. Total: P360,572.80.

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

The trial court in its order of January 17, 1958 dismissed the case as to the New York firm for lack of jurisdiction because it was not
doing business in the Philippines (p. 60, Defendants Record on Appeal).

On the other hand, Melvin Wallick, as the assignee of the New York corporation and after the latter was dropped as a defendant in
Civil Case No. 33114, sued Namerco for damages in connection with the same sulfur transaction (Civil Case No. 37019). The two
cases, both filed in the Court of First Instance of Manila, were consolidated. A joint trial was held. The lower court rendered separate
decisions in the two cases on the same date.

In Civil Case No. 37019, the trial court dismissed Wallick’s action for damages against Namerco because the assignment in favor of
Wallick was champertous in character. Wallick appealed to this Court. The appeal was dismissed because the record on appeal did
not disclose that the appeal was perfected on time (Res. of July 11, 1972 in L-33893).In this Civil Case No. 33114, although the
records on appeal were approved in 1967, inexplicably, they were elevated to this Court in 1971. That anomaly initially contributed
to the delay in the adjudication of this case.

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

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

"4. Responsibility for availability of vessel. — The availability of vessel to transport the quantity of sulfur within the time specified in
item 14 of this specification shall be the responsibility of the bidder. In case of award of contract, failure to ship on time allegedly
due to non-availability of vessels shall not exempt the Contractor from payment of liquidated damages provided in item 15 of this
specification."cralaw virtua1aw library

"15. Liquidated damages. — . . .

"Availability of vessel being a responsibility of the Contractor as specified in item 4 of this specification, the terms ‘unforeseeable
causes beyond the control and without the fault or negligence of the Contractor’ and ‘force majeure’ as used herein shall not be
deemed to embrace or include lack or nonavailability of bottom or vessel. It is agreed that prior to making his bid, a bidder shall have
made previous arrangements regarding shipments within the required time. It is clearly understood that in no event shall the
Contractor be exempt from the payment of liquidated damages herein specified for reason of lack of bottom or vessel. Lack of
bottom or nonavailability of vessel shall, in no case, be considered as a ground for extension of time. . . . ."cralaw virtua1aw library

Namerco’s bid or offer is even more explicit. It provides that it was "responsible for the availability of bottom or vessel" and that it
"guarantees the availability of bottom or vessel to ship the quantity of sulfur within the time specified in this bid" (Exh. B, p. 22,
Defendants’ Record on Appeal).

In the contract of sale itself item 15 of the invitation to bid is reproduced in Article 9 which provides that "it is clearly understood
that in no event shall the seller be entitled to an extension of time or be exempt from the payment of liquidated damages herein
specified for reason of lack of bottom or vessel" (Exh. E, p. 36, Record on Appeal).

It is true that the New York corporation in its cable to Namerco dated August 9, 1956 stated that the sale was subject to availability
of a steamer (Exh. N). However, Namerco did not disclose that cable to the NPC and, contrary to its principal’s instruction, it agreed
that nonavailability of a steamer was not a justification for nonpayment of the liquidated damages.

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

The defendants argue that it was incumbent upon the NPC to inquire into the extent of the agent’s authority and, for its failure to do
so, it could not claim any liquidated damages which, according to the defendants, were provided for merely to make the seller more
diligent in looking for a steamer to transport the sulfur.

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

We agree with the trial court that Namerco is liable for damages because under article 1897 of the Civil Code the agent who exceeds
the limits of his authority without giving the party with whom he contracts sufficient notice of his powers is personally liable to such
party.

The truth is that even before the contract of sale was signed Namerco was already aware that its principal was having difficulties in
booking shipping space. In a cable dated October 16, 1956, or one day before the contract of sale was signed, the New York supplier
advised Namerco that the latter should not sign the contract unless it (Namerco) wished to assume sole responsibility for the
shipment (Exh. T).

Sycip, Namerco’s president, replied in his letter to the seller dated also October 16, 1956, that he had no choice but to finalize the
contract of sale because the NPC would forfeit Namerco’s bidder’s bond in the sum of P45,100 posted by the Domestic Insurance
Company if the contract was not formalized (Exh. 14, 14-A and Exh. V).

Three days later, or on October 19, the New York firm cabled Namerco that the firm did not consider itself bound by the contract of
sale and that Namerco signed the contract on its own responsibility (Exh. W).

In its letters dated November 8 and 19, 1956, the New York corporation informed Namerco that since the latter acted contrary to
the former’s cabled instructions, the former disclaimed responsibility for the contract and that the responsibility for the sale rested
on Namerco (Exh. Y and Y-1).

The letters of the New York firm dated November 26 and December 11, 1956 were even more revealing. It bluntly told Namerco that
the latter was never authorized to enter into the contract and that it acted contrary to the repeated instructions of the former (Exh.
U and Z). Said the vice-president of the New York firm to Namerco:chanrobles virtual lawlibrary

"As we have pointed out to you before, you have acted strictly contrary to our repeated instructions and, however regretfully, you
have no one but yourselves to blame."cralaw virtua1aw library

The rule relied upon by the defendants-appellants that every person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent would apply in this case if the principal is sought to be held liable on the contract entered
into by the agent.

That is not so in this case. Here, it is the agent that it sought to be held liable on a contract of sale which was expressly repudiated by
the principal because the agent took chances, it exceeded its authority, and, in effect, it acted in its own name.

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

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

Manresa says that the agent who exceeds the limits of his authority is personally liable "porque realmente obra sin poderes" and the
third person who contracts with the agent in such a case would be defrauded if he would not be allowed to sue the agent (11 Codigo
Civil, 6th Ed., 1972, p. 725).
The defendants also contend that the trial court erred in holding as enforceable the stipulation for liquidated damages despite its
finding that the contract was executed by the agent in excess of its authority and is, therefore, allegedly unenforceable.

In support of that contention, the defendants cite article 1403 of the Civil Code which provides that a contract entered into in the
name of another person by one who has acted beyond his powers is unenforceable.

We hold that defendants’ contention is untenable because article 1403 refers to the unenforceability of the contract against the
principal. In the instant case, the contract containing the stipulation for liquidated damages is not being enforced against it principal
but against the agent and its surety.

It is being enforced against the agent because article 1807 implies that the agent who acts in excess of his authority is personally
liable to the party with whom he contracted.

And that rule is complemented by article 1898 of the Civil Code which provides that "if the agent contracts in the name of the
principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom
the agent contracted is aware of the limits of the powers granted by the principal." 

It is being enforced against the agent because article 1897 implies that the agent who acts in excess of his authority is personally
liable to the party with whom he contracted.

And the rule is complemented by article 1898 of the Civil Code which provides that "if the agent contracts in the name of the
principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom
the agent contracted is aware of the limits of the powers granted by the principal." 

As priorly discussed, namerco, as agent, exceeded the limits of its authority in contracting with the NPC in the name of its principal.
The NPC was unaware of the limitations on the powers granted by the New York firm to Namerco.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph

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

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

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

Namerco never disclosed to the NPC the cabled or written instructions of its principal. For that reason and because Namerco
exceeded the limits of its authority, it virtually acted in its own name and not as agent and it is, therefore, bound by the contract of
sale which, however, is not enforceable against its principal.

If, as contemplated in articles 1897 and 1898, Namerco is bound under the contract of sale, then it follows that it is bound by the
stipulation for liquidated damages in that contract.

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

Another contention of the defendants is that the Domestic Insurance Company is not liable to the NPC because its bond was posted,
not for Namerco, the agent, but for the New York firm which is not liable on the contract of sale.

That contention cannot be sustained because it was Namerco that actually solicited the bond from the Domestic Insurance Company
and, as explained already, Namerco is being held liable under the contract of sale because it virtually acted in its own name. It
became the principal in the performance bond. In the last analysis, the Domestic Insurance Company acted as surety for Namerco.

The rule is that "want of authority of the person who executes an obligation as the agent or representative of the principal will not,
as a general rule, affect the surety’s liability thereon, especially in the absence of fraud, even though the obligation is not binding on
the principal" (72 C.J.S. 525).
Defendants’ other contentions are that they should be held liable only for nominal damages, that interest should not be collected on
the amount of damages and that the damages should be computed on the basis of a forty-five day period and not for a period of one
hundred fifteen days.

With respect to the imposition of the legal rate of interest on the damages from the filing of the complaint in 1957, or a quarter of a
century ago, defendants’ contention is meritorious. It would be manifestly inequitable to collect interest on the damages especially
considering that the disposition of this case has been considerably delayed due to no fault of the defendants.

The contention that only nominal damages should be adjudged is contrary to the intention of the parties (NPC, Namerco and its
surety) because it is clearly provided that liquidated damages are recoverable for delay in the delivery of the sulfur and, with more
reason, for nondelivery.

No proof of pecuniary loss is required for the recovery of liquidated damages. the stipulation for liquidated damages is intended to
obviate controversy on the amount of damages. There can be no question that the NPC suffered damages because its production of
fertilizer was disrupted or diminished by reason of the nondelivery of the sulfur.chanrobles.com.ph : virtual law library

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

On the other hand, nominal damages are damages in name only or are in fact the same as no damages (25 C.J.S. 466). It would not
be correct to hold in this case that the NPC suffered damages in name only or that the breach of contract was merely technical in
character.

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

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

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

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

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

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

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

These contentions have already been resolved in the preceding discussion. We find no sanction or justification for NPC’s claim that it
is entitled to the full payment of the liquidated damages computed by its official.

Ruling on the amount of damages. — A painstaking evaluation of the equities of the case in the light of the arguments of the parties
as expounded in their five briefs leads to the conclusion that the damages due from the defendants should be further reduced to
P45,100 which is equivalent to their bidder’s bond or to about ten percent of the selling price of the sulfur.

WHEREFORE, the lower court’s judgment is modified and defendants National Merchandising Corporation and Domestic Insurance
Company of the Philippines are ordered to pay solidarily to the National Power Corporation the sum of P45,100.00 as liquidated
damages. No costs.
G.R. No. L-20697      December 24, 1964

EUSEBIO M. LOPEZ, EUSEBIO LOPEZ, JR., DEOGRACIAS P. LIRIO, SOLEDAD LIRIO-DOLOR and RENATO C. DOLOR, in his capacity as
Judicial Administrator of the Intestate Estate of the late Faustino Dolor,petitioners, 
vs.
HON. CARMELINO G. ALVENDIA as presiding judge of branch XVI, CFI Manila, DAVID MINSBERG, ADELAIDA S. MINSBERG, and
CITY SHERIFF OF MANILA, respondents.

PAREDES, J.:

Sometime in March, 1957, David and Adelaida Minsberg, private-parties respondents herein, bought a parcel of residential land
from the petitioners. On March 25, 1957, the first payment in the amount of P900.00 was handed and on April 1, 1957, the amount
of P1,100.00 was paid to complete the down payment. On the lather date, a written contract was executed, wherein it was
covenanted that upon completion of the payment of P7,560.00, the certificate of title on the lot will be issued to private parties
respondents. In July, 1958, the Minsbergs received from petitioners a written notice, to the effect that if they (private-parties
respondents) fail to pay the balance of P5,560.00 in two weeks' time, the down payment of P2,000.00 will be forfeited and they
would lose all their rights over the lot. On July 31, 1958, the Minsbergs paid the balance and, in turn, demanded the title. The
petitioners, however, failed to deliver the title, in spite of the full payment of the purchase price, but told the respondents to wait
for a few days, inasmuch as the necessary papers were in the process of preparation. In 1960, the Minsbergs began the construction
of their house on the lot, and when their estimates failed to complete the house, they again sought the issuance of the title, in order
to enable them to mortgage the same and obtain funds. Instead of giving the title, petitioners issued a mere certification, stating
that they Minsbergs have paid in full the purchase price of the lot. The certification did not merit the acceptance by the banks of the
application for loan, with the lot as security.

Claiming that they suffered damages due to the failure of the petitioners to issue to them the title of the lot, the Minsbergs
instituted Civil Case No. 49628 with the CFI of Manila, presided by respondent, the Hon. Carmelino Alvendia, with the
following petitoria:

WHEREFORE, in view of all the foregoing, it is respectfully prayed that in the case judgment be rendered against defendant,
and in favor of the plaintiffs:

1. Ordering the defendants to deliver to plaintiffs the certificate of title on Lot No. 5, Block No. 7, St. Ignacius Village
Subdivision Plan SIVS;

2. Ordering defendants to pay plaintiffs damages in the sum of P45,000.00 and attorney's fee in the sum of P4,500.00;

3. Ordering defendants to pay the costs of suit;

4. And granting to plaintiffs such other reliefs and remedies which may be warranted by the circumstances.

In the same complaint, it was alleged that the reason why petitioners herein were not able to deliver the title upon demand, was the
fact that the title of the whole subdivision was with the GSIS the land, part of which is the lot in question, having been mortgaged to
secure a loan of P1,600,000.00, a fact not communicated to the Minsbergs.

Petitioners herein presented separate answers and various defenses, which We shall refrain from discussing, since they are not
necessary for the resolution of the present proceedings. After the joining of the issues, an agreement was reached by the parties,
thru the intervention of the Court, which was made the basis of a decision in the case. The dispositive part of the decision, dated
August 24, 1962, states:

While this case was being tried and after the plaintiffs have rested their case, the parties through the intervention of the
Court, having arrived at the following agreement:

That the defendants shall deliver to the plaintiffs the torrens title to Lot No. 5, Block No. 7 of the consolidated subdivision
plan (LRC) Pcs-359, containing 540 square meters, more or less and described as follows:

xxx      xxx      xxx
 WHEREFORE, judgment is rendered, sentencing the defendants jointly and severally to deliver to the plaintiffs a torrens title
issued in the name of Adelaida Saguban-Minsberg of legal age, Filipino, married to David Minsberg and with postal address
at Room 408 Maria Dolores Building, Manila, covering Lot 5, Block 7 of the Consolidated Subdivision plan (LRC) Pcs-359 and
to jointly and severally may the plaintiffs the sum of P3,500.00 as damages. Both said title and damages should be delivered
to the plaintiffs not later than September 21, 1962. Should the defendants fail to deliver the title and/or the amount of
P3,500.00, the amount of damages shall be automatically raised to P10,000.00 and a writ of execution of the decision with
the damages raised to P10,000.00 shall immediately be issued.

Under date of September 28, 1962, the Minsbergs presented a "Motion for Execution," it appearing that although the title was
delivered, one of the checks issued to cover the P3,500.00 damages was dishonored by the drawee bank with the notation "no
arrangement," when presented on September 26, 1962. There was failure to live up to the conditions of the agreement as embodied
in the decision and, therefore, a motion for execution, for P10,000.00 was presented. Petitioners herein filed on October 4, 1962, a
Manifestation and/or Opposition, contending that they have substantially complied with the judgment; that the non-cashing of the
check by the drawee bank, was due to a mere "oversight", on the part of the cashier of the bank A statement dated October 4, 1962
showing that there was an oversight, was attached to the manifestation and/or opposition, the contents of which read:

This is to certify that Republic Bank Check No. 152597, drawn by Mr. Eusebio Lopez, Jr., in favor of Mr. David Minsberg on
September 21, 1962 in the sum of P3,277.38, is a good and valid check and the dishonor of the said check is a pure case of
oversight. The herein described cheek can, therefore, be presented to us for payment anytime and/or redeposited by the
payee, Mr. David Minsberg.

This certification is issued upon the request of Mr. Lopez.

(Sgd.) SIMPLICIO MANALO 

Cashier

Simultaneously with the filing of the Manifestation and/or Opposition, the petitioners herein deposited with the trial court the
amount of P3,277.38, in cash, the value of the dishonored check, to show good faith, and prayed that the motion for execution be
denied.

On December 4, 1962, the respondent Judge issued an Order, the pertinent portions of which state:

In view of the foregoing considerations, the Court holds that the defendants failed to comply with the requirements in the
decision that they pay the plaintiffs as damages the sum of P3,500.00 not later than September 21, 1962. Having failed in
the said requirement, the second portion of the decision automatically comes into effect, namely, that the amount of the
damages should be raised to P10,000.00.

WHEREFORE, let a writ of execution for the sum of P10,000.00 be issued against the defendants in the above-entitled case.

Against the above Order, petitioners presented on December 11, 1962, an Urgent Motion for Reconsideration and to Lift the Writ of
Execution, stating that at the time of the issuance, delivery and presentment of the dishonored check, there was already an
arrangement between the petitioners and the Republic Bank, thru Atty. Eusebio Lopez, Jr.; that the dishonor was due to an oversight
and/or honest intake that upon learning of the dishonor, they informed private-parties respondents, thru counsel, to redeposit or
present for payment the check with drawee bank; and that on October 5, 1962, before the issuance of the execution, they deposited
with the Court the full amount of the dishonored check; that there was a substantial compliance with the decision. In the same
motion, petitioners prayed that they be allowed to present evidence to prove an honest mistake or oversight and/or excusable
negligence. On December 12, 1962, an Urgent Ex-Parte Motion to Suspend proceedings on Writ of Execution was filed by
petitioners, claiming that, with the death of Faustino Dolor, his ownership over the Dolor's Pharmacy, which was being levied upon,
had ceased, and, therefore, could not be reached by the Writ of Execution and the Writ should be lifted over the properties of said
Pharmacy. On December 14, 1962, the respondent Judge issued an Order, denying the motion to suspend proceedings on the writ of
execution. On December 15, 1962, the respondent Court issued the following Order:

In issuing a check, the defendants have decided to effect a method of satisfying their obligation which is fraught with
danger, to say the least. This is because plaintiffs could have refused to accept the check. The check not being currency is
not a legal tender and a creditor could not be compelled to accept it in payment of his credit.

Finally, the Civil Code of the Philippines, provides:

 xxx      xxx      xxx

The delivery of the promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
(Art. 1249, pars. 1 & 2, Civil Code of the Philippines.)

The foregoing legal provision, applied to the undisputed facts in this case, will clearly indicate that it is immaterial whether
or not the defendants had money with the drawee bank sufficient to cover the value of the check they have issued for
P3,500.00 on September 21, 1962. Hence, the offer to introduce evidence to substantiate this alleged fact should be as it is
hereby denied.

In view of the foregoing considerations, the Court hereby denies the motion for reconsideration and to lift the writ of
execution.

Petitioners came to this Court, on a Petition for Certiorari, Mandamus and/or Prohibition with Preliminary Injunction. They claim
that the respondent Court in issuing the order of December 4, 1962, directing the issuance of a writ of execution; the Order of
December 12, 1962, denying the motion for reconsideration and to lift the writ of execution; the Order denying the motion to
suspend the proceedings and in not allowing them to introduce evidence to show the oversight by the cashier of the drawee bank, in
not honoring the checks issued in payment of the damages, acted with grave abuse of discretion and/or committed an oppresive
exercise of authority, for which they could not appeal, or have any other plain, speedy and adequate remedy in the ordinary course
of law. They prayed that a Writ of Preliminary Injunction be issued, directed against the respondent Sheriff of Manila, to desist from
further proceeding on the Writ of Execution dated December 8, 1962 and enjoining the respondent Judge to refrain from issuing an
alias Writ of Execution; and for the annulment of the orders complained of.

On January 17, 1963, this Court gave due course to the petition at bar and issued a preliminary writ, as prayed for. Thereafter, an
Urgent Petition to Lift Garnishment was granted by this Court, upon the posting of an increased bond of P10,000.00.

The respondents, answering the petition, after the usual admissions and denials, contended that there was no grave abuse of
discretion practiced by the respondent Judge, in issuing the orders complained of claiming that the decision was based on a
compromise agreement entered into by the parties, after the respondents had rested their case. They also point out that they
claimed P49,500.00 as damages and attorney's fees, and the sum of P10,000.00 was provided in the decision as damages upon the
failure of the petitioners, to comply with the conditions of the compromise agreement and said decision.

Under the facts obtaining in the case, We find no abuse of discretion, much less a grave one, committed by respondent judge, in
issuing the Orders complained of. The jurisdiction of the trial court to take cognizance of the case is conceded. Petitioners admit
their failure to live up to the terms of the judgment, which was rendered, pursuant to a compromise agreement and where time was
of the essence. They attribute, however, their failure, to an alleged "mere oversight" on the part of the cashier of the drawee bank in
not cashing the check when presented, and contend, by such "mere over sight", that they have substantially complied with the
judgment. We find the contention untenable. From the rendition of the decision, to the date they were to comply with the same,
one (1) month transpired. Within the span of such time, petitioners could have ascertained that the arrangement they now claim to
have made with the Bank, was known to its cashier who did not state at all in his certification that there was such a previous
arrangement. The respondent Court did not simply believe that there was an arrangement; and this disbelief is strengthened by the
facts and circumstances of record. Likewise, petitioners asked the respondent Court to allow them to submit evidence to show the
supposed "oversight," but said court did not deem it necessary to do so. Granting for the purposes of argument, that the said acts
were erroneous still, they were merely mistakes of fact or errors of judgment and/or of law, not within the reach of a writ
of certiorari, much less a writ of mandamus. Having failed to comply with the decision, petitioners have no cause to lament if
petitioners did not agree with the orders complained of, they could have appealed them. Certiorari is not a substitute for appeal.
And, the bank, having accepted the alleged arrangement, had constituted itself as the agent of the petitioners. The principal is
responsible for the acts of the agent done within the scope of his authority, and should bear the damages caused upon third parties.
If the fault (oversight) lies on the bank, petitioners are free to sue said bank for damages occasioned thereby.

PREMISES CONSIDERED, the petition should be, as it is hereby dismissed, for lack of merits. The Writ of Preliminary Injunction earlier
issued, is dissolved. Costs against petitioners in both instances.
G.R. No. 126751       March 28, 2001

SAFIC ALCAN & CIE, petitioner, 

vs.
IMPERIAL VEGETABLE OIL CO., INC., respondent.

YNARES-SANTIAGO, J.:

Petitioner Safic Alcan & Cie (hereinafter, "Safic") is a French corporation engaged in the international purchase, sale and trading of
coconut oil. It filed with the Regional Trial Court of Manila, Branch XXV, a complaint dated February 26, 1987 against private
respondent Imperial Vegetable Oil Co., Inc. (hereinafter, "IVO"), docketed as Civil Case No. 87- 39597. Petitioner Safic alleged that on
July 1, 1986 and September 25, 1986, it placed purchase orders with IVO for 2,000 long tons of crude coconut oil, valued at
US$222.50 per ton, covered by Purchase Contract Nos. A601446 and A601655, respectively, to be delivered within the month of
January 1987. Private respondent, however, failed to deliver the said coconut oil and, instead, offered a "wash out" settlement,
whereby the coconut oil subject of the purchase contracts were to be "sold back" to IVO at the prevailing price in the international
market at the time of wash out. Thus, IVO bound itself to pay to Safic the difference between the said prevailing price and the
contract price of the 2,000 long tons of crude coconut oil, which amounted to US$293,500.00. IVO failed to pay this amount despite
repeated oral and written demands.

Under its second cause of action, Safic alleged that on eight occasions between April 24, 1986 and October 31, 1986, it placed
purchase orders with IVO for a total of 4,750 tons of crude coconut oil, covered by Purchase Contract Nos. A601297A/B, A601384,
A601385, A601391, A601415, A601681, A601683 and A601770A/B/C/. When IVO failed to honor its obligation under the wash out
settlement narrated above, Safic demanded that IVO make marginal deposits within forty-eight hours on the eight purchase
contracts in amounts equivalent to the difference between the contract price and the market price of the coconut oil, to
compensate it for the damages it suffered when it was forced to acquire coconut oil at a higher price. IVO failed to make the
prescribed marginal deposits on the eight contracts, in the aggregate amount of US$391,593.62, despite written demand therefor.

The demand for marginal deposits was based on the customs of the trade, as governed by the provisions of the standard N.I.O.P.
Contract arid the FOSFA Contract, to wit:

N.I.O.P. Contract, Rule 54 - If the financial condition of either party to a contract subject to these rules becomes so impaired
as to create a reasonable doubt as to the ability of such party to perform its obligations under the contract, the other party
may from time to time demand marginal deposits to be made within forty-eight (48) hours after receipt of such demand,
such deposits not to exceed the difference between the contract price and the market price of the goods covered by the
contract on the day upon which such demand is made, such deposit to bear interest at the prime rate plus one percent (1%)
per annum. Failure to make such deposit within the time specified shall constitute a breach of contract by the party upon
whom demand for deposit is made, and all losses and expenses resulting from such breach shall be for the account of the
party upon whom such demand is made. (Underscoring ours.)1

FOSFA Contract, Rule 54 - BANKRUPTCY/INSOLVENCY: If before the fulfillment of this contract either party shall suspend
payment, commit an act of bankruptcy, notify any of his creditors that he is unable to meet his debts or that he has
suspended payment or that he is about to suspend payment of his debts, convene, call or hold a meeting either of his
creditors or to pass a resolution to go into liquidation (except for a voluntary winding up of a solvent company for the
purpose of reconstruction or amalgamation) or shall apply for an official moratorium, have a petition presented for winding
up or shal1i have a Receiver appointed, the contract shall forthwith be closed either at the market price then current for
similar goods or, at the option of the other party at a price to be ascertained by repurchase or resale and the difference
between the contract price and such closing-out price shall be the amount which the other party shall be entitled to
claim shall be liable to account for under this contract (sic). Should either party be dissatisfied with the price, the matter
shall be referred to arbitration. Where no such resale or repurchase takes place, the closing-out price shall be fixed by a
Price Settlement Committee appointed by the Federation. (Underscoring ours.)2

Hence, Safic prayed that IVO be ordered to pay the sums of US$293,500.00 and US$391,593.62, plus attorney's fees and litigation
expenses. The complaint also included an application for a writ of preliminary attachment against the properties of IVO.

Upon Safic's posting of the requisite bond, the trial court issued a writ of preliminary attachment. Subsequently, the trial court
ordered that the assets of IVO be placed under receivership, in order to ensure the preservation of the same.
In its answer, IVO raised the following special affirmative defenses: Safic had no legal capacity to sue because it was doing business
in the Philippines without the requisite license or authority; the subject contracts were speculative contracts entered into by IVO's
then President, Dominador Monteverde, in contravention of the prohibition by the Board of Directors against engaging in
speculative paper trading, and despite IVO's lack of the necessary license from Central Bank to engage in such kind of trading
activity; and that under Article 2018 of the Civil Code, if a contract which purports to be for the delivery of goods, securities or shares
of stock is entered into with the intention that the difference between the price stipulated and the exchange or market price at the
time of the pretended delivery shall be paid by the loser to the winner, the transaction is null and void.1âwphi1.nêt

IVO set up counterclaims anchored on harassment, paralyzation of business, financial losses, rumor-mongering and oppressive
action. Later, IVO filed a supplemental counterclaim alleging that it was unable to operate its business normally because of the
arrest of most of its physical assets; that its suppliers were driven away; and that its major creditors have inundated it with claims for
immediate payment of its debts, and China Banking Corporation had foreclosed its chattel and real estate mortgages.

During the trial, the lower court found that in 1985, prior to the date of the contracts sued upon, the parties had entered into and
consummated a number of contracts for the sale of crude coconut oil. In those transactions, Safic placed several orders and IVO
faithfully filled up those orders by shipping out the required crude coconut oil to Safic, totaling 3,500 metric tons. Anent the 1986
contracts being sued upon, the trial court refused to declare the same as gambling transactions, as defined in Article 2018 of the Civil
Code, although they involved some degree of speculation. After all, the court noted, every business enterprise carries with it a
certain measure of speculation or risk. However, the contracts performed in 1985, on one hand, and the 1986 contracts subject of
this case, on the other hand, differed in that under the 1985 contracts, deliveries were to be made within two months. This, as
alleged by Safic, was the time needed for milling and building up oil inventory. Meanwhile, the 1986 contracts stipulated that the
coconut oil were to be delivered within period ranging from eight months to eleven to twelve months after the placing of orders.
The coconuts that were supposed to be milled were in all likelihood not yet growing when Dominador Monteverde sold the crude
coconut oil. As such, the 1986 contracts constituted trading in futures or in mere expectations.

The lower court further held that the subject contracts were ultra vires  and were entered into by Dominador Monteverde without
authority from the Board of Directors. It distinguished between the 1985 contracts, where Safic likewise dealt with Dominador
Monteverde, who was presumably authorized to bind IVO, and the 1986 contracts, which were highly speculative in character.
Moreover, the 1985 contracts were covered by letters of credit, while the 1986 contracts were payable by telegraphic transfers,
which were nothing more than mere promises to pay once the shipments became ready. For these reasons, the lower court held
that Safic cannot invoke the 1985 contracts as an implied corporate sanction for the high-risk 1986 contracts, which were evidently
entered into by Monteverde for his personal benefit.

The trial court ruled that Safic failed to substantiate its claim for actual damages. Likewise, it rejected IVO's counterclaim and
supplemental counterclaim.

Thus, on August 28, 1992, the trial court rendered judgment as follows:

WHEREFORE, judgment is hereby rendered dismissing the complaint of plaintiff Safic Alcan & Cie, without prejudice to any
action it might subsequently institute against Dominador Monteverde, the former President of Imperial Vegetable Oil Co.,
Inc., arising from the subject matter of this case. The counterclaim and supplemental counterclaim of the latter defendant
are likewise hereby dismissed for lack of merit. No pronouncement as to costs.

The writ of preliminary attachment issued in this case as well as the order placing Imperial Vegetable Oil Co., Inc. under
receivership are hereby dissolved and set aside.3

Both IVO and Safic appealed to the Court of Appeals, jointly docketed as CA-G.R. CV No.40820.

IVO raised only one assignment of error, viz:

THE TRIAL COURT ERRED IN HOLDING 'I'HAT THE ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT WAS NOT THE
MAIN CAUSE OF THE DAMAGES SUFFERED BY DEFENDANT AND IN NOT AWARDING DEFENDANT-APPELLANT SUCH
DAMAGES.

For its part, Safic argued that:

 THE TRIAL COURT ERRED IN HOLDING THAT IVO'S PRESIDENT, DOMINADOR MONTEVERDE, ENTERED INTO CONTRACTS
WHICH WERE ULTRA VIRES AND WHICH DID NOT BIND OR MAKE IVO LIABLE.

THE TRIAL COURT ERRED IN HOLDING THA SAFIC WAS UNABLE TO PROVE THE DAMAGES SUFFERED BY IT AND IN NOT
AWARDING SUCH DAMAGES.

THE TRIAL COURT ERRED IN NOT HOLDING THAT IVO IS LIABLE UNDER THE WASH OUT CONTRACTS.

On September 12, 1996, the Court of Appeals rendered the assailed Decision dismissing the, appeals and affirming the judgment
appealed from in toto.4

Hence, Safic filed the instant petition for review with this Court, substantially reiterating the errors it raised before the Court of
Appeals and maintaining that the Court of Appeals grievously erred when:

a. it declared that the 1986 forward contracts (i.e., Contracts Nos. A601446 and A60155 (sic) involving 2,000 long tons of
crude coconut oil, and Contracts Nos. A60l297A/B, A601385, A60l39l, A60l4l5, A601681. A601683 and A60l770A/B/C
involving 4,500 tons of crude coconut oil) were unauthorized acts of Dominador Monteverde which do not bind IVO in
whose name they were entered into. In this connection, the Court of Appeals erred when (i) it ignored its own finding that
(a) Dominador Monteverde, as IVO's President, had "an implied authority to make any contract necessary or appropriate to
the contract of the ordinary business of the company"; and (b) Dominador Monteverde had validly entered into similar
forward contracts for and on behalf of IVO in 1985; (ii) it distinguished between the 1986 forward contracts despite the fact
that the Manila RTC has struck down IVO's objection to the 1986 forward contracts (i.e. that they were highly speculative
paper trading which the IVO Board of Directors had prohibited Dominador Monteverde from engaging in because it is a
form of gambling where the parties do not intend actual delivery of the coconut oil sold) and instead found that the 1986
forward contracts were not gambling; (iii) it relied on the testimony of Mr. Rodrigo Monteverde in concluding that the IVO
Board of Directors did not authorize its President, Dominador Monteverde, to enter into the 1986 forward contracts; and
(iv) it did not find IVO, in any case, estopped from denying responsibility for, and liability under, the 1986 forward contracts
because IVO had recognized itself bound to similar forward contracts which Dominador Monteverde entered into (for and
on behalf of IVO) with Safic in 1985 notwithstanding that Dominador Monteverde was (like in the 1986 forward contracts)
not expressly authorized by the IVO Board of Directors to enter into such forward contracts;

b. it declared that Safic was not able, to prove damages suffered by it, despite the fact that Safic had presented not only
testimonial, but also documentary, evidence which proved the higher amount it had to pay for crude coconut oil (vis-à-
vis the contract price it was to pay to IVO) when IVO refused to deliver the crude coconut oil bought by Safic under the
1986 forward contracts; and

c. it failed to resolve the issue of whether or not IVO is liable to Safic under the wash out contracts involving Contracts Nos.
A601446 and A60155 (sic), despite the fact that Safic had properly raised the issue on its appeal, and the evidence and the
law support Safic's position that IVO is so liable to Safic.

In fine, Safic insists that the appellate court grievously erred when it did not declare that IVO's President, Dominador Monteverde,
validly entered into the 1986 contracts for and on behalf of IVO.

We disagree.

Article III, Section 3 [g] of the By-Laws5 of IVO provides, among others, that –

Section 3. Powers and Duties of the President. - The President shall be elected by the Board of Directors from their own
number .

He shall have the following duties:

xxxxxxxxx
 [g] Have direct and active management of the business and operation of the corporation, conducting the same according to,
the orders, resolutions and instruction of the Board of Directors and according to his own discretion whenever and
wherever the same is not expressly limited by such orders, resolutions and instructions.

It can be clearly seen from the foregoing provision of IVO's By-laws that Monteverde had no blanket authority to bind IVO to any
contract. He must act according to the instructions of the Board of Directors. Even in instances when he was authorized to act
according to his discretion, that discretion must not conflict with prior Board orders, resolutions and instructions. The evidence
shows that the IVO Board knew nothing of the 1986 contracts6 and that it did not authorize Monteverde to enter into speculative
contracts.7 In fact, Monteverde had earlier proposed that the company engage in such transactions but the IVO Board rejected his
proposal.8 Since the 1986 contracts marked a sharp departure from past IVO transactions, Safic should have obtained from
Monteverde the prior authorization of the IVO Board. Safic can not rely on the doctrine of implied agency because before the
controversial 1986 contracts, IVO did not enter into identical contracts with Safic. 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.9 In the case of Bacaltos
Coal Mines v. Court of Appeals,10 we elucidated the rule on dealing with an agent thus:

Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he
does not make such inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of that authority
will not be any excuse. Persons dealing with an assumed agent, whether the assumed agency be a general or special one,
are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and
extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it.11

The most prudent thing petitioner should have done was to ascertain the extent of the authority of Dominador Monteverde. Being
remiss in this regard, petitioner can not seek relief on the basis of a supposed agency.

Under Article 189812 of the Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal unless the
latter ratifies the same expressly or impliedly. It also bears emphasizing that when the third person knows that the agent was acting
beyond his power or authority, the principal can not be held liable for the acts of the agent. If the said third person is aware of such
limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the
principal's ratification.13

There was no such ratification in this case. When Monteverde entered into the speculative contracts with Safic, he did not secure
the Board's approval.14 He also did not submit the contracts to the Board after their consummation so there was, in fact, no occasion
at all for ratification. The contracts were not reported in IVO's export sales book and turn-out book.15 Neither were they reflected in
other books and records of the corporation.16 It must be pointed out that the Board of Directors, not Monteverde, exercises
corporate power.17 Clearly, Monteverde's speculative contracts with Safic never bound IVO and Safic can not therefore enforce those
contracts against IVO.

To bolster its cause, Safic raises the novel point that the IVO Board of Directors did not set limitations on the extent of Monteverde's
authority to sell coconut oil. It must be borne in mind in this regard that a question that was never raised in the courts below can not
be allowed to be raised for the first time on appeal without offending basic rules of fair play, justice and due process.18 Such an issue
was not brought to the fore either in the trial court or the appellate court, and would have been disregarded by the latter tribunal
for the reasons previously stated. With more reason, the same does not deserve consideration by this Court.

Be that as it may, Safic's belated contention that the IVO Board of Directors did not set limitations on Monteverde's authority to sell
coconut oil is belied by what appears on the record. Rodrigo Monteverde, who succeeded Dominador Monteverde as IVO President,
testified that the IVO Board had set down the policy of engaging in purely physical trading thus:

Q. Now you said that IVO is engaged in trading. With whom does, it usually trade its oil?

A. I am not too familiar with trading because as of March 1987, I was not yet an officer of the corporation, although I was at
the time already a stockholder, I think IVO is engaged in trading oil.

Q. As far as you know, what kind of trading was IVO engaged with?

A. It was purely on physical trading.

Q. How did you know this?

A. As a stockholder, rather as member of [the] Board of Directors, I frequently visited the plant and from my observation, as
I have to supervise and monitor purchases of copras and also the sale of the same, I observed that the policy of the
corporation is for the company to engaged (sic) or to purely engaged (sic) in physical trading.

Q. What do you mean by physical trading?

A. Physical Trading means - we buy and sell copras that are only available to us. We only have to sell the available stocks in
our inventory.

Q. And what is the other form of trading?

Atty. Fernando

No basis, your Honor.

Atty. Abad

Well, the witness said they are engaged in physical trading and what I am saying [is] if there are any other kind or
form of trading.

Court

Witness may answer if he knows.

Witness

A. Trading future[s] contracts wherein the trader commits a price and to deliver coconut oil in the future in which
he is yet to acquire the stocks in the future.

Atty. Abad

Q. Who established the so-called physical trading in IVO?

A. The Board of Directors, sir.

Atty. Abad.

Q. How did you know that?

A. There was a meeting held in the office at the factory and it was brought out and suggested by our former president,
Dominador Monteverde, that the company should engaged (sic) in future[s] contract[s] but it was rejected by the Board of
Directors. It was only Ador Monteverde who then wanted to engaged (sic) in this future[s] contract[s].

Q. Do you know where this meeting took place?

A. As far as I know it was sometime in 1985.

Q. Do you know why the Board of Directors rejected the proposal of Dominador Monteverde that the company should
engaged (sic) in future[s] contracts?

Atty. Fernando

Objection, your Honor, no basis.

Court
 Why don't you lay the basis?

Atty. Abad

Q. Were you a member of the board at the time?

A. In 1975, I am already a stockholder and a member.

Q. Then would [you] now answer my question?

Atty. Fernando

No basis, your Honor. What we are talking is about 1985.

Atty. Abad

Q. When you mentioned about the meeting in 1985 wherein the Board of Directors rejected the future[s] contract[s], were
you already a member of the Board of Directors at that time?

A. Yes, sir.

Q. Do you know the reason why the said proposal of Mr. Dominador Monteverde to engage in future[s] contract[s] was
rejected by the Board of Directors?

A. Because this future[s] contract is too risky and it partakes of gambling.

Q. Do you keep records of the Board meetings of the company?

A. Yes, sir.

Q. Do you have a copy of the minutes of your meeting in 1985?

A. Incidentally our Secretary of the Board of Directors, Mr. Elfren Sarte, died in 1987 or 1988, and despite [the] request of
our office for us to be furnished a copy he was not able to furnish us a copy.19

xxxxxxxxx

Atty. Abad

Q. You said the Board of Directors were against the company engaging in future[s] contracts. As far as you know, has this
policy of the Board of Directors been observed or followed?

Witness

A. Yes, sir.

Q. How far has this Dominador Monteverde been using the name of I.V.0. in selling future contracts without the proper
authority and consent of the company's Board of Directors?

A. Dominador Monteverde never records those transactions he entered into in connection with these future[s] contracts in
the company's books of accounts.

Atty. Abad

Q. What do you mean by that the future[s] contracts were not entered into the books of accounts of the company?
 Witness

A. Those were not recorded at all in the books of accounts of the company, sir.20

xxxxxxxxx

Q. What did you do when you discovered these transactions?

A. There was again a meeting by the Board of Directors of the corporation and that we agreed to remove the president and
then I was made to replace him as president.

Q. What else?

A. And a resolution was passed disowning the illegal activities of the former president.21

Petitioner next argues that there was actually no difference between the 1985 physical contracts and the 1986 futures contracts.

The contention is unpersuasive for, as aptly pointed out by the trial court and sustained by the appellate court –

Rejecting IVO's position, SAFIC claims that there is no distinction between the 1985 and 1986 contracts, both of which
groups of contracts were signed or authorized by IVO's President, Dominador Monteverde. The 1986 contracts, SAFIC
would bewail, were similarly with their 1985 predecessors, forward sales contracts in which IVO had undertaken to deliver
the crude coconut oil months after such contracts were entered into. The lead time between the closing of the deal and the
delivery of the oil supposedly allowed the seller to accumulate enough copra to mill and to build up its inventory and so
meet its delivery commitment to its foreign buyers. SAFIC concludes that the 1986 contracts were equally binding, as the
1985 contracts were, on IVO.

Subjecting the evidence on both sides to close scrutiny, the Court has found some remarkable distinctions between the
1985 and 1986 contracts. x x x

1. The 1985 contracts were performed within an average of two months from the date of the sale. On the other hand, the
1986 contracts were to be performed within an average of eight and a half months from the dates of the sale. All the
supposed performances fell in 1987. Indeed, the contract covered by Exhibit J was to be performed 11 to 12 months from
the execution of the contract. These pattern (sic) belies plaintiffs contention that the lead time merely allowed for milling
and building up of oil inventory. It is evident that the 1986 contracts constituted trading in futures or in mere expectations.
In all likelihood, the coconuts that were supposed to be milled for oil were not yet on their trees when Dominador
Monteverde sold the crude oil to SAFIC.

2. The mode of payment agreed on by the parties in their 1985 contracts was uniformly thru the opening of a letter of credit
LC by SAFIC in favor of IVO. Since the buyer's letter of credit guarantees payment to the seller as soon as the latter is able to
present the shipping documents covering the cargo, its opening usually mark[s] the fact that the transaction would be
consummated. On the other hand, seven out of the ten 1986 contracts were to be paid by telegraphic transfer upon
presentation of the shipping documents. Unlike the letter of credit, a mere promise to pay by telegraphic transfer gives no
assurance of [the] buyer's compliance with its contracts. This fact lends an uncertain element in the 1986
contracts.1âwphi1.nêt

3. Apart from the above, it is not disputed that with respect to the 1985 contracts, IVO faithfully complied with Central Bank
Circular No. 151 dated April 1, 1963, requiring a coconut oil exporter to submit a Report of Foreign Sales within twenty-four
(24) hours "after the closing of the relative sales contract" with a foreign buyer of coconut oil. But with respect to the
disputed 1986 contracts, the parties stipulated during the hearing that none of these contracts were ever reported to the
Central Bank, in violation of its above requirement. (See Stipulation of Facts dated June 13, 1990). The 1986 sales were,
therefore suspect.

4. It is not disputed that, unlike the 1985 contacts, the 1986 contracts were never recorded either in the 1986 accounting
books of IVO or in its annual financial statement for 1986, a document that was prepared prior to the controversy. (Exhibits
6 to 6-0 and 7 to 7-1). Emelita Ortega, formerly an assistant of Dominador Monteverde, testified that they were strange
 goings-on about the 1986 contract. They were neither recorded in the books nor reported to the Central Bank. What is
more, in those unreported cases where profits were made, such profits were ordered remitted to unknown accounts in
California, U.S.A., by Dominador Monteverde.

xxxxxxxxx

Evidently, Dominador Monteverde made business or himself, using the name of IVO but concealing from it his speculative
transactions.

Petitioner further contends that both the trial and appellate courts erred in concluding that Safic was not able to prove its claim for
damages. Petitioner first points out that its wash out agreements with Monteverde where IVO allegedly agreed to pay
US$293,500.00 for some of the failed contracts was proof enough and, second, that it presented purchases of coconut oil it made
from others during the period of IVO's default.

We remain unconvinced. The so-called "wash out" agreements are clearly ultra vires and not binding on IVO. Furthermore, such
agreements did not prove Safic's actual losses in the transactions in question. The fact is that Safic did not pay for the coconut oil
that it supposedly ordered from IVO through Monteverede. Safic only claims that, since it was ready to pay when IVO was not ready
to deliver, Safic suffered damages to the extent that they had to buy the same commodity from others at higher prices.

The foregoing claim of petitioner is not, however, substantiated by the evidence and only raises several questions, to wit: 1.] Did
Safic commit to deliver the quantity of oil covered by the 1986 contracts to its own buyers? Who were these buyers? What were the
terms of those contracts with respect to quantity, price and date of delivery? 2.] Did Safic pay damages to its buyers? Where were
the receipts? Did Safic have to procure the equivalent oil from other sources? If so, who were these sources? Where were their
contracts and what were the terms of these contracts as to quantity, price and date of delivery?

The records disclose that during the course of the proceedings in the trial court, IVO filed an amended motion22for production and
inspection of the following documents: a.] contracts of resale of coconut oil that Safic bought from IVO; b.] the records of the
pooling and sales contracts covering the oil from such pooling, if the coconut oil has been pooled and sold as general oil; c.] the
contracts of the purchase of oil that, according to Safic, it had to resort to in order to fill up alleged undelivered commitments of IVO;
d.] all other contracts, confirmations, invoices, wash out agreements and other documents of sale related to (a), (b) and (c). This
amended motion was opposed by Safic.23 The trial court, however, in its September 16, 1988 Order ,24 ruled that:

From the analysis of the parties' respective positions, conclusion can easily be drawn therefrom that there is materiality in
the defendant's move: firstly, plaintiff seeks to recover damages from the defendant and these are intimately related to
plaintiffs alleged losses which it attributes to the default of the defendant in its contractual commitments; secondly, the
documents are specified in the amended motion. As such, plaintiff would entertain no confusion as to what, which
documents to locate and produce considering plaintiff to be (without doubt) a reputable going concern in the management
of the affairs which is serviced by competent, industrious, hardworking and diligent personnel; thirdly, the desired
production and inspection of the documents was precipitated by the testimony of plaintiffs witness (Donald O'Meara) who
admitted, in open court, that they are available. If the said witness represented that the documents, as generally described,
are available, reason there would be none for the same witness to say later that they could not be produced, even after
they have been clearly described.

Besides, if the Court may additionally dwell on the issue of damages, the production and inspection of the desired
documents would be of tremendous help in the ultimate resolution thereof. Plaintiff claims for the award of liquidated or
actual damages to the tune of US$391,593.62 which, certainly, is a huge amount in terms of pesos, and which defendant
disputes. As the defendant cannot be precluded in taking exceptions to the correctness and validity of such claim which
plaintiffs witness (Donald O'Meara) testified to, and as, by this nature of the plaintiffs claim for damages, proof thereof is a
must which can be better served, if not amply ascertained by examining the records of the related sales admitted to be in
plaintiffs possession, the amended motion for production and inspection of the defendant is in order.

The interest of justice will be served best, if there would be a full disclosure by the parties on both sides of all documents
related to the transactions in litigation.

Notwithstanding the foregoing ruling of the trial court, Safic did not produce the required documents, prompting the court a quo to
assume that if produced, the documents would have been adverse to Safic's cause. In its efforts to bolster its claim for damages it
purportedly sustained, Safic suggests a substitute mode of computing its damages by getting the average price it paid for certain
quantities of coconut oil that it allegedly bought in 1987 and deducting this from the average price of the 1986 contracts. But this
mode of computation if flawed .because: 1.] it is conjectural since it rests on average prices not on actual prices multiplied by the
actual volume of coconut oil per contract; and 2.] it is based on the unproven assumption that the 1987 contracts of purchase
provided the coconut oil needed to make up for the failed 1986 contracts. There is also no evidence that Safic had contracted to
supply third parties with coconut oil from the 1986 contracts and that Safic had to buy such oil from others to meet the requirement.

Along the same vein, it is worthy to note that the quantities of oil covered by its 1987 contracts with third parties do not match the
quantities of oil provided under the 1986 contracts. Had Safic produced the documents that the trial court required, a substantially
correct determination of its actual damages would have been possible. This, unfortunately, was not the case. Suffice it to state in this
regard that "[T]he power of the courts to grant damages and attorney's fees demands factual, legal and equitable justification; its
basis cannot be left to speculation and conjecture."25

WHEREFORE, in view of all the foregoing, the petition is DENIED for lack of merit.
G.R. No. L-2437            February 13, 1906

MONICA CASON, plaintiff-appellant, 
vs.
FRANCISCO WALTERIO RICKARDS, ET AL., defendants-appellees.

W.A. Kincaid for appellant.

Pillsbury and Sutro for appellees.

WILLARD, J.:

From the 1st day of November, 1895, until the 31st day of October, 1896, the defendant Rickards was the agent at Dagupan, in the
Province of Pangasinan, of the other defendant, Smith, Bell & Co. While he was such agent he received from the plaintiff, as a
deposit, the sum of 2,000 pesos. When he left the employ of the defendant company the 2,000 pesos were, by his orders, delivered
to another agent of Smith, Bell & Co. in that province, and Smith, Bell & Co. received ad used the same. This money was not mingled
with other money belonging either to Richards or to Smith, Bell & Co., and at the time of its delivery by Rickards to the other agent
he notified Smith, Bell & Co. that it was not the money of Smith, Bell & Co., but was the money of the plaintiff. The judgment of the
court below holding Smith, Bell & Co., responsible for this amount was clearly right. The question as to whether Rickards was
authorized by Smith, Bell & Co. to receive deposits of this character for third persons is a matter of no consequence. The identical
money which he received from the plaintiff was by him turned over to Smith, Bell & Co., with notice that it was the money of the
plaintiff, and they now have it in their possession, and are therefore bound to pay it to her.

At the trial of this case Rickards testified that a few days after he received the 2,000 pesos from the plaintiff, and about the 8th day
of October, 1896, he received from her an order or warrant upon the Spanish treasury for the sum of 4,200 pesos; that he wrote
Smith, Bell & Co., asking if it could be collected; that they told him to send it to Manila. It was sent to Manila, and collected through
the Hongkong and Shanghai Bank. Rickards testified that he received the money from the Hongkong and Shanghai Bank, and paid all
of it out in the business of Smith, Bell & Co.; that after he had received it he entered upon the books of Smith, Bell & Co. at Dagupan
a credit in favor of the plaintiff of 4,200 pesos, less 5 per cent commission for collection, of which commission Smith, Bell & Co.
received the benefit. He testified that all these transactions took place prior to the 31st day of October, 1896, when he left the
employ of Smith, Bell & Co. He also testified that he had seen the books of Smith, Bell & Co.; that they were in court in an action
commenced in regard to this same amount in 1896 or 1897, and that the books which were then produced in court by Smith, Bell &
Co. contained an entry or entries of the receipt by Smith, Bell & Co. of this 4,200 pesos. If this testimony is to be believed there is no
doubt as to the liability of Smith, Bell & Co. to repay to the plaintiff the sum of 4,200 pesos, less the commission of 5 per cent.

The question as to the general authority of Rickards to receive money on deposit for Smith, Bell & Co. has nothing to do with this
cause of action, for Rickards testified that he received express directions in regard to this particular transaction. Rickards in his
testimony stated that he had had several conversations with different agents and employees of Smith, Bell & Co. in Manila in regard
to the transaction. At the trial of this case Smith, Bell & Co. did not present as witnesses any of these employees or agents, and did
not present any of their books which the witness Rickards declared would corroborate his statement, if produced, but contented
themselves with calling as a witness one who was then a bookkeeper of the Hongkong and Shanghai Bank. He, testifying from
entries which appeared in the books of that bank, stated that there was received for Rickards, in November, 1896, 4,200 pesos, a
part of which was credited to his accounts in that bank, and the balance, amounting to about 2,616 pesos, was paid in cash. The
witness could not testify to whom this cash was paid. Although he testified that he had some independent recollection of this
transaction, yet it is apparent that his testimony is substantially, if not entirely, based upon the entries made in the books of the
bank, which were in his handwriting.

The question in this case is this: Can the positive testimony of Rickards, which has been set forth above, be overcome by the
testimony of the agent of the bank in view of the fact that Smith, Bell & Co. had it in their power to demonstrate the falsity of the
testimony of Rickards by producing their books? No reason appears in the case why the books were not produced. The trial was had
in Manila, where is located the main office of Smith, Bell & Co. Rickards gave his testimony at the opening of the trial. If it were false
its falsity could have been easily proved by the introduction of these books, and their production was more imperatively demanded
considering the statement of Rickards that he had seen them, and that they did contain the entries in regard to this amount of 4,200
pesos.

Under these circumstances the judgment of the court below relieving Smith, Bell & Co. of the responsibility for this 4,200 pesos can
not be affirmed. The evidence as it stands in the record strongly preponderates against them, and the judgment must be reversed.
The question arises as to what disposition should be made of this case; whether final judgment should be entered in this court
against Smith, Bell & Co., or whether the case should be remanded for further proceedings. Under the Code of Civil Procedure we
have authority, when the judgment must be reversed, either to enter final judgment in this court or to remand the case for a new
trial or for further proceedings. In the present case we think that the ends of justice require that there should be a new trial as to the
4,200 pesos. (Regalado vs. Luchsinger & Co., 1 Phil. Rep., 619.) If at the new trial Smith, Bell & Co. still fail to produce their books,
and no additional evidence is offered to overcome the testimony of Rickards, final judgment should be entered against them in
reference to this 4,200 pesos. In accordance with the provisions of section 505 of the Code of Civil Procedure, upon the new trial it
will not be necessary to retake any of the evidence which has already been taken.

The judgment is reversed, and the case is remanded to the court below for a new trial only of the issue relating to the 4,200 pesos.
After the new trial judgment will, as a matter of course, be entered for the plaintiff against Smith, Bell & Co. in reference to the 2,000
pesos, and for or against them in respect to the 4,200 pesos, as the results of the new trial may require. No costs will be allowed to
either party in this court. So ordered.
G.R. No. L-17160           November 29, 1965

PHILIPPINE PRODUCTS COMPANY, plaintiff-appellant, 

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

Jose A. Javier for plaintiff-appellant.

Ibarra and Papa for defendants-appellees.

BENGZON, C.J.:

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

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

The record shows that:

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

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

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

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

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

Plaintiff appealed from that portion of the judgment dismissing its complaint as regards the three defendants.

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

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

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

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

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

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

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

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

Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly
binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.

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

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

IN VIEW OF THE FOREGOING CONSIDERATIONS, the appealed judgment is affirmed, with costs against appellant.
G.R. No. L-30098 February 18, 1970

THE COMMISSIONER OF PUBLIC HIGHWAYS and the AUDITOR GENERAL, petitioners, 

vs.
HON. LOURDES P. SAN DIEGO as Presiding Judge of the Court of First Instance of Rizal, Branch IX, sitting in Quezon City, TESTATE
ESTATE OF N. T. HASHIM (Special Proceedings No. 71131 of the Court of First Instance of Manila) represented by its Judicial
Administrator, Tomas N. Hashim, TOMAS N. HASHIM, personally, and as Judicial Administrator of the Estate of Hashim, Special
Proceedings No. 71131 of the Court of ]First instance of Manila, ALL THE LEGAL OR TESTAMENTARY HEIRS of the Estate of Hashim,
MANUELA C. FLORENDO, personally as Deputy Clerk, Court of First Instance of Rizal, Quezon City, Branch IX, BENJAMIN GARCIA as
"Special Sheriff" appointed by respondent Judge Lourdes P. San Diego, BENJAMIN V. CORUÑA, personally and as Chief
Documentation Staff, Legal Department, Philippine National Bank, and the PHILIPPINE NATIONAL BANK, respondents.

Office of the Solicitor General for petitioners.

Paredes, Poblador, Nazareno, Abada and Tomacruz for respondent Judge Lourdes P. San Diego.

Jesus B. Santos for respondent Testate estate of N. T. Hashim.

Jose A. Buendia for respondent Manuela C. Florendo.

Emata, Magkawas and Associates for respondent legal heir Jose H. Hashim.

Alberto O. Villaraza for respondents Estate of N.T. Hashim and Tomas N. Hashim.

Conrado E. Medina for respondent Philippine National Bank.

Benjamin V. Coruña for and in his own behalf.

TEEHANKEE, J.:

In this special civil action for certiorari and prohibition, the Court declares null and void the two questioned orders of respondent
Court levying upon funds of petitioner Bureau of Public Highways on deposit with the Philippine National Bank, by virtue of the
fundamental precept that government funds are not subject to execution or garnishment.

The background facts follow:

On or about November 20, 1940, the Government of the Philippines filed a complaint for eminent domain in the Court of First
Instance of Rizal1 for the expropriation of a parcel of land belonging to N. T. Hashim, with an area of 14,934 square meters, needed
to construct a public road, now known as Epifanio de los Santos Avenue. On November 25, 1940, the Government took possession of
the property upon deposit with the City Treasurer of the sum of P23,413.64 fixed by the Court therein as the provisional value of all
the lots needed to construct the road, including Hashim's property. The records of the expropriation case were destroyed and lost
during the second world war, and neither party took any step thereafter to reconstitute the proceedings.

In 1958, however, the estate of N.T. Hashim, deceased, through its Judicial Administrator, Tomas N. Hashim, filed a money claim
with the Quezon City Engineer's Office in the sum of P522,620.00, alleging said amount to be the fair market value of the property in
question, now already converted and used as a public highway. Nothing having come out of its claim, respondent estate filed on
August 6, 1963, with the Court of First Instance of Rizal, Quezon City Branch, assigned to Branch IX, presided by respondent judge,2 a
complaint for the recovery of the fair market price of the said property in the sum of P672,030.00 against the Bureau of Public
Highways, which complaint was amended on August 26, 1963, to include as additional defendants, the Auditor General and the City
Engineer of Quezon City.3

The issues were joined in the case with the filing by then Solicitor General Arturo A. Alafriz of the State's answer, stating that the
Hashim estate was entitled only to the sum of P3,203.00 as the fair market value of the property at the time that the State took
possession thereof on November 25, 1940, with legal interest thereon at 6% per annum, and that said amount had been available
and tendered by petitioner Bureau since 1958. The parties thereafter worked out a compromise agreement, respondent estate
having proposed on April 28, 1966, a payment of P14.00 per sq. m. for its 14,934 sq.m.-parcel of land or the total amount of
P209,076.00, equivalent to the land's total assessed value,4 which was confirmed, ratified and approved in November, 1966 by the
Commissioner of Public Highways and the Secretary of Public Works and Communications. On November 7, 1966, the Compromise
Agreement subscribed by counsel for respondent estate and by then Solicitor General Antonio P. Barredo, now a member of this
Court, was submitted to the lower Court and under date of November 8, 1966, respondent judge, as prayed for, rendered judgment
approving the Compromise Agreement and ordering petitioners, as defendants therein, to pay respondent estate as plaintiff therein,
the total sum of P209,076.00 for the expropriated lot.

On October 10, 1968, respondent estate filed with the lower Court a motion for the issuance of a writ of execution, alleging that
petitioners had failed to satisfy the judgment in its favor. It further filed on October 12, 1968, an ex-parte motion for the
appointment of respondent Benjamin Garcia as special sheriff to serve the writ of execution. No opposition having been filed by the
Solicitor General's office to the motion for execution at the hearing thereof on October 12, 1968, respondent judge, in an order
dated October 14, 1968, granted both motions.

On the same date, October 14, 1968, respondent Garcia, as special sheriff, forthwith served a Notice of Garnishment, together with
the writ of execution dated October 14, 1968, issued by respondent Manuela C. Florendo as Deputy Clerk of Court, on respondent
Philippine National Bank, notifying said bank that levy was thereby made upon funds of petitioners Bureau of Public Highways and
the Auditor General on deposit, with the bank to cover the judgment of P209,076.00 in favor of respondent estate, and requesting
the bank to reply to the garnishment within five days. On October 16, 1968, three days before the expiration of the five-day
deadline, respondent Benjamin V. Coruña in his capacity as Chief, Documentation Staff, of respondent bank's Legal Department,
allegedly acting in excess of his authority and without the knowledge and consent of the Board of Directors and other ranking
officials of respondent bank, replied to the notice of garnishment that in compliance therewith, the bank was holding the amount of
P209,076.00 from the account of petitioner Bureau of Public Highways. Respondent bank alleged that when it was served with
Notice to Deliver Money signed by respondent Garcia, as special sheriff, on October 17, 1968, it sent a letter to the officials of the
Bureau of Public Highways notifying them of the notice of garnishment.

Under date of October 16, 1968, respondent estate further filed with the lower Court an ex-parte motion for the issuance of an
order ordering respondent bank to release and deliver to the special sheriff, respondent Garcia, the garnished amount of
P209,076.00 deposited under the account of petitioner Bureau, which motion was granted by respondent judge in an order of
October 18, 1968. On the same day, October 18, 1968, respondent Coruña allegedly taking advantage of his position, authorized the
issuance of a cashier's check of the bank in the amount of P209,076.00, taken out of the funds of petitioner Bureau deposited in
current account with the bank and paid the same to respondent estate, without notice to said petitioner.

Later on December 20, 1968, petitioners, through then Solicitor General Felix V. Makasiar, wrote respondent bank complaining that
the bank acted precipitately in having delivered such a substantial amount to the special sheriff without affording petitioner Bureau
a reasonable time to contest the validity of the garnishment, notwithstanding the bank's being charged with legal knowledge that
government funds are exempt from execution or garnishment, and demanding that the bank credit the said petitioner's account in
the amount of P209,076.00, which the bank had allowed to be illegally garnished. Respondent bank replied on January 6, 1969 that
it was not liable for the said garnishment of government funds, alleging that it was not for the bank to decide the question of legality
of the garnishment order and that much as it wanted to wait until it heard from the Bureau of Public Highways, it was "helpless to
refuse delivery under the teeth" of the special order of October 18, 1968, directing immediate delivery of the garnished amount.

Petitioners therefore filed on January 28, 1969 the present action against respondents, in their capacities as above stated in the title
of this case, praying for judgment declaring void the question orders of respondent Court. Petitioners also sought the issuance of a
writ of preliminary mandatory injunction for the immediate reimbursement of the garnished sum of P209,076.00, constituting funds
of petitioner Bureau on deposit with the Philippine National Bank as official depository of Philippine Government funds, to the said
petitioner's account with the bank, so as to forestall the dissipation of said funds, which the government had allocated to its public
highways and infrastructure projects. The Court ordered on January 31, 1969 the issuance of the writ against the principal
respondents solidarily, including respondent judge therein so that she would take forthwith all the necessary measures and
processes to compel the immediate return of the said government funds to petitioner Bureau's account with respondent bank.5

In compliance with the writ, respondent bank restored the garnished sum of P209,076.00 to petitioner Bureau's account with it.6 The
primary responsibility for the reimbursement of said amount to petitioner Bureau's account with the respondent bank, however,
rested solely on respondent estate, since it is the judgment creditor that received the amount upon the questioned execution.
Strangely enough, as appears now from respondent bank's memorandum in lieu of oral argument,7 what respondent bank did,
acting through respondent Coruña as its counsel, was not to ask respondent estate to reimburse it in turn in the same amount, but
to file with the probate court with jurisdiction over respondent estate,8 a motion for the estate to deposit the said amount with it,
purportedly in compliance with the writ. Respondent estate thereupon deposited with respondent bank as a savings account the
sum of P125,446.00, on which the bank presumably would pay the usual interest, besides. As to the balance of P83,630.00, this sum
had been in the interval paid as attorney's fees to Atty. Jesus B. Santos, counsel for the estate, by the administrator, allegedly
without authority of the probate court.9 Accordingly, respondent estate has not reimbursed the respondent bank either as to this
last amount, and the bank has complacently not taken any steps in the lower court to require such reimbursement.

The ancillary questions now belatedly raised by the State may readily be disposed of. Petitioners may not invoke the State's
immunity from suit, since the case below was but a continuation in effect of the pre-war expropriation proceedings instituted by the
State itself. The expropriation of the property, which now forms part of Epifanio, de los Santos Avenue, is a fait accompli and is not
questioned by the respondent state. The only question at issue was the amount of the just compensation due to respondent estate
in payment of the expropriated property, which properly pertained to the jurisdiction of the lower court. 10 It is elementary that in
expropriation proceedings, the State precisely submits to the Court's jurisdiction and asks the Court to affirm its lawful right to take
the property sought to be expropriated for the public use or purpose described in its complaint and to determine the amount of just
compensation to be paid therefor.

Neither may the State impugn the validity of the compromise agreement executed by the Solicitor General on behalf of the State
with the approval of the proper government officials, on the ground that it was executed only by the lawyer of respondent estate,
without any showing of having been specially authorized to bind the estate thereby, because such alleged lack of authority may be
questioned only by the principal or client, and respondent estate as such principal has on the contrary confirmed and ratified the
compromise agreement. 11 As a matter of fact, the Solicitor General, in representation of the State, makes in the petition no prayer
for the annulment of the compromise agreement or of the respondent court's decision approving the same.

On the principal issue, the Court holds that respondent Court's two questioned orders (1) for execution of the judgment, in
pursuance whereof respondent deputy clerk issued the corresponding writ of execution and respondent special sheriff issued the
notice of garnishment, and (2) for delivery of the garnished amount of P209,076.00 to respondent estate as judgment creditor
through respondent special sheriff, are null and void on the fundamental ground that government funds are not subject to execution
or garnishment.

1. As early as 1919, the Court has pointed out that although the Government, as plaintiff in expropriation proceedings, submits itself
to the jurisdiction of the Court and thereby waives its immunity from suit, the judgment that is thus rendered requiring its payment
of the award determined as just compensation for the condemned property as a condition precedent to the transfer to the title
thereto in its favor, cannot be realized upon execution.12 The Court there added that it is incumbent upon the legislature to
appropriate any additional amount, over and above the provisional deposit, that may be necessary to pay the award determined in
the judgment, since the Government cannot keep the land and dishonor the judgment.

In another early case, where the government by an act of the Philippine Legislature, expressly consented to be sued by the plaintiff
in an action for damages and waived its immunity from suit, the Court adjudged the Government as not being legally liable on the
complaint, since the State under our laws would be liable only for torts caused by its special agents, specially commissioned to carry
out the acts complained of outside of such agents' regular duties. We held that the plaintiff would have to look to the legislature for
another legislative enactment and appropriation of sufficient funds, if the Government intended itself to be legally liable only for the
damages sustained by plaintiff as a result of the negligent act of one of its employees. 13

The universal rule that where the State gives its consent to be sued by private parties either by general or special law, it may limit
claimant's action "only up to the completion of proceedings anterior to the stage of execution" and that the power of the Courts
ends when the judgment is rendered, since government funds and properties may not be seized under writs of execution or
garnishment to satisfy such judgments, is based on obvious considerations of public policy. Disbursements of Public funds must be
covered by the corresponding appropriation as required by law. The functions and public services rendered by the State cannot be
allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by
law.

Thus, as pointed out by the Court in Belleng vs. Republic, 14 while the State has given its consent to be sued in compensation cases,
the pauper-claimant therein must look specifically to the Compensation Guarantee Fund provided by the Workmen's Compensation
Act for the corresponding disbursement in satisfaction of his claim, since the State in Act 3083, the general law waiving its immunity
from suit "upon any money claim involving liability arising from contract express or implied," imposed the limitation in Sec. 7 thereof
that "no execution shall issue upon any judgment rendered by any Court against the Government of the (Philippines) under the
provisions of this Act;" and that otherwise, the claimant would have to prosecute his money claim against the State under
Commonwealth Act 327.

This doctrine was again stressed by. the Court in Republic vs. Palacio, 15 setting aside as null and void the order of garnishment issued
by the sheriff pursuant to the lower Court's writ of execution on funds of the Pump Irrigation Trust Fund in the account of the
Government's Irrigation Service Unit with the Philippine National Bank. The Court emphasized then and re-emphasizes now that
judgments against the State or its agencies and instrumentalities in cases where the State has consented to be sued, operate merely
to liquidate and establish the plaintiff's claim; such judgments may not be enforced by writs of execution or garnishment and it is for
the legislature to provide for their payment through the corresponding appropriation, as indicated in Act 3083.

2. Respondent bank and its Chief, Documentation Staff, respondent Coruña have advanced two specious arguments to justify their
wrongful delivery of the garnished public funds to respondent estate. Their first contention that the said government funds by
reason of their being deposited by petitioner Bureau under a current account subject to withdrawal by check, instead of being
deposited as special trust funds, "lost their kind and character as government funds," 16 is untenable. As the official depositary of the
Philippine Government, respondent bank and its officials should be the first ones to know that all government funds deposited with
it by any agency or instrumentality of the government, whether by way of general or special deposit, remain government funds,
since such government agencies or instrumentalities do not have any non-public or private funds of their own.

Their second contention that said government funds lost their character as such "the moment they were deposited with the
respondent bank", 17 since the relation between a depositor and a depository bank is that of creditor and debtor, is just as
untenable, absolutely. Said respondents shockingly ignore the fact that said government funds were deposited with respondent
bank as the official depositary of the Philippine Government. Assuming for the nonce the creation of such relationship of creditor
and debtor, petitioner Bureau thereby held a credit against respondent bank whose obligation as debtor was to pay upon demand of
said petitioner-creditor the public funds thus deposited with it; even though title to the deposited funds passes to the bank under
this theory since the funds become mingled with other funds which the bank may employ in its ordinary business, what was
garnished was not the bank's own funds but the credit of petitioner bureau against the bank to receive payment of its funds, as a
consequence of which respondent bank delivered to respondent estate the garnished amount of P209,076.00 belonging to said
petitioner. Petitioner bureau's credit against respondent bank thereby never lost its character as a credit representing government
funds thus deposited. The moment the payment is made by respondent bank on such deposit, what it pays out represents the public
funds thus deposited which are not garnishable and may be expended only for their legitimate objects as authorized by the
corresponding legislative appropriation. Neither respondent bank nor respondent Coruña are the duly authorized disbursing officers
and auditors of the Government to authorize and cause payment of the public funds of petitioner Bureau for the benefit or private
persons, as they wrongfully did in this case.

3. Respondents bank and Coruña next pretend that refusal on their part to obey respondent judge's order to deliver the garnished
amount, "which is valid and binding unless annulled, would have exposed them for contempt of court." 18 They make no excuse for
not having asked the lower court for time and opportunity to consult petitioner Bureau or the Solicitor General with regard to the
garnishment and execution of said deposited public funds which were allocated to specific government projects, or for not having
simply replied to the sheriff that what they held on deposit for petitioner Bureau were non-garnishable government funds. They
have not given any cogent reason or explanation, — charged as they were with knowledge of the nullity of the writ of execution and
notice of garnishment against government funds, for in the earlier case of Republic vs. Palacio, supra, they had then prudently and
timely notified the proper government officials of the attempted levy on the funds of the Irrigation Service Unit deposited with it,
thus enabling the Solicitor General to take the corresponding action to annul the garnishment — for their failure to follow the same
prudent course in this case. Indeed, the Court is appalled at the improper haste and lack of circumspection with which respondent
Coruña and other responsible officials of respondent bank precipitately allowed the garnishment and delivery of the large amount
involved, all within the period of just four days, even before the expiration of the five-day reglementary period to reply to the
sheriff's notice of garnishment. Failure on the State's part to oppose the issuance of the writ of execution, which was patently null
and void as an execution against government funds, could not relieve them of their own responsibility.

4. Respondents bank and Coruña further made common cause with respondent estate beyond the legal issues that should solely
concern them, by reason of their having wrongfully allowed the garnishment and delivery of government funds, instead assailing
petitioners for not having come to court with "clean hands" and asserting that in fairness, justice and equity, petitioners should not
impede, obstruct or in any way delay the payment of just compensation to the land owners for their property that was occupied way
back in 1940. This matter of payment of respondent estate's judgment credit is of no concern to them as custodian and depositary of
the public funds deposited with them, whereby they are charged with the obligation of assuring that the funds are not illegally or
wrongfully paid out.
Since they have gone into the records of the expropriation case, then it should be noted that they should have considered the vital
fact that at the time that the compromise agreement therein was executed in November, 1966, respondent estate was well aware of
the fact that the funds for the payment of the property in the amount of P209,076.00 still had to be released by the Budget
Commissioner and that at the time of the garnishment, respondent estate was still making the necessary representations for the
corresponding release of such amount, pursuant to the Budget Commissioner's favorable 
recommendation.19 And with regard to the merits of the case, they should have likewise considered that respondent estate could
have no complaint against the fair attitude of the authorities in not having insisted on their original stand in their answer that
respondent estate was entitled only to the sum of P3,203.00 as the fair market value of the property at the time the State took
possession thereof on November 25, 1940, with legal interests thereon, but rather agreed to pay therefor the greatly revised and
increased amount of P209,076.00 at P14.00 per square meter, not to mention the consequential benefits derived by said respondent
from the construction of the public highway with the resultant enhanced value of its remaining properties in the area.

5. The manner in which respondent bank's counsel and officials proceeded to comply with the writ of preliminary mandatory
injunction issued by the Court commanding respondent estate, its judicial administrator and respondents bank and Coruña, in
solidum, to reimburse forthwith the account of petitioner Bureau in the garnished amount of P209,076.00, does not speak well of
their fidelity to the bank's interests. For while respondent bank had restored with its own funds the said amount of P209,076.00 to
petitioner Bureau's account, it has not required respondent estate as the party primarily liable therefor as the recipient of the
garnished amount to reimburse it in turn in this same amount. Rather, said bank officials have allowed respondent estate to keep all
this time the whole amount of P209,076.00 wrongfully garnished by it. For as stated above, respondent bank allowed respondent
estate merely to deposit with it as a savings account, of respondent estate, the lesser sum of P125,446.00 on which the bank
presumably has paid and continues paying respondent estate, besides the usual interest rates on such savings accounts, and neither
has it taken any steps to require reimbursement to it from respondent estate of the remainder of P83,630.00 which respondent
estate of its own doing and responsibility paid by way of attorney's fees.

It thus appears that all this time, respondent bank has not been reimbursed by respondent estate as the party primarily liable for the
whole amount of P209,076.00 wrongfully and illegally garnished and received by respondent estate. This grave breach of trust and
dereliction of duty on the part of respondent bank's officials should be brought to the attention of respondent bank's Board of
Directors and management for the appropriate administrative action and other remedial action for the bank to recover the damages
it has been made to incur thereby.

6. The Solicitor General has likewise questioned the legality of respondent Court's Order of October 14, 1968, appointing respondent
Garcia as "special sheriff" for the purpose of effecting service of the writ of execution, simply on respondent estate's representation
that it was desirable "for a speedy enforcement of the writ."

The Court finds this general practice of the lower courts of appointing "special sheriffs" for the service of writs of execution to be
unauthorized by law. The duty of executing all processes" of the courts in civil cases, particularly, writs of execution, devolves upon
the sheriff or his deputies, under Section 183 of the Revised Administrative Code and Rule 39, section 8 of the Rules of Court. Unlike
the service of summons which may be made, aside from the sheriff or other proper court officers, "for special reasons by any person
especially authorized by the judge of the court issuing the summons" under Rule 14, section 5 of the Rules of Court, the law requires
that the responsibility of serving writs of execution, which involve the taking delivery of money or property in trust for the judgment
creditor, should be carried out by regularly bonded sheriffs or other proper court officers. (Sections 183 and 330, Revised
Administrative Code). The bond required by law of the sheriff is conditioned inter alia, "for the delivery or payment to the
Government, or the persons entitled thereto, of all the property or sums of money that shall officially come into his or their (his
deputies') hands" (Section 330, idem), and thus avoids the risk of embezzlement of such properties and moneys.

Section 185 of the Revised Administrative Code restrictively authorizes the judge of the Court issuing the process or writ to deputize
some suitable person only "when the sheriff is party to any action or proceeding or is otherwise incompetent to serve process
therein." The only other contingency provided by law is when the office of sheriff is vacant, and the judge is then authorized, "in case
of emergency, (to) make a temporary appointment to the office of sheriff ... pending the appointment and qualification of the sheriff
in due course; and he may appoint the deputy clerk of the court or other officer in the government service to act in said capacity."
(Section 189, idem).

None of the above contingencies having been shown to be present, respondent Court's order appointing respondent Garcia as
"special sheriff" to serve the writ of execution was devoid of authority.
7. No civil liability attaches, however, to respondents special sheriff and deputy clerk, since they acted strictly pursuant to orders
issued by respondent judge in the discharge of her judicial functions as presiding judge of the lower court, and respondent judge's
immunity from civil responsibility covers them, although the said orders are herein declared null and void. 20

ACCORDINGLY, the writs of certiorari and prohibition are granted. The respondent court's questioned Orders of October 14, and 18,
1968, are declared null and void, and all further proceedings in Civil Case No. Q-7441 of the Court of First Instance of Rizal, Quezon
City, Branch IX are abated. The writ of preliminary mandatory injunction heretofore issued is made permanent, except as to
respondent judge who is excluded therefrom, without prejudice to any cause of action that private respondents may have, inter se.
Respondent estate and respondent Tomas N. Hashim as prayed for by respondent Philippine National Bank in its Answer, are
ordered jointly and severally to reimburse said respondent bank in the amount of P209,076.00 with legal interest until the date of
actual reimbursement. Respondents Estate of N. T. Hashim, Philippine National Bank and Benjamin Coruña are ordered jointly to pay
treble costs.

The Clerk of Court is directed to furnish copies of this decision to the Board of Directors and to the president of respondent
Philippine National Bank for their information and appropriate action. So ordered.
G.R. No. L-23352        December 31, 1925

THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., INC., plaintiff-appellee, 

vs.
JUAN M. POIZAT, ET AL., defendants. 
GABRIELA ANDREA DE COSTER, appellant.

Antonio M. Opisso for appellant.

Eusebio Orense and Fisher, DeWitt, Perkins & Brady for appellee.

STATEMENT

August 25, 1905, the appellant, with his consent executed to and in favor of her husband, Juan M. Poizat, a general power of
attorney, which among other things, authorized him to do in her name, place and stead, and making use of her rights and actions,
the following things:

To loan or borrow any amount in cash or fungible conditions he may deem convenient collecting or paying the principal or
interest, for the time, and under the principal of the interest, when they respectively should or private documents, and
making there transactions with or without mortgage, pledge or personal securities.

November 2, 1912, Juan M. Poizat applied for and obtained from the plaintiff a credit for the sum of 10,000 Pounds Sterling to be
drawn on the" Banco Espanol del Rio de la Plata" in London not later than January, 1913. Later, to secure the payment of the loan,
he executed a mortgage upon the real property of his wife, the material portions of which are as follows:

This indenture entered into the City of Manila, P.I., by and between Juan M. Poizat, merchant, of legal age, married and
residing in the City of Manila, in his own behalf and in his capacity also as attorney in fact of his wife Dona Gabriela Andrea
de Coster by virtue of the authority vested in him by the power of attorney duly executed and acknowledge in this City of
Manila, etc.

First. That in the name of Dona Gabriela Andrea de Coster, wife of Don Juan M. Poizat, there is registered on page 89 (back)
of Book 3, Urban Property consisting of a house and six adjacent warehouse, all of strong material and constructed upon
her own land, said property being Nos. 5, 3, and 1 of Calle Urbiztondo, and No. 13 of Calle Barraca in the District of Binondo
in the City of Manila, etc.

Second. That the marriage of Don Juan M. Poizat and Dona Gabriela Andrea de Coster being subsisting and undissolved, and
with the object of constructing a new building over the land hereinabove described, the aforesaid house with the six
warehouse thereon constructed were demolished and in their stead a building was erected, by permission of the
Department of Engineering and Public Works of this City issued November 10, 1902, said building being of strong material
which, together with the land, now forms only one piece of real estate, etc; which property must be the subject of a new
description in which it must appear that the land belongs in fee simple and in full ownership as paraphernal property to the
said Dona Gabriela Andrea de Coster and the new building thereon constructed to the conjugal partnership of Don Juan M.
Poizat and the said Dona Gabriela Andrea de Coster, etc.

Third. That the Philippine Sugar Estates Development Company, Ltd., having granted to Don Juan M. Poizat a credit of Ten
Thousand Pounds Sterling with a mortgage upon the real property above described, etc.

(a) That the Philippine sugar Estated Development Company, Ltd. hereby grants Don Juan M. Poizat a credit in the amount
of Ten Thousand Pounds sterling which the said Mr. Poizat may use within the entire month of January of the coming year,
1913, upon the bank established in the City of London, England, known as 'Banco Espanol del Rio de la Plata, which shall be
duly advised, so as to place upon the credit of Mr. Poizat the said amount of Ten Thousand Pounds Sterling, after executing
the necessary receipts therefore.

(c) That Don Juan M. Poizat personally binds himself and also binds his principal Dona Gabriela Andrea de Coster to pay the
Philippine Sugar Estates Development Company, Ltd., for the said amount of Ten Thousand Pounds Sterling at the yearly
interest of 9 per cent which shall be paid at the end of each quarter, etc.
 (d) Don Juan M. Poizat also binds himself personally and his principal Dona Gabriela Andrea de Coster to return to the
Philippine Sugar Estates Development Company, Ltd., the amount of Ten Thousand Pounds Sterling within four years from
the date that the said Mr. Poizat shall receive the aforesaid sum as evidenced by the receipt that he shall issue to the
'BAnco Espanol del Rio de la Plata.'

(e) As security for the payment of the said credit, in the case Mr. Poizat should receive the money, together with its interest
hereby constitutes a voluntary especial mortgage upon the Philippine Sugar Estates Development Company, Ltd., f the
urban property above described, etc.

(f) Don Juan M. Poizat in the capacity above mentioned binds himself, should he receive the amount of the credit, and while
he may not return the said amount of Ten thousand Pounds Sterling to the Philippine Sugar Estates Development Company,
Ltd., to insure against fire the mortgaged property in an amount not less than One hundred Thousand Pesos, etc.

Fourth. Don Buenaventura Campa in the capacity that he holds hereby accepts this indenture in the form, manner, and
condition executed by Don Juan M. Poizat by himself personally and in representation of his wife Dona Gabriela Andrea de
Coster, in favor of the Philippine Sugar Estates Development Company, Ltd.,

In witness whereof, we have signed these presents in Manila, this November 2, 1912.

(Sgd.) JUAN M. POIZAT

THE PHILIPPINE SUGAR ESTATES
DEVELOPMENT COMPANY, LTD.
The President
BUENAVENTURA CAMPA

Signed in the presence of:

(Sgd.) MANUEL SAPSANO

JOSE SANTOS

UNITED STATES OF AMERICA

PHILIPPINE ISLANDS
CITY OF MANILA

In the City of Manila P.I., this November 2, 1912, before me Enrique Barrera y Caldes, a Notary Public for said city,
personally appeared before me Don Juan M. Poizat and Don Buenaventura Campa, whom i know to be the persons who
executed the foregoing document and acknowledged same before me as an act of their free will and deed; the first
exhibited to me his certificate of registry No. 14237, issued in Manila, February 6, 1912, the second did not exhibit any
cedula, being over sixty years old; this document bears No. 495, entered on page 80 of my Notarial registry.

Before me: 
(Sgd.) Dr. ENRIQUE BARRERA Y CALDES 
[NOTARIAL SEAL]

Notary Public
Up to the 31st of December , 1912

For failure to pay the loan, on November 12, 1923, the plaintiff brought an action against the defendants to foreclose the mortgage.
In this action, the summons was served upon the defendant Juan M. Poizat only, who employed the services of Antonio A. Sanz to
represent the defendants. The attorneys filed a general appearance for all of them, and later an answer in the nature of a general
denial.

February 18, 1924, when the case was called for trial, Jose Galan y Blanco in open court admitted all of the allegations made in the
compliant, and consented that judgment should be rendered as prayed for . Later, Juan M. Poizat personally, for himself and his
codefendants, file an exception to the judgment and moved for a new trial, which was denied March 31, 1924.
August 22, 1924, execution was issued directing the sale of the mortgaged property to satisfy the judgment.itc@alf

September 18, 1924, the property, which had an assessed value of P342,685, was sold to the plaintiff for the sum of P100,000.

September 23, 1924, and for the first time, the appellant personally appeared by her present attorney, and objected to the
confirmation of the sale, among other things, upon illegally executed, and is null and void, because the agent of this defendant was
not authorized to execute it. That there was no consideration. That the plaintiff, with full knowledge that J. M. Poizat was acting
beyond the scope of his authority, filed this action to subject the property of this defendant to the payment of the debt which, as to
appellant, was not a valid contract. That the judgment was rendered by confession when the plaintiff and J. M. Poizat knew that
Poizat was not authorized to confess judgment, and that the proceeding was a constructive fraud. That at the time the action was
filed and the judgment rendered, this defendant was absent from the Philippine Islands, and had no knowledge of the execution of
the mortgage. That after the judgment of foreclosure became final and order of the sale of the property was made, that this
defendant for the first time learned that he mortgage contract was tainted with fraud, and that she first knew and learned of such
things on the 11th of September, 1924. That J. M. Poizat was not authorized to bind her property to secure the payment of his
personal debts. That the plaintiff knew that the agent of the defendant was not authorized to bind her or her property. That the
mortgage was executed to secure a loan of 10,000 Pounds which was not made to this defendant or for her benefit, but was made
to him personally and for the personal use and benefit of J. M. Poizat.

Among other things, the mortgage in question, marked Exhibit B, was introduced in evidence, and made a part of the record.

All of such objections to the confirmation of the sale were overruled, from which Gabriela Andrea de Coster appealed and assigns
the following errors:

I. The lower court erred in finding that Juan M. Poizat was, under the power of attorney which he had from Gabriela Andrea
de Coster, authorized to mortgage her paraphernal property as security for a loan made to him personally by the Philippine
Sugar Estates Development Company, Ltd., to him;

II. The lower court erred in not finding that under the power of attorney, Juan M. Poizat had no authority to make Gabriela
Andrea de Coster jointly liable with him for a loan of 10,000 pound made by the Philippine Sugar Estates Development Co.,
Ltd., to him;

III. The lower court erred in not finding that the Philippine Sugar Estates Development Company, Ltd., had knowledge and
notice of the lack of authority of Don Juan M. Poizat to execute the mortgage deed Exhibit A of the plaintiff;

IV. The lower court erred in holding that Gabriela Andrea de Coster was duly summoned in this case; and in holding that
Attorney Jose Galan y Blanco could lawfully represent her or could, without proof of express authority, confess judgment
against Gabriela Andrea de Coster;

V. The court erred in holding that the judgment in this case has become final and res judicata;

VI. The court erred in approving the judicial sale made by the sheriff at an inadequate price;

VII. The lower court erred in not declaring these proceedings, the judgment and the sale null and void.

JOHNS, J.:

For the reasons stated in the decision of this court in the Bank of the Philippine Islands vs. De Coster, the alleged service of the
summons in the foreclosure suit upon the appellant was null and void. In fact, it was made on J. M. Poizat only, and there is no claim
or pretense that any service of summons was ever made upon her. After service was made upon him, the attorneys in question
entered their appearance for all of the defendants in the action, including the appellant upon whom no service was ever made, and
file an answer for them. Later, in open court, it was agreed that judgment should be entered for the plaintiff as prayed for in its
complaint.
The appellant contends that the appearance made by the attorneys for her was collusive and fraudulent, and that it was made
without her authority, and there maybe some truth in that contention. It is very apparent that t the attorneys made no effort to
protect or defend her legal rights, but under our view of the case, that question is not material to this decision.

The storm center of this case is the legal force and effect of the real mortgage in question , by whom and for whom it was executed,
and upon whom is it binding, and whether or not it is null and void as to the appellant.

It is admitted that the appellant gave her husband, J. M. Poizat, the power of attorney in question, and that it is in writing and speaks
for itself. If the mortgage was legally executed by her attorney in fact for her and in her name as her act and deed, it would be legal
and binding upon her and her property. If not so executed, it is null and void.

It appears upon the face of the instrument that J. M. Poizat as the husband of the wife, was personally a party to the mortgage, and
that he was the only persona who signed the mortgage. and the he was the only person who signed the mortgage. It does not
appear from his signature that he signed it for his wife or as her agent or attorney in fact, and there is nothing in his signature that
would indicate that in the signing of it by him, he intended that his signature should bind his wife. It also appears from the
acknowledgment of the instrument that he executed it as his personal act and deed only, and there is nothing to show that he
acknowledge it as the agent or attorney in fact of his wife, or as her act and deed.

The mortgage recites that it was entered into by and between Juan M. Poizat in his own behalf and as attorney in fact of his wife.
That the record title of the mortgaged property is registered in the name of his wife, Dona Gabriela Andrea de Coster. That they
were legally married, and that the marriage between them has never been dissolved. That with the object of constructing a new
building on the land. the six warehouses thereon were demolished, and that a new building was erected. That the property is the
subject of a new registration in which it must be made to appear that the land belongs in fee simple and in full ownership as the
paraphernal property of the wife, and that the new building thereon is the property of the conjugal partnership. "That the Philippine
Sugar Estates Development Company, Ltd., having granted to Don Juan M. Poizat a credit of 10,000 Pounds Sterling with the
mortgage upon the real property above described," that the Development Company "hereby grants Don Juan M. Poizat a credit in
the amount of 10,000 Pounds Sterling which the said Mr. Poizat may use, etc." That should he personally or on behalf of his wife use
the credit he acknowledges, that he and his principal are indebted to the Development Company in the sum of 10,000 Pounds
Sterling which "they deem to have received as a loan from the said commercial entity." That he binds himself and his wife to pay
that amount with a yearly interest of 9 per cent, payable quarterly. That as security for the payment of said credit in the case Mr.
Poizat should receive the money at any time, with its interest, "the said Mr. Poizat in the dual capacity that above mentioned binds
himself, should he receive the amount of the credit."

It thus appears that at the time the power of attorney and the mortgage were executed, Don Juan M. Poizat and Gabriela Andrea de
Coster were husband and wife, and that the real property upon which the mortgage was her sole property before her marriage, and
that it was her paraphernal property at the time the mortgage was executed, and that the new building constructed on the land was
the property of the conjugal partnership.

The instrument further recites that the Development Company "hereby grants Don Juan M. Poizat a credit in the amount of 10,000
Pounds Sterling which the said Mr. Poizat may use within the entire month of January of the coming year, 1913." In other words, it
appears upon the face of the mortgage that the loan was made to the husband with authority to use the money for his sole use and
benefit. With or without a power of attorney, the signature of the husband would be necessary to make the instrument a valid
mortgage upon the property of the wife, even though she personally signed the mortgage.

It is contended that the instrument upon its face shows that its purpose and intent was to bind the wife. But it also shows upon its
face that the credit was granted to Don Juan M. Poizat which he might use within the "entire month of January."

Any authority which he had to bind his wife should be confined and limited to his power of attorney.

Giving to it the very broadest construction, he would not have any authority to mortgage her property, unless the mortgage was
executed for her "and in her name, place or stead," and as her act and deed. The mortgage in question was not so executed. it was
signed by Don Juan M. Poizat in his own name, his own proper person, and by him only, and it was acknowledge by him in his
personal capacity, and there is nothing in either the signature or acknowledgment which shows or tends to show that it was
executed for or on behalf of his wife or "in her name, place or stead."

It is contended that the instrument shows upon its face that it was intended to make the wife liable for his debt, and to mortgage
her property to secure its payment, and that his personal signature should legally be construed as the joined or dual signature of
both the husband and that of the wife as her agent. That is to say, construing the recitals in the mortgage and the instrument as a
whole, his lone personal signature should be construed in a double capacity and binding equally and alike both upon the husband
and the wife. No authority has been cited, and none will ever be found to sustain such a construction.

As the husband of the wife, his signature was necessary to make the mortgage valid. In other words, to make it valid, it should have
been signed by the husband in his own proper person and by him as attorney in fact for his wife, and it should have been executed
by both husband and wife, and should have been so acknowledged.

There is no principle of law by which a person can become liable on a real mortgage which she never executed either in person or by
attorney in fact. It should be noted that this is a mortgage upon real property, the title to which cannot be divested except by sale on
execution or the formalities of a will or deed. For such reasons, the law requires that a power of attorney to mortgage or sell real
property should be executed with all of the formalities required in a deed. For the same reason that the personal signature of Poizat,
standing alone, would not convey the title of his wife in her own real property, such a signature would not bind her as a mortgagor
in real property, the title to which was in her name.

We make this broad assertion that upon the facts shown in the record, no authority will ever be found to hold the wife liable on a
mortgage of her real property which was executed in the form and manner in which the mortgage in question was executed. The
real question involved is fully discussed in Mechem on Agency, volume 1, page 784, in which the author says:

It is to be observed that the question here is not how but how such an authority is to be executed. it is assumed that the
agent was authorized to bind his principal, but the question is, has he done so.

That is the question here.

Upon that point, there is a full discussion in the following sections, and numerous authorities are cited:

SEC. 1093. Deed by agent must purport to be made and sealed in the name of the principal. — It is a general rule in the law
of agency that in order to bind the principal by a deed executed by an agent, the deed must upon its grace purport to be
made, signed and sealed in the name of the principal. If, on the contrary, though the agent describes name, the words of
grant, covenant and the like, purport upon the face of the instrument to be his, and the seal purports to be his seal, the
deed will bind the agent if any one and not the principal.

SEC. 1101. Whose deed is a given deed. — How question determined. — In determining whether a given deed is the deed of
the principal, regard may be had First, to the party named as grantor. Is the deed stated to be made by the principal or by
some other person? Secondly, to the granting clause. Is the principal or the agent the person who purports to make the
grant? Thirdly, to the covenants, if any. Are these the covenants of the principal? Fourthly, to the testimonium clause. Who
is it who is to set his name and seal in testimony of the grant? Is it the principal or the agent? And Fifthly, to the signature
and seal. Whose signature and seal are these? Are they those of the principal or of the agent?

If upon such an analysis the deed does not upon its face purport to be the deed of the principal, made, signed, sealed and
delivered in his name and his deed, it cannot take effect as such.

SEC. 1102. Not enough to make deed the principal's that the agent is described as such. — It is not enough merely that not
acted in the name of the principal. Nor is it ordinarily sufficient that he describes himself in the deed as acting by virtue of a
power of attorney or otherwise, or for or in behalf, or as attorney, of the principal, or as a committee, or as trustee of a
corporation, etc.; for these expressions are usually but descriptio personae, and if, in fact, he has acted of action thereon
accrue to and against him personally and not to or against the principal, despite these recital.

SEC. 1103. Not principal's deed where agent appears as grantor and signer. — Neither can the deed ordinarily be deemed
to be the deed of the principal where the agent is the one who is named as the grantor or maker, and he is also the one
who signs and seals it. . . .

SEC. 1108. . . . But however clearly the body of the deed may show an intent that it shall be the act of he principal, yet
unless its executed by his attorney for him, it is not his deed, but the deed of the attorney or of no one. The most usual and
approved form of executing a deed by attorney is by his writing the name of the principal and adding by A B his attorney or
by his attorney A B.'
That is good law. Applying it to the facts, under his power of attorney, Juan M. Poizat may have had authority to borrow money and
mortgage the real property of his wife, but the law specifies how and in what manner it must be done, and the stubborn fact
remains that, as to the transaction in question, that power was never exercised. The mortgage in question was executed by him and
him only, and for such reason, it is not binding upon the wife, and as to her, it is null and void.

It follows that the whole decree against her and her paraphernal property and the sale of that property to satisfy the mortgage are
null and void, and that any title she may have had in or to her paraphernal property remains and is now vested in the wife as fully
and as absolutely as if the mortgage had never been executed, the decree rendered or the property sold. As to Don Juan M. Poizat,
the decree is valid and binding, and remains in full force and effect.

It is an undisputed fact, which appears in the mortgage itself, that the land in question was the paraphernal property of the wife, but
after the marriage the old buildings on the property were torn down and a new building constructed and, in the absence of evidence
to the contrary, it must be presumed that the new building is conjugal property of the husband and wife. As such, it is subject of the
debts of the conjugal partnership for the payment or security of which the husband has the power to mortgage or otherwise
encumber the property .

It is very probable that his particular question was not fully presented to or considered by the lower court.

The mortgage as to the paraphernal property of the wife is declared null and void ab initio, and as to her personally, the decree is
declared null and void, and as to her paraphernal property, the sale is set aside and vacated, and held for naught, leaving it free and
clear from the mortgage, decree and sale, and in the same condition as if the mortgage had never been executed, with costs in favor
of the appellant. So ordered.
G.R. No. L-40234 December 14, 1987

MARIMPERIO COMPAÑIA NAVIERA, S.A., petitioner, 

vs.
COURT OF APPEALS and UNION IMPORT & EXPORT CORPORATION and PHILIPPINES TRADERS CORPORATION, respondents.

PARAS, J.:

This is a petition for certiorari under Section 1, Rule 65 of the Rules of Court seeking the annulment and setting aside of the decision
of the Court of Appeals * and promulgated on September 2, 1974 in CA-G.R. No. 48521-R entitled "Union Import and Export
Corporation, et al., Plaintiffs-Appellees v. Marimperio Compañia Naviera, S.A., Defendant-Appellant", ordering petitioner to pay
respondent the total sum of US $265,482.72 plus attorney's fees of US$100,000.00 and (b) the resolution of the said Court of
Appeals in the same case, dated February 17, 1975 fixing the amount of attorney, s fees to Pl00,000.00 instead of $100,000.00 as
erroneously stated in the decision but denying petitioner's motion for reconsideration and/or new trial.

The dispositive portion of the decision sought to be annulled (Rollo, p. 215) reads as follows:

For all the foregoing, and in accordance therewith, let judgment be entered (a) affirming the decision appealed
from insofar as it directs the defendant-appellant: (1) to pay plaintiffs the sum of US $22,500.00 representing the
remittance of plaintiffs to said defendant for the first 15-day hire of the vessel "SS PAXOI" including overtime and
an overpayment of US $254.00; (2) to pay plaintiffs the sum of US $16,000.00, corresponding to the remittance of
plaintiffs to defendant for the second 15-day hire of the aforesaid vessel; (3) to pay plaintiffs the sum of US
$6,982.72, representing the cost of bunker oil, survey and watering of the said vessel; (4) to pay plaintiffs the sum
of US $100,000.00 as and for attorney's fees; and, (b) reversing the portion granting commission to the intervenor-
appellee and hereby dismissing the complaint-in-intervention. The order of the court a quo denying the plaintiffs'
Motion for Partial Reconsideration, is likewise, affirmed, without any special pronouncement as to costs.

The facts of the case as gathered from the amended decision of the lower court (Amended Record on Appeal, p. 352), are as follows:

In 1964 Philippine Traders Corporation and Union Import and Export Corporation entered into a joint business venture for the
purchase of copra from Indonesia for sale in Europe. James Liu President and General Manager of the Union took charge of the
European market and the chartering of a vessel to take the copra to Europe. Peter Yap of Philippine on the other hand, found one
P.T. Karkam in Dumai Sumatra who had around 4,000 tons of copra for sale. Exequiel Toeg of Interocean was commissioned to look
for a vessel and he found the vessel "SS Paxoi" of Marimperio available. Philippine and Union authorized Toeg to negotiate for its
charter but with instructions to keep confidential the fact that they are the real charterers.

Consequently on March 21, 1965, in London England, a "Uniform Time Charter" for the hire of vessel "Paxoi" was entered into by the
owner, Marimperio Compania Naviera, S.A. through its agents N. & J. Vlassopulos Ltd. and Matthews Wrightson, Burbridge, Ltd. to
be referred to simply as Matthews, representing Interocean Shipping Corporation, which was made to appear as charterer, although
it merely acted in behalf of the real charterers, private respondents herein.

The pertinent provisions or clauses of the Charter Party read:

1. The owners let, and the Charterers hire the Vessel for a period of 1 (one) trip via safe port or ports Hong Kong,
Philippine Islands and/or INDONESIA from the time the Vessel is delivered and placed at the disposal of the
Charterers on sailing HSINKANG ... .

4. The Charterers are to provide and pay for oil-fuel, water for boilers, port charges, pilotages ... .

6. The Charterers to pay as hire s.21 (Twenty-one Shillings per deadweights ton per 30 days or pro rata
commencing in accordance with Clause 1 until her redelivery to the owners.

Payment of hire to be made in cash as per Clause 40 without discount, every 15 days in advance.
 In default of payment of the Owners to have the right of withdrawing the vessel from the services of the
Charterers, without noting any protest and without interference by any court or any formality whatsoever and
without prejudice the Owners may otherwise have on the Charterers under the Charter.

7. The Vessel to be redelivered on the expiration of the Charter in the same good order as when delivered to the
Charterers (fair wear and tear expected) in the Charterer's option in ANTWERP HAMBURG RANGE.

20. The Charterers to have the option of subletting the Vessel, giving due notice to the Owners, but the original
Charterers always to remain responsible to the Owners for due performance of the Charter.

29. Export and/or import permits for Charterers'cargo to the Charterers'risk and expense. Charterers to obtain and
be responsible for all the necessary permits to enter and/or trade in and out of all ports during the currency of the
Charter at their risk and expense. ...

33. Charterers to pay as overtime, bonus and premiums to Master, Officers and crew, the sum of 200 (Two
Hundred Pounds) per month to be paid together with hire.

37. Bunkers on delivery as on board. Bunkers on redelivery maximum 110 tons. Prices of bunkers at 107' per long
ton at both ends.

38. Upon sailing from each loading port, Master to cable SEASHIPS MANILA advising the quantity loaded and the
time of completion.

40. The hire shall be payable in external sterling or at Charterers' option in U.S. dollars in London; - Williams
Deacon's Vlassopulos Ltd., Account No. 861769.

In view of the aforesaid Charter, on March 30, 1965 plaintiff Charterer cabled a firm offer to P.T. Karkam to buy the 4,000 tons of
copra for U.S.$180.00 per ton, the same to be loaded either in April or May, 1965. The offer was accepted and plaintiffs opened two
irrevocable letters of Credit in favor of P.T. Karkam

On March 29, 1965, the Charterer was notified by letter by Vlassopulos through Matthews that the vessel "PAXOI" had sailed from
Hsinkang at noontime on March 27, 196-5 and that it had left on hire at that time and date under the Uniform Time-Charter.

The Charterer was however twice in default in its payments which were supposed to have been done in advance. The first 15-day
hire comprising the period from March 27 to April 1-1, 1965 was paid despite follow-ups only on April 6, 1965 and the second 15-day
hire for the period from April 12 to April 27, 1965 was paid also despite follow-ups only on April 26, 1965. On April 14, 1965 upon
representation of Toeg, the Esso Standard Oil (Hongkong) Company supplied the vessel with 400 tons of bunker oil at a cost of US
$6,982.73.

Although the late payments for the charter of the vessel were received and acknowledged by Vlassopulos without comment or
protest, said agent notified Matthews, by telex on April 23, 1965 that the shipowners in accordance with Clause 6 of the Charter
Party were withdrawing the vessel from Charterer's service and holding said Charterer responsible for unpaid hirings and all legal
claims.

On April 29, 1965, the shipowners entered into another charter agreement with another Charterer, the Nederlansche Stoomvart of
Amsterdam, the delivery date of which was around May 3, 1965 for a trip viaIndonesia to Antwep/Hamburg at an increase charter
cost.

Meanwhile, the original Charterer again remitted on April 30, 1965, the amount corresponding to the 3rd 15-day hire of the vessel
"PAXOI" but this time the remittance was refused.

On May 3,1965, respondents Union Import and Export Corporation and Philippine Traders Corporation filed a complaint with the
Court of First Instance of Manila, Branch VIII, against the Unknown Owners of the Vessel "SS Paxoi" for specific performance with
prayer for preliminary attachment, alleging, among other things, that the defendants (unknown owners) through their duly
authorized agent in London, the N & J Vlassopulos Ltd., ship brokers, entered into a contract of Uniform Time-Charter with the
Interocean Shipping Company of Manila through the latter's duly authorized broker, the Overseas Steamship Co., Inc., for the
Charter of the vessel SS PAXOI' under the terms and conditions appearing therein ...; that, immediately thereafter, the Interocean
Shipping Company sublet,the said vessel to the plaintiff Union Import & Export, Corporation which in turn sublet the same to the
other plaintiff, the Philippine Traders Corporation (Amended Record on Appeal, p. 17). Respondents as plaintiffs in the complaint
obtained a writ of preliminary attachment of vessel PAXOI' " which was anchored at Davao on May 5, 1969, upon the filing of the
corresponding bond of P1,663,030.00 (Amended Record on Appeal, p. 27). However, the attachment was lifted on May 15, 1969
upon defendant's motion and filing of a counterbond for P1,663,030 (Amended Record on Appeal, p. 62).

On May 11, 1965, the complaint was amended to Identify the defendant as Marimperio Compania Naviera S.A., petitioner herein
(Amended Record on Appeal, p. 38). In answer to the amended complaint, by way of special defenses defendant (petitioner herein)
alleged among others that the Charter Party covering its vessel "SS PAXOI" was entered into by defendant with Interocean Shipping
Co. which is not a party in the complaint; that defendant has no agreement or relationship whatsoever with the plaintiffs; that
plaintiffs are unknown to defendant; that the charter party entered into by defendant with the Interocean Shipping Co. over the
vessel "SS PAXOI" does not authorize a sub-charter of said vessel to other parties; and that at any rate, any such sub-charter was
without the knowledge or consent of defendant or defendant's agent, and therefore, has no effect and/or is not binding upon
defendant. By way of counterclaim, defendant prayed that plaintiffs be ordered to pay defendant (1) the sum of 5,085.133d or its
equivalent, in Philippine currency of P54,929.60, which the defendant failed to realize under the substitute charter, from May 3,
1965 to May 16, 1965, while the vessel was under attachment; (2) the sum of E68.7.10 or its equivalent of P7,132.83, Philippine
currency, as premium for defendant's counterbond for the first year, and such other additional premiums that will have to be paid
by defendant for additional premiums while the case is pending; and (3) a sum of not less than P200,000.00 for and as attomey's
fees and expenses of litigations (Amended Record on Appeal, p. 64).

On March 16, 1966, respondent Interocean Shipping Corporation filed a complaint-in-intervention to collect what it claims to be its
loss of income by way of commission and expenses in the amount of P15,000.00 and the sum of P2,000.00 for attorney's fees
(Amended Record on Appeal, p. 87). In its amended answer to the complaint-in-intervention petitioner, by way of special defenses
alleged that (1) the plaintiff-in-intervention, being the charterer, did not notify the defendant shipowner, petitioner, herein, about
any alleged sub-charter of the vessel "SS PAXOI" to the plaintiffs; consequently, there is no privity of contract between defendant
and plaintiffs and it follows that plaintiff-in-intervention, as charterer, is responsible for defendant shipowner for the proper
performance of the charter party; (2) that the charter party provides that any dispute arising from the charter party should be
referred to arbitration in London; that Charterer plaintiff-in-intervention has not complied with this provision of the charter party;
consequently its complaint-in intervention is premature; and (3) that the alleged commission of 2 1/2 and not become due for the
reason, among others, that the charterer violated the contract, and the full hiring fee due the shipowner was not paid in accordance
with the terms and conditions of the charter party. By way of counterclaim defendant shipowner charged the plaintiff-in-
intervention attorney's fees and expenses of litigation in the sum of P10,000.00 (Amended Record on Appeal, p. 123).

On November 22, 1969 the Court of First Instance of Manila, Branch VIII rendered its decision ** in favor of defendant Marimperio
Compania Naviera, S.A., petitioner herein, and against plaintiffs Union Import and Export Corporation and Philippine Traders
Corporation, respondents herein, dismissing the amended complaint, and ordering said plaintiff on the counterclaim to pay
defendant, jointly and severally, the amount of f 8,011.38 or its equivalent in Philippine currency of P75,303.40, at the exchange rate
of P9.40 to 1 for the unearned charter hire due to the attachment of the vessel "PAXOI" in Davao, plus premiums paid on the
counterbond as of April 22, 1968 plus the telex and cable charges and the sum of P10,000.00 as attorney's fees and costs. The trial
court dismissed the complaint-in-intervention, ordering the intervenor, on the counterclaim, to pay defendant the sum of
P10,000.00 as attorney's fees, and the costs (Amended Record on Appeal, p. 315).

Plaintiffs filed a Motion for Reconsideration and/or new trial of the decision of the trial court on December 23, 1969 (Amended
Record on Appeal, p. 286); the intervenor filed its motion for reconsideration and/or new trial on January 7, 1970 (Amended Record
on Appeal, p. 315).

Acting on the two motions for reconsideration, the trial court reversed its stand in its amended decision dated January 24, 1978. The
dispositive portion of the amended decision states:

FOR ALL THE FOREGOING CONSIDERATIONS, the Court renders judgment for the plaintiffs Union Import & Export
Corporation and Philin Traders Corporation, and plaintiff-in-intervention, Interocean Shipping Corporation, and
consequently orders the defendant, Marimperio Compania Naveria S.A.:

(1) To pay plaintiffs the sum of US$22,500.00 representing the remittance of plaintiffs to said
defendant for the first 15-day hire of the vessel "SS PAXOI" including overtime and an
overpayment of US$254.00;
 (2) To pay plaintiffs the sum of US$16,000.00 corresponding to the remittance of plaintiffs to
defendant for the second 15-day hire of the aforesaid vessel;

(3) To pay plaintiffs the sum of US$6,982.72 representing the cost of bunker oil, survey and
watering of the said vessel;

(4) To pay plaintiffs the sum of US$220,0,00.00 representing the unrealized profits; and

(5) To pay plaintiffs the sum of P100,000.00, as and for attorney's fees (Moran, Comments on the
Rules of Court, Vol. III, 1957 5d 644, citing Haussermann vs. Rahmayer, 12 Phil. 350; and others)"
(Francisco vs. Matias, G.R. No. L-16349, January 31, 1964; Sison vs. Suntay, G.R. No. L-1000 .
December 28, 1957).

The Court further orders defendant to pay plaintiff-in-intervention the amount of P15,450.44,
representing the latter's commission as broker, with interest thereon at 6% per annum from the
date of the filing of the complaint-in-intervention, until fully paid, plus the sum of P2,000.00 as
attorney's fees.

The Court finally orders the defendant to pay the costs.

In view of the above conclusion, the Court orders the dismissal of the counterclaims filed by defendant against the
plaintiffs and plaintiff-in- intervention, as wen as its motion for the award of damages in connection with the
issuance of the writ of preliminary attachment.

Defendant (petitioner herein), filed a motion for reconsideration and/or new trial of the amended decision on February 19, 1970
(Amended Record on Appeal, p. 382). Meanwhile a new Judge was assigned to the Trial Court (Amended Record on Appeal, p. 541).
On September 10, 1970 the trial court issued its order of September 10, 1970 *** denying defendant's motion for reconsideration
(Amended Record on Appeal, p. 583).

On Appeal, the Court of Appeals affirmed the amended decision of the lower court except the portion granting commission to the
intervenor- appellee, which it reversed thereby dismissing the complaint-in- intervention. Its two motions (1) for reconsideration
and/or new trial and (2) for new trial having been denied by the Court of Appeals in its Resolution of February 17, 1975 which,
however, fixed the amount of attorney's fees at P100,000.00 instead of $100,000.00 (Rollo, p. 81), petitioner filed with this Court its
petition for review on certiorari on March 19, 197 5 (Rollo, p. 86).

After deliberating on the petition, the Court resolved to require the respondents to comment thereon, in its resolution dated April 2,
1975 (rollo, p. 225).

The comment on petition for review by certiorari was filed by respondents on April 21, 1975, praying that the petition for review by
certiorari dated March 18, 1975 be dismissed for lack of merit Rollo p. 226). The reply to comment was filed on May 8, 1975 (Rollo,
p. 259). The rejoinder to reply to comment was filed on May 13, 197 5 (Rollo, p. 264).

On October 20, 1975, the Court resolved (a) to give due course to the petition; (b) to treat the petition for review as a special civil
action; and (c) to require both parties to submit their respective memoranda within thirty (30) days from notice hereof (Rollo, p. 27).

Respondents filed their memoranda on January 27, 1976 (Rollo, p. 290); petitioner, on February 26, 1976 (Rollo, p. 338).
Respondents' reply memorandum was filed on April 14, 1976 (Rollo, p. 413) and Rejoinder to respondents' reply memorandum was
filed on May 28, 1976 (Rollo, p. 460).

On June 11, 1976, the Court resolved to admit petitioner's rejoinder to respondents' reply memorandum and to declare this case
submitted for decision (Rollo, p. 489).

The main issues raised by petitioner are:

1. Whether or not respondents have the legal capacity to bring the suit for specific performance against petitioner
based on the charter party, and
 2. Whether or not the default of Charterer in the payment of the charter hire within the time agreed upon gives
petitioner a right to rescind the charter party extra judicially.

I.

According to Article 1311 of the Civil Code, a contract takes effect between the parties who made it, and also their assigns and heirs,
except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or
by provision of law. Since a contract may be violated only by the parties, thereto as against each other, in an action upon that
contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract. Therefore, a party who has
not taken part in it cannot sue or be sued for performance or for cancellation thereof, unless he shows that he has a real interest
affected thereby (Macias & Co. v. Warner Barners & Co., 43 Phil. 155 [1922] and Salonga v. Warner Barnes & Co., Ltd., 88 Phil. 125
[1951]; Coquia v. Fieldmen's Insurance Co., Inc., 26 SCRA 178 [1968]).

It is undisputed that the charter party, basis of the complaint, was entered into between petitioner Marimperio Compañia Naviera,
S.A., through its duly authorized agent in London, the N & J Vlassopulos Ltd., and the Interocean Shipping Company of Manila
through the latter's duly authorized broker, the Overseas Steamship Co., Inc., represented by Matthews, Wrightson Burbridge Ltd.,
for the Charter of the 'SS PAXOI' (Amended Complaint, Amended Record on Appeal, p. 33; Complaint-in-Intervention, Amended
Record on Appeal, p. 87). It is also alleged in both the Complaint (Amended Record on Appeal 18) and the Amended Complaint
(Amended Record on Appeal, p. 39) that the Interocean Shipping Company sublet the said vessel to respondent Union Import and
Export Corporation which in turn sublet the same to respondent Philippine Traders Corporation. It is admitted by respondents that
the charterer is the Interocean Shipping Company. Even paragraph 3 of the complaint-in-intervention alleges that respondents were
given the use of the vessel "pursuant to paragraph 20 of the Uniform Time Charter ..." which precisely provides for the subletting of
the vessel by the charterer (Rollo, p. 24). Furthermore, Article 652 of the Code of Commerce provides that the charter party shall
contain, among others, the name, surname, and domicile of the charterer, and if he states that he is acting by commission, that of
the person for whose account he makes the contract. It is obvious from the disclosure made in the charter party by the authorized
broker, the Overseas Steamship Co., Inc., that the real charterer is the Interocean Shipping Company (which sublet the vessel to
Union Import and Export Corporation which in turn sublet it to Philippine Traders Corporation).

In a sub-lease, there are two leases and two distinct judicial relations although intimately connected and related to each other,
unlike in a case of assignment of lease, where the lessee transmits absolutely his right, and his personality disappears; there only
remains in the juridical relation two persons, the lessor and the assignee who is converted into a lessee (Moreno, Philippine Law
Dictionary, 2nd ed., p. 594). In other words, in a contract of sub-lease, the personality of the lessee does not disappear; he does not
transmit absolutely his rights and obligations to the sub-lessee; and the sub-lessee generally does not have any direct action against
the owner of the premises as lessor, to require the compliance of the obligations contracted with the plaintiff as lessee, or vice
versa (10 Manresa, Spanish Civil Code, 438).

However, there are at least two instances in the Civil Code which allow the lessor to bring an action directly (accion directa) against
the sub-lessee (use and preservation of the premises under Art. 1651, and rentals under Article 1652).

Art. 1651 reads:

Without prejudice to his obligation toward the sub-lessor, the sub-lessee is bound to the lessor for all acts which
refer to the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee.

Article 1652 reads:

The sub-lessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sub-lessee shall not
be responsible beyond the amount of rent due from him, in accordance with the terms of the sub-lease, at the
time of the extra-judicial demand by the lessor.

Payments of rent in advance by the sub-lessee shall be deemed not to have been made, so far as the lessor's claim
is concerned, unless said payments were effected in virtue of the custom of the place.

It will be noted however that in said two Articles it is not the sub-lessee, but the lessor, who can bring the action. In the instant case,
it is clear that the sub-lessee as such cannot maintain the suit they filed with the trial court (See A. Maluenda and Co. v. Enriquez, 46
Phil. 916).
In the law of agency "with an undisclosed principal, the Civil Code in Article 1883 reads:

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

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

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

While in the instant case, the true charterers of the vessel were the private respondents herein and they chartered the vessel
through an intermediary which upon instructions from them did not disclose their names. Article 1883 cannot help the private
respondents, because although they were the actual principals in the charter of the vessel, the law does not allow them to bring any
action against the adverse party and vice, versa.

II.

The answer to the question of whether or not the default of charterer in the payment of the charter hire within the time agreed
upon gives petitioner a right to rescind the charter party extrajudicially, is undoubtedly in the affirmative.

Clause 6 of the Charter party specifically provides that the petitioner has the right to withdraw the vessel fromthe service of the
charterers, without noting any protest and without interference of any court or any formality in the event that the charterer defaults
in the payment of hire. The payment of hire was to be made every fifteen (1 5) days in advance.

It is undisputed that the vessel "SS PAXOI" came on hire on March 27, 1965. On March 29, Vlassopulos notified by letter the
charterer through Matthews of that fact, enclosing therein owner's debit note for a 15-day hire payable in advance. On March 30,
1965 the shipowner again notified Matthews that the payment for the first 15-day hire was overdue. Again on April 2 the shipowner
telexed Matthews insisting on the payment, but it was only on April 7 that the amount of US $22,500.00 was remitted to Williams
Deacons Bank, Ltd. through the Rizal Commercial Banking Corporation for the account of Vlassopulos, agent of petitioner,
corresponding to the first 15-day hire from March 27 to April 11, 1965.

On April 8, 1965, Vlassopulos acknowledged receipt of the payment, again with a debit note for the second 15-day hire and overtime
which was due on April 11, 1965. On April 23, 1965, Vlassopulos notified Matthews by telex that charterers were in default and in
accordance with Clause 6 of the charter party, the vessel was being withdrawn from charterer's service, holding them responsible
for unpaid hire and all other legal claims of the owner. Respondents remitted the sum of US$6,000.00 and US$10,000.00 to the bank
only on April 26, 1965 representing payment for the second 15-day hire from April 12 to April 27, 1965, received and accepted by
the payee, Vlassopulos without any comment or protest.

Unquestionably, as of April 23, 1965, when Vlassopulos notified Matthews of the withdrawal of the vessel from the Charterers'
service, the latter was already in default. Accordingly, under Clause 6 of the charter party the owners had the right to withdraw " SS
PAXO I " from the service of charterers, which withdrawal they did.

The question that now arises is whether or not petitioner can rescind the charter party extra-judicially. The answer is also in the
affirmative. A contract is the law between the contracting parties, and when there is nothing in it which is contrary to law, morals,
good customs, public policy or public order, the validity of the contract must be sustained (Consolidated Textile Mills, Inc. v.
Reparations Commission, 22 SCRA 674 [19681; Lazo v. Republic Surety & Insurance Co., Inc., 31 SCRA 329 [1970]; Castro v. Court of
Appeals, 99 SCRA 722 [1980]; Escano v. Court of Appeals, 100 SCRA 197 [1980]). A judicial action for the rescission of a contract is
not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions
(Enrile v. Court of Appeals, 29 SCRA 504 [1969]; University of the Philippines v. De los Angeles, 35 SCRA 102 [1970]; Palay, Inc. v.
Clave, 124 SCRA 638 [1983]).

PREMISES CONSIDERED, (1) the decision of the Court of Appeals affirming the amended decision of the Court of First Instance of
Manila, Branch VIII, is hereby REVERSED and SET ASIDE except for that portion of the decision dismissing the complaint-in-
intervention; and (2) the original decision of the trial court is hereby REINSTATED.
G.R. No. 167812             December 19, 2006

JESUS M. GOZUN, petitioner, vs.
JOSE TEOFILO T. MERCADO a.k.a. ‘DON PEPITO MERCADO, respondent.

D E C I S I O NCARPIO MORALES, J.:

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. 763091 reversing the trial court’s decision2 against Jose Teofilo T. Mercado a.k.a. Don Pepito Mercado
(respondent) and accordingly dismissing the complaint of Jesus M. Gozun (petitioner).

In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon respondent’s request, petitioner,
owner of JMG Publishing House, a printing shop located in San Fernando, Pampanga, submitted to respondent draft samples and
price quotation of campaign materials.

By petitioner’s claim, respondent’s wife had told him that respondent already approved his price quotation and that he could start
printing the campaign materials, hence, he did print campaign materials like posters bearing respondent’s photograph,3 leaflets
containing the slate of party candidates,4 sample ballots,5 poll watcher identification cards,6 and stickers.

Given the urgency and limited time to do the job order, petitioner availed of the services and facilities of Metro Angeles Printing and
of St. Joseph Printing Press, 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 ofP640,310 (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.
G.R. No. L-25301            October 26, 1968

GOLD STAR MINING CO., INC., petitioner, 

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

Emiliano S. Samson and R. Balderrama-Samson for petitioner.

Leandro Sevilla and Ramon C. Aquino for respondents.

REYES, J.B.L., J.:

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

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

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

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

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

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

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

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

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

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

IN VIEW WHEREOF, judgment is rendered:

1. Declaring the plaintiffs —

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

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

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

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

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

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

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

(d) P1,000.00 as attorneys fees;

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

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

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

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

7. The counterclaims of defendants are dismissed;

8. Costs against defendant Lincallo.

SO ORDERED. (Emphasis supplied.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WHEREFORE, finding no reversible error in the decision appealed from, the same is affirmed, with costs against petitioner-appellant,
Gold Star Mining Co., Inc.
G.R. No. L-13471             January 12, 1920

VICENTE SY-JUCO and CIPRIANA VIARDO, plaintiffs-appellants, 

vs.
SANTIAGO V. SY-JUCO, defendant-appellant.

Sumulong and Estrada for plaintiffs and appellants.

Delgado and Delgado for defendant and appellant.

AVANCEÑA, J.:

In 1902 the defendant was appointed by the plaintiffs administrator of their property and acted as such until June 30, 1916, when his
authority was cancelled. The plaintiffs are defendant's father and mother who allege that during his administration the defendant
acquired the property claimed in the complaint in his capacity as plaintiffs' administrator with their money and for their benefit.
After hearing the case the trial court rendered his decision, the dispositive part of which is the following:

Wherefore, the court give judgment for the plaintiffs and orders:

1. That the defendant return to the plaintiffs the launch Malabon, in question, and execute all the necessary documents and
instruments for such delivery and the registration in the records of the Custom House of said launch as plaintiffs' property;

2. That the defendant return to the plaintiffs the casco No. 2584, or pay to them the value thereof which has been fixed at
the sum of P3,000, and should the return of said casco be made, execute all the necessary instruments and documents for
its registration in plaintiffs' name at the Custom House; and

3. That the defendant return to the plaintiffs the automobile No. 2060 and execute the necessary instruments and
documents for its registration at the Bureau of Public Works. And judgment is hereby given for the defendant absolving him
from the complaint so far concerns:

1. The rendition of accounts of his administration of plaintiffs property;

2. The return of the casco No. 2545;

3. The return of the typewriting machine;

4. The return of the house occupied by the defendant; and

5. The return of the price of the piano in question.

Both parties appealed from this judgment.

In this instance defendant assigns three errors alleged to have been committed by the lower court in connection with the three
items of the dispositive part of the judgment unfavorable to him. We are of the opinion that the evidence sufficiently justifies the
judgment against the defendant.

Regarding the launch Malabon, it appears that in July, 1914, the defendant bought it in his own name from the Pacific Commercial
Co., and afterwards registered it at the Custom House. But his does not necessarily show that the defendant bought it for himself
and with his own money, as he claims. This transaction was within the agency which he had received from the plaintiffs. The fact
that he has acted in his own name may be only, as we believe it was, a violation of the agency on his part. As the plaintiffs' counsel
truly say, the question is not in whose favor the document of sale of the launch is executed nor in whose name same was registered,
but with whose money was said launch bought. The plaintiffs' testimony that it was bought with their money and for them is
supported by the fact that, immediately after its purchase, the launch had to be repaired at their expense, although said expense
was collected from the defendant. I the launch was not bought for the plaintiffs and with their money, it is not explained why they
had to pay for its repairs.
The defendant invokes the decision of this Court in the case of Martinez vs. Martinez (1 Phil. Rep., 647), which we do not believe is
applicable to the present case. In said case, Martinez, Jr., bought a vessel in his own name and in his name registered it at the
Custom House. This court then said that although the funds with which the vessel was bought belonged to Martinez Sr., Martinez Jr.
is its sole and exclusive owner. But in said case the relation of principal and agent, which exists between the plaintiffs and the
defendant in the present case, did not exist between Martinez, Sr., and Martinez, Jr. By this agency the plaintiffs herein clothed the
defendant with their representation in order to purchase the launch in question. However, the defendant acted without this
representation and bought the launch in his own name thereby violating the agency. If the result of this transaction should be that
the defendant has acquired for himself the ownership of the launch, it would be equivalent to sanctioning this violation and
accepting its consequences. But not only must the consequences of the violation of this agency not be accepted, but the effects of
the agency itself must be sought. If the defendant contracted the obligation to but the launch for the plaintiffs and in their
representation, but virtue of the agency, notwithstanding the fact that he bought it in his own name, he is obliged to transfer to the
plaintiffs the rights he received from the vendor, and the plaintiffs are entitled to be subrogated in these rights.

There is another point of view leading us to the same conclusion. From the rule established in article 1717 of the Civil Code that,
when an agency acts in his own name, the principal shall have no right of action against the person with whom the agent has
contracted, cases involving things belonging to the principal are excepted. According to this exception (when things belonging to the
principal are dealt with) the agent is bound to the principal although he does not assume the character of such agent and appears
acting in his own name (Decision of the Supreme Court of Spain, May 1, 1900). This means that in the case of this exception the
agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must be
considered as entered into between the principal and the third person; and, consequently, if the obligations belong to the former, to
him alone must also belong the rights arising from the contract. The money with which the launch was bough having come from the
plaintiff, the exception established in article 1717 is applicable to the instant case.

Concerning the casco No. 2584, the defendant admits it was constructed by the plaintiff himself in the latter's ship-yard. Defendant's
allegation that it was constructed at his instance and with his money is not supported by the evidence. In fact the only proof
presented to support this allegation is his own testimony contradicted, on the on hand, by the plaintiffs' testimony and, on the other
hand, rebutted by the fact that, on the date this casco was constructed, he did not have sufficient money with which to pay the
expense of this construction.

As to the automobile No. 2060, there is sufficient evidence to show that its prices was paid with plaintiffs' money. Defendant's
adverse allegation that it was paid with his own money is not supported by the evidence. The circumstances under which, he says,
this payment has been made, in order to show that it was made with his own money, rather indicate the contrary. He presented in
evidence his check-book wherein it appears that on March 24, 1916, he issued a check for P300 and on the 27th of same month
another for P400 and he says that the first installment was paid with said checks. But it results that, in order to issue the check for
P300 on March 24 of that year, he had to deposit P310 on that same day; and in order to issue the other check for P400 on the 27th
of the same month, he deposited P390 on that same day. It was necessary for the defendant to make these deposits for on those
dates he had not sufficient money in the bank for which he could issue those checks. But, in order to pay for the price of the
automobile, he could have made these payments directly with the money he deposited without the necessity of depositing and
withdrawing it on the same day. If this action shows something, it shows defendant's preconceived purpose of making it appear that
he made the payment with his own funds deposited in the bank.

The plaintiffs, in turn, assign in this instance the following three errors alleged to have been committed by the lower court:

1. The court erred in not declaring that the plaintiffs did not sell to the defendant the casco No. 2545 and that they were its
owners until it was sunk in June, 1916.

2. The court erred in absolving the defendant from his obligation to render an account of his administration to the plaintiffs,
and to pay to the latter the amount of the balance due in their favor.

3. The court erred in not condemning the defendant to pay to the plaintiffs the value of the woods, windows and doors
taken from their lumber-year by the defendant and used in the construction of the house on calle Real of the barrio of La
Concepcion, municipality of Malabon, Rizal.

Concerning the casco No. 2545, the lower court refrained from making any declaration about its ownership in view of the fact that
this casco had been leased and was sunk while in the lessee's hands before the complaint in this case was filed. The lower court,
therefore, considered it unnecessary to pass upon this point. We agree with the plaintiffs that the trial court should have made a
pronouncement upon this casco. The lessee may be responsible in damages for its loss, and it is of interest to the litigants in this
case that it be determined who is the owner of said casco that may enforce this responsibility of the lessee.

Upon an examination of the evidence relative to this casco, we find that it belonged to the plaintiffs and that the latter sold it
afterwards to the defendant by means of a public instrument. Notwithstanding plaintiffs' allegation that when they signed this
instrument they were deceived, believing it not to be an instrument of sale in favor of the defendant, nevertheless, they have not
adduced sufficient proof of such deceit which would destroy the presumption of truth which a public document carries with it.
Attorney Sevilla, who acted as the notary in the execution of this instrument, testifying as a witness in the case, said that he never
verified any document without first inquiring whether the parties knew its content. Our conclusion is that this casco was lawfully
sold to the defendant by the plaintiffs.

Concerning the wood, windows and doors given by the plaintiffs to the defendant and used in the construction of the latter's house
on calle Real of the barrio of La Concepcion of the municipality of Malabon, Rizal, we find correct the trial Court's decision that they
were given to the defendant as his and his wife's property.

Concerning the rendition of accounts which the plaintiffs require of the defendant, we likewise find correct the trial court's decision
absolving the latter from this petition, for it appears, from the plaintiffs' own evidence, that the defendant used to render accounts
of his agency after each transactions, to the plaintiffs' satisfaction.

From the foregoing considerations, we affirm the judgment appealed from in all its parts except in so far as thecasco No. 2545 is
concerned, and as to this we declare that, it having been sold by the plaintiffs to the defendant, the latter is absolved. No special
findings as to costs. So ordered.
G.R. No. L-32116 April 2l, 1981

RURAL BANK OF CALOOCAN, INC. and JOSE O. DESIDERIO, JR., petitioners, vs.

THE COURT OF APPEALS and MAXIMA CASTRO, respondents. DE CASTRO, * J.:

This is a petition for review by way of certiorari of the decision 1 of the Court of Appeals in CA-G.R. No. 39760-R entitled "Maxima
Castro, plaintiff-appellee, versus Severino Valencia, et al., defendants; Rural Bank of Caloocan, Inc., Jose Desiderio, Jr. and Arsenio
Reyes, defendants-appellants," which affirmed in toto the decision of the Court of First Instance of Manila in favor of plaintiff-
appellee, the herein private respondent Maxima Castro.

On December 7, 1959, respondent Maxima Castro, accompanied by Severino Valencia, went to the Rural Bank of Caloocan to apply
for an industrial loan. It was Severino Valencia who arranged everything about the loan with the bank and who supplied to the latter
the personal data required for Castro's loan application. On December 11, 1959, after the bank approved the loan for the amount of
P3,000.00, Castro, accompanied by the Valencia spouses, signed a promissory note corresponding to her loan in favor of the bank.

On the same day, December 11, 1959, the Valencia spouses obtained from the bank an equal amount of loan for P3,000.00. They
signed a promissory note (Exhibit "2") corresponding to their loan in favor of the bank and had Castro affixed thereon her signature
as co-maker.

The two loans were secured by a real-estate mortgage (Exhibit "6") on Castro's house and lot of 150 square meters, covered by
Transfer Certificate of Title No. 7419 of the Office of the Register of Deeds of Manila.

On February 13, 1961, the sheriff of Manila, thru Acting Chief Deputy Sheriff Basilio Magsambol, sent a notice of sheriff's sale
addressed to Castro, announcing that her property covered by T.C.T. No. 7419 would be sold at public auction on March 10, 1961 to
satisfy the obligation covering the two promissory notes plus interest and attorney's fees.

Upon request by Castro and the Valencias and with conformity of the bank, the auction sale that was scheduled for March 10, 1961
was postponed for April 10, 1961. But when April 10, 1961 was subsequently declared a special holiday, the sheriff of Manila sold
the property covered by T.C.T. No. 7419 at a public auction sale that was held on April 11, 1961, which was the next succeeding
business day following the special holiday.

Castro alleged that it was only when she received the letter from the Acting Deputy Sheriff on February 13, 1961, when she learned
for the first time that the mortgage contract (Exhibit "6") which was an encumbrance on her property was for P6.000.00 and not for
P3,000.00 and that she was made to sign as co-maker of the promissory note (Exhibit "2") without her being informed of this.

On April 4, 1961, Castro filed a suit denominated "Re: Sum of Money," against petitioners Bank and Desiderio, the Spouses Valencia,
Basilio Magsambol and Arsenio Reyes as defendants in Civil Case No. 46698 before the Court of First Instance of Manila upon the
charge, amongst others, that thru mistake on her part or fraud on the part of Valencias she was induced to sign as co-maker of a
promissory note (Exhibit "2") and to constitute a mortgage on her house and lot to secure the questioned note. At the time of filing
her complaint, respondent Castro deposited the amount of P3,383.00 with the court a quo in full payment of her personal loan plus
interest.

In her amended complaint, Castro prayed, amongst other, for the annulment as far as she is concerned of the promissory note
(Exhibit "2") and mortgage (Exhibit "6") insofar as it exceeds P3,000.00; for the discharge of her personal obligation with the bank by
reason of a deposit of P3,383.00 with the court a quo upon the filing of her complaint; for the annulment of the foreclosure sale of
her property covered by T.C.T. No. 7419 in favor of Arsenio Reyes; and for the award in her favor of attorney's fees, damages and
cost.

In their answers, petitioners interposed counterclaims and prayed for the dismissal of said complaint, with damages, attorney's fees
and costs. 2

The pertinent facts arrived from the stipulation of facts entered into by the parties as stated by respondent Court of Appeals are as
follows:
Spawning the present litigation are the facts contained in the following stipulation of facts submitted by the parties
themselves:

1. That the capacity and addresses of all the parties in this case are admitted .

2. That the plaintiff was the registered owner of a residential house and lot located at Nos. 1268-1270 Carola
Street, Sampaloc, Manila, containing an area of one hundred fifty (150) square meters, more or less, covered by
T.C.T. No. 7419 of the Office of the Register of Deeds of Manila;

3. That the signatures of the plaintiff appearing on the following documents are genuine:

a) Application for Industrial Loan with the Rural Bank of Caloocan, dated December 7, 1959 in the amount of
P3,000.00 attached as Annex A of this partial stipulation of facts;

b) Promissory Note dated December 11, 1959 signed by the plaintiff in favor of the Rural Bank of Caloocan for the
amount of P3,000.00 as per Annex B of this partial stipulation of facts;

c) Application for Industrial Loan with the Rural Bank of Caloocan, dated December 11, 1959, signed only by the
defendants, Severino Valencia and Catalina Valencia, attached as Annex C, of this partial stipulation of facts;

d) Promissory note in favor of the Rural Bank of Caloocan, dated December 11, 1959 for the amount of P3000.00,
signed by the spouses Severino Valencia and Catalina Valencia as borrowers, and plaintiff Maxima Castro, as a co-
maker, attached as Annex D of this partial stipulation of facts;

e) Real estate mortgage dated December 11, 1959 executed by plaintiff Maxima Castro, in favor of the Rural Bank
of Caloocan, to secure the obligation of P6,000.00 attached herein as Annex E of this partial stipulation of facts;

All the parties herein expressly reserved their right to present any evidence they may desire on the circumstances
regarding the execution of the above-mentioned documents.

4. That the sheriff of Manila, thru Acting Chief Deputy Sheriff, Basilio Magsambol, sent a notice of sheriff's sale,
address to the plaintiff, dated February 13, 1961, announcing that plaintiff's property covered by TCT No. 7419 of
the Register of Deeds of the City of Manila, would be sold at public auction on March 10, 1961 to satisfy the total
obligation of P5,728.50, plus interest, attorney's fees, etc., as evidenced by the Notice of Sheriff's Sale and Notice
of Extrajudicial Auction Sale of the Mortgaged property, attached herewith as Annexes F and F-1, respectively, of
this stipulation of facts;

5. That upon the request of the plaintiff and defendants-spouses Severino Valencia and Catalina Valencia, and with
the conformity of the Rural Bank of Caloocan, the Sheriff of Manila postponed the auction sale scheduled for
March 10, 1961 for thirty (30) days and the sheriff re-set the auction sale for April 10, 1961;

6. That April 10, 1961 was declared a special public holiday; (Note: No. 7 is omitted upon agreement of the parties.)

8. That on April 11, 1961, the Sheriff of Manila, sold at public auction plaintiff's property covered by T.C.T. No. 7419
and defendant, Arsenio Reyes, was the highest bidder and the corresponding certificate of sale was issued to him
as per Annex G of this partial stipulation of facts;

9. That on April 16, 1962, the defendant Arsenio Reyes, executed an Affidavit of Consolidation of Ownership, a
copy of which is hereto attached as Annex H of this partial stipulation of facts;

10. That on May 9, 1962, the Rural Bank of Caloocan Incorporated executed the final deed of sale in favor of the
defendant, Arsenio Reyes, in the amount of P7,000.00, a copy of which is attached as Annex I of this partial
stipulation of facts;
 11. That the Register of Deeds of the City of Manila issued the Transfer Certificate of Title No. 67297 in favor of the
defendant, Arsenio Reyes, in lieu of Transfer Certificate of Title No. 7419 which was in the name of plaintiff,
Maxima Castro, which was cancelled;

12. That after defendant, Arsenio Reyes, had consolidated his title to the property as per T.C.T. No. 67299, plaintiff
filed a notice of lis pendens with the Register of Deeds of Manila and the same was annotated in the back of T.C.T.
No. 67299 as per Annex J of this partial stipulation of facts; and

13. That the parties hereby reserved their rights to present additional evidence on matters not covered by this
partial stipulation of facts.

WHEREFORE, it is respectfully prayed that the foregoing partial stipulation of facts be approved and admitted by
this Honorable Court.

As for the evidence presented during the trial, We quote from the decision of the Court of Appeals the statement thereof, as
follows:

In addition to the foregoing stipulation of facts, plaintiff claims she is a 70-year old widow who cannot read and
write the English language; that she can speak the Pampango dialect only; that she has only finished second grade
(t.s.n., p. 4, December 11, 1964); that in December 1959, she needed money in the amount of P3,000.00 to invest
in the business of the defendant spouses Valencia, who accompanied her to the defendant bank for the purpose of
securing a loan of P3,000.00; that while at the defendant bank, an employee handed to her several forms already
prepared which she was asked to sign on the places indicated, with no one explaining to her the nature and
contents of the documents; that she did not even receive a copy thereof; that she was given a check in the amount
of P2,882.85 which she delivered to defendant spouses; that sometime in February 1961, she received a letter
from the Acting Deputy Sheriff of Manila, regarding the extrajudicial foreclosure sale of her property; that it was
then when she learned for the first time that the mortgage indebtedness secured by the mortgage on her property
was P6,000.00 and not P3,000.00; that upon investigation of her lawyer, it was found that the papers she was
made to sign were:

(a) Application for a loan of P3,000.00 dated December 7, 1959 (Exh. B-1 and Exh. 1);

(b) Promissory note dated December 11, 1959 for the said loan of P3,000.00 (Exh- B-2);

(c) Promissory note dated December 11, 1959 for P3,000.00 with the defendants Valencia spouses as borrowers
and appellee as co-maker (Exh. B-4 or Exh. 2).

The auction sale set for March 10, 1961 was postponed co April 10, 1961 upon the request of defendant spouses
Valencia who needed more time within which to pay their loan of P3,000.00 with the defendant bank; plaintiff
claims that when she filed the complaint she deposited with the Clerk of Court the sum of P3,383.00 in full
payment of her loan of P3,000.00 with the defendant bank, plus interest at the rate of 12% per annum up to April
3, 1961 (Exh. D).

As additional evidence for the defendant bank, its manager declared that sometime in December, 1959, plaintiff
was brought to the Office of the Bank by an employee- (t.s.n., p 4, January 27, 1966). She wept, there to inquire if
she could get a loan from the bank. The claims he asked the amount and the purpose of the loan and the security
to he given and plaintiff said she would need P3.000.00 to be invested in a drugstore in which she was a partner
(t.s.n., p. 811. She offered as security for the loan her lot and house at Carola St., Sampaloc, Manila, which was
promptly investigated by the defendant bank's inspector. Then a few days later, plaintiff came back to the bank
with the wife of defendant Valencia A date was allegedly set for plaintiff and the defendant spouses for the
processing of their application, but on the day fixed, plaintiff came without the defendant spouses. She signed the
application and the other papers pertinent to the loan after she was interviewed by the manager of the defendant.
After the application of plaintiff was made, defendant spouses had their application for a loan also prepared and
signed (see Exh. 13). In his interview of plaintiff and defendant spouses, the manager of the bank was able to
gather that plaintiff was in joint venture with the defendant spouses wherein she agreed to invest P3,000.00 as
additional capital in the laboratory owned by said spouses (t.s.n., pp. 16-17) 3
The Court of Appeals, upon evaluation of the evidence, affirmed in toto the decision of the Court of First Instance of Manila, the
dispositive portion of which reads:

FOR ALL THE FOREGOING CONSIDERATIONS, the Court renders judgment and:

(1) Declares that the promissory note, Exhibit '2', is invalid as against plaintiff herein;

(2) Declares that the contract of mortgage, Exhibit '6', is null and void, in so far as the amount thereof exceeds the
sum of P3,000.00 representing the principal obligation of plaintiff, plus the interest thereon at 12% per annum;

(3) Annuls the extrajudicial foreclosure sale at public auction of the mortgaged property held on April 11, 1961, as
well as all the process and actuations made in pursuance of or in implementation thereto;

(4) Holds that the total unpaid obligation of plaintiff to defendant Rural Bank of Caloocan, Inc., is only the amount
of P3,000.00, plus the interest thereon at 12% per annum, as of April 3, 1961, and orders that plaintiff's deposit of
P3,383.00 in the Office of the Clerk of Court be applied to the payment thereof;

(5) Orders defendant Rural Bank of Caloocan, Inc. to return to defendant Arsenio Reyes the purchase price the
latter paid for the mortgaged property at the public auction, as well as reimburse him of all the expenses he has
incurred relative to the sale thereof;

(6) Orders defendants spouses Severino D. Valencia and Catalina Valencia to pay defendant Rural Bank of
Caloocan, Inc. the amount of P3,000.00 plus the corresponding 12% interest thereon per annum from December
11, 1960 until fully paid; and

Orders defendants Rural Bank of Caloocan, Inc., Jose Desiderio, Jr. and spouses Severino D. Valencia and Catalina
Valencia to pay plaintiff, jointly and severally, the sum of P600.00 by way of attorney's fees, as well as costs.

In view of the conclusion that the court has thus reached, the counterclaims of defendant Rural Bank of Caloocan,
Inc., Jose Desiderio, Jr. and Arsenio Reyes are hereby dismissed, as a corollary

The Court further denies the motion of defendant Arsenio Reyes for an Order requiring Maxima Castro to deposit
rentals filed on November 16, 1963, resolution of which was held in abeyance pending final determination of the
case on the merits, also as a consequence of the conclusion aforesaid. 4

Petitioners Bank and Jose Desiderio moved for the reconsideration 5 of respondent court's decision. The motion having been
denied, 6 they now come before this Court in the instant petition, with the following Assignment of Errors, to wit:

THE COURT OF APPEALS ERRED IN UPHOLDING THE PARTIAL ANNULMENT OF THE PROMISSORY NOTE, EXHIBIT 2,
AND THE MORTGAGE, EXHIBIT 6, INSOFAR AS THEY AFFECT RESPONDENT MAXIMA CASTRO VIS-A-VIS PETITIONER
BANK DESPITE THE TOTAL ABSENCE OF EITHER ALLEGATION IN THE COMPLAINT OR COMPETENT PROOF IN THE
EVIDENCE OF ANY FRAUD OR OTHER UNLAWFUL CONDUCT COMMITTED OR PARTICIPATED IN BY PETITIONERS IN
PROCURING THE EXECUTION OF SAID CONTRACTS FROM RESPONDENT CASTRO.

II

THE COURT OF APPEALS ERRED IN IMPUTING UPON AND CONSIDERING PREJUDICIALLY AGAINST PETITIONERS, AS
BASIS FOR THE PARTIAL ANNULMENT OF THE CONTRACTS AFORESAID ITS FINDING OF FRAUD PERPETRATED BY
THE VALENCIA SPOUSES UPON RESPONDENT CASTRO IN UTTER VIOLATION OF THE RES INTER ALIOS ACTA RULE.

III
 THE COURT OF APPEAL ERRED IN NOT HOLDING THAT, UNDER THE FACTS FOUND BY IT, RESPONDENT CASTRO IS
UNDER ESTOPPEL TO IMPUGN THE REGULARITY AND VALIDITY OF HER QUESTIONED TRANSACTION WITH
PETITIONER BANK.

IV

THE COURT OF APPEALS ERRED IN NOT FINDING THAT, BETWEEN PETITIONERS AND RESPONDENT CASTRO, THE
LATTER SHOULD SUFFER THE CONSEQUENCES OF THE FRAUD PERPETRATED BY THE VALENCIA SPOUSES, IN AS
MUCH AS IT WAS THRU RESPONDENT CASTRO'S NEGLIGENCE OR ACQUIESCENSE IF NOT ACTUAL CONNIVANCE
THAT THE PERPETRATION OF SAID FRAUD WAS MADE POSSIBLE.

THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF THE DEPOSIT BY RESPONDENT CASTRO OF
P3,383.00 WITH THE COURT BELOW AS A TENDER AND CONSIGNATION OF PAYMENT SUFFICIENT TO DISCHARGE
SAID RESPONDENT FROM HER OBLIGATION WITH PETITIONER BANK.

VI

THE COURT OF APPEALS ERRED IN NOT DECLARING AS VALID AND BINDING UPON RESPONDENT CASTRO THE
HOLDING OF THE SALE ON FORECLOSURE ON THE BUSINESS DAY NEXT FOLLOWING THE ORIGINALLY SCHEDULED
DATE THEREFOR WHICH WAS DECLARED A HOLIDAY WITHOUT NECESSITY OF FURTHER NOTICE THEREOF.

The issue raised in the first three (3) assignment of errors is whether or not respondent court correctly affirmed the lower court in
declaring the promissory note (Exhibit 2) invalid insofar as they affect respondent Castro vis-a-vis petitioner bank, and the mortgage
contract (Exhibit 6) valid up to the amount of P3,000.00 only.

Respondent court declared that the consent of Castro to the promissory note (Exhibit 2) where she signed as co-maker with the
Valencias as principal borrowers and her acquiescence to the mortgage contract (Exhibit 6) where she encumbered her property to
secure the amount of P6,000.00 was obtained by fraud perpetrated on her by the Valencias who had abused her confidence, taking
advantage of her old age and ignorance of her financial need. Respondent court added that "the mandate of fair play decrees that
she should be relieved of her obligation under the contract" pursuant to Articles 24 7 and 1332 8 of the Civil Code.

The decision in effect relieved Castro of any liability to the promissory note (Exhibit 2) and the mortgage contract (Exhibit 6) was
deemed valid up to the amount of P3,000.00 only which was equivalent to her personal loan to the bank.

Petitioners argued that since the Valencias were solely declared in the decision to be responsible for the fraud against Castro, in the
light of the res inter alios acta rule, a finding of fraud perpetrated by the spouses against Castro cannot be taken to operate
prejudicially against the bank. Petitioners concluded that respondent court erred in not giving effect to the promissory note (Exhibit
2) insofar as they affect Castro and the bank and in declaring that the mortgage contract (Exhibit 6) was valid only to the extent of
Castro's personal loan of P3,000.00.

The records of the case reveal that respondent court's findings of fraud against the Valencias is well supported by evidence.
Moreover, the findings of fact by respondent court in the matter is deemed final. 9 The decision declared the Valencias solely
responsible for the defraudation of Castro. Petitioners' contention that the decision was silent regarding the participation of the
bank in the fraud is, therefore, correct.

We cannot agree with the contention of petitioners that the bank was defrauded by the Valencias. For one, no claim was made on
this in the lower court. For another, petitioners did not submit proof to support its contention.

At any rate, We observe that while the Valencias defrauded Castro by making her sign the promissory note (Exhibit 2) and the
mortgage contract (Exhibit 6), they also misrepresented to the bank Castro's personal qualifications in order to secure its consent to
the loan. This must be the reason which prompted the bank to contend that it was defrauded by the Valencias. But to reiterate, We
cannot agree with the contention for reasons above-mentioned. However, if the contention deserves any consideration at all, it is in
indicating the admission of petitioners that the bank committed mistake in giving its consent to the contracts.
Thus, as a result of the fraud upon Castro and the misrepresentation to the bank inflicted by the Valencias both Castro and the bank
committed mistake in giving their consents to the contracts. In other words, substantial mistake vitiated their consents given. For if
Castro had been aware of what she signed and the bank of the true qualifications of the loan applicants, it is evident that they would
not have given their consents to the contracts.

Pursuant to Article 1342 of the Civil Code which provides:

Art. 1342. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created
substantial mistake and the same is mutual.

We cannot declare the promissory note (Exhibit 2) valid between the bank and Castro and the mortgage contract (Exhibit 6) binding
on Castro beyond the amount of P3,000.00, for while the contracts may not be invalidated insofar as they affect the bank and Castro
on the ground of fraud because the bank was not a participant thereto, such may however be invalidated on the ground of
substantial mistake mutually committed by them as a consequence of the fraud and misrepresentation inflicted by the Valencias.
Thus, in the case of Hill vs. Veloso, 10this Court declared that a contract may be annulled on the ground of vitiated consent if deceit
by a third person, even without connivance or complicity with one of the contracting parties, resulted in mutual error on the part of
the parties to the contract.

Petitioners argued that the amended complaint fails to contain even a general averment of fraud or mistake, and its mention in the
prayer is definitely not a substantial compliance with the requirement of Section 5, Rule 8 of the Rules of Court. The records of the
case, however, will show that the amended complaint contained a particular averment of fraud against the Valencias in full
compliance with the provision of the Rules of Court. Although, the amended complaint made no mention of mistake being incurred
in by the bank and Castro, such mention is not essential in order that the promissory note (Exhibit 2) may be declared of no binding
effect between them and the mortgage (Exhibit 6) valid up to the amount of P3,000.00 only. The reason is that the mistake they
mutually suffered was a mere consequence of the fraud perpetrated by the Valencias against them. Thus, the fraud particularly
averred in the complaint, having been proven, is deemed sufficient basis for the declaration of the promissory note (Exhibit 2) invalid
insofar as it affects Castro vis-a-vis the bank, and the mortgage contract (Exhibit 6) valid only up to the amount of P3,000.00.

The second issue raised in the fourth assignment of errors is who between Castro and the bank should suffer the consequences of
the fraud perpetrated by the Valencias.

In attributing to Castro an consequences of the loss, petitioners argue that it was her negligence or acquiescence if not her actual
connivance that made the fraud possible.

Petitioners' argument utterly disregards the findings of respondent Court of Appeals wherein petitioners' negligence in the contracts
has been aptly demonstrated, to wit:

A witness for the defendant bank, Rodolfo Desiderio claims he had subjected the plaintiff-appellee to several
interviews. If this were true why is it that her age was placed at 61 instead of 70; why was she described in the
application (Exh. B-1-9) as drug manufacturer when in fact she was not; why was it placed in the application that
she has income of P20,000.00 when according to plaintiff-appellee, she his not even given such kind of information
-the true fact being that she was being paid P1.20 per picul of the sugarcane production in her hacienda and 500
cavans on the palay production. 11

From the foregoing, it is evident that the bank was as much , guilty as Castro was, of negligence in giving its consent to the contracts.
It apparently relied on representations made by the Valencia spouses when it should have directly obtained the needed data from
Castro who was the acknowledged owner of the property offered as collateral. Moreover, considering Castro's personal
circumstances – her lack of education, ignorance and old age – she cannot be considered utterly neglectful for having been
defrauded. On the contrary, it is demanded of petitioners to exercise the highest order of care and prudence in its business dealings
with the Valencias considering that it is engaged in a banking business –a business affected with public interest. It should have
ascertained Castro's awareness of what she was signing or made her understand what obligations she was assuming, considering
that she was giving accommodation to, without any consideration from the Valencia spouses.

Petitioners further argue that Castro's act of holding the Valencias as her agent led the bank to believe that they were authorized to
speak and bind her. She cannot now be permitted to deny the authority of the Valencias to act as her agent for one who clothes
another with apparent authority as her agent is not permitted to deny such authority.
The authority of the Valencias was only to follow-up Castro's loan application with the bank. They were not authorized to borrow for
her. This is apparent from the fact that Castro went to the Bank to sign the promissory note for her loan of P3,000.00. If her act had
been understood by the Bank to be a grant of an authority to the Valencia to borrow in her behalf, it should have required a special
power of attorney executed by Castro in their favor. Since the bank did not, We can rightly assume that it did not entertain the
notion, that the Valencia spouses were in any manner acting as an agent of Castro.

When the Valencias borrowed from the Bank a personal loan of P3,000.00 evidenced by a promissory note (Exhibit 2) and
mortgaged (Exhibit 6) Castro's property to secure said loan, the Valencias acted for their own behalf. Considering however that for
the loan in which the Valencias appeared as principal borrowers, it was the property of Castro that was being mortgaged to secure
said loan, the Bank should have exercised due care and prudence by making proper inquiry if Castro's consent to the mortgage was
without any taint or defect. The possibility of her not knowing that she signed the promissory note (Exhibit 2) as co-maker with the
Valencias and that her property was mortgaged to secure the two loans instead of her own personal loan only, in view of her
personal circumstances – ignorance, lack of education and old age – should have placed the Bank on prudent inquiry to protect its
interest and that of the public it serves. With the recent occurrence of events that have supposedly affected adversely our banking
system, attributable to laxity in the conduct of bank business by its officials, the need of extreme caution and prudence by said
officials and employees in the discharge of their functions cannot be over-emphasized.

Question is, likewise, raised as to the propriety of respondent court's decision which declared that Castro's consignation in court of
the amount of P3,383.00 was validly made. It is contended that the consignation was made without prior offer or tender of payment
to the Bank, and it therefore, not valid. In holding that there is a substantial compliance with the provision of Article 1256 of the Civil
Code, respondent court considered the fact that the Bank was holding Castro liable for the sum of P6,000.00 plus 12% interest per
annum, while the amount consigned was only P3,000.00 plus 12% interest; that at the time of consignation, the Bank had long
foreclosed the mortgage extrajudicially and the sale of the mortgage property had already been scheduled for April 10, 1961 for
non-payment of the obligation, and that despite the fact that the Bank already knew of the deposit made by Castro because the
receipt of the deposit was attached to the record of the case, said Bank had not made any claim of such deposit, and that therefore,
Castro was right in thinking that it was futile and useless for her to make previous offer and tender of payment directly to the Bank
only in the aforesaid amount of P3,000.00 plus 12% interest. Under the foregoing circumstances, the consignation made by Castro
was valid. if not under the strict provision of the law, under the more liberal considerations of equity.

The final issue raised is the validity or invalidity of the extrajudicial foreclosure sale at public auction of the mortgaged property that
was held on April 11, 1961.

Petitioners contended that the public auction sale that was held on April 11, 1961 which was the next business day after the
scheduled date of the sale on April 10, 1961, a special public holiday, was permissible and valid pursuant to the provisions of Section
31 of the Revised Administrative Code which ordains:

Pretermission of holiday. – Where the day, or the last day, for doing any act required or permitted by law falls on a
holiday, the act may be done on the next succeeding business day.

Respondent court ruled that the aforesaid sale is null and void, it not having been carried out in accordance with Section 9 of Act No.
3135, which provides:

Section 9. – Notice shall be given by posting notices of the sale for not less than twenty days in at least three public
places of the municipality or city where the property is situated, and if such property is worth more than four
hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a
newspaper of general circulation in the municipality or city.

We agree with respondent court. The pretermission of a holiday applies only "where the day, or the last day for doing any
act required or permitted by law  falls on a holiday," or when the last day of a given period for doing an act falls on a holiday. It does
not apply to a day fixed by an office or officer of the government for an act to be done, as distinguished from a period of time within
which an act should be done, which may be on any day within that specified period. For example, if a party is required by law to file
his answer to a complaint within fifteen (15) days from receipt of the summons and the last day falls on a holiday, the last day is
deemed moved to the next succeeding business day. But, if the court fixes the trial of a case on a certain day but the said date is
subsequently declared a public holiday, the trial thereof is not automatically transferred to the next succeeding business day. Since
April 10, 1961 was not the day or the last day set by law for the extrajudicial foreclosure sale, nor the last day of a given period but a
date fixed by the deputy sheriff, the aforesaid sale cannot legally be made on the next succeeding business day without the notices
of the sale on that day being posted as prescribed in Section 9, Act No. 3135.
WHEREFORE, finding no reversible error in the judgment under review, We affirm the same in toto. No pronouncement as to cost.
G.R. No. L-25950        December 24, 1926

E. AWAD, plaintiff-appellant, 
vs.
FILMA MERCANTILE CO., INC., defendant-appellee.

M. H. de Joya and Ramon P. Gomez for appellant. 

Crossfield and O'Brien for appellee.

OSTRAND, J.:

Early in the month of September, 1924, the plaintiff, doing business in the Philippine Islands under the name of E. Awad & Co.,
delivered certain merchandise of the invoice value of P11,140 to Chua Lioc, a merchant operating under the name of Hang Chua Co.
in Manila, said merchandise to be sold on commission by Chua Lioc. Representing himself as being the owner of the merchandise,
Chua Lioc, on September 8, 1924, sold it to the defendant for the sum of P12,155.60. He owed the Philippine Manufacturing Co., the
sum of P3,480, which the defendant agreed to pay, and was also indebted to the defendant itself in the sum of P2,017.98. The total
amount of the two debts, P5,497.98, was deducted from the purchase price, leaving a balance of P6,657.52 which the defendant
promised to pay to Chua Lioc on or before October 9, 1924.

The merchandise so purchased on September 9, was delivered to the defendant, who immediately offered it for sale. Three days
later D. J. Awad, the representative of the plaintiff in the Philippine Islands; having ascertained that the goods entrusted to Chua Lioc
was being offered for sale by the defendant, obtained authorization from Chua Lioc to collect the sum of P11,707 from said
defendant and informed the latter's treasurer of the facts above set forth. On September 15, D. J. Awad, in behalf of E. Awad & Co.,
wrote a letter to the defendant corporation advising it that, inasmuch as the merchandise belonged to E. Awad & Co., the purchase
price should be paid to them, to which letter, the defendant, on September 18, 1924, made the following answer:

Messrs. E. AWAD & CO.

435 Juan Luna Manila.

GENTLEMEN: We are in receipt of your letter of September 15, 1924, in which you state that certain blankets and shirts were
brought from you by the Chinaman Chua Lioc under false pretenses on consignment, basis, and in which you say that the
merchandise is yours and we should make payment to you for said merchandise. In answer to your letter, we beg to say to you that
the blankets and shirts in question, together with other merchandise, were purchased and received by us from the Chinaman Chua
Lioc on September 9, 1924, in the ordinary course of business, and that there is now due from us to the said Chinaman a balance of
P6,657.52, which is payable on October 9, 1924. In view of these facts, we are unable to comply with your request, and would advise
you, in case this Chinaman is indebted to you for said merchandise, to take the necessary steps through the Court to secure the
payment of this balance due to him to your firm, inasmuch as if you do not do so, we shall be obliged to pay the balance which we
owe for said merchandise directly to him.

Yours respectfully,

FILMA MERCHANTILE CO. INC.

On the same date, September 18, 1924, the Philippine Trust Company, brought an action, civil case No. 26934, against Chua Lioc for
the recovery of the sum of P1,036.36 and under a writ of attachment garnished the balance due Chua Lioc from the defendant. On
October 7, E. Awad also brought an action, civil case No. 27016, against Chua Lioc for the recovery of the sum of P11,140, the invoice
value of the merchandise above-mentioned and also obtained a writ of attachment under which notice of garnishment of the said
aforesaid balance we served upon the herein defendant.

The complaint in the present action was filed on November 26, 1924, the plaintiff demanding payment of the same sum of P11,140
for which action had already been brought against Chua Lioc. The defendant, its answer, set up as special defense that it brought the
merchandise in good faith and without any knowledge whether of the person from whom or the condition under which the said
merchandise had been acquired by Chua Lioc or Hang Chuan Co.; that the defendant therefore had acquired title to the merchandise
purchased; that the balance of P6,657.52, now in the hands of the defendant had been attached in the two actions brought on
September 18, and October 7, respectively, and garnishment served upon the defendant, who therefore, holds the money subject to
the orders of the court in the cases above-mentioned, but which sum the defendant is able and willing to pay at any time when the
court decides to whom the money lawfully pertains.1awphil.net

Upon trial, the court below dismissed the case without costs on the ground that the plaintiff was only entitled to payment of the
sum of P6,657.52, but which sum the defendant had the right to retain subject to the orders of the court in cases Nos. 26134 and
27016. From this judgment the plaintiff appealed.

The law applicable to the case is well settled. Article 246 of the Code of Commerce reads as follows:

When the agent transacts business in his own name, it shall not be necessary for him to state who is the principal and he
shall be directly liable, as if the business were for his own account, to the persons with whom he transacts the same, said
persons not having any right of action against the principal, nor the latter against the former, the liabilities of the principal
and of the agent to each other always being reserved.

The rule laid down in the article quoted is contrary to the general rule in the United States as to purchases of merchandise from
agents with undisclosed principal, but it has been followed in a number of cases and is the law in its jurisdiction. (Pastells &
Regordosa vs. Hollman & Co., 2 Phil., 235; Castle Bros., Wolf & Sons vs. Go-Juno, & Phil., 144; Lim Tiu vs. Ruiz y Rementeria, 15 Phil.,
367.) But the appellant points out several circumstances which, in his opinion, indicate that the defendant-appellee was aware of
the condition under which the merchandise was entrusted to the agent Chua Lioc and therefore did not purchase the goods in good
faith. This, if true, would, of course, lead to a decision of the case in favor of the plaintiff, but there is, in our opinion, nothing
conclusive about the circumstances referred to and they are not sufficient to overcome the presumption of good faith.

The appealed judgment is in accordance with the law and the facts and is affirmed with the costs against the appellant. So ordered.
G.R. Nos. L-25836-37 January 31, 1981

THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee, 

vs.
JOSE M. ARUEGO, defendant-appellant.

FERNANDEZ, J.:

The defendant, Jose M. Aruego, appealed to the Court of Appeals from the order of the Court of First Instance of Manila, Branch XIII,
in Civil Case No. 42066 denying his motion to set aside the order declaring him in default, 1and from the order of said court in the
same case denying his motion to set aside the judgment rendered after he was declared in default. 2 These two appeals of the
defendant were docketed as CA-G.R. NO. 27734-R and CA-G.R. NO. 27940-R, respectively.

Upon motion of the defendant on July 25, 1960, 3 he was allowed by the Court of Appeals to file one consolidated record on appeal
of CA-G.R. NO. 27734-R and CA-G.R. NO. 27940-R. 4

In a resolution promulgated on March 1, 1966, the Court of Appeals, First Division, certified the consolidated appeal to the Supreme
Court on the ground that only questions of law are involved. 5

On December 1, 1959, the Philippine Bank of Commerce instituted against Jose M. Aruego Civil Case No. 42066 for the recovery of
the total sum of about P35,000.00 with daily interest thereon from November 17, 1959 until fully paid and commission equivalent to
3/8% for every thirty (30) days or fraction thereof plus attorney's fees equivalent to 10% of the total amount due and costs. 6 The
complaint filed by the Philippine Bank of Commerce contains twenty-two (22) causes of action referring to twenty-two (22)
transactions entered into by the said Bank and Aruego on different dates covering the period from August 28, 1950 to March 14,
1951. 7 The sum sought to be recovered represents the cost of the printing of "World Current Events," a periodical published by the
defendant. To facilitate the payment of the printing the defendant obtained a credit accommodation from the plaintiff. Thus, for
every printing of the "World Current Events," the printer, Encal Press and Photo Engraving, collected the cost of printing by drawing
a draft against the plaintiff, said draft being sent later to the defendant for acceptance. As an added security for the payment of the
amounts advanced to Encal Press and Photo-Engraving, the plaintiff bank also required defendant Aruego to execute a trust receipt
in favor of said bank wherein said defendant undertook to hold in trust for plaintiff the periodicals and to sell the same with the
promise to turn over to the plaintiff the proceeds of the sale of said publication to answer for the payment of all obligations arising
from the draft. 8

Aruego received a copy of the complaint together with the summons on December 2, 1959. 9 On December 14, 1959 defendant filed
an urgent motion for extension of time to plead, and set the hearing on December 16, 1959. 10 At the hearing, the court denied
defendant's motion for extension. Whereupon, the defendant filed a motion to dismiss the complaint on December 17, 1959 on the
ground that the complaint states no cause of action because:

a) When the various bills of exchange were presented to the defendant as drawee for acceptance, the amounts thereof had already
been paid by the plaintiff to the drawer (Encal Press and Photo Engraving), without knowledge or consent of the defendant drawee.

b) In the case of a bill of exchange, like those involved in the case at bar, the defendant drawee is an accommodating party only for
the drawer (Encal Press and Photo-Engraving) and win be liable in the event that the accommodating party (drawer) fails to pay its
obligation to the plaintiff. 11

The complaint was dismissed in an order dated December 22, 1959, copy of which was received by the defendant on December 24,
1959. 12

On January 13, 1960, the plaintiff filed a motion for reconsideration. 13 On March 7, 1960, acting upon the motion for reconsideration
filed by the plaintiff, the trial court set aside its order dismissing the complaint and set the case for hearing on March 15, 1960 at
8:00 in the morning. 14 A copy of the order setting aside the order of dismissal was received by the defendant on March 11, 1960 at
5:00 o'clock in the afternoon according to the affidavit of the deputy sheriff of Manila, Mamerto de la Cruz. On the following day,
March 12, 1960, the defendant filed a motion to postpone the trial of the case on the ground that there having been no answer as
yet, the issues had not yet been joined. 15 On the same date, the defendant filed his answer to the complaint interposing the
following defenses: That he signed the document upon which the plaintiff sues in his capacity as President of the Philippine
Education Foundation; that his liability is only secondary; and that he believed that he was signing only as an accommodation
party. 16

On March 15, 1960, the plaintiff filed an ex parte motion to declare the defendant in default on the ground that the defendant
should have filed his answer on March 11, 1960. He contends that by filing his answer on March 12, 1960, defendant was one day
late. 17 On March 19, 1960 the trial court declared the defendant in default. 18 The defendant learned of the order declaring him in
default on March 21, 1960. On March 22, 1960 the defendant filed a motion to set aside the order of default alleging that although
the order of the court dated March 7, 1960 was received on March 11, 1960 at 5:00 in the afternoon, it could not have been
reasonably expected of the defendant to file his answer on the last day of the reglementary period, March 11, 1960, within office
hours, especially because the order of the court dated March 7, 1960 was brought to the attention of counsel only in the early hours
of March 12, 1960. The defendant also alleged that he has a good and substantial defense. Attached to the motion are the affidavits
of deputy sheriff Mamerto de la Cruz that he served the order of the court dated March 7, 1960 on March 11, 1960, at 5:00 o'clock
in the afternoon and the affidavit of the defendant Aruego that he has a good and substantial defense. 19 The trial court denied the
defendant's motion on March 25, 1960. 20 On May 6, 1960, the trial court rendered judgment sentencing the defendant to pay to the
plaintiff the sum of P35,444.35 representing the total amount of his obligation to the said plaintiff under the twenty-two (22) causes
of action alleged in the complaint as of November 15, 1957 and the sum of P10,000.00 as attorney's fees. 21

On May 9, 1960 the defendant filed a notice of appeal from the order dated March 25, 1961 denying his motion to set aside the
order declaring him in default, an appeal bond in the amount of P60.00, and his record on appeal. The plaintiff filed his opposition to
the approval of defendant's record on appeal on May 13, 1960. The following day, May 14, 1960, the lower court dismissed
defendant's appeal from the order dated March 25, 1960 denying his motion to set aside the order of default. 22 On May 19, 1960,
the defendant filed a motion for reconsideration of the trial court's order dismissing his appeal. 23 The plaintiff, on May 20, 1960,
opposed the defendant's motion for reconsideration of the order dismissing appeal. 24 On May 21, 1960, the trial court reconsidered
its previous order dismissing the appeal and approved the defendant's record on appeal. 25 On May 30, 1960, the defendant received
a copy of a notice from the Clerk of Court dated May 26, 1960, informing the defendant that the record on appeal filed ed by the
defendant was forwarded to the Clerk of Court of Appeals. 26

On June 1, 1960 Aruego filed a motion to set aside the judgment rendered after he was declared in default reiterating the same
ground previously advanced by him in his motion for relief from the order of default. 27 Upon opposition of the plaintiff filed on June
3, 1960, 28 the trial court denied the defendant's motion to set aside the judgment by default in an order of June 11, 1960. 29 On June
20, 1960, the defendant filed his notice of appeal from the order of the court denying his motion to set aside the judgment by
default, his appeal bond, and his record on appeal. The defendant's record on appeal was approved by the trial court on June 25,
1960. 30 Thus, the defendant had two appeals with the Court of Appeals: (1) Appeal from the order of the lower court denying his
motion to set aside the order of default docketed as CA-G.R. NO. 27734-R; (2) Appeal from the order denying his motion to set aside
the judgment by default docketed as CA-G.R. NO. 27940-R.

In his brief, the defendant-appellant assigned the following errors:

THE LOWER COURT ERRED IN HOLDING THAT THE DEFENDANT WAS IN DEFAULT.

II

THE LOWER COURT ERRED IN ENTERTAINING THE MOTION TO DECLARE DEFENDANT IN DEFAULT ALTHOUGH AT
THE TIME THERE WAS ALREADY ON FILE AN ANSWER BY HIM WITHOUT FIRST DISPOSING OF SAID ANSWER IN AN
APPROPRIATE ACTION.

III

THE LOWER COURT ERRED IN DENYING DEFENDANT'S PETITION FOR RELIEF OF ORDER OF DEFAULT AND FROM
JUDGMENT BY DEFAULT AGAINST DEFENDANT. 31

It has been held that to entitle a party to relief from a judgment taken against him through his mistake, inadvertence, surprise or
excusable neglect, he must show to the court that he has a meritorious defense. 32 In other words, in order to set aside the order of
default, the defendant must not only show that his failure to answer was due to fraud, accident, mistake or excusable negligence but
also that he has a meritorious defense.

The record discloses that Aruego received a copy of the complaint together with the summons on December 2, 1960; that on
December 17, 1960, the last day for filing his answer, Aruego filed a motion to dismiss; that on December 22, 1960 the lower court
dismissed the complaint; that on January 23, 1960, the plaintiff filed a motion for reconsideration and on March 7, 1960, acting upon
the motion for reconsideration, the trial court issued an order setting aside the order of dismissal; that a copy of the order was
received by the defendant on March 11, 1960 at 5:00 o'clock in the afternoon as shown in the affidavit of the deputy sheriff; and
that on the following day, March 12, 1960, the defendant filed his answer to the complaint.

The failure then of the defendant to file his answer on the last day for pleading is excusable. The order setting aside the dismissal of
the complaint was received at 5:00 o'clock in the afternoon. It was therefore impossible for him to have filed his answer on that
same day because the courts then held office only up to 5:00 o'clock in the afternoon. Moreover, the defendant immediately filed
his answer on the following day.

However, while the defendant successfully proved that his failure to answer was due to excusable negligence, he has failed to show
that he has a meritorious defense. The defendant does not have a good and substantial defense.

Defendant Aruego's defenses consist of the following:

a) The defendant signed the bills of exchange referred to in the plaintiff's complaint in a representative capacity, as the then
President of the Philippine Education Foundation Company, publisher of "World Current Events and Decision Law Journal," printed
by Encal Press and Photo-Engraving, drawer of the said bills of exchange in favor of the plaintiff bank;

b) The defendant signed these bills of exchange not as principal obligor, but as accommodation or additional party obligor, to add to
the security of said plaintiff bank. The reason for this statement is that unlike real bills of exchange, where payment of the face value
is advanced to the drawer only upon acceptance of the same by the drawee, in the case in question, payment for the supposed bills
of exchange were made before acceptance; so that in effect, although these documents are labelled bills of exchange, legally they
are not bills of exchange but mere instruments evidencing indebtedness of the drawee who received the face value thereof, with the
defendant as only additional security of the same. 33

The first defense of the defendant is that he signed the supposed bills of exchange as an agent of the Philippine Education
Foundation Company where he is president. Section 20 of the Negotiable Instruments Law provides that "Where the instrument
contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative
capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent or
as filing a representative character, without disclosing his principal, does not exempt him from personal liability."

An inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was signing as a representative
of the Philippine Education Foundation Company. 34 He merely signed as follows: "JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO
For failure to disclose his principal, Aruego is personally liable for the drafts he accepted.

The defendant also contends that he signed the drafts only as an accommodation party and as such, should be made liable only after
a showing that the drawer is incapable of paying. This contention is also without merit.

An accommodation party is one who has signed the instrument as maker, drawer, indorser, without receiving value therefor and for
the purpose of lending his name to some other person. Such person is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of the taking of the instrument knew him to be only an accommodation party. 35 In lending
his name to the accommodated party, the accommodation party is in effect a surety for the latter. He lends his name to enable the
accommodated party to obtain credit or to raise money. He receives no part of the consideration for the instrument but assumes
liability to the other parties thereto because he wants to accommodate another. In the instant case, the defendant signed as a
drawee/acceptor. Under the Negotiable Instrument Law, a drawee is primarily liable. Thus, if the defendant who is a lawyer, he
should not have signed as an acceptor/drawee. In doing so, he became primarily and personally liable for the drafts.

The defendant also contends that the drafts signed by him were not really bills of exchange but mere pieces of evidence of
indebtedness because payments were made before acceptance. This is also without merit. Under the Negotiable Instruments Law, a
bill of exchange is an unconditional order in writting addressed by one person to another, signed by the person giving it, requiring
the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or
to bearer. 36 As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered a bill of
exchange. The nature of acceptance is important only in the determination of the kind of liabilities of the parties involved, but not in
the determination of whether a commercial paper is a bill of exchange or not.

It is evident then that the defendant's appeal can not prosper. To grant the defendant's prayer will result in a new trial which will
serve no purpose and will just waste the time of the courts as well as of the parties because the defense is nil or ineffective. 37

WHEREFORE, the order appealed from in Civil Case No. 42066 of the Court of First Instance of Manila denying the petition for relief
from the judgment rendered in said case is hereby affirmed, without pronouncement as to costs.
G.R. No. L-8988            March 30, 1916

HARTFORD BEAUMONT, assignee of W. Borck, plaintiff-appellee, 

vs.
MAURO PRIETO, BENITO LEGARDA, JR., and BENITO VALDES as administrator of the estate of Benito Legarda, deceased, and
BENITO VALDES, defendants and appellants. (See U.S. Supreme Court decision in this same case., p. 985, post.)

Hausserman, Cohn & Fisher (and subsequently) Gilbert, Cohn & Fisher, and Escaler & Salas and Ledesma, Lim & Irurreta Goyena for
appellants Legarda and Valdes.
No appearance for the other appellants.
Beaumont & Tenney and Aitken & DeSelms for appellee.

ARAULLO, J.:

Negotiations having been had, prior to December 4, 1911, between W. Borck and Benito Valdes, relative to the purchase, at first, of
a part of the Nagtajan Hacienda, situated in the district of Sampaloc of this city of Manila and belonging to Benito Legarda, and later
on, of the entire hacienda, said Benito Valdes, on the date above-mentioned, addressed to said Borck the following letter (Exhibit E):

MANILA, December 4, 1911.

Mr. W. BORCK,
Real Estate Agent,
Manila, P.I.

SIR: In compliance with your request I herewith give you an option for three months to buy the property of Mr. Benito
Legarda known as the Nagtahan Hacienda, situated in the district of Sampaloc, Manila, and consisting of about, 1,993,000
sq. meters of land, for the price of its assessed government valuation.

B. VALDES.

Subsequent to the said date, W. Borck addressed to Benito Valdes several letters relative to the purchase and sale of the hacienda,
and as he did not obtain what he expected or believe he was entitled to obtain from Valdes, he filed the complaint that originated
these proceedings, which was amended on the 10th of the following month, April, by bringing his action not only against Benito
Valdes but also against Benito Legarda, referred to in the letter above quoted.

In said amended complaint it is alleged that the defendant Benito Legarda was the owners of fee simple of the Nagtajan Hacienda,
and that Benito Valdes was his attorney in fact and had acted as such on the occasions reffered to in the complaint by virtue of a
power of attorney duly executed under notarial seal and presented in the office of the register of deeds, a copy of which, marked as
Exhibit A, was attached to the complaint; that on or above December 4, 1911, the defendant Benito Valdez gave to the plaintiff the
document written and signed by him, Valdes, quoted at the beginning of this decision, to wit, the letter afore-mentioned, which
document is inserted in the amendment to the complaint; that on January 19, 1912, while the offer or option mentioned in said
document still stood, the plaintiff in writing accepted the terms of said offer and requested of Valdes to be allowed to inspect the
property, titles and other documents pertaining to the property, and offered to pay to the defendant, immediately and in cash as
soon as a reasonable examination could be made of said property titles and other documents, the price stipulated in the contract for
said hacienda which is also described in the complaint, as well as its value and the revenue annually obtainable therefrom; that, in
spite of the frequent demands made by the plaintiff, the defendants ha persistently refused to deliver to him the property titles and
other documents relative to said property and to execute any instrument of conveyance thereof in his favor; that the plaintiff, on
account of said refusal on the part of the defendant Valdes, based on instructions from the defendant Legarda, had suffered
damages in the amount of P760,000, and, by the tardiness, failure and refusal of the defend to comply with his obligation, the
plaintiff had incurred great expense and suffered great losses, whereby he was prejudiced in the mount of P80,000; that the plaintiff
was and had been, on all occasions, willing to comply with the obligation imposed upon him to pay to the defendants the full
stipulated price. The plaintiff concluded by praying: (1) That the defendant Valdes be ordered to execute the necessary formal
document as proof of the contract or obligation before referred to, and to incorporate the same in a public instrument, and that the
defendant Legarda be ordered to convey in absolute sale to the plaintiff, either directly or through the defendant Valdes, by a
property deed, the said Nagtajan Hacienda, described in the complaint; (2) that both defendants and each of them be ordered and
required to render an account to the plaintiff of such rents and profits as they may have collected from the said property from the
19th of January, 1912, until the date of the execution of the judgment that may be rendered in these proceedings, together with
legal interest on the amounts thereof; (3) that, in case it can shown that specific performance of the contract is impossible, that the
defendant be ordered to pay the plaintiff damages in the sum of P760,000; and finally, that the plaintiff have recovered the interests
and the costs in these proceedings.

While this complaint was not yet amended, the defendant Valdes filed a demurer, on the grounds that there was a misjoinder of
parties on account of the erroneous inclusion therein of the defendant Valdes, that the complaint did not set forth fact that
constituted a cause of action against said defendant, and that it was ambiguous, unintelligible and vague. This demurrer was
overruled on April 11, 1912.

The defendant Benito Legarda also interposed a demurrer to the amended complaint on the grounds that the facts therein set forth
did not constitute a right of action against him. This demurrer was likewise overruled on June 26, 1912.

On the 22nd of the same month of June, the court, ruling on a petition made in voluntary insolvency proceedings brought on May
10, 1912, by the plaintiff W. Borck, and in view of the agreement entered into in said proceedings by all of the latter's creditors,
ordered that the plaintiff Borck be substituted in the instant proceedings by Hartford Beaumont, as the trustee appointed therein
and representative of the said plaintiff's creditors, the assignee of his rights, in said proceedings.

The defendant Benito Valdes, answering the complaint as amended, denied each and all of the allegations thereof from paragraph 4,
except those which the admitted in the special defense, in which he alleged: (1) That the option given by him to the plaintiff was an
option without consideration and subject to the approval of the defendant Legarda; (2) that, as the defendant Legarda has not
approved said option, it had no value whatever, according to the understanding and agreement between himself and the plaintiff;
(3) that the option offered by him to the plaintiff had not been accepted by the latter within a reasonable period of time nor during
the time it was in force, in accordance with the conditions agreed upon between the parties; (4) that he sighed the letter of
December 4, in which he tendered to the plaintiff the option which has given rise to this suit, through deceit employed by the
plaintiff with respect to its contents, for the plaintiff had stated to him that it was written in accordance with what had been agreed
upon by both parties, without which statement he would not have signed it; (5) that the plaintiff, on the prior to January 19, 1912,
was insolvent, and had neither proven his solvency nor offered to pay the price in cash, as he had agreed to do; and (6) that he,
Valdes, was merely a general attorney in fact of the defendant Benito Legarda and had no interest whatever in the subject-matter of
the suit, nor in the litigation, and in all his acts had carried out the instructions of the said Legarda. He finally prayed that the
complaint be dismissed with costs against the plaintiff.

The defendant Benito Legarda, answering the complaint, denied each and all of the allegations thereof, from paragraph 3, except
such as he expressly admitted and were contained in the special defense inserted in said answer, in which he alleged: (1) That his
codefendant Benito Valdes, though his attorney-in-fact, had instructions not to give any option on the hacienda in question without
Legarda's previous knowledge and consent; (2) that on and before December 4, 1911, the plaintiff had knowledge of the scope and
limitations of the powers conferred upon the defendant Valdes; (3) that the latter gave the option, alleged by the plaintiff, without
his (Legarda's) knowledge or consent, thus violating the instructions he had given to the said Valdes; (4) that he had disapproved and
rejected the option in question as soon as he had learned of it; (5) that he had been informed, and therefore alleged as true, that the
option said to have been executed in behalf of the plaintiff had been obtained by the latter by a false and malicious interruption of
the letter of December 4, 1911, and that the plaintiff, availing himself of such interpretation, induced the defendant Valdes to sign
the said option; (6) that the option said to have been tendered to the plaintiff had not been legally accepted; and (7) that on the
subsequently to January 19, 1912, the date on which, according to the plaintiff, a tender of payment of the price of the
Nagtajan Hacienda, in accordance with its assessed value, was made to his codefendant Valdes, as well as to the date of the answer,
the plaintiff was insolvent.

After the hearing, in which the respective parties presented their evidence, the Court of First Instance of this city of Manila, on
February 12, 1912, rendered judgment in which he found; (1) That the instrument Exhibit E that is, the letter of December 4, 1911,
quoted at the beginning of this decision), as supported by Exhibit A (the power of attorney, a copy of which accompanied the
complaint) and as confirmed by Exhibit G (the letter of January 19, 1912, addressed by the plaintiff Borck to the defendant Valdes,
presented in evidence at the trial and of which mention will be made elsewhere herein), constituted a contract by which the
principal defendant undertook to convey to the plaintiff the property therein described; (2) that the plaintiff made a sufficient tender
of performance, of his part, of the contract, in accordance with section 347 of the Code of Civil Procedure; (3) that the defendants
had failed to execute such conveyance in accordance with said contract, and that the plaintiff was entitled to the specific
performance thereof, and to the net income, if any, obtained from the land since January 19, 1912, but that he had not shown
sufficient loss which entitle him to additional damage unless it subsequently should appear that a conveyance could not be made.
The court accordingly decreed: (1) That upon the payment by the plaintiff to the principal defendant, Benito Legarda, or to the clerk
of the court, of the sum of P307,000, the said defendant, or his codefendant and attorney-in-fact, should execute and deliver to the
plaintiff good and sufficient conveyance, free of all incumbrance, of the property described in Exhibits B and C, attached to the
plaintiffs complaint, so far as the same was included within the terms of Exhibit G; (2) that upon the said defendants' failure to
execute such conveyance within a reasonable time after such payment, the clear of the court should execute one, and the same
together with the decree, should constitute a true conveyance; (3) that if for any sufficient reason such conveyance could not then
be made, the plaintiff should have and recover from the defendant Legarda, as alternative damages, the sum of P73,000, with
interest thereon at 6 per cent per annum from March 13, 1912; and (4) that the defendants should render an accounting, within
thirty days, of the income and profits derived from said property since January 19, 1912, and pay the costs of the proceedings.

The parties having being notified of this judgment, the defendant Benito Legarda and Benito Valdes excepted thereto and at the
same time prayed that it be se aside and that they be granted a new trial on the grounds that the judgment was not sufficiently
supported by the evidence and was contrary to law, and that the findings of fact therein contained were manifestly and openly
contrary to the weight of the evidence. Their prayer having been denied by a ruling to which they also excepted, they have brought
these proceedings on appeal to the Supreme Court by the proper bill of exceptions, and have specified in their respective briefs
several errors which they allege the lower court committed. Some of these errors consist in that the trial judge overruled the
demurrer filed to the complaint; others, in that he admitted certain evidence and excluded others, this being the alleged cause of
the erroneous consideration of the instrument Exhibit E and of the rights and obligations derived from it, both with respect to the
plaintiff and the two defendants' and still others refer to the various statements in the judgment resulting from those findings and
on which the conclusions arrived at, have been founded.

The defendant Benito Legarda also alleged, among the said errors, as especially affecting his rights, that the court held that Benito
Valdes was his agent, empowered to execute contracts in his (Legarda's) name in respect to real property; that the court admitted in
evidence the document Exhibit A, introduced by the plaintiff, to wit, the copy of the power of attorney attached to the complaint,
which never was offered as such; and that he based one of his findings thereon.

The defendant Benito Valdes specified, also particularly with reference to himself, other errors consisting in the court having held
that he voluntarily executed the option in question, instead of holding that it was obtained through fraud; and likewise in holding
that the document Exhibit E was a contract of option and not an offer to sell, and in not holding that said option was an offer subject
to the approval of the defendant Legarda.

Inasmuch as it does not appear from the bill of exceptions that the defendants recorded the exceptions to the overruling of the
demurrer respectively filed to the complaint by both defendants, the assignment of error relative to the said ruling cannot be taken
into consideration by this Supreme Court.

The plaintiff's action is based on the failure of the defendant Valdes, as the agent or attorney in fact of the other defendant Benito
Legarda, to perform the obligation contracted by the Benito Valdes to sell to the plaintiff the property belonging to the said Legarda,
mentioned in the letter of December 4, 1911 (Exhibit E), within the period and for the price specified therein; and the object or
purpose of these proceedings is to require fulfillment of the said obligation and to secure the payment of a proper indemnity for
damages to the plaintiff because of its not having been duly and timely complied with.

Inasmuch as it was set forth in the document Exhibit E that the property known as the Nagtajan Hacienda, (an option to buy which
was given by the defendant Valdes to the plaintiff Borck) belonged to Benito Legarda; as negotiations had been undertaken prior to
the execution of the said document, between the plaintiff Borck and the defendant Valdes with respect to the maters set forth in
that document, by virtue of which Borck knew that Valdes was Legarda's agent or attorney-in-fact, although it appears in said
instrument that the agent Valdes acted in his own name; and, further, as the plaintiff in the complaint made the necessary
allegations to explain the relations that existed between the principal Legarda and the agent Valdez with regard to the said
document Exhibit E and the failure alleged by the plaintiff, to fulfill the stipulations therein contained; therefore, the facts alleged in
the complaint did constitute a right of action against either or both defendants, and the lower court did not err in so holding, for,
though the person who contracts with an agent has no action against the principal, pursuant to article 1717 of the Civil Code, when
the agent acts in his own name, as in such a case the agent would be directly liable to the person with whom he contracted as if it
were a personal matter of the agent's yet this does not occur when the acts performed by the agent involved the principal's own
things, and in the document Exhibit E, which was inserted in the complaint when the latter was amended, it appears that the
defendant Valdes, who signed the said document, stated that the property, the option to buy which he gave to the plaintiff, Borck,
belonged to Legarda. And as it is unquestionable that, pursuant to the above-cited provision of law, the action was properly brought
against Benito Legarda as Valdes' principal, it is also unquestionable that Valdes was properly included in the complaint as one of the
defendant, for said article 1717, in providing that in cases like the one here in question the person who contracted with the agent
has an action against the principal, does not say that such person does not have, and cannot bring an action against the agent also,
and the silence of the statute on this point should not be construed in that sense, when the rights and obligations, — the matter
brought into discussion by means of the action prosecuted, — cannot be legally and juridically determined without hearing both the
principal and the agent.

Section 114 of the Code of Civil Procedure in force, treating of the parties who should be included in an action as defendants,
includes any person who has or claims an interest in the controversy or the subject-mater thereof adverse to the plaintiff, or who is a
necessary party to a complete determination or settlement of the questions involved therein; and there can be no doubt whatever,
and the record itself shows, that the agent Benito Valdes was and in a necessary party in these proceedings for the complete and
proper determination of the matter involved.

As one of the allegations of the complaint was that the defendant Benito Valdes was the attorney in fact of Benito Legarda, the
owner of the Nagtajan Hacienda, the option to buy which was granted by the said defendant Valdes to the plaintiff Borck, in the
letter of December 4, 1911, Exhibit E, there was attached to the complaint a copy of the power of attorney marked Exhibit A, by
virtue of which, as therein also set forth, the defendant Benito Valdes, the attorney-in-fact of Benito Legarda, in giving to the plaintiff
the option to buy the said hacienda, had acted according to the aforesaid document Exhibit F, which was likewise inserted in the
amended complaint as a part thereof.

Inasmuch as the relation which, according to the plaintiff, existed between Benito Legarda and Benito Valdes as to the obligation
contracted by means of Exhibit E, and the fulfillment thereof was established by means of the said allegations, supported, as it
appeared, by the power of attorney Exhibit A, and by the letter or document Exhibit E (which were made by the plaintiff a part of the
complaint), the joining of the copy of the power of attorney to the complaint cannot be considered to have been done merely for
the purpose of attesting the personality of either of the defendants, but to show the legal status of each of them in the obligation
referred to, in view of the terms of the document Exhibit E, the authority under which the defendant Valdes acted in executing this
document, as well as the fact of hi having been granted such authority by the defendant Legarda, by means of said power of
attorney. So that as said two documents, to wit, Exhibit A or the power of attorney executed by Legarda in favor of Valdes,
authorizing him to perform various acts, among them, that of selling, exchanging, ceding, admitting in payment or by way of
compensation or in any other manner acquiring or conveying all kinds of real property for such prices and on such conditions he
might deem proper, and the document Exhibit E, or the letter setting forth the option given to the plaintiff Valdes to buy the said
Nagtajan Hacienda belonging to Legarda, cannot be considered separately, in view of the allegations of the complaint and the action
brought thereon against the two defendants; and as said two documents, each of complement of the other, constituted the basis of
the action brought in the complaint, and as their genuineness and due execution were not denied under oath by either of the two
defendants, as they might have done, pursuant to section 103 of the Code of Civil Procedure, the plaintiff was not obliged to present
at the trial, as proof, the aforementioned power of attorney to prove its existence and the fact of Valdes being his attorney in fact,
vested with the powers specified in this instrument, notwithstanding the general denial made by the defendant Legarda in his
answer of the allegations contained in the complaint from its third paragraph on, in which paragraph that averment is made,
supported by the copy of the said power of attorney attached to the complaint.

On the contrary, as the said document Exhibit A constitutes prima facie  proof of the fact that Benito Valdes is the attorney-in-fact of
Benito Legarda, and that he is vested with the powers specified therein, on account of Legarda's not having denied under oath the
genuiness and due execution of the said document, it was therefore incumbent upon Legarda himself to prove that he had not
executed the said power of attorney in Valdes' favor and that he had not conferred upon him, by virtue thereof, the powers therein
mentioned. (Merchant vs.International Banking Corporation, 6 Phil., 314; Papa vs. Martinez, 12 Phil., 613; Chinese Chamber of
Commercevs. Pua Te Ching, 14 Phil., 222; Banco Espanol-Filipino vs. McKay & Zoeller, 27 Phil., 183; Knight vs. Whitmore, 125 Cal.,
198; McCormick Harvesting Machine Co., vs. Doucette, 61 Minn., 40.)

The lower court, therefore, did not err in holding that Benito Valdes was the agent of Benito Legarda, vested with powers to execute
contracts for the sale of real estate in the latter's name; nor in considering as proof the power of attorney, the plaintiff's Exhibit A,
and making it the basis of one of the conclusions of the judgment, notwithstand that it was not offered as such proof by the plaintiff.
Consequently, the court likewise did not err in admitting the evidence introduced by the plaintiff himself to show the existence of
the contractual obligation on the part of the defendant Legarda, as principal of the other defendant, Valdes, and which was
contended by the plaintiff to be one of the grounds of the action brought in this complaint against the two defendants.

It is unquestionable that, by means of the document Exhibit E, to wit, the letter of December 4, 1911, quoted at the beginning of this
decision, the defendant Valdes granted to the plaintiff Borck the right to purchase the Nagtajan Hacienda belonging to Benito
Legarda, during the period of three months and for its assessed valuation, a grant which necessarily implied the offer or obligation
on the part of the defendant Valdes to sell to Borck the said hacienda during the period and for the price mentioned, and as the
grant made by Valdes to Borck in the said letter was made as a result of the requests of Borck himself, as stated in the letter, and of
the negotiations previously entered into between the latter and Valdes with respect to the purchase of the hacienda, as shown in
the letter of the 2d of the same month of December, that is, the letter which two days before was addressed by Borck to Valdes,
Exhibit C, the terms of the said document Exhibit E appear to be of the nature of an option contract between Valdes and Borck,
inasmuch as, by means of said document, the former finally accepted the propositions of the latter with respect to the granting of
that right to Borck. There was, therefore a meeting of minds on the part of the one and the other, with regard to the stipulations
made in the said document. But it is not shown that there was any cause or consideration for that agreement, and this omission is a
bar which precludes our holding that the stipulations contained in Exhibit E is a contract of option, for, pursuant to article 121 of the
Civil Code, there can be no contract without the requisite, among others, of the cause for the obligation to be established.

In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language:

A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from,
or selling to, B certain securities or properties within a limited time at a specified price. (Story vs. Salamon, 71 N.Y., 420.)

From vol. 6, page 5001, of the work "Words and Phrases," citing the case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep.,
17) the following quotation has been taken:

An agreement in writing to give a person the `option' to purchase lands within a given time at a named price is neither a
sale nor an agreement to sell. It is simply a contract by which the owner of property agrees with another person that he
shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then
agree to sell it; but he does sell something; that is, the right or privilege to buy at the election or option of the other party.
The second party gets in  praesenti, not lands, nor an agreement that he shall have lands, but he does get something of
value; that is, the right to call for the receive lands if he elects. The owner parts with his right to sell his lands, except to the
second party, for a limited period. The second party receives this right, or, rather, from his point of view, he receives the
right to elect to buy.

But the two definitions above cited refer to the contract of option, or, what amounts to the same thing, to the case where there was
cause or consideration for the obligation, the subject of the agreement made by the parties; while in the case at bar there was no
such cause or consideration.

The lower court in the judgment appealed from said:

There is some discussion in the briefs as to whether this instrument constitutes a mere offer to sell or an actual contract of
option. In terms it purports to be the latter and in fact recites the acceptance of a "request" or offer, by the plaintiff. But
viewing the instrument as in itself no more than an offer, it was at least a continuing one, "for three months," and as it is
not claimed to have been withdrawn during that period, nor afterward, the plaintiff could at any time enter into an actual
contract, if it were not such already, by mere acceptance.

So the, the lower court did not insist that, by the said document Exhibit E, a real contract of option was executed. He stated that it
was at least a continuing offer for three months — an offer which it was neither alleged nor proven to have been withdrawn during
that period — and held that but the plaintiff's mere acceptance at any time during the course of said period, the terms of the said
document became a contract, if such it were not already.

There is therefor no foundation for the third assignment of error made by the defendant Valdes, to wit, that the lower court erred in
holding that the document Exhibit E was a contract of option and not an offer to sell.

A certainly this document Exhibit E contains an offer or promise on the part of the defendant Valdes, who signed it, to sell
the hacienda in question to the plaintiff Borck, at its assessed valuation, to whom was granted three months within which to make
use of his right to purchase the property. In order that such an offer, or proposal, or promise on the part of Valdes, to sell the
said hacienda might be converted into a binding contract for him and for Borck, it was necessary that the latter should have
accepted the offer, by making use of the right thereby granted him, within the period stipulated, and paying the price agreed upon in
that document.

Referring particularly to the sale of real estate, there is in fact practically no difference between a contract of option to purchase
land and an offer or promise to sell it. In both cases the purchaser has the right to decide whether he will buy the land, and that right
becomes a contract when it is exercised, or, what amounts to the same thing, when use is made of the option, or when the offer or
promise to sell the property is accepted in conformity with the terms and conditions specified in such option, offer, or promise.
 An option for the purchase of a real estate is merely a right of election to purchase which when exercised, by comes a
contract. (Hopwood vs. McCausland, 120 Iowa, 218.)

So that in the case at bar it is immaterial whether the contents of the document be considered as an option granted by the
defendant Valdes to the plaintiff to purchase the Nagtajan Hacienda, or as an offer or promise on the part of the former to sell the
estate to the latter within the period and for the price specified in Exhibit E.

In the defendants' answer no concrete allegation was made that either of them had withdrawn said offer to sell, but the defendant
Valdes introduced evidence to prove that the withdrawal of the offer was made before the plaintiff had accepted it, that is, before
January 17, 1912, and for this purpose presented a letter from the defendant Legarda (p. 103, part 1 of the record), dated November
13, 1911, and addressed from Paris to Mauro Prieto, also one of Legarda's attorneys in fact. In this letter Legarda stated to Prieto,
among other things, that, with reference to the steps taken by Borck for the purchase of the Nagtajan Hacienda, the addressee
might say to Borck that the writer was not very anxious to sell the property except for a price greater than P400,000 in cash. The
defendant Valdes testified that the contents of this letter were communicated by him to Borck, though he did not state positively on
what date. Valdes also presented the witnesses Alejandro Roces and Jose E. Alemany. The first testified that sometime during the
second half of January, on an occasion when he was in Dr. Valdes' office, he heard the latter and Borck speaking, and that Borck said
something to Dr. Valdes about P300,000, and that it would be difficult to find a purchaser for cash; and that he also heard them talk
about P400,000. The second witness, Dr. Jose E. Alemany, also testified that about the 12th or 15th of January, at a time when he
was in Dr. Valdes' office, he heard a conversation between Valdes and Borck in which the former said to the latter that what Borck
wanted was impossible, and that the latter replied to Valdes that it was very dear, that he did not want it, that he did not have the
money. On this occasion, this witness also heard them talking about P400,000.

As the record does not show positively that the defendant Valdes, on the occasion above referred to, told the plaintiff Borck that he
(Valdes) withdrew the offer of sale contained in the document Exhibit E, for here merely communicated to Borck the contents of the
said letter from Legarda to Prieto, as the date when he did this does not appear; and as the statements made by the witnesses with
regard to the conversation they heard between Valdes and Borck are vague and as it cannot be deduced therefrom that such
statements referred expressly to the fact that Valdes withdrew the offer on that occasion, it must be concluded that there is no
proof on this point. But, though it had been proven that the withdrawal of the offer was made in the month of December, 1911, or
before January 17, 1912, as stated by Valdes' counsel in his brief, such a fact could not be a bar to, or annul the acceptance by the
plaintiff Borck, of said offer on any date prior to the expiration of the three months fixed in the document Exhibit E, to wit, March 4,
1912, because the offer or promise to sell therein contained was not made without period or limitation whatever (in which case
Valdes might have withdrawn it and the latter have accepted it at nay time until it was withdrawn) but for three months, that is, for
a specific period of time; and, as the plaintiff Borck had a right to accept the offer during that period, it was Valdes' corresponding
duty not to withdraw the offer during the same period. Therefore the withdrawal of the offer claimed to have been made by this
defendant was null and void.

Consequently, the lower court did not err in holding that the offer and not been withdrawn during the three months mentioned and
that it could be converted into a real contract by the plaintiff Borck's mere acceptance within the same period.

One of the allegations made by the plaintiff in the complaint, as we have seen, is that on January 19, 1912, while the said offer was
still open, the plaintiff accepted it in writing, in conformity with its terms, and requested permission of the defendant Valdes to
inspect the property titles and other documents pertaining to the estate, and offered to pay the defendant Valdes as soon as a
reasonable examination could be made of the said property titles and other documents, immediately and in cash the price stipulated
and agreed upon in the contract for the said stipulated and agreed upon in the contract for the said hacienda. To prove this
allegation, the plaintiff presented the document Exhibit G, which reads as follows:

MANILA, January 19, 1912.

DR. BENITO VALDES,

195 San Sebastian,
City.

SIR: I hereby advise you that I am ready to purchase the Hacienda Nagtahan, situated in the district of Sampaloc and
Nagtahan, Manila, and in the Province of Rizal, consisting of about 1,993,000, square meters of land, property of Mr. Benito
Legarda, for the sum of three hundred and seven thousand (307,000) pesos Ph. c. the price quoted in the option given my
by you.
 Full payment will be made on or before the third day of March 1912, provided all documents in connection with the
Hacienda Nagtahan, as Torrens title deed, contracts of leases and other matters be immediately placed at my disposal for
inspection and if such papers have been found in good order.

Very truly yours,

W. BORCK.

In the preceding letter that plaintiff in fact did state that he accepted the offer made to him or the option given to him by the
defendant Valdes in the document or letter of December 4, 1911, Exhibit E, for, even though it was not stated therein what option it
was that was mentioned in the said letter it is unquestionable that it could refer to no other than to the option or offer mentioned in
the said Exhibit E, as no other was then pending between the plaintiff and this defendant.

But aside from the fact that the complete payment of the P307,000 mentioned in the said letter was made to depend on the
condition that all the documents relative to the Nagtahan Hacienda, such as the Torrens title, etc., be immediately placed at the
plaintiff's disposal for his inspection, and be found satisfactory, the said tender of payment was offered to be made on or before
March 3, 1912.

A simple statement of the last part of the letter is enough to convince that the plaintiff did not offer to pay, immediately and in cash
to the defendant Valdes as he alleged in his complaint, the price stipulated and agreed upon between themselves in the said
document Exhibit E. Of court, it is undeniable that the plaintiff Borck had a right to examine the title deed and all the documents
relative to the Nagtajan Hacienda, before the sale of the property should be consummated by means of the execution of the proper
deed of conveyance in his favor by the defendant Valdes as the attorney-in-fact of the other defendant Legarda, and, consequently,
the plaintiff Borck was also entitled to refrain from making payment as long as he should not find the documents relative to the said
property complete and satisfactory, an indispensable condition in order that the said deed of conveyance might be executed in his
favor. But at the very moment this instrument was executed and signed by the vendor, the payment of the stipulated price should
have been made in order that it might be an immediate cash payment. Pursuant to the language of that part of the document or
letter Exhibit G to which we now refer in respect to the payment, it cannot be understood that the plaintiff tendered payment to the
defendant immediately and in cash, for the simple reason that if the documents had been placed by the defendant at the plaintiff's
disposal for his inspection, for example, on January 20th, the day following the date of the letter Exhibit G, and the plaintiff had
examined and found them satisfactory, and the defendant Valdes had executed in the plaintiff's favor the proper deed of
conveyance or sale of the hacienda on the 25th of the same month of January, according to the exact terms of the letter of
acceptance of the offer, Exhibit G, dated January 19, 1912, the plaintiff, that is, the purchaser Borck, could have made full payment
to the defendant Valdes, of the P307,000, the price of the property, on the 3d of March, 1912, or on any date on which the deed of
conveyance was issued, from the 25th of January up to the said 3d day of March, for nothing else can be understood by, and no
other meaning and scope can attach to, the words "full payment will be made on or before the third day of March 1912." In short, by
the way the part of said document Exhibit G relative to the offer of payment in the example above given is drawn, the purchaser
Borck might pay the stipulated price of the property, or have the period from the 25th of January to the 3d of March within which to
pay it, and meanwhile the ownership of the estate would already have been conveyed, by means of the proper deed, to the
purchaser Borck, and he could not have been obliged to pay the said price until the very day of March 3, 1912, by reason of the
contents of the said letter, Exhibit G.

In connection with the allegation we have just been discussing, to wit, that the plaintiff Borck made a tender of payment to the
defendant Valdes "immediately and in cash" of the price of the hacienda fixed in the instrument Exhibit G, the plaintiff also
presented as proof, in relation to the allegation as to the presentation of the letter of January 19, 1912, Exhibit G, another letter
written by himself, and also addressed to the defendant Valdes, under date of the 23rd of the same month of January This document
is marked Exhibit J and is of the following tenor:

January 23, 1912.

DR. BENITO VALDES,

195 Calle San Sebastian,
City.
 SIR. I have the pleasure to inform you that I can improve the conditions of payment for the Hacienda Nagtahan in so far as
to agree to pay the whole amount of purchase price, three hundred and seven thousand (307,000) pesos, Ph., c., ten days
after the Torrens title deeds and all papers in connection with the hacienda have been placed at my disposal for inspection
and these documents and papers have been found in good order.

Respectfully yours,

As may be seen by the language in which the preceding letter is couched, the plaintiff virtually recognized, just as he had done in the
letter of January 19th, that is, the one written four days before, Exhibit G, that the tender of payment to the defendant Valdes, of
the price of the hacienda, could not be understood to have been a tender of "immediate and cash" payment, as alleged in the
complaint, but that payment might be made on any date prior to March 3, or on this same date, even though he may have found
satisfactory all the documents that the defendant might have placed at his disposal to be examined, and consequently, although the
proper deed of conveyance of the property should have been executed in his favor. Nothing else is meant by the statement made by
the plaintiff Borck to the defendant Valdes in the letter of January 23, Exhibit J, that he had the pleasure to inform him that he could
improve the conditions of payment for the Hacienda Nagtajan in so far as to agree to pay the whole amount of purchase price,
P307,000, ten days after the Torrens title deeds and all papers in connection with the haciendashould have been placed at his
disposal for inspection and should have been found satisfactory, for the payment which Borck offered to make to Valdes, of the price
of the property, in said letter Exhibit J, was not indeed to be effected on the third of March or prior thereto, but within the limited
period of ten days after the documents-relative to the property should have been delivered to the plaintiff for his inspection and
been found satisfactory. And were they any doubt that the meaning or the sense; of said offer was not as just above stated, it would
be removed by a mere perusal of the statement made therein by the plaintiff telling the defendant Valdes that he, the former, had
the pleasure to inform he latter that he, Borck, could improve the conditions of payment for thehacienda, to wit, those mentioned in
the letter written' four days before, that is, on January 19th, Exhibit G, in the manner aforementioned by paying the whole amount
of the purchase price ten days after the documents should have been delivered to the plaintiff and he should have found them
satisfactory.

But, the letter of January 23, Exhibit J, is drawn up_in such a way that it also does not contain any tender of "immediate and cash"
payment by the plaintiff Borck to the defendant Valdes.

Indeed, as said letter makes the total payment of the price of the property depend on the delivery by the defendant Valdes to the
plaintiff Borck of all the documents relative to the hacienda, and of the further condition that, the latter should find such documents
in good order and satisfactory, and as a period of ten days was fixed for the said payment, counting from the date of the delivery of
the documents, and on the condition that Borck should find them satisfactory, the date of payment cannot be-understood to have
been fixed for any certain day after those ten days, or for the eleventh day, for the simple reason that, for example, if the documents
were delivered to Borck on February 1 for his inspection, and after the lapse of ten days thereafter he had not finished examining
them and had kept them in his possession for this purpose for ten days longer, that is, until February 20, and then had found them
satisfactory, the result would be that the payment would have had to be made, not ten days, but twenty days, after the delivery of
the said documents, and this would have been authorized by the ambiguous terms in which the tender of payment are couched.

But supposing that as appears to be the case, it had been the purpose of the plaintiff Borck, in fixing those ten days in the letter
Exhibit J, for the payment, that there should be an interval of said ten days between the delivery and inspection of the said titles and
the determination of whether they were satisfactory or not, it might also have happened that on the third day after the delivery of
the titles, these might have been found by the purchaser to be satisfactory, and that the vendor might immediately have executed
the proper deed of conveyance of the property in the purchaser's favor. In that event, according to the terms of said letter Exhibit J,
the purchaser Borck would not be obliged to make payment to the vendor Valdes until seven days after the execution of the deed of
conveyance and the transfer of the property to the former that is, not until the expiration of the period of ten days counting from
the date of the delivery of the documents to‚the purchaser; and it is evident that such a payment would not be in cash, pursuant to
the provisions of article 1462, in connection with article 1500, of the Civil Code.

Furthermore: The plaintiff Borck also presented another letter in connection with his aforementioned allegation made in the
complaint, and related to the other two previous letters, Exhibit G and J, to prove what he had intended to accomplish by means of
the latter, to wit, that the tender of payment made by him to the defendant was made in accordance with the said allegation,
"immediately and in cash."

This letter (Exhibit K) bears the date of February 28,t1912, and reads as follows:
 MANILA, P.I., February 28, 1912.

DR. BENITO VALDES,

Attorney-in-fact for Benito Legarda
Manila.

DEAR SIR: To prevent any misunderstanding, I wish to advise you that the purchase price of the Hacienda Nagtahan is ready
to be paid over to you, and I request you to notify me whenever it is convenient for you to place at my disposal for
inspection the title deed and papers in connection with said estate.

Very respectfully,

W. BORCK.

As may also be seen by the very terms employed by the-plaintiff in this letter, he virtually admits, clearly acknowledges, that in the
two previous letters, Exhibits G and J, he had made the tender of payment of the price for the Nagtajan Hacienda in such a manner
that it could not be understood to have been in accordance with the agreement entered into between himself and Valdes, that is,
that the payment should be in cash.

The letter Exhibit K in fact begins with these words:

"To prevent any misunderstanding." and then says: I wish to advise you that the purchase price for the Hacienda Nagtahan
is ready to be paid over to you, and request you to notify me whenever it is convenient for you to place at my disposal for
inspection the title deed and papers in connection with said estate.

The first words of the letter of course indicate that the plaintiff Borck himself, in writing them, feared, at least the was not sure, that,
in accepting, in the letter of January 19th, Exhibit G, the offer of the sale of the hacienda to him by Valdes, and in making therein the
tender of payment band in renewing this tender in the letter, Exhibit J, of the 23 of the same month, he, the plaintiff, had not
conformed to the terms of the offer of sale or of the option to buy, given to him by Valdes by means of the document Exhibit E, for
in the said last letter, Exhibit K, he takes it for granted that there was or might be some misunderstanding between himself and the
defendant Valdes with)respect to the tender made by him of the price of the estate. According to the admission of the plaintiff Borck
in his complaint, this price was to be paid "at one and in cash." In the said letter Exhibit K, to avoid that misunderstanding, the
plaintiff Borck stated to the defendant Valdes that the purchase price for the hacienda was ready to be paid over to hi, and
requested to be notified by Valdes when it would be convenient for him to place at the plaintiff's disposal for inspection the title
deed and papers in connection with said estate.

The notification contained in this letter written by Borck to Valdes, that the purchase price of the estate was ready to be paid over to
the latter, and the mention made in this same letter, immediately after the notification, of the inspection which the plaintiff wished
to make of the titles which he desired should be delivered to him for this purpose, show that this last letter, Exhibit K, relates to the
one that preceded it, dated January 23, Exhibit J, or, what amounts to the same thing, is a result of it, for it is virtually said therein
that the price of P307,000 (which according to his previous letter, he had agreed to pay for the hacienda, ten days after the delivery
to him of the documents relative to the estate and their having been found by him to be satisfactory) was already held in readiness
by the plaintiff for delivery to the defendant, but this delivery of the price was subordinated to the delivery requested by the plaintiff
to those titles and other documents,‚and to the plaintiff's finding such documents satisfactory, and the delivery of the price was also
subordinate to the period of the ten days, mentioned in the said letter Exhibit J. The letter Exhibit K can have no meaning„whatever
in that part thereof where reference is made to»the offer of payment of the price of the hacienda, or to the payment itself, except in
connection with the previous Exhibit J, inasmuch as the letter Exhibit K does not state when Borck was to deliver to Valdes the price
which, according to this same letter, the plaintiff already had in readiness for that purpose. So that neither in the letter Exhibit K is
any specific offer of payment made by the plaintiff Borck to the defendant Valdes, of the price stipulated in the document Exhibit E
to be paid "at open and in cash," notwithstanding its being said therein that the plaintiff had the money ready to be turned over to
the defendant.

Upon the plaintiff Borck's testifying at the trial as witness, said documents Exhibits E, G., J, and K, and also others marked from A to
M, including the four just referred to, were presented in evidence. Among these documents is found Exhibit F, which reads as
follows:
 MANILA, January 17, 1912.

DR. BENITO VALDES,

194 San Sebastian,
City.

SIR: In reference to our negotiations regarding the Hacienda Nagtahan at Manila, property of Mr. Benito Legarda, consisting
of about 1,993,000 sq. meters of land, I offer to purchase said property for the sum of three hundred and seven thousand
(307,000) pesos P. c., cash, net to you, payable the first day of May 1912 or before and with delivery of a Torrens title free
of all encumbrances as taxes and other debts.

Respectfully,

YOURS,

On said documents being presented in evidence at the trial, the defendants objected to their admission; the court reserved his
decision thereon and in the judgment appealed from made no mention as to the contents of said document‚Exhibit F, and in ruling
on the defendants' motion for a new trial, in which motion they signed as one of the error of the said judgment the fact that no
notice whatever had been taken therein of the said Exhibit F, which defendants claimed to be one of the their most important
proofs, the court stated as a reason for the omission that this Exhibit F was unsigned, unidentified and was not attested by anyone,
besides the fact that no conclusion, either in favor‚of or against the plaintiff, could be based on its because, although the said letter,
that is, Exhibit F, might have been actually delivered, no right whatever could be predicated thereon, nor any liability, and it was,
therefore, inadmissible.

The record shows that when Exhibit F and Exhibits G, J, K, L, and M, were shown to the defendant Valdes by the plaintiff's counsel
Beaumont, for their identification and in order that Valdes might state to the court whether he had received the originals and, if so,
where they were, defendant merely said in reply that he had received three originals from Borck and two originals from Beaumont
(p. 14 of the transcription of the stenographic notes), and exhibited the originals of Exhibits C, M. L., K, and G, but not that of‚Exhibit
F. The plaintiff Borck having been presented as a witness, after he had been asked the first four questions by Attorney Hartford
Beaumont, the latter made the following statement: "I would like to interrupt the witness at this moment in order to present all the
Exhibits A to M, which were identified by the previous witness." Counsel for the defendant Legarda objected to the admission of the
said documents on the ground that they were incompetent, immaterial and irrelevant. The same objection was also made by
counsel for the defendant Valdes in behalf of his client, and the court said that he would reserve his decision (pp. 24 and 25 of the
record).

During the examination of plaintiff Borck, in which Attorney Beaumont plied him with questions in regard to the aforementioned
documents, beginning with Exhibit A and showed him the documents themselves, on coming to Exhibit F, after having given
attention to other exhibits among which was Exhibit O, which we shall mention later on, the plaintiff answered the questions put to
him with respect to Exhibit F in the following manner as found in the transcription of the stenographic notes in English(p. 61 on the
record):

Q.       Now I will show you Exhibit F, and call you attention to the fact that it has the same date, January 17, as Exhibit O,
and ask you to state the circumstances under which Exhibit O was signed —

A.       This is may acceptance of the option of Dr. Valdes.

Q.       How does it happen that it has the same date as Exhibit O? —

A.       Because I don't believe in hanging back with my business. I conclude it as soon as possible. As soon as I got the offer, I
made my acceptance to Dr. Valdes.

The document Exhibit F, as has been seen, is unsigned but the document Exhibit J, to wit, the aforementioned letter of January 23,
1912, is in the same condition. It is true that although the document Exhibit J is unsigned because it is a copy of the letter addressed
on that same date to Valdes by Borck, Valdes kept the original in his possession and he did not present the original of Exhibit Fibut
only the other letters before mentioned, although he stated with reference to the letter he had received from Borck, that as he was
not a business man and was not acquainted with that kind of business, he sometimes read the letters and, after taking notes of their
contents, transmitted their substance to Mr. Legarda, and at other times sent to him the letters themselves, from which testimony
of Valdes it is concluded that he was not in the habit of keeping the originals he received from Borck. However, as has already been
seen, notwithstanding that Exhibit F was not identified by Valdes, the plaintiff Borck, However, as has already been seen,
notwithstanding that Exhibit F was not identified by Valdes, the plaintiff Borck, referring to the said document on its being shown to
him by his attorney, who called his attention to the fact that it has the same date, January 17, as Exhibit O, and asked him to state
the circumstances under which Exhibit O was signed, said that Exhibit F was his acceptance of Dr. Valdes' option; and in answering
the next question, explained the reason why Exhibit F bore the same date as Exhibit O, saying that "he did not believe in
hanging‹back with his business;" that he "concluded it as soon as possible;" and that "as soon as he got the offer, he made his
acceptance to Dr. Valdes."

Exhibit O is as follows:

MANILA, January 17, 1912.

W. BORCK, Esq.,
Manila.

DEAR SIR: Referring to our recent conversation regarding_the proposed purchase by clients of ours of the property known
as the Hacienda Nagtajan, I beg to advise you that our clients, after investigation of the physical conditions of the property,
are prepared to make an offer for the purchase of the same at the price named by you, to wit, P380,000, cash, provided
that there is good titled to the property, that it contains substantially and area represented, namely, 1,993,000 square
meters, and that the existing leases upon certain portions of the said property are found to be in proper form. It is the
desire of our clients to have an opportunity to investigate the legality of_the title and leases at the earliest practicable
moment, and they have authorized us to say that if the conditions are satisfactory with regard to these matters, they are
prepared to make you a firm offer of the amount above named, and to make a deposit of a reasonable amount as an
evidence of good faith.

Very truly yours,

BRUCE LAWRENCE, ROSS, AND BLOCK,

"JAMES ROSS."

Connecting the contents of this document Exhibit O with those of the previous Exhibit F, and taking into account the testimony given
by Borck, as above quoted, in answering the questions put to him by his own attorney, relative to the said exhibits, it is clearly
understood that on Borck's receiving the letter of January 17m 1912, from the law firm of Bruce, Lawrence, Ross and Block, and
signed by James Ross, Exhibit O, in which these gentlemen stated that they were prepared to make an offer for the purchase of the
Hacienda Nagtajan at the price of P380,000 cash, he wrote on the same date, January 17, to Dr. Valdes the letter, a copy of which is
Exhibit F, in which, referring to the negotiations between them regarding the said Nagtajan Hacienda, he offered to purchase this
property for P307,000, cash and net, payable on or before the first day of May, 1912, delivery to be made to him to a Torrens title
free of all encumbrance, such as taxes and other debts. For this reason the plaintiff Borck stated in his testimony that the said letter
Exhibit F was his acceptance of Dr. Valdes option, for, not believing in hanging back with his business and desiring to conclude it as
soon as possible, as soon as he received the officer, contained in the letter Exhibit O, from the said law firm, he transmitted or made
known his acceptance to Dr. Valdes.

We do not think there could be a better identification of the letter Exhibit F than that made by it sown writer, the plaintiff Borck, for
he admitted in his testimony that he wrote this letter, and although the defendant Valdes did not present the original of the said
letter Exhibit F, perhaps because it was one of those which he did not keep in his possession, there can be no doubt whatever that
the original of the said Exhibit F was transmitted to Valdes by the plaintiff Borck, of the latter explicitly said so in stating that letter
was his acceptance of Dr. Valdes' option, the plaintiff explaining why he had written said letter, on referring to the relation between
said Exhibit F and the Exhibit C, on account of the same date both letters bore, on making further explanations in the matter, hand
saying: "As soon as I got the offer, I made my acceptance to Dr. Valdes." Furthermore, if there were still any doubt whatever about
this, it would disappear after a consideration of the following quotation taken from the plaintiff's written brief file before the lower
court rendered judgment, in which mention is made of the said brief and of the questions discussed therein said brief is found on
pages 190 to 206 of the record and is signed, by the plaintiff's attorneys, Aitken and Beaumont.
On page 195 thereof, appears the following:

3. THE ACCEPTANCE.

On the 17th of January, 1912, Mr. Borck received a written offer (Exhibit O) for the property from Mr. James Ross of this city
for the price of P380,000 and thereupon on the same day wrote Dr. Valdes the letter which appears as Exhibit T (pp. 56, 169
of the record). No question arises as to the validity of this acceptance for reasons which will presently appear. . . .

As may be seen, in the paragraph of that brief signed by the plaintiff's attorney there is a restatement of what the plaintiff had said
in his testimony, to with, that as soon as he received, on January 17, 1912, a written offer Exhibit O, from Mr. James Ross of this city
for the property in question and for the price of P380,000, he wrote on the same day the letter of Dr. Valdes that appears as Exhibit
T (pp. 56, 169, of the record). In this same brief the statement was also made that no question had arisen as to the validity of this
acceptance, for the reasons which would presently appear.

It is to be noted that Exhibit T, mentioned in the preceding paragraph transcribed from the brief, is the same Exhibit F, which was
erroneously marked with the letter T in the said paragraph, as shown by the fact that in this paragraph Exhibit T is referred to as
being found on page 56 of the record, which page containes Exhibit F, and on page 169 of the record, which contains a copy of the
same Exhibit F,_the date of this latter exhibit, January 17, being also that of the Exhibit O, mentioned in the said brief.

The trial court therefore erred in not admitting in evidence‚said document Exhibit F and, consequently, in not taking it into
consideration in the judgment appealed from. This rejection cannot be warranted by the fact that the defendants themselves
opposed its admission, for the latter also opposed the admission of all the documents presented by the plaintiff, on the
understanding that, as they were not bound by the documents Exhibits A and E, the one as principal and the other as agent, such
documents were immaterial, incompetent and irrelevant, nevertheless the trial court admitted some of those documents and
considered them for the purpose of drawing his conclusions in the judgment rendered.

It is hardly necessary now to show that said letter of January 17, 1912 (Exhibit F) was Borck's acceptance of the option or offer of
sale made to him by the defendant Valdes in his letter of December 4, 1911 (Exhibit E), for the plaintiff Borck himself admitted in his
testimony at the trial that the letter Exhibit F was his acceptance of said option.

In fact, the plaintiff Borck, referring in the letter, Exhibit F, to the negotiations between himself and Valdes regarding the Nagtajan
Hacienda belonging to Benito Legarda, offers to purchase said property for the sum of P307,000, cash and net, payable the first day
of May 1912, or before, the plaintiff to be furnished with a Torrens title free of all encumbrances, such as taxes and other debts. The
offer of sale or option of purchase contained in the document Exhibit E, was for the period of three months, from December 4, 1911,
for the assessed valuation of the property, understood to be P307,000, though subsequently at the trial it was fixed by agreement of
the parties at P306,954 and payment was to be made in cash, for, even though this was not stated in the document, that failure
itself so to state created the understanding that the price was to be paid in cash when delivery of the property was made, in
accordance with the provisions of article 1462, in connection with article 1500, of the Civil Code. The plaintiff Borck recognized this
in his complaint, in making the allegation we considered at the beginning of this decision, to with, that he accepted in writing the
said offer in conformity with its terms and offered to pay to the said Valdes, "immediately and in cash" the price stipulated; and he
also so testified at«the trial, saying, in reference to the conditions of the payment of the purchase price, that "the conditions were
not discussed, because the payment was to be made in cash on exhibition of the documents." Now then, in the document Exhibit F,
that is, the letter of January 17, 1912, it is stated that payment of the net amount would be made in cash on_the first day of May,
1912, or before. So that it may be said with all the more reason that in relation to the other offers of payment contained in the
documents F, G, J, and K, that in the letter, Exhibit F, the plaintiff Borck, in accepting the offer of sale, did not make an offer to pay
the price "immediately and in cash," as stated in his allegation set forth in the complaint, for, by virtue of the said documents, he
reserved to himself the right to make the payment on the first day of May, 1912, or on any date prior thereto, as might suit him, that
i, two months after the termination of the option or of the offer, which would be, on or before March 4, 1912, although the deed of
conveyance of the property in his favor should have been executed by the defendant Valdes on any date within the period of the
option, that is, within the three months which ended on the said 4th day of March, 1912, whereby the plaintiff virtually gave himself
five months from the date of the offer of sale or option of purchase, to effect the said payment. This is evidently not an offer to pay
"immediately and in cash," nor is it a payment in cash, as the law provides, nor such a payment as the plaintiff Borck himself
understood it to be, when he stated in his testimony that the payment was to be made in cash upon exhibition of the documents.

Duly considering the documents Exhibits F, G, J, and‚k, that is, the statements made by the plaintiff Borck in the letter of January 17,
19 and 23, 1912, and February 28th of the same year, addressed by him to the defendant Valdes, in accepting the option that the
latter had granted him for the purchase of the Nagtajan Hacienda, or the offer of sale of the said hacienda defendant made to the
plaintiff, with respect to the payment of the price therof, it is seen that in the said documents the plaintiff Borck offered to pay to
the defendant Valdes the said price, first within the period of five months from December 4, 1911, afterwards within the terms of
three months from the same date of December 4, and, finally, within a period which could as well be ten days as twenty or thirty of
more days from the time Valdes should put at the plaintiff's disposal to be inspected, the titles and other documents relative to the
said hacienda, and the plaintiff should find them satisfactory and the proper deed of conveyance should, in consequence thereof, be
executed in his favor by Valdes; and this evidently is an offer of payment in installments, and not an "immediate and cash" payment.

The lower court in the judgment appealed from says that as the document Exhibit E, dated December 4, 1911, gave the plaintiff a
three months' option for the purchase of the property, a period which expired, therefore, on March 4, 1912, this necessarily allowed
the plaintiff them for the payment until this last date, and as in the letter Exhibit G, of the date of January 19, 1912, the plaintiff said
that he would pay before the expiration of the said period, in no manner could this have modified the option, rather, on the
contrary, it coincided with it, the court adding, moreover, that a payment made on or before the 4th of March would have been a
payment in cash, if this was required by Exhibit E.

It is true that the period granted by the defendant Valdes to the plaintiff for purchasing the property, was three months from
December 4, 1912, but not because this period expired on March 4, 1912, that is, the last day of the said three months, may it be
understood that the defendant granted to the plaintiff the period for payment until the very last day, March 4, 1912, for the simple
reason that, the period for the purchase being three months, that is,‚the time during which the plaintiff Borck could make use of the
power or the right granted by him by Valdes to arrange for the purchase of, and to purchase in fact, the said property, if Borck
purchased it on any date prior to March 4, 1912 (on January 19, 1912, for example) the result would be that the proper deed of sale
being consequently executed in his favor on the said date of January 19, and the time that payment would be made not having been
fixed in the said document Exhibit E, such payment would‚have to be made at the time of the delivery of the thing sold, pursuant to
article 1500 of the Civil Code; but as, in accordance with article 1462 of the same code, the execution of the deed of sale is
equivalent to the delivery of the thing which is the object of the contract, the payment would not be in cash if it were not made on
the same 19th day of January, 1912, and were postponed until some other later day, or until March 4, 1912. In short, it is impossible
to confound the period of the option granted to the plaintiff Borck for the purchase of the Nagtajan Hacienda, with the period for
the payment of it price, had he purchased it. The plaintiff Borck had three months, from December 4, 1911, within which to make
the purchase; to make the payment he did not have a single day after the date on which the proper deed of sale would have been
executed in his favor; he was to pay the price at the very moment the said deed was executed, because, by this means, the property
would have been delivered to his, although there still might have been lacking one or two months of the three months' period of the
said option. This is the payment in cash to which the law refers in the sale of real estate in cases where the time for making payment
has not been fixed, and the plaintiff himself, Borck, so understood when he stated in his testimony, as we have before said, that, as
the conditions for the payment had not–been discussed, payment was to be made in cash on exhibition of the documents, or, what
amounts to the same thing, on the execution of the proper deed of sale of the property in his favor. It is therefore evident was not
fixed therein, the document Exhibit E, dated December 4, 1911, required the payment to be made in cash, and the lower court erred
in holding that the plaintiff Borck's letter, Exhibit G, of the date of January 19, 1912, in stating that the payment would be made on
or before March 4, 1912, in no manner modified the option or offer of sale contained in the document Exhibit E, but that on the
contrary it coincided therewith; also in holding that a payment made on or before March 4, 1912, would have been a cash payment.

The letter of December 4, 1911, Exhibit E, contained, as aforesaid, an offer of sale or a proposal of sale on the partof the defendant
Valdes to the plaintiff Borck, of the Nagtajan Hacienda, for the assessed valuation of the same, effective during the period of three
months counting from the said date. Such proposal or offer was an expression of the will only of the defendant Valdes, manifested
to the plaintiff Borck. In order that such a proposal might have the force of a contract, it was necessary that the plaintiff Borck's will
should have been expressed in harmony with all the terms of the said proposal.

Consent is shown by the concurrence of the offer and the acceptance of the thing and the cause which are to constitute the
contract. (Art. 1262, Civil Code.)

There is no contract unless, among other requisites, there is consent of the contracting parties. (Art. 1261, par. 1, of the
same code.)

Contracts are perfected by mere consent, and from that time they are binding, not only with regard to the fulfillment of
what has been expressly stipulated, but also with regard to all the consequences which, according to their character, are in
accordance with good faith, use, and law. (Art. 1258, Civil Code.)

Promises are binding in just so far as they are accepted in the explicit terms in which they are made; it not being lawful to
alter, against the will of the promisor, the conditions imposed by him (Decision of the supreme court of Spain, of November
 25, 1858); for only thus may the indispensable consent of the parties exist for the perfection of the contract. (Decision of
the same court, of September 26, 1871.)

An option is an unaccepted offer. It states the terms and conditions on which the owner is willing to sell or lease his land, if
the holder elects to accept them within…the time limited. If the holder does so elect, he must give notice to the other party,
and the accepted offer thereupon becomes a valid and binding contract. If an acceptance is not made within the time fixed,
the owner is no longer bound by his offer, and the option is at an end. (words and Phrases, vol. 6, p. 5000, citing
McMillan vs. Philadelphia Co., 28 Atl., 220; 159 Pa., 142.)

An offer of a bargain by one person to another, imposes no obligation upon the former, unless it be accepted by the latter,
according to the terms in which the offer was made. Any qualification or, or departure from, those terms, invalidates the
offer, unless the same be agreed to by the person who made it. (Eliason et al. vs. Henshaw, 4 Wheaton, 225.)

In order that an acceptance of proposition may be operative it must be unequivocal, unconditional, and without variance of
any sort between it and the proposal, . . . . An absolute acceptance of a proposal, coupled with any qualification or
condition, will not be regarded as a complete contract, because there at no time exists the requisite mutual assent to the
same thing in the same senses. (Bruner et al. vs. Wheaton, 46 Mo., 363.)

As already seen while we were considering the documents Exhibits F, G, J, and K, the plaintiff Borck accepted the offer of sale made
to hi, or the option of purchase given him in document Exhibit E by the defendant Valdes, of the Nagtajan Hacienda, for the assessed
valuation of the same, but his acceptance was not in accordance with the condition with regard to the payment of the price of the
property, under which the offer or the option was made for, while this payment was to be paid in cash, as the plaintiff Borck himself
admitted and the defendant Valdes positively stated in his testimony, and also a provided by law, for the reason that the time was
not fixed in said offer or option when the payment should be made in the aforesaid four documents Exhibits F, G, J, and K, the
plaintiff Borck made the offer to pay the said price, in the first of them, within the period of five months from December 14, 1911; in
the second, within the period of three months from the same date, and, finally, in the other two documents, within an indefinite
period which could as well be ten days as twenty or thirty or more, counting from the date when the muniments of title relative to
the said hacienda should have been placed at his disposal to be inspected and he should have found them satisfactory and, in
consequence thereof, the deed of conveyance should have been executed in his favor by the defendant Valdes.

So that there was no concurrence of the offer and the acceptance as to one of the conditions related to the cause of the contract, to
wit, the form in which the payment should be made. The expression of Borck's will was not in accordance with all the terms of
Valdes' proposal, or, what amounts to the same thing, the latter's promise was not accepted by the former in the specific terms, in
which it was made, and finally, the acceptance of the said proposal on Borck's part was not unequivocal and without variance of any
sort between it and the proposal, because, in view of the terms in which the payment was offered by Borck in his said letters of
January 17, 19 and 23, Exhibits F, G, J, and K, there was variance from the moment in which according to said terms, in the first two
letters, the payment of the price should be made on or before the 1st of May and on or before the 3d of March, 1912, respectively,
that is, within a period limited in those letters, and the offer of payment was equivocal inasmuch as, by the last two letters, it was
made to depend on certain acts as a basis for fixing the period in which the said payment should have to be made; finally, there was
no mutual conformity between the person who made the proposal or offer, Valdes, and the person who accepted it, Borck, in the
same sense with respect to the form of payment, and Borck deviated from the terms of the proposition with regard to the form of
payment and the record does not show that Valdes assented to such variance.

It is, therefore, evident that, in accordance with the provision of law and the principles laid down in the decisions above cited, the
proposal or offer of sale made by the defendant Valdes to the plaintiff Borck, or the option of purchase granted by the former to the
latter, with respect to the Nagtajan Hacienda, in the document Exhibit E, was not converted into a perfect and binding contract for
the, and that as Valdes did not assent to the modification introduced by Borck in the offer of sale made by this defendant in regard
to one of its terms, to with, the form of payment, the said offer became null and void, and, consequently, Borck has no right to
demand of the defendant Valdes and of the latter's principal, the other defendant, Legarda, or of the administrators of the estate
left by Legarda at his death which occurred during the course of these proceedings, and whose names appear at the beginning of
this decision, the fulfillment of that offer, nor, therefore, any indemnity whatever for such nonfulfillment.

The lower court erred, than, in finding otherwise in the three conclusions of law contained in the judgment appealed from which
were mentioned at the beginning of this decision and on which, in short, the pronouncement made in that judgment was founded.

As the power of attorney conferred by Benito Legarda upon Benito Valdes was explicit and positive, according to the document
Exhibit A, a copy of which was attached to the complaint, to sell and convey all kinds of real estate at such prices and on such
conditions as Valdes might deem proper, and also as the terms of the option granted by Valdes to Borck, or of the offer of sale made
by the former to the latter in the document Exhibit E, of the Nagtajan Hacienda belonging to Benito Legarda, are clear; and,
furthermore, as the plaintiff made the said documents an integral part of the complaint as the grounds thereof, the testimony
introduced by the defendant Valdes to prove that said offer of sale made by him to Borck was subject to the approval of his, Valdes',
principal was improper (sections 103 and 285, Code Civ. Proc.) and the lower court did not err in not taking that testimony into
consideration in his judgment. Likewise the evidence presented by the defendant Valdes in an endeavor to prove that said offer of
sale was obtained from him by the plaintiff Borck by means of fraud and deceit, was improper. Consequently the trial court did not
err by making no finding in the judgment on those two points.

In conclusion, as the offer of sale of the Nagtajan Hacienda, made by Valdes to Borck, or the option of purchase thereof granted by
the former to the latter by the letter of December 4, 1911, Exhibit E, did not constitute a perfect contract and, consequently, was not
binding upon the defendants Valdes and Legarda or the plaintiff Borck, by reason of the lack of the mutual assent of the parties
concerned therein, which is wholly in accordance with the terms of the said offer, there can be no obligation demandable in law by
virtue of the stipulations contained in said document, and the action prosecuted by the plaintiff for that purpose in these
proceedings in improper.

For the foregoing reasons the judgment appealed from is reversed and we absolve the defendants from the complaint. The costs of
the first instance shall be imposed upon the plaintiff. No special finding is made with respect to those of this second instance. So
ordered.
G.R. No. 75640               April 5, 1990

NATIONAL FOOD AUTHORITY, (NFA), petitioner, 

vs.
INTERMEDIATE APPELLATE COURT, SUPERIOR (SG) SHIPPING CORPORATION, respondents.

Zapanta, Gloton & Ulejorada for petitioner.

Sison, Ortiz & Associates for private respondents.

PARAS, J.:

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

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

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

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

Costs against both defendants.

SO ORDERED. (p. 22, Rollo)

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

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

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

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

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

Plaintiff was therefore constrained to file the instant complaint.

Defendant-appellant National Food Authority admitted that it entered into a contract with Gil Medalla whereby plaintiffs
vessel "MV Sea Runner" transported 8,550 sacks of rice of said defendant from San Jose, Mindoro to Manila.
 For services rendered, the National Food Authority paid Gil Medalla P27,000.00 for freightage.

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

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

It is contended by petitioner NFA that it is not liable under the exception to the rule (Art. 1883) since it had no knowledge of the fact
of agency between respondent Superior Shipping and Medalla at the time when the contract was entered into between them (NFA
and Medalla). Petitioner submits that "(A)n undisclosed principal cannot maintain an action upon a contract made by his agent
unless such principal was disclosed in such contract. One who deals with an agent acquires no right against the undisclosed
principal."

Petitioner NFA's contention holds no water. It is an undisputed fact that Gil Medalla was a commission agent of respondent Superior
Shipping Corporation which owned the vessel "MV Sea Runner" that transported the sacks of rice belonging to petitioner NFA. The
context of the law is clear. Art. 1883, which is the applicable law in the case at bar provides:

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

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

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

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

WHEREFORE, PREMISES CONSIDERED, the petition is hereby DENIED and the appealed decision is hereby AFFIRMED.
G.R. No. L-49395 December 26, 1984

GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC., petitioner 

vs.
THE INTERMEDIATE APPELLATE COURT and E.R. SQUIBB & SONS PHILIPPINE CORPORATION,respondents.

 ABAD SANTOS, J.:

This is a petition to review a decision of the defunct Court of Appeals which affirmed the judgment of the trial court whereby:

... judgment is hereby rendered in favor of the plaintiff [E.R. Squibb & Sons Philippine Corporation], ordering the
defendant [Green Valley Poultry & Allied Products, Inc.] to pay the sum of P48,374.74 plus P96.00 with interest at
6% per annum from the filing of this action; plus attorney's fees in the amount of P5,000.00 and to pay the costs.

On November 3, 1969, Squibb and Green Valley entered into a letter agreement the text of which reads as follows:

E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green Valley Poultry & Allied Products, Inc. as a
non-exclusive distributor for Squibb Veterinary Products, as recommended by Dr. Leoncio D. Rebong, Jr. and Dr.
J.G. Cruz, Animal Health Division Sales Supervisor.

As a distributor, Green Valley Poultry & Allied Products, Inc. wig be entitled to a discount as follows:

Feed Store Price (Catalogue)

Less 10%

Wholesale Price

Less 10%

Distributor Price

There are exceptions to the above price structure. At present, these are:

1. Afsillin Improved — 40 lbs. bag

The distributor commission for this product size is 8% off P120.00

2. Narrow — Spectrum Injectible Antibiotics

These products are subject to price fluctuations. Therefore, they are invoiced at net price per vial.

3. Deals and Special Offers are not subject to the above distributor price structure. A 5% distributor commission is
allowed when the distributor furnishes copies for each sale of a complete deal or special offer to a feedstore,
drugstore or other type of account.

Deals and Special Offers purchased for resale at regular price invoiced at net deal or special offer price.

Prices are subject to change without notice. Squibb will endeavor to advise you promptly of any price changes.
However, prices in effect at the tune orders are received by Squibb Order Department will apply in all instances.

Green Valley Poultry & Allied Products, Inc. win distribute only for the Central Luzon and Northern Luzon including
Cagayan Valley areas. We will not allow any transfer or stocks from Central Luzon and Northern Luzon including
Cagayan Valley to other parts of Luzon, Visayas or Mindanao which are covered by our other appointed
 Distributors. In line with this, you will follow strictly our stipulations that the maximum discount you can give to
your direct and turnover accounts will not go beyond 10%.

It is understood that Green Valley Poultry and Allied Products, Inc. will accept turn-over orders from Squibb
representatives for delivery to customers in your area. If for credit or other valid reasons a turn-over order is not
served, the Squibb representative will be notified within 48 hours and hold why the order will not be served.

It is understood that Green Valley Poultry & Allied Products, Inc. will put up a bond of P20,000.00 from a mutually
acceptable bonding company.

Payment for Purchases of Squibb Products will be due 60 days from date of invoice or the nearest business day
thereto. No payment win be accepted in the form of post-dated checks. Payment by check must be on current
dating.

It is mutually agreed that this non-exclusive distribution agreement can be terminated by either Green Valley
Poultry & Allied Products, Inc. or Squibb Philippines on 30 days notice.

I trust that the above terms and conditions will be met with your approval and that the distributor arrangement
will be one of mutual satisfaction.

If you are agreeable, please sign the enclosed three (3) extra copies of this letter and return them to this Office at
your earliest convenience.

Thank you for your interest and support of the products of E.R. Squibb & Sons Philippines Corporation. (Rollo, pp.
12- 13.)

For goods delivered to Green Valley but unpaid, Squibb filed suit to collect. The trial court as aforesaid gave judgment in favor of
Squibb which was affirmed by the Court of Appeals.

In both the trial court and the Court of Appeals, the parties advanced their respective theories.

Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never purchased goods from Squibb; that the
goods received were on consignment only with the obligation to turn over the proceeds, less its commission, or to return the goods
ff not sold, and since it had sold the goods but had not been able to collect from the purchasers thereof, the action was premature.

Upon the other hand, Squibb claimed that the contract was one of sale so that Green Valley was obligated to pay for the goods
received upon the expiration of the 60-day credit period.

Both courts below upheld the claim of Squibb that the agreement between the parties was a sales contract.

We do not have to categorize the contract. Whether viewed as an agency to sell or as a contract of sale, the liability of Green Valley
is indubitable. Adopting Green Valley's theory that the contract is an agency to sell, it is liable because it sold on credit without
authority from its principal. The Civil Code has a provision exactly in point. It reads:

Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit.
Should he do so, the principal may demand from him payment in cash, but the commission agent shall be entitled
to any interest or benefit, which may result from such sale.

WHEREFORE, the petition is hereby dismissed; the judgment of the defunct Court of Appeals is affirmed with costs against the
petitioner.

G.R. No. L-16671             March 30, 1921

LIM CHAI SENG, plaintiff-appellant, 

vs.
WENCESLAO TRINIDAD, Collector of Internal Revenue, defendant-appellant.
Crossfield and O'Brien for plaintiff and appellant.
Attorney-General Feria for defendant and appellant.

STREET, J.:

The plaintiff, Lim Chai Seng, is a merchant, of Chinese nationality, doing business in Manila; and as such he is subject to the
merchant's tax of 1 per cent imposed on all gross sales. In order to comply with the law and regulations of the Bureau of Internal
Revenue, it is incumbent on the person liable to this tax to keep records of their transactions and to make quarterly reports from
which the amount of tax due is computed; and it seems sometimes to have been found convenient in the Chinese community for
two or more firms to employ jointly a sort of specialist to act as their representative in their relations with the Bureau of Internal
Revenue.

It thus happened that during the years 1917 and 1918, one Cu Chiat was the agent and intermediary of the plaintiff, Lim Chai Seng,
in making reports to the Collector of Internal Revenue of business done by Lim Chai Seng as well as in the making of payments for
the taxes due from the latter. In the performance of these services the books of Lim Chai Seng were consulted in order to discover
the amount due to the Bureau of Internal Revenue, and either the proper amount of money or a check was delivered by the
merchant to Cu Chiat, whose duty is then became to repair to the office of the collector, to make the proper report of business done
by Lim Chai Seng, and to make payment accordingly.

It appears, however, that instead of fulfilling this duty punctually, Cu Chiat, upon five different occasion, submitted false reports of
the business of Lim Chai Seng, showing business to have transacted for five particular quarters in amounts must lower than was
really the case. By this means Cu Chiat contrived to make it appear that the taxes due from Lim Chai Seng were considerably less
than were in fact due, and he misappropriated the excess that had been confided to him. Upon the three occasions when checks had
been given to him by Lim Chai Seng for the exact amount really due, the misappropriation was accomplished by causing the
Collector of Internal Revenue to apply the excess contained in those checks to the payment of similar taxes due from other Chinese
firms of whom Cu Chiat was also the representative. The amounts thus misappropriated by Cu Chiat were as follows:

For the second quarter, 1917, P100.

For the third quarter, 1917, P200.
For the second quarter, 1918, P500.
For the third quarter, 1918, P500.
For the fourth quarter, 1918, P200.

In the time these peculations were found out, and the Internal Revenue Collector required Lim Chai Seng to make good the
deficiency in the tax and to pay in addition thereto an additional 25 per cent surcharge thereon under the authority of the second
paragraph of section 1458 of the Administrative Code. This payment having been made under protest the present action was
instituted by Lim Chai Seng to recover the entire amount paid, or P1,875. The trial judge decided that the amount of P375, collected
in the character of surcharge, was properly due, on account of the failure of Cu Chiat to submit correct returns for the five period
with which his peculations were concerns. As to this amount the trial judge held that there could be no recovery. The same was true,
so he decided, in regard to those transactions in connection with which Lim Chai Seng had delivered money to Cu Chiat to be applied
to the taxes due. In regard, however, to the three payments when checks were delivered by Lim Chai Seng for the exact amount due,
the trial judge held that the Collector of Internal Revenue had no right to apply the excess to the taxes due from other merchants.
He accordingly gave judgment in favor of the plaintiff for the excess, amounting to P1,200, carried in these checks over the amount
shown to be due on the face of the reports submitted by Cu Chiat and which the collector had, as the trial judge held, improperly
applied to other accounts. From this judgment both parties appealed; and for the plaintiff it is assigned as error that the trial judge
erroneously refused to allow recovery by the plaintiff of the sum of P300 which had been exacted as a surcharge upon the P1,200
above-mentioned. For the defendant it is assigned as error that the trial judge allowed recovery of the P1,200 as above stated.

It will be convenient first to discuss the point presented by the assignment of error of the defendant as appellant; that is, whether
the Collector of Internal Revenue has made himself liable to account to the plaintiff for the P1,200, which represents the excess of
the plaintiff's three checks over the amount apparently due upon the returns made, and which the collector applied, under the
directions of Cu Chiat, to the payment of the taxes due from other persons.

The point is simple enough and we think it is to be solved with reference to the general rule that a principal is bound by the acts of
his agent in the scope of the agency. In this connection it is undeniable that Cu Chiat had full authority to make returns to the
Collector of Internal Revenue of the business done each quarter by Lim Chai Seng and to make payment of the proper amount of the
taxes due by those returns. This being undeniable, it follows that when Cu Chiat made returns, as he did, showing a certain amount
of business transacted and the taxes due were computed according to those returns, the Collector of Internal Revenue could not
legitimately collect a greater amount. Furthermore, in view of the authority which, as the Collector of Internal Revenue knew, had
been confided to Cu Chiat by Lim Chai Seng it was entirely proper for him to allow the check of Lim Chai Seng to be applied not only
to the taxes of the latter but under the directions of Cu Chia to the similar taxes of other merchants — the more so as according to
the proof it was not unusual for checks drawn by one firm to be thus applied to the taxes of another.

It cannot be overlooked that in the commercial world the checks of persons of known solvency are customarily received as money;
and that this check was received and applied by the Collector of Internal Revenue in entire good faith in the usual course of business
and without any knowledge whatever that the check, or part thereof, was being misapplied, is shown by the testimony. Nor can it be
maintained that the mere fact that the three checks in questions were made payable to the Collector of Internal Revenue and not to
Cu Chiat, is a circumstance from which it could be argued that the Collector was put upon notice that the check was applicable only
to the taxes of the plaintiff. Even if the Collector had refunded the excess in money to Cu Chiat, the latter could have at once applied
it to other taxes; and no question could have been made as to the propriety of the Collector's then receiving it. A check when
received and treated as money is the same as money so far as legal consequences are concerned.

We hold the case to be one where the plaintiff, as principal, is bound by the act of his agent, and the effects of the dishonestly of the
latter must be borne by the principal, not by an innocent third party who has dealt with the dishonest agent in good faith.

It results that the action of the trial judge in allowing the plaintiff to recover the sum or P1,200 representing the amount
misappropriated from said checks by Cu Chiat, must be reversed. In view of this result it is obvious that the error assigned in the
brief of the plaintiff as appellant, with reference to the P300, collected as a surcharge upon this sum of P1,200, is untenable, and said
assignment need not be discussed.

The judgment appealed from is affirmed in so far as it absolves the defendant from liability for the amount of P375, collected as
surcharge upon the delinquent taxes, and is reversed in so far as it concedes to the plaintiff a recovery of the mount of P1,200 from
the defendant; and the defendant will be wholly absolved from the complaint. It is so ordered, without express pronouncement as
to costs.
G.R. No. L-22604             February 3, 1925GUADALUPE GONZALEZ and LUIS GOMEZ, plaintiffs-appellants, vs.
E.J. HABERER, defendant-appellee.OSTRAND, J.:

This action is brought to recover the sum of P34,260 alleged to be due the plaintiffs from the defendant upon a written agreement
for the sale of a tract of land situated in the Province of Nueva Ecija. The plaintiffs also ask for damages in the sum of P10,000 for the
alleged failure of the defendant to comply with his part of the agreement.

The defendant in his answer admits that of the purchase price stated in the agreement a balance of P31,000 remains unpaid, but by
way of special defense, cross-complaint and counter-claim alleges that at the time of entering into the contract the plaintiffs through
false representations lead him to believe that they were in possession of the land and that the title to the greater portion thereof
was not in dispute; that on seeking to obtain possession he found that practically the entire area of the land was occupied by
adverse claimants and the title thereto disputed; that he consequently has been unable to obtain possession of the land; and that
the plaintiffs have made no efforts to prosecute the proceedings for the registration of the land. He therefore asks that the contract
be rescinded; that the plaintiffs be ordered to return to him the P30,000 already paid by him to them and to pay P25,000 as
damages for breach of the contract.

The court below dismissed the plaintiffs' complaint, declared the contract rescinded and void and gave the defendant judgment
upon his counterclaim for the sum of P30,000, with interest from the date upon which the judgment becomes final. The case is now
before this court upon appeal by the plaintiffs from that judgment.

The contract in question reads as follows:

Know all men by these presents:

That I, Guadalupe Gonzalez y Morales de Gomez, married with Luis Gomez, of age, and resident of the municipality
of Bautista, Province of Pangasinan, Philippine Islands, do hereby state:

1. That I am the absolute and exclusive owner of a parcel of land situated in the barrio of Partida, municipality of
Guimba, Nueva Ecija, described as follows:

Bounded on the north by the land of Don Marcelino Santos; on the east, by the land of Doña Cristina Gonzalez; on
the south by the Binituan River; and on the west, by the land of Doña Ramona Gonzalez; containing an area of 488
hectares approximately.

2. That an application was filed for the registration of the above described land in the registry of property of Nueva
Ecija, which application is still pending in the Court of First Instance of Nueva Ecija.

3. That in consideration of the sum of P125 per hectare I do hereby agree and bind myself to sell and transfer by
way of real and absolute sale the land above described to Mr. E.J. Habere, binding myself to execute the deed of
sale immediately after the decree of the court adjudicating said land in my favor is registered in the registry of
property of the Province of Nueva Ecija. The condition of this obligation to sell are as follows:

"1. That Mr. E.J. Haberer has at this moment paid me the sum of P30,000 on account of the price of the
aforesaid land.

"2. That said Mr. E.J. Haberer agrees and binds himself to pay within six months from the date of the
execution of this document the unpaid balance of the purchase price.

"3. That said Mr. E.J. Haberer shall have the right to take possession of the aforesaid land immediately
after the execution of this document together with all the improvements now existing on the same land,
such as palay plantation and others.

"4. That said Mr. E.J. agrees and binds himself to pay the expenses to be incurred from this date in the
registration of the aforesaid land up to the filing of the proper decree in the office of the register of deeds
of the Province of Nueva Ecija.
 "5. That in the event that the court should hold that I am not the owner of all or any part of the aforesaid
land, I agree and bind myself to return without interest all such amounts of money as I have received or
may receive from Mr. E.J. Haberer as the purchase price of said land, but, in the event that the court
should adjudicate a part of the aforesaid land to me, then I agree and bind myself to sell said portion
adjudicated to me, returning all the amounts received from Mr. E.J. Haberer in excess of the price of said
portion at the rate of P125 per hectare.

"6. The Mr. E.J. Haberer does hereby waive any interest or indemnity upon the amount that I am to return
to him and which I have receive from Mr. E.J. Haberer as the purchase price of the aforesaid land."

I, E.J. Haberer, married, of age, and resident of the municipality of Talavera, Nueva Ecija, do hereby state that,
having known the contents of this document, I accept the same with all the stipulations and conditions thereof.

I, Luis Gomez, married, of age, and resident of the municipality of Bautista, Province of Pangasinan, do hereby
grant my wife, Dña. Guadalupe Gonzalez y Morales de Gomez, the due marital license to execute this document
and make effective the definite sale of the land as above stipulated, she being empowered to execute the deed of
sale and other necessary documents in order that the full ownership over the aforesaid land may be transferred to
Mr. E.J. Haberer, as stipulated in this document.

In testimony whereof, we hereunto set our hands at Manila, this 7th day of July, 1920.

(Sgd.) GUADALUPE G. DE GOMEZ

E.J. HABERER
LUIS GOMEZ

Signed in the presence of the witnesses:

(Sgd.) EMIGDIO DOMINGO

L.G. ALVAREZ

(Acknowledged before notary.)

It is conceded by the plaintiffs that the defendant never obtained actual or physical possession of the land, but it is argued that
under the contract quoted the plaintiffs were under no obligation to place him in possession. This contention cannot be sustained.
Cause 3 of paragraph 3 of the contract gave the defendant the right to take possession of the land immediately upon the execution
of the contract and necessarily created the obligation on the part of the plaintiffs to make good the right thus granted; it was one of
the essential conditions of the agreement and the failure of the plaintiffs to comply with this condition, without fault on the part of
the defendant, is in itself sufficient ground for the rescission, even in the absence of any misrepresentation on their part. (Civil Code,
art. 1124 ; Pabalan vs. Velez, 22 Phil., 29.)

It is therefore unnecessary to discuss the question whether the defendant was induced to enter into the agreement through
misrepresentation made by the plaintiff Gomez. We may say, however, that the evidence leaves no doubt that some
misrepresentations were made and that but for such misrepresentations the defendant would not have been likely to enter into the
agreement in the form it appeared. As to the contention that the plaintiff Gonzalez cannot be charged with the misrepresentations
of Gomez, it is sufficient to say that the latter in negotiating for the sale of the land acted as the agent and representative of the
other plaintiff, his wife; having accepted the benefit of the representations of her agent she cannot, of course, escape liability for
them. (Haskellvs. Starbird, 152 Mass., 117; 23 A.S.R., 809.)

The contention of the appellants that the symbolic delivery effected by the execution and delivery of the agreement was a sufficient
delivery of the possession of the land, is also without merit. The possession referred to in the contract is evidently physical; if it were
otherwise it would not have been necessary to mention it in the contract. (See Cruzado vs. Bustos and Escaler, 34 Phil., 17.)

The judgment appealed from is in accordance with the law, is fully sustained by the evidence, and is therefore affirmed, with the
costs against the appellants. So ordered.
G.R. No. L-21438             September 28, 1966

AIR FRANCE, petitioner, 
vs.
RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.

Lichauco, Picazo and Agcaoili for petitioner.

Bengzon Villegas and Zarraga for respondent R. Carrascoso.

SANCHEZ, J.:

The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso P25,000.00 by way of moral
damages; P10,000.00 as exemplary damages; P393.20 representing the difference in fare between first class and tourist class for the
portion of the trip Bangkok-Rome, these various amounts with interest at the legal rate, from the date of the filing of the complaint
until paid; plus P3,000.00 for attorneys' fees; and the costs of suit.

On appeal,2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from P393.20 to P383.10, and
voted to affirm the appealed decision "in all other respects", with costs against petitioner.

The case is now before us for review on certiorari.

The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:

Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on March 30, 1958.

On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines, Inc., issued to plaintiff a
"first class" round trip airplane ticket from Manila to Rome. From Manila to Bangkok, plaintiff travelled in "first class", but at
Bangkok, the Manager of the defendant airline forced plaintiff to vacate the "first class" seat that he was occupying
because, in the words of the witness Ernesto G. Cuento, there was a "white man", who, the Manager alleged, had a "better
right" to the seat. When asked to vacate his "first class" seat, the plaintiff, as was to be expected, refused, and told
defendant's Manager that his seat would be taken over his dead body; a commotion ensued, and, according to said Ernesto
G. Cuento, "many of the Filipino passengers got nervous in the tourist class; when they found out that Mr. Carrascoso was
having a hot discussion with the white man [manager], they came all across to Mr. Carrascoso and pacified Mr. Carrascoso
to give his seat to the white man" (Transcript, p. 12, Hearing of May 26, 1959); and plaintiff reluctantly gave his "first class"
seat in the plane.3

1. The trust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent Court of Appeals. Petitioner charges
that respondent court failed to make complete findings of fact on all the issues properly laid before it. We are asked to consider
facts favorable to petitioner, and then, to overturn the appellate court's decision.

Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of record without expressing
therein clearly and distinctly the facts and the law on which it is based". 5 This is echoed in the statutory demand that a judgment
determining the merits of the case shall state "clearly and distinctly the facts and the law on which it is based"; 6 and that "Every
decision of the Court of Appeals shall contain complete findings of fact on all issues properly raised before it". 7

A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The law, however, solely insists that a decision
state the "essential ultimate facts" upon which the court's conclusion is drawn. 9 A court of justice is not hidebound to write in its
decision every bit and piece of evidence 10 presented by one party and the other upon the issues raised. Neither is it to be burdened
with the obligation "to specify in the sentence the facts"which a party "considered as proved". 11 This is but a part of the mental
process from which the Court draws the essential ultimate facts. A decision is not to be so clogged with details such that prolixity, if
not confusion, may result. So long as the decision of the Court of Appeals contains the necessary facts to warrant its conclusions, it is
no error for said court to withhold therefrom "any specific finding of facts with respect to the evidence for the defense". Because as
this Court well observed, "There is no law that so requires". 12 Indeed, "the mere failure to specify (in the decision) the contentions
of the appellant and the reasons for refusing to believe them is not sufficient to hold the same contrary to the requirements of the
provisions of law and the Constitution". It is in this setting that in Manigque, it was held that the mere fact that the findings "were
based entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant's side in the
controversy as shown by his own testimony", would not vitiate the judgment. 13 If the court did not recite in the decision the
testimony of each witness for, or each item of evidence presented by, the defeated party, it does not mean that the court has
overlooked such testimony or such item of evidence. 14 At any rate, the legal presumptions are that official duty has been regularly
performed, and that all the matters within an issue in a case were laid before the court and passed upon by it. 15

Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written statement of the ultimate facts as
found by the court ... and essential to support the decision and judgment rendered thereon". 16They consist of the
court's "conclusions" with respect to the determinative facts in issue". 17 A question of law, upon the other hand, has been declared
as "one which does not call for an examination of the probative value of the evidence presented by the parties." 18

2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of the Court of Appeals. 19 That
judgment is conclusive as to the facts. It is not appropriately the business of this Court to alter the facts or to review the questions of
fact. 20

With these guideposts, we now face the problem of whether the findings of fact of the Court of Appeals support its judgment.

3. Was Carrascoso entitled to the first class seat he claims?

It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first class ticket. But petitioner asserts
that said ticket did not represent the true and complete intent and agreement of the parties; that said respondent knew that he did
not have confirmed reservations for first class on any specific flight, although he had tourist class protection; that, accordingly, the
issuance of a first class ticket was no guarantee that he would have a first class ride, but that such would depend upon the
availability of first class seats.

These are matters which petitioner has thoroughly presented and discussed in its brief before the Court of Appeals under its third
assignment of error, which reads: "The trial court erred in finding that plaintiff had confirmed reservations for, and a right to, first
class seats on the "definite" segments of his journey, particularly that from Saigon to Beirut". 21

And, the Court of Appeals disposed of this contention thus:

Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee that the passenger
to whom the same had been issued, would be accommodated in the first-class compartment, for as in the case of plaintiff
he had yet to make arrangements upon arrival at every station for the necessary first-class reservation. We are not
impressed by such a reasoning. We cannot understand how a reputable firm like defendant airplane company could have
the indiscretion to give out tickets it never meant to honor at all. It received the corresponding amount in payment of first-
class tickets and yet it allowed the passenger to be at the mercy of its employees. It is more in keeping with the ordinary
course of business that the company should know whether or riot the tickets it issues are to be honored or not.22

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention, thus:

On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question. Apart from his testimony, see
plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1", and defendant's own witness, Rafael Altonaga, confirmed plaintiff's
testimony and testified as follows:

Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?

A. That the space is confirmed.

Q. Confirmed for first class?

A. Yes, "first class". (Transcript, p. 169)

xxx     xxx     xxx
Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that although plaintiff paid for, and
was issued a "first class" airplane ticket, the ticket was subject to confirmation in Hongkong. The court cannot give credit to the
testimony of said witnesses. Oral evidence cannot prevail over written evidence, and plaintiff's Exhibits "A", "A-l", "B", "B-l", "C" and
"C-1" belie the testimony of said witnesses, and clearly show that the plaintiff was issued, and paid for, a first class ticket without any
reservation whatever.

Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the reservation for a "first class"
accommodation for the plaintiff was confirmed. The court cannot believe that after such confirmation defendant had a verbal
understanding with plaintiff that the "first class" ticket issued to him by defendant would be subject to confirmation in Hongkong. 23

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount refunded on Carrascoso's
ticket, the decision of the Court of First Instance was affirmed by the Court of Appeals in all other respects. We hold the view that
such a judgment of affirmance has merged the judgment of the lower court. 24Implicit in that affirmance is a determination by the
Court of Appeals that the proceeding in the Court of First Instance was free from prejudicial error and "all questions raised by the
assignments of error and all questions that might have been raised are to be regarded as finally adjudicated against the appellant".
So also, the judgment affirmed "must be regarded as free from all error". 25 We reached this policy construction because nothing in
the decision of the Court of Appeals on this point would suggest that its findings of fact are in any way at war with those of the trial
court. Nor was said affirmance by the Court of Appeals upon a ground or grounds different from those which were made the basis of
the conclusions of the trial court. 26

If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat, notwithstanding the fact that seat
availability in specific flights is therein confirmed, then an air passenger is placed in the hollow of the hands of an airline. What
security then can a passenger have? It will always be an easy matter for an airline aided by its employees, to strike out the very
stipulations in the ticket, and say that there was a verbal agreement to the contrary. What if the passenger had a schedule to fulfill?
We have long learned that, as a rule, a written document speaks a uniform language; that spoken word could be notoriously
unreliable. If only to achieve stability in the relations between passenger and air carrier, adherence to the ticket so issued is
desirable. Such is the case here. The lower courts refused to believe the oral evidence intended to defeat the covenants in the ticket.

The foregoing are the considerations which point to the conclusion that there are facts upon which the Court of Appeals predicated
the finding that respondent Carrascoso had a first class ticket and was entitled to a first class seat at Bangkok, which is a stopover in
the Saigon to Beirut leg of the flight. 27 We perceive no "welter of distortions by the Court of Appeals of petitioner's statement of its
position", as charged by petitioner. 28 Nor do we subscribe to petitioner's accusation that respondent Carrascoso "surreptitiously
took a first class seat to provoke an issue". 29 And this because, as petitioner states, Carrascoso went to see the Manager at his office
in Bangkok "to confirm my seat and because from Saigon I was told again to see the Manager". 30 Why, then, was he allowed to take
a first class seat in the plane at Bangkok, if he had no seat? Or, if another had a better right to the seat?

4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is that Carrascoso's action is planted
upon breach of contract; that to authorize an award for moral damages there must be an averment of fraud or bad faith;31 and that
the decision of the Court of Appeals fails to make a finding of bad faith. The pivotal allegations in the complaint bearing on this issue
are:

3. That ... plaintiff entered into a contract  of air carriage with the Philippine Air Lines for a valuable consideration, the latter
acting as general agents for and in behalf of the defendant, under which said contract, plaintiff was entitled to, as
defendant agreed to furnish plaintiff, First Class passage on defendant's plane during the entire duration of plaintiff's tour of
Europe with Hongkong as starting point up to and until plaintiff's return trip to Manila, ... .

4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok, defendant furnished to
the plaintiff First Class accommodation but only after protestations, arguments and/or insistence were made by the plaintiff
with defendant's employees.

5. That finally, defendant  failed to provide  First Class passage, but instead furnished plaintiff only TouristClass
accommodations from Bangkok to Teheran and/or Casablanca, ... the plaintiff has been compelledby defendant's
employees to leave the First Class accommodation berths at Bangkok after he was already seated.

6. That consequently, the plaintiff, desiring no repetition of the inconvenience and embarrassments brought by defendant's
breach of contract was forced to take a Pan American World Airways plane on his return trip from Madrid to Manila.32
 xxx     xxx     xxx

2. That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid, plaintiff suffered inconveniences,
embarrassments, and humiliations, thereby causing plaintiff mental anguish, serious anxiety, wounded feelings, social humiliation,
and the like injury, resulting in moral damages in the amount of P30,000.00. 33

xxx     xxx     xxx

The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiff a first class passage covering,
amongst others, the Bangkok-Teheran leg; Second, That said contract was breached when petitioner failed to furnish first class
transportation at Bangkok; and Third, that there was bad faith when petitioner's employee compelled Carrascoso to leave his first
class accommodation berth "after he was already, seated" and to take a seat in the tourist class, by reason of which he suffered
inconvenience, embarrassments and humiliations, thereby causing him mental anguish, serious anxiety, wounded feelings and social
humiliation, resulting in moral damages. It is true that there is no specific mention of the term bad faith in the complaint. But, the
inference of bad faith is there, it may be drawn from the facts and circumstances set forth therein. 34 The contract was averred to
establish the relation between the parties. But the stress of the action is put on wrongful expulsion.

Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed petitioner on guard on what
Carrascoso intended to prove: That while sitting in the plane in Bangkok, Carrascoso was oustedby petitioner's manager who gave
his seat to a white man; 35 and (b) evidence of bad faith in the fulfillment of the contract was presented without objection on the
part of the petitioner. It is, therefore, unnecessary to inquire as to whether or not there is sufficient averment in the complaint to
justify an award for moral damages. Deficiency in the complaint, if any, was cured by the evidence. An amendment thereof to
conform to the evidence is not even required. 36 On the question of bad faith, the Court of Appeals declared:

That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the defendant Air
France while at Bangkok, and was transferred to the tourist class not only without his consent but against his will, has been
sufficiently established by plaintiff in his testimony before the court, corroborated by the corresponding entry made by the
purser of the plane in his notebook which notation reads as follows:

"First-class passenger was forced to go to the tourist class against his will, and that the captain refused to
intervene",

and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The captain of the plane who was
asked by the manager of defendant company at Bangkok to intervene even refused to do so. It is noteworthy that no one
on behalf of defendant ever contradicted or denied this evidence for the plaintiff. It could have been easy for defendant to
present its manager at Bangkok to testify at the trial of the case, or yet to secure his disposition; but defendant did
neither. 37

The Court of appeals further stated —

Neither is there evidence as to whether or not a prior reservation was made by the white man. Hence, if the employees of
the defendant at Bangkok sold a first-class ticket to him when all the seats had already been taken, surely the plaintiff
should not have been picked out as the one to suffer the consequences and to be subjected to the humiliation and indignity
of being ejected from his seat in the presence of others. Instead of explaining to the white man the improvidence
committed by defendant's employees, the manager adopted the more drastic step of ousting the plaintiff who was then
safely ensconsced in his rightful seat. We are strengthened in our belief that this probably was what happened there, by the
testimony of defendant's witness Rafael Altonaga who, when asked to explain the meaning of the letters "O.K." appearing
on the tickets of plaintiff, said "that the space is confirmed for first class. Likewise, Zenaida Faustino, another witness for
defendant, who was the chief of the Reservation Office of defendant, testified as follows:

"Q How does the person in the ticket-issuing office know what reservation the passenger has arranged with you?

A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19, 1959)

In this connection, we quote with approval what the trial Judge has said on this point:
 Why did the, using the words of witness Ernesto G. Cuento, "white man" have a "better right" to the seat occupied
by Mr. Carrascoso? The record is silent. The defendant airline did not prove "any better", nay, any right on the part
of the "white man" to the "First class" seat that the plaintiff was occupying and for which he paid and was issued a
corresponding "first class" ticket.

If there was a justified reason for the action of the defendant's Manager in Bangkok, the defendant could have
easily proven it by having taken the testimony of the said Manager by deposition, but defendant did not do so; the
presumption is that evidence willfully suppressed would be adverse if produced [Sec. 69, par (e), Rules of Court];
and, under the circumstances, the Court is constrained to find, as it does find, that the Manager of the defendant
airline in Bangkok not merely asked but threatened the plaintiff to throw him out of the plane if he did not give up
his "first class" seat because the said Manager wanted to accommodate, using the words of the witness Ernesto G.
Cuento, the "white man".38

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the term "bad faith".
But can it be doubted that the recital of facts therein points to bad faith? The manager not only prevented Carrascoso from
enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him
suffer the humiliation of having to go to the tourist class compartment - just to give way to another passenger whose right
thereto has not been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different
from what is understood in law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive design or
with some motive of self-interest or will or for ulterior purpose." 39

And if the foregoing were not yet sufficient, there is the express finding of bad faith  in the judgment of the Court of First
Instance, thus:

The evidence shows that the defendant violated its contract of transportation with plaintiff in bad faith, with the
aggravating circumstances that defendant's Manager in Bangkok went to the extent of threatening the plaintiff in
the presence of many passengers to have him thrown out of the airplane to give the "first class" seat that he was
occupying to, again using the words of the witness Ernesto G. Cuento, a "white man" whom he (defendant's
Manager) wished to accommodate, and the defendant has not proven that this "white man" had any "better right"
to occupy the "first class" seat that the plaintiff was occupying, duly paid for, and for which the corresponding "first
class" ticket was issued by the defendant to him.40

5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is well settled in law. 41 For the
willful malevolent act of petitioner's manager, petitioner, his employer, must answer. Article 21 of the Civil Code says:

ART. 21. Any person who willfully 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.

In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the provisions of Article 2219 (10), Civil
Code, moral damages are recoverable. 42

6. A contract to transport passengers is quite different in kind and degree from any other contractual relation. 43And this, because of
the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of
the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty.
Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness,
respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language,
indignities and abuses from such employees. So it is, that any rule or discourteous conduct on the part of employees towards a
passenger gives the latter an action for damages against the carrier. 44

Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of contract and a tort, giving a right of
action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand payment under
threat of ejection, though the language used was not insulting and she was not ejected." 46 And this, because, although the relation
of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that breaks the contract may be also a
tort". 47 And in another case, "Where a passenger on a railroad train, when the conductor came to collect his fare tendered him the
cash fare to a point where the train was scheduled not to stop, and told him that as soon as the train reached such point he would
pay the cash fare from that point to destination, there was nothing in the conduct of the passenger which justified the conductor in
using insulting language to him, as by calling him a lunatic," 48 and the Supreme Court of South Carolina there held the carrier liable
for the mental suffering of said passenger.1awphîl.nèt

Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action as we have said, is placed
upon his wrongful expulsion. This is a violation of public duty by the petitioner air carrier — a case of quasi-delict. Damages are
proper.

7. Petitioner draws our attention to respondent Carrascoso's testimony, thus —

Q You mentioned about an attendant. Who is that attendant and purser?

A When we left already — that was already in the trip — I could not help it. So one of the flight attendants approached me
and requested from me my ticket and I said, What for? and she said, "We will note that you transferred to the tourist class".
I said, "Nothing of that kind. That is tantamount to accepting my transfer." And I also said, "You are not going to note
anything there because I am protesting to this transfer".

Q Was she able to note it?

A No, because I did not give my ticket.

Q About that purser?

A Well, the seats there are so close that you feel uncomfortable and you don't have enough leg room, I stood up and I went
to the pantry that was next to me and the purser was there. He told me, "I have recorded the incident in my notebook." He
read it and translated it to me — because it was recorded in French — "First class passenger was forced to go to the tourist
class against his will, and that the captain refused to intervene."

Mr. VALTE —

I move to strike out the last part of the testimony of the witness because the best evidence would be the notes. Your
Honor.

COURT —

I will allow that as part of his testimony. 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebook reading "First class
passenger was forced to go to the tourist class against his will, and that the captain refused to intervene" is predicated upon
evidence [Carrascoso's testimony above] which is incompetent. We do not think so. The subject of inquiry is not the entry, but the
ouster incident. Testimony on the entry does not come within the proscription of the best evidence rule. Such testimony is
admissible. 49a

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of the startling occurrence was still
fresh and continued to be felt. The excitement had not as yet died down. Statements then, in this environment, are admissible as
part of the res gestae. 50 For, they grow "out of the nervous excitement and mental and physical condition of the declarant". 51 The
utterance of the purser regarding his entry in the notebook was spontaneous, and related to the circumstances of the ouster
incident. Its trustworthiness has been guaranteed. 52 It thus escapes the operation of the hearsay rule. It forms part of the res gestae.

At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would have been an easy matter for
petitioner to have contradicted Carrascoso's testimony. If it were really true that no such entry was made, the deposition of the
purser could have cleared up the matter.

We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.
8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant exemplary damages — in contracts
and quasi- contracts. The only condition is that defendant should have "acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner." 53 The manner of ejectment of respondent Carrascoso from his first class seat fits into this legal precept. And
this, in addition to moral damages.54

9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a similar judgment for attorneys' fees.
The least that can be said is that the courts below felt that it is but just and equitable that attorneys' fees be given. 55 We do not
intend to break faith with the tradition that discretion well exercised — as it was here — should not be disturbed.

10. Questioned as excessive are the amounts decreed by both the trial court and the Court of Appeals, thus: P25,000.00 as moral
damages; P10,000.00, by way of exemplary damages, and P3,000.00 as attorneys' fees. The task of fixing these amounts is primarily
with the trial court. 56 The Court of Appeals did not interfere with the same. The dictates of good sense suggest that we give our
imprimatur thereto. Because, the facts and circumstances point to the reasonableness thereof.57

On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error. We accordingly vote to affirm
the same. Costs against petitioner. So ordered.
G.R. No. 107282 March 16, 1994

THE MANILA REMNANT CO., INC., petitioner, 

vs.
HON. COURT OF APPEALS, AND SPS. OSCAR C. VENTANILLA AND CARMEN GLORIA DIAZ, respondents.

Tabalingcos & Associates Law Office for petitioner.

Oscar C. Ventanilla, Jr. and Augusto Garmaitan for private respondents.

CRUZ, J.:

The present petition is an offshoot of our decision in Manila Remnant Co., Inc., (MRCI) v. Court of Appeals, promulgated on
November 22, 1990.

That case involved parcels of land in Quezon City which were owned by petitioner MRCI and became the subject of its agreement
with A.U. Valencia and Co., Inc., (AUVCI) by virtue of which the latter was to act as the petitioner's agent in the development and
sale of the property. For a stipulated fee, AUVCI was to convert the lands into a subdivision, manage the sale of the lots, execute
contracts and issue official receipts to the lot buyers. At the time of the agreement, the president of both MRCI and AUVCI was
Artemio U. Valencia.

Pursuant to the above agreement, AUVCI executed two contracts to sell dated March 3, 1970, covering Lots 1 and 2, Block 17, in
favor of spouses Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract price of P66,571.00, payable monthly in ten
years. After ten days and without the knowledge of the Ventanilla couple, Valencia, as president of MRCI, resold the same parcels to
Carlos Crisostomo, one of his sales agents, without any consideration. Upon orders of Valencia, the monthly payments of the
Ventanillas were remitted to the MRCI as payments of Crisostomo, for which receipts were issued in his name. The receipts were
kept by Valencia without the knowledge of the Ventanillas and Crisostomo. The Ventanillas continued paying their monthly
installments.

On May 30, 1973, MRCI informed AUVCI that it was terminating their agreement because of discrepancies discovered in the latter's
collections and remittances. On June 6, 1973, Valencia was removed by the board of directors of MRCI as its president.

On November 21, 1978, the Ventanilla spouses, having learned of the supposed sale of their lots to Crisostomo, commenced an
action for specific performance, annulment of deeds, and damages against Manila Remnant Co., Inc., A.U. Valencia and Co., Inc., and
Carlos Crisostomo. It was docketed as Civil Case No. 26411 in the Court of First Instance of Quezon City, Branch
7-B.

On November 17, 1980, the trial court rendered a decision declaring the contracts to sell in favor of the Ventanillas valid and
subsisting, and annulling the contract to sell in favor of Crisostomo. It ordered the MRCI to execute an absolute deed of sale in favor
of the Ventanillas, free from all liens and encumbrances. Damages and attorney's fees in the total amount of P210,000.00 were also
awarded to the Ventanillas for which the MRCI, AUVCI, and Crisostomo were held solidarily liable.

The lower court ruled further that if for any reason the transfer of the lots could not be effected, the defendants would be solidarily
liable to the Ventanillas for reimbursement of the sum of P73,122.35, representing the amount paid for the two lots, and legal
interest thereon from March 1970, plus the decreed damages and attorney's fees. Valencia was also held liable to MRCI for moral
and exemplary damages and attorney's fees.

From this decision, separate appeals were filed by Valencia and MRCI. The appellate court, however, sustained the trial court in toto.

MRCI then filed before this Court a petition for certiorari to review the portion of the decision of the Court of Appeals upholding the
solidary liability of MRCI, AUVCI and Carlos Crisostomo for the payment of moral and exemplary damages and attorney's fees to the
Ventanillas.
On November 22, 1990, this Court affirmed the decision by the Court of Appeals and declared the judgment of the trial court
immediately executory.

The Present Case

On January 25, 1991, the spouses Ventanilla filed with the trial court a motion for the issuance of a writ of execution in Civil Case No.
26411. The writ was issued on May 3, 1991, and served upon MRCI on May 9, 1991.

In a manifestation and motion filed by MRCI with the trial court on May 24, 1991, the petitioner alleged that the subject properties
could not be delivered to the Ventanillas because they had already been sold to Samuel Marquez on February 7, 1990, while their
petition was pending in this Court. Nevertheless, MRCI offered to reimburse the amount paid by the respondents, including legal
interest plus the aforestated damages. MRCI also prayed that its tender of payment be accepted and all garnishments on their
accounts lifted.

The Ventanillas accepted the amount of P210,000.00 as damages and attorney's fees but opposed the reimbursement offered by
MRCI in lieu of the execution of the absolute deed of sale. They contended that the alleged sale to Samuel Marquez was void,
fraudulent, and in contempt of court and that no claim of ownership over the properties in question had ever been made by
Marquez.

On July 19, 1991, Judge Elsie Ligot-Telan issued the following order:

To ensure that there is enough amount to cover the value of the lots involved if transfer thereof to plaintiff may no
longer be effected, pending litigation of said issue, the garnishment made by the Sheriff upon the bank account of
Manila Remnant may be lifted only upon the deposit to the Court of the amount of P500,000.00 in cash.

MRCI then filed a manifestation and motion for reconsideration praying that it be ordered to reimburse the Ventanillas in the
amount of P263,074.10 and that the garnishment of its bank deposit be lifted. This motion was denied by the trial court in its order
dated September 30, 1991. A second manifestation and motion filed by MRCI was denied on December 18, 1991. The trial court also
required MRCI to show cause why it should not be cited for contempt for disobedience of its judgment.

These orders were questioned by MRCI in a petition for certiorari before the respondent court on the ground that they were issued
with grave abuse of discretion.

The Court of Appeals ruled that the contract to sell in favor of Marquez did not constitute a legal impediment to the immediate
execution of the judgment. Furthermore, the cash bond fixed by the trial court for the lifting of the garnishment was fair and
reasonable because the value of the lot in question had increased considerably. The appellate court also set aside the show-cause
order and held that the trial court should have proceeded under Section 10, Rule 39 of the Rules of Court and not Section 9 thereof. 1

In the petition now before us, it is submitted that the trial court and the Court of Appeals committed certain reversible errors to the
prejudice of MRCI.

The petitioner contends that the trial court may not enforce it garnishment order after the monetary judgment for damages had
already been satisfied and the amount for reimbursement had already been deposited with the sheriff. Garnishment as a remedy is
intended to secure the payment of a judgment debt when a well-founded belief exists that the erring party will abscond or
deliberately render the execution of the judgment nugatory. As there is no such situation in this case, there is no need for a
garnishment order.

It is also averred that the trial court gravely abused its discretion when it arbitrarily fixed the amount of the cash bond for the lifting
of the garnishment order at P500,000.00.

MRCI further maintains that the sale to Samuel Marquez was valid and constitutes a legal impediment to the execution of the
absolute deed of sale to the Ventanillas. At the time of the sale to Marquez, the issue of the validity of the sale to the Ventanillas had
not yet been resolved. Furthermore, there was no specific injunction against the petitioner re-selling the property.
Lastly, the petitioner insists that Marquez was a buyer in good faith and had a right to rely on the recitals in the certificate of title.
The subject matter of the controversy having passed to an innocent purchaser for value, the respondent court erred in ordering the
execution of the absolute deed of sale in favor of the Ventanillas.

For their part, the respondents argue that the validity of the sale to them had already been established even while the previous
petition was still pending resolution. That petition only questioned the solidary liability of MRCI to the Ventanillas. The portion of the
decision ordering the MRCI to execute an absolute deed of sale in favor of the Ventanillas became final and executory when the
petitioner failed to appeal it to the Supreme Court. There was no need then for an order enjoining the petitioner from re-selling the
property in litigation.

They also point to the unusual lack of interest of Marquez in protecting and asserting his right to the disputed property, a clear
indication that the alleged sale to him was merely a ploy of the petitioner to evade the execution of the absolute deed of sale in
their favor.

The petition must fail.

The validity of the contract to sell in favor of the Ventanilla spouses is not disputed by the parties. Even in the previous petition, the
recognition of that contract was not assigned as error of either the trial court or appellate court. The fact that the MRCI did not
question the legality of the award for damages to the Ventanillas also shows that it even then already acknowledged the validity of
the contract to sell in favor of the private respondents.

On top of all this, there are other circumstances that cast suspicion on the validity, not to say the very existence, of the contract with
Marquez.

First, the contract to sell in favor of Marquez was entered into after the lapse of almost ten years from the rendition of the judgment
of the trial court upholding the sale to the Ventanillas.

Second, the petitioner did not invoke the contract with Marquez during the hearing on the motion for the issuance of the writ of
execution filed by the private respondents. It disclosed the contract only after the writ of execution had been served upon it.

Third, in its manifestation and motion dated December 21, 1990, the petitioner said it was ready to deliver the titles to the
Ventanillas provided that their counterclaims against private respondents were paid or offset first. There was no mention of the
contract to sell with Marquez on February 7, 1990.

Fourth, Marquez has not intervened in any of these proceedings to assert and protect his rights to the subject property as an alleged
purchaser in good faith.

At any rate, even if it be assumed that the contract to sell in favor of Marquez is valid, it cannot prevail over the final and executory
judgment ordering MRCI to execute an absolute deed of sale in favor of the Ventanillas. No less importantly, the records do not
show that Marquez has already paid the supposed balance amounting to P616,000.00 of the original price of over P800,000.00. 2

The Court notes that the petitioner stands to benefit more from the supposed contract with Marquez than from the contract with
the Ventanillas with the agreed price of only P66,571.00. Even if it paid the P210,000.00 damages to the private respondents as
decreed by the trial court, the petitioner would still earn more profit if the Marquez contract were to be sustained.

We come now to the order of the trial court requiring the posting of the sum of P500,000.00 for the lifting of its garnishment order.

While the petitioners have readily complied with the order of the trial court for the payment of damages to the Ventanillas, they
have, however, refused to execute the absolute deed of sale. It was for the purpose of ensuring their compliance with this portion of
the judgment that the trial court issued the garnishment order which by its term could be lifted only upon the filling of a cash bond
of P500,000.00.

The petitioner questions the propriety of this order on the ground that it has already partially complied with the judgment and that
it has always expressed its willingness to reimburse the amount paid by the respondents. It says that there is no need for a
garnishment order because it is willing to reimburse the Ventanillas in lieu of execution of the absolute deed of sale.
The alternative judgment of reimbursement is applicable only if the conveyance of the lots is not possible, but it has not been shown
that there is an obstacle to such conveyance. As the main obligation of the petitioner is to execute the absolute deed of sale in favor
of the Ventanillas, its unjustified refusal to do so warranted the issuance of the garnishment order.

Garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to
the litigation. 3 It is an attachment by means of which the plaintiff seeks to subject to his claim property of the defendant in the
hands of a third person or money owed by such third person or garnishee to the defendant. 4The rules on attachment also apply to
garnishment proceedings.

A garnishment order shall be lifted if it established that:

(a) the party whose accounts have been garnished has posted a counterbond or has made the requisite cash
deposit; 5

(b) the order was improperly or irregularly issued 6 as where there is no ground for garnishment 7 or the affidavit
and/or bond filed therefor are defective or insufficient; 8

(c) the property attached is exempt from execution, hence exempt from preliminary attachment 9 or

(d) the judgment is rendered against the attaching or garnishing creditor. 10

Partial execution of the judgment is not included in the above enumeration of the legal grounds for the discharge of a garnishment
order. Neither does the petitioner's willingness to reimburse render the garnishment order unnecessary. As for the counterbond, the
lower court did not err when it fixed the same at P500,000.00. As correctly pointed out by the respondent court, that amount
corresponds to the current fair market value of the property in litigation and was a reasonable basis for determining the amount of
the counterbond.

Regarding the refusal of the petitioner to execute the absolute deed of sale, Section 10 of Rule 39 of the Rules of Court reads as
follows:

Sec. 10. Judgment for specific act; vesting title — If a judgment directs a party to execute a conveyance of land, or
to deliver deeds or other documents, or to perform any other specific act, and the party fails to comply within the
time specified, the court may direct the act to be done at the cost of the disobedient party by some other person
appointed by the court and the act when so done shall have like effect as if done by the party. If real or personal
property is within the Philippines, the court in lieu of directing a conveyance thereof may enter judgment divesting
the title of any party and vesting it in others and such judgment shall have the force and effect of a conveyance
executed in due form of law.

Against the unjustified refusal of the petitioner to accept payment of the balance of the contract price, the remedy of the
respondents is consignation, conformably to the following provisions of the Civil Code:

Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the
debtor shall be released from responsibility by the consignation of the thing or sum due. . .

Art. 1258. Consignation shall be made by depositing the things due at the disposal of the judicial authority, before
whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in
other cases.

The consignation having been made, the interested parties shall also be notified thereof.

Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of
the obligation.

Accordingly, upon consignation by the Ventanillas of the sum due, the trial court may enter judgment canceling the title of the
petitioner over the property and transferring the same to the respondents. This judgment shall have the same force and effect as
conveyance duly executed in accordance with the requirements of the law.
In sum, we find that:

1. No legal impediment exists to the execution, either by the petitioner or the trial court, of an absolute deed of sale of the subject
property in favor of the respondent Ventanillas; and

2. The lower court did not abuse its discretion when it required the posting of a P500,000.00 cash bond for the lifting of the
garnishment order.

WHEREFORE, the petition is DENIED and the challenged decision of the Court of Appeals is AFFIRMED in toto, with costs against the
petitioner. It is so ordered.
G.R. No. L-41377             July 26, 1935

ANGELA BLONDEAU and FERNANDO DE LA CANTERA Y UZQUIANO, plaintiffs-appellants, 

vs.
AGUSTIN NANO and JOSE VALLEJO, defendants-appellees.

John R. McFie, Jr., for appellants.

Evangelista and Santos for appellee Vallejo.
No appearance for the other appellee.

MALCOLM, J.:

This action was brought in the Court of First Instance of Manila to foreclose a mortgage alleged to have been made by the
defendants Agustin Nano and Jose Vallejo to the plaintiff Angela Blondeau, bearing date November 5, 1931, to secure the payment
of the sum of P12,000, and covering property situated on Calle Georgia, Manila. Nano, purporting to represent both defendants,
after filing an answer, was found in contempt of court. The other defendant Vallejo thereupon presented an amended answer in
which it was alleged that his signature to the mortgage was a forgery. Following the trial, judgment was rendered against Nano but
not against Vallejo. From this judgment the plaintiffs have taken an appeal.

With all due deference to the findings of the trial judge, now an honored member of this court, we are inclined to the view, first,
that the accessorias bearing Nos. 905A to 905F, Calle Georgia, Manila, were as indicated in the mortgage, the property of the
defendant Agustin Nano, and second, that the purported signature of the defendant Vallejo to the mortgage was not a forgery. In
support of the first of our statements, attention need only be invited to a series of documents, including the transfer certificate of
title, showing that Vallejo was considered the owner of the land only. As to the second statement, it needs be recalled that the
mortgage was executed in the home of the plaintiffs, and that of those present, the principal plaintiff Angela Blondeau and her
husband Fernando de la Cantera, together with the instrumental witness Pedro Jimenez Zoboli, identified Vallejo as the person who
signed the document. As against their testimony stands the alibi of Vallejo, partially corroborated by the testimony of the notary
public Gregorio Bilog. It is expecting a great deal to have us believe that not only the mortgage but the power of attorney of Vallejo
in favor of Nano and a series of documents were the product of the evil machinations of Nano, and that although Nano and Vallejo,
members of same family, lived together, Vallejo was entirely unacquainted with the activities of Nano in dealing with their joint
property. It is significant that the proper cedulas of Vallejo were presented for the accomplishment of the documents, and that if
there was fraud, not one but a number of notaries public were deceived thereby.

We repeat that upon its face, the mortgage appears to be regular and to have been duly executed and accepted by Vallejo on
November 5, 1931. The evidence then resolves itself into a question of the execution of the mortgage by Vallejo on the one hand,
and the denial of its execution on the other hand. That there was a conflict between experts as to the handwriting, one being of the
opinion that the signatures of Vallejo were genuine, and the other being of the opinion that they were not genuine, is not
unexpected. Under such conditions, the question is, which side produced the weightier testimony, and as hereinbefore indicated, we
are of the opinion that the balance inclined in favor of the plaintiffs.

But there is a narrower ground on which the defenses of the defendant-appellee must be overruled. Agustin Nano had possession of
Jose Vallejo's title papers. Without those title papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have
been perpetrated. When Fernando de la Cantera, a member of the Philippine bar and the husband of Angela Blondeau, the principal
plaintiff, searched the registration records, he found them in due form, including the power of attorney of Vallejo, in favor of Nano.
If this had not been so and if thereafter the proper notation of the encumbrance could not have been made, Angela Blondeau would
not have lent P12,000 to the defendant Vallejo.

The Torrens system is intended for the registration of title, rather than the muniments of title. It represents a departure from the
orthodox principles of property law. Under the common law, if the pretended signature of the mortgagor is a forgery, the
instrument is invalid for every purpose and will pass on the title or rights to anyone, unless the spurious document is ratified and
accepted by the mortgagor. The Torrens Act on the contrary permits a forged transfer, when duly entered in the registry, to become
the root of a valid title in a bona fide purchaser. The act erects a safeguard against a forged transfer being registered, by the
requirement that no transfer shall be registered unless the owner's certificate was produced along with the instrument of transfer.
An executed transfer of registered lands placed by the registered owner thereof in the hands of another operates as a
representation to a third party that the holder of the transfer is authorized to deal with the lands. (53 C.J., 1141, 1142; Act No. 496,
as amended, secs. 47, 51, 55.)
With respect to the conclusiveness of the Torrens title and the binding force and effect of annotations thereon even when through a
forged deed the land passes into the possession of an innocent purchaser for value, the basic rule is found in the opinion delivered
by Mr. Chief Justice Arellano in De la Cruz vs. Fabie ( [1916], 35 Phil., 144). The history of the case was as follows:

Vedasto Velazquez was attorney in fact of Gregoria Hernandez. Gregoria Hernandez registered her title of ownership to the
land in question in the property registry and was issued certificate of title No. 121. Vedasto Velazquez, being the attorney in
fact of Gregoria Hernandez, had in his possession all the muniments of title of the land, including the certificate of title No.
121, and, abusing her confidence in him, a few days after the registration of the land, forged a notarial instrument wherein
he made it appear that she had sold the said land to him for the price of P8,000.

Vedasto Velazquez then went to the register of deeds and applied for the registration of the land in his own name,
presenting Gregoria Hernandez' certificate of title No. 121 for cancellation, and the deed of conveyance which was
purported to have been made by Gregoria Hernandez in his favor in order that he might be registered as the true owner of
the land. All this was done; Gregoria Hernandez' title was cancelled and certificate of title No. 43 was issued to Vedasto
Velazquez.

xxx     xxx     xxx

On May 31, 1907, Vedasto Velazquez sold the land finally and absolutely to Ramon Fabie, who presented to the register of deeds the
notarial instrument executed for the purpose and was thereupon furnished with the certificate of title No. 766." On these facts, it
was held that Fabie was an innocent holder of a title for value and that, under section 55 of the Land Registration Law, he was the
absolute owner of the land.

The decision above cited has repeatedly been reexamined by this court, one of the most recent instances being found in the case
of El Hogar Filipino vs. Olviga ( [1934], 60 Phil., 17). While counsel for the appellee is undoubtedly correct in his contention that
neither the case of Fabie nor the case of Olgiva nor any other case relied upon by the appellants is on all fours with the present facts,
the principle on which these cases rest should here be carried forward and given application.

The recent decision of the United States Supreme Court in the case of Eliason vs. Wilborn ( [1930], 281 U.S., 457), is of enlightening
interest. Plaintiffs in this case, purchasers of land previously brought under the Illinois Torrens Act, delivered the certificate of title to
a party under an agreement to sell, who forged a deed to himself, had a certificate issue in his name, and then conveyed to
defendants who were good faith purchasers for value. Plaintiffs informed the register of the forgery after the defendants had
bought, and demanded the cancellation of the deeds and certificates, and the reissue of a certificate to themselves. The register
refused, and a petition was brought to compel such action. The Circuit Court for Cook County, Illinois, the Supreme Court of Illinois,
and the United States Supreme Court, united in dismissing the petition. Mr. Justice Holmes, delivering the opinion of the latter court,
said:

. . . The statute requires the production of the outstanding certificate, as a condition to the issue of a new one. The
appellants saw fit no entrust it to Napletone and they took the risk. They say that according to the construction of the act
adopted the registrar's certificate would have had the same effect even if the old certificate had not been produced. But
that, if correct, is no answer. Presumably the register will do his duty, and if he does he will require the old certificate to be
handed in. It does not justify the omission of a precaution that probably would be sufficient, to point out that a dishonest
official could get around it. There is not the slightest reason to suppose that Napletone would have got a certificate on
which the Wilborns could rely, without the delivery of the old one by the appellants. As between two innocent persons, one
of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear
the loss.

Vargas & Mañalac in their treatise on the Philippine Land Registration Law quote with approval the comment of Mr. Powell in his
book on Land Registration, section 213. The question which the author propounded was: Why does the law say that the person who
had no title at all and only a forged deed as a color of title should become the true owner of the land by merely continuing to occupy
and enjoy the land which in fact does not belong to him, but which belongs to the victim of the forgery? His answer was:

. . . that public policy, expediency, and the need of a statute of repose as to the possession of land, demand such a rule.
Likewise, public policy, expediency, and the need of repose and certainty as to land titles demand that the bona
fide purchaser of a certificate of title to registered land, who, though he buys on a forged transfer, succeeds in having the
land registered in his name, should nevertheless hold an unimpeachable title. There is more natural justice in recognizing
 his title as being valid than there is in recognizing as valid the title of one who has succeeded in ripening a forged color of
title by prescription.

In the first place, a forger cannot effectuate his forgery in the case of registered land by executing a transfer which can be
registered, unless the owner has allowed him, in some way, to get possession of the owner's certificate. The Act has erected
in favor of the owner, as a safeguard, against a forged transfer being perpetrated against him, the requirement that no
voluntary transfer shall be registered unless the owner's certificate is produced along with the instrument of transfer.
Therefore, if the owner has voluntarily or carelessly allowed the forger to come into possession of his owner's certificate he
is to be judged according to the maxim, that when one of two innocent persons must suffer by the wrongful act of a third
person the loss fall on him who put it into the power of that third person to perpetrate the wrong. Furthermore, even if the
forger stole the owner's certificate, the owner is up against no greater hardship than is experienced by one whose money or
negotiable paper payable to bearer is stolen and transferred by the thief to an innocent purchaser.

Other incidental facts might be mentioned and other incidental legal propositions might be discussed, but in its final analysis this is a
case of a mortgagee relying upon a Torrens title, and loaning money in all good faith on the basis of the title standing in the name of
the mortgagors only thereafter to discover one defendant to be an alleged forger and the other defendant, if not a party to the
conspiracy, at least having by his negligence or acquiescence made it possible for the fraud to transpire. Giving to the facts the most
favorable interpretation for Vallejo, yet, as announced by the United States Supreme Court, the maxim is, as between two innocent
persons, in this case Angela Blondeau and Jose Vallejo, one of whom must suffer the consequence of a breach of trust, the one who
made it possible by his act of confidence must bear the loss, in this case Jose Vallejo. Accordingly, the four errors assigned will be
sustained, the judgment reversed, and in the court of origin a new one entered sustaining plaintiff's mortgage and granting her the
relief prayed for in her complaints .So ordered, without special pronouncement as to the costs in either instance.
G.R. No. L-19375               May 21, 1969

DY PEH, AND/OR VICTORY RUBBER MANUFACTURING,petitioner, 

vs.
COLLECTOR OF INTERNAL REVENUE,respondent.

Rene A. Diokno for petitioner.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Felicisimo R. Rosete and Special Attorney Alejandro B.
Afurong for respondent.

DIZON,J.:

Petition filed by Dy Peh for the review of the decision and resolution of the Court of Tax Appeals dated April 29 and December 23,
1961, respectively, in C.T.A. Case No. 538, ordering him to pay deficiency percentage taxes in the total amount of P51,939,27.

The following facts are not disputed: .

Petitioner, during all the time material to this case, was engaged in the business of manufacturing and selling rubber shoes and allied
products in the city of Cebu, under the registered firm name Victory Rubber Manufacturing.

Sometime in the year 1955 the Bureau of Internal Revenue unearthed anomalies committed in the office of the Treasurer of the city
of Cebu in connection with the payment of taxes by some taxpayers, amongst them petitioner herein. As a result the respondent
assessed against, and demanded from petitioner the payment of the following sums: P4,725, including P100 as penalty, P29,980,
including P50 as penalty, and P17,425 including P50 as penalty, on January 27, 1956, November 12, 1955 and November 12, 1955,
respectively. This assessment was based upon short payments in connection with taxes due from petitioner during the periods
covered by the assessment. The investigation of the anomalies disclosed that the amounts of the taxes allegedly paid by him, as
appearing in the original of every official receipt he had in his possession, were bigger than the amounts appearing in the
corresponding duplicate, triplicate and quadruplicate copies thereof kept in the office of the City Treasurer of Cebu. Such
discrepancies are hereunder tabulated as follows:

Official Appearing in the Original Appearing in the Duplicate

Receipt Triplicate and/or
Number Date Amount Quadruplicate

Re 1st cause of action Date Amount Difference

699004 4-20-54 P3,227.47 4-20-54 P227.47 P3,000.00

704201 7-20-54 3,681.41 7-20-54 681.41 3,000.00

709008 10-20-54 1,892.78 10-20-54 192.78 1,700.00

A-210319 1-20-55 2,575.46 1-20-55 175.46 2,400.00

A-218105 4-20-55 3,968.68 4-20-55 168.69 3,800.00

Re 2nd cause of action

1923194 4-21-52 P4,380.37 4-21-52 P380.37 P4,000.00

1972817 7-21-52 4,140.29 7-21-52 140.29 4,000.00

 6399188 10-20-52 2,113.07 10-20-52 113.07 2,000.00

7769180 1-17-53 1,457.42 4-7-53 6.00 1,451.42

7778387 4-18-53 4,057.56 4-18-52 57.56 4,000.00

8423087 7-20-53 2,850.63 7-20-53 50.63 2,800.00

8470851 10-20-53 2,901.87 10-20-53 101.87 2,800.00

693613 1-20-54 2,996.26 1-20-54 96.26 2,900.00

Re 3rd cause of action

A-
1-17-52 P3,815.18 1-17-52 P115.18 P3,700.00
1709018

Petitioner's contention below and here is this: since the checks issued by him covered in full the amount due for each quarter, and
were accepted and deposited by the City Treasurer of Cebu; since the originals of the official receipts issued by the latter show that
the full amount of the taxes due from him had been paid, he must be deemed to have paid such taxesin full, and any anomaly in the
application of the amounts paid by him consisting in the diversion of part thereof to pay the taxes of other taxpayers — whether
attributable solely to employees in the office of said Treasurer or to other parties — should not be held against him.

Respondent's contention, on the other hand, is that the amounts actually paid by petitioner were those appearing on the duplicates,
triplicates and quadruplicates of the official receipts mentioned heretofore; that the originals thereof were falsified or altered to
make them show payment in full of the taxes due from petitioner.

In connection with the issues thus joined petitioner tried to prove that the payments in question were made by him personally,
while, on the other hand, respondent claimed that said payments were made not by petitioner personally but by Tan Chuan Liong,
his authorized agent in the matter of payment of his taxes; that Bartolome Baguio, Chief of the Internal Revenue Division of the City
Treasurer's Office of Cebu, had allowed the wrongful practice of permitting Tan Chuan Liong to prepare the official receipts in
connection with tax payments made by him in behalf of his merchant clients; that it was Tan Chuan Liong who applied a portion of
the amounts given to him by petitioner to pay tax obligations of other taxpayers, also his clients, and that therefore petitioner's
recourse is against him.lawphi1.ñet

Whether it was petitioner, in person, who made the payment of his taxes herein involved, or it was his aforesaid agent, is manifestly
a question of fact squarely resolved by the Court of Tax Appeals as follows: "Petitioner sought to prove that he never employed Tan
Chuan Liong as a business agent in the payment of the tax in question. The preponderance of the evidence shows otherwise. If, as
alleged, petitioner paid the tax personally, why were the official receipts prepared by Tan Chuan Liong and not by Bartolome Baguio
or any authorized employee in the office of the City Treasurer of Cebu? It appears that Tan Chuan Liong prepared the official receipts
of payments of taxpayers who employed him as business agent. It has not been shown that Tan Chuan Liong prepared any official
receipt covering payment of taxpayers other than those who employed him business agent."

After ruling against petitioner on this question, the Court of Tax Appeals said further:

Even assuming that Tan Chuan Liong was not employed by petitioner as business agent, petitioner is not entirely blameless.
The records show that the payments were made by checks. The number of the official receipts covering the payments are
indicated on the back of the checks. After the checks had been deposited and the amounts credited in favor of the
Government, the cancelled checks were returned to petitioner. Petitioner is, therefore, charged with knowledge of the fact
that the amount covered by each check was applied in payment not only of his tax but also of taxes of other taxpayers, the
numbers of the official receipts covering which are indicated on the back of the check. The fact that he accepted the
cancelled checks without protest is evidence of his acquiescence to the manner in which the amount covered by each check
was applied by the collecting officer. He cannot now be heard to complain.lawphi1.ñet

We can hardly add any other consideration to strengthen the lower court's ruling.
Another question of fact vital to this case is whether or not the official receipts in petitioner's possession were falsified, and if so by
whom.

In this connection, We believe it established as a fact that petitioner had employed Tan Chuan Liong as a business agent in the
matter of payment of his taxes. The testimonies of Bartolome Baguio, Isidro Badana and Lauro Abalos on this matter (T.s.n. pp. 200-
201, 472-473, 483-484, 501-503, 508-510, 525, 535-539) were corroborated by the statement and report of NBI handwriting expert
Felipe Logan. That Tan Chuan Liong, as such petitioner's agent, actually paid to the government less than the amounts of the taxes
due from petitioner is also fully proven by their testimonies and the duplicate, triplicate and quadruplicate copies of the official
receipts which appear upon their face to be genuine or authentic. The same thing cannot be claimed for the official receipts in
question, because the lower court found that, as in the case ofTiu Bon Sin vs. Collector etc., C.T.A. No. 286, andYap Pe Giok vs.
Arañas, C.T.A. No. 533, appellant employed the same business agent who misappropriated a portion of the amounts entrusted to
him and paid less than what was due from his principals. In plain words, the lower court expressed the view that the official receipts
in petitioner's hands did not reflect the truth.

The trial court's ruling upon these questions must be sustained pursuant to our consistent ruling to the effect that in reviews of the
nature of the present, only errors of law are reviewable by this Court (G.R. L-12174, Maria B. Castro vs. Collector, April 26, 1962; G.R.
L-9738, Blas Gutierrez, et al. vs. Court of Tax Appeals; G.R. L-8556, Benito Sanchez vs. Commissioner of Customs, Sept. 30, 1957 and
54 O.G. No. 2, p. 361, Eugenie Perez vs. Court of Tax Appeals, G.R. L-10507, May 30, 1958; G.R. No. L-13387, Sy Chiuco vs. Collector,
March 23, 1960; G.R. No. L-11622, Collector vs. Fisher and G.R. No. L-1168, Fisher vs. Collector, January 28, 1961).

The foregoing disposes of the first two assignments of error submitted in petitioner's brief. In the third, it is his contention that the
Court a quo erred in holding that he is estopped from questioning the misapplication of his payments.

This is only a corollary of the questions raised in the previous assignments of error. Inasmuch as We have held in resolving the latter
that, in point of fact, Tan Chuan Liong was petitioner's agent, the conclusion must necessarily be that the agent's acts bind his
principal; without prejudice, of course, to the latter seeking recourse against him in an appropriate civil or criminal action.

The fourth and last assignment of error has been impliedly resolved adversely to petitioner in our rulings upon the first three.

PREMISES CONSIDERED, the decision appealed from is hereby affirmed, with costs.
G.R. No. 137686           February 8, 2000 RURAL BANK OF MILAOR (CAMARINES SUR), petitioner, vs.
FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIÑO, FELICISIMO OCFEMIA, RENATO OCFEMIA JR, and WINSTON
OCFEMIA, respondents.PANGANIBAN, J.:

When a bank, by its acts and failure to act, has clearly clothed its manager with apparent authority to sell an acquired asset in the
normal course of business, it is legally obliged to confirm the transaction by issuing a board resolution to enable the buyers to
register the property in their names. It has a duty to perform necessary and lawful acts to enable the other parties to enjoy all
benefits of the contract which it had authorized.

The Case

Before this Court is a Petition for Review on Certiorari challenging the December 18, 1998 Decision of the Court of Appeals 1 (CA) in
CA-GR SP No. 46246, which affirmed the May 20, 1997 Decision 2 of the Regional Trial Court (RTC) of Naga City (Branch 28). The CA
disposed as follows:

Wherefore, premises considered, the Judgment appealed from is hereby AFFIRMED. Costs against the respondent-
appellant. 3

The dispositive portion of the judgment affirmed by the CA ruled in this wise:

WHEREFORE, in view of all the foregoing findings, decision is hereby rendered whereby the [petitioner] Rural Bank of Milaor
(Camarines Sur), Inc. through its Board of Directors is hereby ordered to immediately issue a Board Resolution confirming
the Deed of Sale it executed in favor of Renato Ocfemia marked Exhibits C, C-1 and C-2); to pay [respondents] the sum of
FIVE HUNDRED (P500.00) PESOS as actual damages; TEN THOUSAND (P10,000.00) PESOS as attorney's fees; THIRTY
THOUSAND (P30,000.00) PESOS as moral damages; THIRTY THOUSAND (P30,000.00) PESOS as exemplary damages; and to
pay the costs. 4

Also assailed is the February 26, 1999 CA Resolution 5 which denied petitioner's Motion for Reconsideration.

The Facts

The trial court's summary of the undisputed facts was reproduced in the CA Decision as follows:

This is an action for mandamus with damages. On April 10, 1996, [herein petitioner] was declared in default on motion of
the [respondents] for failure to file an answer within the reglementary-period after it was duly served with summons. On
April 26, 1996, [herein petitioner] filed a motion to set aside the order of default with objection thereto filed by [herein
respondents].

On June 17, 1996, an order was issued denying [petitioner's] motion to set aside the order of default. On July 10, 1996, the
defendant filed a motion for reconsideration of the order of June 17, 1996 with objection thereto by [respondents]. On July
12, 1996, an order was issued denying [petitioner's] motion for reconsideration. On July 31, 1996, [respondents] filed a
motion to set case for hearing. A copy thereof was duly furnished the [petitioner] but the latter did not file any opposition
and so [respondents] were allowed to present their evidence ex-parte. A certiorari case was filed by the [petitioner] with
the Court of Appeals docketed as CA GR No. 41497-SP but the petition was denied in a decision rendered on March 31,
1997 and the same is now final.

The evidence presented by the [respondents] through the testimony of Marife O. Niño, one of the [respondents] in this
case, show[s] that she is the daughter of Francisca Ocfemia, a co-[respondent] in this case, and the late Renato Ocfemia
who died on July 23, 1994. The parents of her father, Renato Ocfemia, were Juanita Arellano Ocfemia and Felicisimo
Ocfemia. Her other co-[respondents] Rowena O. Barrogo, Felicisimo Ocfemia, Renato Ocfemia, Jr. and Winston Ocfemia are
her brothers and sisters.1âwphi1.nêt

Marife O. Niño knows the five (5) parcels of land described in paragraph 6 of the petition which are located in Bombon,
Camarines Sur and that they are the ones possessing them which [were] originally owned by her grandparents, Juanita
Arellano Ocfemia and Felicisimo Ocfemia. During the lifetime of her grandparents, [respondents] mortgaged the said five
(5) parcels of land and two (2) others to the [petitioner] Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage
(Exhs. A and A-1) and the Promissory Note (Exh. B).

The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to redeem the mortgaged properties consisting
of seven (7) parcels of land and so the mortgage was foreclosed and thereafter ownership thereof was transferred to the
[petitioner] bank. Out of the seven (7) parcels that were foreclosed, five (5) of them are in the possession of the
[respondents] because these five (5) parcels of land described in paragraph 6 of the petition were sold by the [petitioner]
bank to the parents of Marife O. Niño as evidenced by a Deed of Sale executed in January 1988 (Exhs. C, C-1 and C-2).

The aforementioned five (5) parcels of land subject of the deed of sale (Exh. C), have not been, however transferred in the
name of the parents of Merife O. Niño after they were sold to her parents by the [petitioner] bank because according to the
Assessor's Office the five (5) parcels of land, subject of the sale, cannot be transferred in the name of the buyers as there is
a need to have the document of sale registered with the Register of Deeds of Camarines Sur.

In view of the foregoing, Marife O. Niño went to the Register of Deeds of Camarines Sur with the Deed of Sale (Exh. C) in
order to have the same registered. The Register of Deeds, however, informed her that the document of sale cannot be
registered without a board resolution of the [petitioner] Bank. Marife Niño then went to the bank, showed to if the Deed of
Sale (Exh. C), the tax declaration and receipt of tax payments and requested the [petitioner] for a board resolution so that
the property can be transferred to the name of Renato Ocfemia the husband of petitioner Francisca Ocfemia and the father
of the other [respondents] having died already.

The [petitioner] bank refused her request for a board resolution and made many alibi[s]. She was told that the [petitioner]
bank ha[d] a new manager and it had no record of the sale. She was asked and she complied with the request of the
[petitioner] for a copy of the deed of sale and receipt of payment. The president of the [petitioner] bank told her to get an
authority from her parents and other [respondents] and receipts evidencing payment of the consideration appearing in the
deed of sale. She complied with said requirements and after she gave all these documents, Marife O. Niño was again told to
wait for two (2) weeks because the [petitioner] bank would still study the matter.

After two (2) weeks, Marife O. Niño returned to the [petitioner] bank and she was told that the resolution of the board
would not be released because the [petitioner] bank ha[d] no records from the old manager. Because of this, Marife O.
Niño brought the matter to her lawyer and the latter wrote a letter on December 22, 1995 to the [petitioner] bank inquiring
why no action was taken by the board of the request for the issuance of the resolution considering that the bank was
already fully paid [for] the consideration of the sale since January 1988 as shown by the deed of sale itself (Exh. D and D-1 ).

On January 15, 1996 the [petitioner] bank answered [respondents'] lawyer's letter (Exh. D and D-1) informing the latter that
the request for board resolution ha[d] already been referred to the board of directors of the [petitioner] bank with another
request that the latter should be furnished with a certified machine copy of the receipt of payment covering the sale
between the [respondents] and the [petitioner] (Exh. E). This request of the [petitioner] bank was already complied [with]
by Marife O. Niño even before she brought the matter to her lawyer.

On January 23, 1996 [respondents'] lawyer wrote back the branch manager of the [petitioner] bank informing the latter
that they were already furnished the receipts the bank was asking [for] and that the [respondents] want[ed] already to
know the stand of the bank whether the board [would] issue the required board resolution as the deed of sale itself already
show[ed] that the [respondents were] clearly entitled to the land subject of the sale (Exh. F). The manager of the
[petitioner] bank received the letter which was served personally to him and the latter told Marife O. Niño that since he was
the one himself who received the letter he would not sign anymore a copy showing him as having already received said
letter (Exh. F).

After several days from receipt of the letter (Exh. F) when Marife O. Niño went to the [petitioner] again and reiterated her
request, the manager of the [petitioner] bank told her that they could not issue the required board resolution as the
[petitioner] bank ha[d] no records of the sale. Because of this Merife O. Niño already went to their lawyer and ha[d] this
petition filed.

The [respondents] are interested in having the property described in paragraph 6 of the petition transferred to their names
because their mother and co-petitioner, Francisca Ocfemia, is very sickly and they want to mortgage the property for the
medical expenses of Francisca Ocfemia. The illness of Francisca Ocfemia beg[a]n after her husband died and her suffering
from arthritis and pulmonary disease already became serious before December 1995.
 Marife O. Niño declared that her mother is now in serious condition and they could not have her hospitalized for treatment
as they do not have any money and this is causing the family sleepless nights and mental anguish, thinking that their
mother may die because they could not submit her for medication as they do not have money. 6

The trial court granted the Petition. As noted earlier, the CA affirmed the RTC Decision.

Hence, this recourse. 7 In a Resolution dated June 23, 1999, this Court issued a Temporary Restraining Order directing the trial court
"to refrain and desist from executing [pending appeal] the decision dated May 20, 1997 in Civil Case No. RTC-96-3513, effective
immediately until further orders from this Court." 8

Ruling of the Court of Appeals

The CA held that herein respondents were "able to prove their present cause of action" against petitioner. It ruled that the RTC had
jurisdiction over the case, because (1) the Petition involved a matter incapable of pecuniary estimation; (2) mandamus fell within the
jurisdiction of RTC; and (3) assuming that the action was for specific performance as argued by the petitioner, it was still cognizable
by the said court.

Issues

In its Memorandum, 9 the bank posed the following questions:

1. Question of Jurisdiction of the Regional Trial Court. — Has a Regional Trial Court original jurisdiction over an action
involving title to real property with a total assessed value of less than P20,000.00?

2. Question of Law. — May the board of directors of a rural banking corporation be compelled to confirm a deed of absolute
sale of real property owned by the corporation which deed of sale was executed by the bank manager without prior
authority of the board of directors of the rural banking corporation? 10

This Court's Ruling

The present Petition has no merit.

First Issue:
Jurisdiction of the Regional Trial Court

Petitioner submits that the RTC had no jurisdiction over the case. Disputing the ruling of the appellate court that the present action
was incapable of pecuniary estimation, petitioner argues that the matter in fact involved title to real property worth less than
P20,000. Thus, under RA 7691, the case should have been filed before a metropolitan trial court, a municipal trial court or a
municipal circuit trial court.

We disagree. The well-settled rule is that jurisdiction is determined by the allegations of the complaint. 11 In the present case, the
Petition for Mandamus filed by respondents before the trial court prayed that petitioner-bank be compelled to issue a board
resolution confirming the Deed of Sale covering five parcels of unregistered land, which the bank manager had executed in their
favor. The RTC has jurisdiction over such action pursuant to Section 21 of BP 129, which provides:

Sec. 21. Original jurisdiction in other cases. — Regional Trial Courts shall exercise original jurisdiction;

(1) in the issuance of writ of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction which may be
enforced in any part of their respective regions; and

(2) In actions affecting ambassadors and other public ministers and consuls.

A perusal of the Petition shows that the respondents did not raise any question involving the title to the property, but merely asked
that petitioner's board of directors be directed to issue the subject resolution. Moreover, the bank did not controvert the allegations
in the said Petition. To repeat, the issue therein was not the title to the property; it was respondents' right to compel the bank to
issue a board resolution confirming the Deed of Sale.
 Second Issue:
Authority of the Bank Manager

Respondents initiated the present proceedings, so that they could transfer to their names the subject five parcels of land; and
subsequently, to mortgage said lots and to use the loan proceeds for the medical expenses of their ailing mother. For the property to
be transferred in their names, however, the register of deeds required the submission of a board resolution from the bank
confirming both the Deed of Sale and the authority of the bank manager, Fe S. Tena, to enter into such transaction. Petitioner
refused. After being given the runaround by the bank, respondents sued in exasperation.

Allegations in the Petition for Mandamus Deemed Admitted

Respondents based their action before the trial court on the Deed of Sale, the substance of which was alleged in and a copy thereof
was attached to the Petition for Mandamus. The Deed named Fe S. Tena as the representative of the bank. Petitioner, however,
failed to specifically deny under oath the allegations in that contract. In fact, it filed no answer at all, for which reason it was
declared in default. Pertinent provisions of the Rules of Court read:

Sec. 7. Action or defense based on document. — Whenever an action or defense is based upon a written instrument or
document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy
thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may
with like effect be set forth in the pleading.

Sec. 8. How to contest genuineness of such documents.— When an action or defense is founded upon a written instrument,
copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due
execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and
sets forth what he claims to be the facts; but this provision does not apply when the adverse party does not appear to be a
party to the instrument or when compliance with an order for an inspection of the original instrument is refused. 12

In failing to file its answer specifically denying under oath the Deed of Sale, the bank admitted the due execution of the said
contract. Such admission means that it acknowledged that Tena was authorized to sign the Deed of Sale on its behalf. 13 Thus,
defenses that are inconsistent with the due execution and the genuineness of the written instrument are cut off by an admission
implied from a failure to make a verified specific denial.

Other Acts of the Bank

In any event, the bank acknowledged, by its own acts or failure to act, the authority of Fe S. Tena to enter into binding contracts.
After the execution of the Deed of Sale, respondents occupied the properties in dispute and paid the real estate taxes due thereon.
If the bank management believed that it had title to the property, it should have taken some measures to prevent the infringement
or invasion of its title thereto and possession thereof.

Likewise, Tena had previously transacted business on behalf of the bank, and the latter had acknowledged her authority. A bank is
liable to innocent third persons where representation is made in the course of its normal business by an agent like Manager Tena,
even though such agent is abusing her authority. 14 Clearly, persons dealing with her could not be blamed for believing that she was
authorized to transact business for and on behalf of the bank. Thus, this Court has ruled in Board of Liquidators v.  Kalaw: 15

Settled jurisprudence has it that where similar acts have been approved by the directors as a matter of general practice,
custom, and policy, the general manager may bind the company without formal authorization of the board of directors. In
varying language, existence of such authority is established, by proof of the course of business, the usages and practices of
the company and by the knowledge which the board of directors has, or must be presumed to have, of acts and doings of
its subordinates in and about the affairs of the corporation. So also,

. . . authority to act for and bind a corporation may be presumed from acts of recognition in other instances where the
power was in fact exercised.

. . . Thus, when, in the usual course of business of a corporation, an officer has been allowed in his official capacity to
manage its affairs, his authority to represent the corporation may be implied from the manner in which he has been
permitted by the directors to manage its business.
Notwithstanding the putative authority of the manager to bind the bank in the Deed of Sale, petitioner has failed to file an answer to
the Petition below within the reglementary period, let alone present evidence controverting such authority. Indeed, when one of
herein respondents, Marife S. Nino, went to the bank to ask for the board resolution, she was merely told to bring the receipts. The
bank failed to categorically declare that Tena had no authority. This Court stresses the following:

. . . Corporate transactions would speedily come to a standstill were every person dealing with a corporation held duty-
bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face. This Court
has observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that —

In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the situation as it
presents itself to the third party with whom the contract is made. Naturally he can have little or no information as
to what occurs in corporate meetings; and he must necessarily rely upon the external manifestation of corporate
consent. The integrity of commercial transactions can only be maintained by holding the corporation strictly to the
liability fixed upon it by its agents in accordance with law; and we would be sorry to announce a doctrine which
would permit the property of man in the city of Paris to be whisked out of his hands and carried into a remote
quarter of the earth without recourse against the corporation whose name and authority had been used in the
manner disclosed in this case. As already observed, it is familiar doctrine 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, be estopped from denying his authority; and where it is said "if the
corporation permits this means the same as "if the thing is permitted by the directing power of the corporation." 16

In this light, the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. If a
corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the
agent out to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith
dealt with it through such agent, be estopped from denying the agent's authority. 17

Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale. Accordingly, it has a clear legal duty to issue the
board resolution sought by respondent's. Having authorized her to sell the property, it behooves the bank to confirm the Deed of
Sale so that the buyers may enjoy its full use.

The board resolution is, in fact, mere paper work. Nonetheless, it is paper work necessary in the orderly operations of the register of
deeds and the full enjoyment of respondents' rights. Petitioner-bank persistently and unjustifiably refused to perform its legal duty.
Worse, it was less than candid in dealing with respondents regarding this matter. In this light, the Court finds it proper to assess the
bank treble costs, in addition to the award of damages.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. The Temporary Restraining Order
issued by this Court is hereby LIFTED. Treble costs against petitioner.
G.R. No. 160346               August 25, 2009

PURITA PAHUD, SOLEDAD PAHUD, and IAN LEE CASTILLA (represented by Mother and Attorney-in-Fact VIRGINIA
CASTILLA), Petitioners, vs.
COURT OF APPEALS, SPOUSES ISAGANI BELARMINO and LETICIA OCAMPO, EUFEMIA SAN AGUSTIN-MAGSINO, ZENAIDA SAN
AGUSTIN-McCRAE, MILAGROS SAN AGUSTIN-FORTMAN, MINERVA SAN AGUSTIN-ATKINSON, FERDINAND SAN AGUSTIN, RAUL
SAN AGUSTIN, ISABELITA SAN AGUSTIN-LUSTENBERGER and VIRGILIO SAN AGUSTIN, Respondents.

D E C I S I O NNACHURA, J.:

For our resolution is a petition for review on certiorari assailing the April 23, 2003 Decision1 and October 8, 2003 Resolution2 of the
Court of Appeals (CA) in CA-G.R. CV No. 59426. The appellate court, in the said decision and resolution, reversed and set aside the
January 14, 1998 Decision3 of the Regional Trial Court (RTC), which ruled in favor of petitioners.

The dispute stemmed from the following facts.

During their lifetime, spouses Pedro San Agustin and Agatona Genil were able to acquire a 246-square meter parcel of land situated
in Barangay Anos, Los Baños, Laguna and covered by Original Certificate of Title (OCT) No. O-(1655) 0-15.4 Agatona Genil died on
September 13, 1990 while Pedro San Agustin died on September 14, 1991. Both died intestate, survived by their eight (8) children:
respondents Eufemia, Raul, Ferdinand, Zenaida, Milagros, Minerva, Isabelita and Virgilio.

Sometime in 1992, Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of Undivided Shares5conveying in favor of
petitioners (the Pahuds, for brevity) their respective shares from the lot they inherited from their deceased parents
for P525,000.00.6 Eufemia also signed the deed on behalf of her four (4) other co-heirs, namely: Isabelita on the basis of a special
power of attorney executed on September 28, 1991,7 and also for Milagros, Minerva, and Zenaida but without their apparent written
authority.8 The deed of sale was also not notarized.9

On July 21, 1992, the Pahuds paid P35,792.31 to the Los Baños Rural Bank where the subject property was mortgaged.10 The bank
issued a release of mortgage and turned over the owner’s copy of the OCT to the Pahuds.11 Over the following months, the Pahuds
made more payments to Eufemia and her siblings totaling toP350,000.00.12 They agreed to use the remaining P87,500.0013 to defray
the payment for taxes and the expenses in transferring the title of the property.14 When Eufemia and her co-heirs drafted an extra-
judicial settlement of estate to facilitate the transfer of the title to the Pahuds, Virgilio refused to sign it.15

On July 8, 1993, Virgilio’s co-heirs filed a complaint16 for judicial partition of the subject property before the RTC of Calamba, Laguna.
On November 28, 1994, in the course of the proceedings for judicial partition, a Compromise Agreement17 was signed with seven (7)
of the co-heirs agreeing to sell their undivided shares to Virgilio for P700,000.00. The compromise agreement was, however, not
approved by the trial court because Atty. Dimetrio Hilbero, lawyer for Eufemia and her six (6) co-heirs, refused to sign the agreement
because he knew of the previous sale made to the Pahuds.18lawphil.net

On December 1, 1994, Eufemia acknowledged having received P700,000.00 from Virgilio.19 Virgilio then sold the entire property to
spouses Isagani Belarmino and Leticia Ocampo (Belarminos) sometime in 1994. The Belarminos immediately constructed a building
on the subject property.

Alarmed and bewildered by the ongoing construction on the lot they purchased, the Pahuds immediately confronted Eufemia who
confirmed to them that Virgilio had sold the property to the Belarminos.20 Aggrieved, the Pahuds filed a complaint in
intervention21 in the pending case for judicial partition.1avvphil

After trial, the RTC upheld the validity of the sale to petitioners. The dispositive portion of the decision reads:

WHEREFORE, the foregoing considered, the Court orders:

1. the sale of the 7/8 portion of the property covered by OCT No. O (1655) O-15 by the plaintiffs as heirs of deceased Sps.
Pedro San Agustin and Agatona Genil in favor of the Intervenors-Third Party plaintiffs as valid and enforceable, but
obligating the Intervenors-Third Party plaintiffs to complete the payment of the purchase price of P437,500.00 by paying
 the balance of P87,500.00 to defendant Fe (sic) San Agustin Magsino. Upon receipt of the balance, the plaintiff shall
formalize the sale of the 7/8 portion in favor of the Intervenor[s]-Third Party plaintiffs;

2. declaring the document entitled "Salaysay sa Pagsang-ayon sa Bilihan" (Exh. "2-a") signed by plaintiff Eufemia San Agustin
attached to the unapproved Compromise Agreement (Exh. "2") as not a valid sale in favor of defendant Virgilio San Agustin;

3. declaring the sale (Exh. "4") made by defendant Virgilio San Agustin of the property covered by OCT No. O (1655)-O-15
registered in the names of Spouses Pedro San Agustin and Agatona Genil in favor of Third-party defendant Spouses Isagani
and Leticia Belarmino as not a valid sale and as inexistent;

4. declaring the defendant Virgilio San Agustin and the Third-Party defendants spouses Isagani and Leticia Belarmino as in
bad faith in buying the portion of the property already sold by the plaintiffs in favor of the Intervenors-Third Party Plaintiffs
and the Third-Party Defendant Sps. Isagani and Leticia Belarmino in constructing the two-[storey] building in (sic) the
property subject of this case; and

5. declaring the parties as not entitled to any damages, with the parties shouldering their respective responsibilities
regarding the payment of attorney[’]s fees to their respective lawyers.

No pronouncement as to costs.

SO ORDERED.22

Not satisfied, respondents appealed the decision to the CA arguing, in the main, that the sale made by Eufemia for and on behalf of
her other co-heirs to the Pahuds should have been declared void and inexistent for want of a written authority from her co-heirs.
The CA yielded and set aside the findings of the trial court. In disposing the issue, the CA ruled:

WHEREFORE, in view of the foregoing, the Decision dated January 14, 1998, rendered by the Regional Trial Court of Calamba,
Laguna, Branch 92 in Civil Case No. 2011-93-C for Judicial Partition is hereby REVERSED and SET ASIDE, and a new one entered, as
follows:

(1) The case for partition among the plaintiffs-appellees and appellant Virgilio is now considered closed and terminated;

(2) Ordering plaintiffs-appellees to return to intervenors-appellees the total amount they received from the latter, plus an
interest of 12% per annum from the time the complaint [in] intervention was filed on April 12, 1995 until actual payment of
the same;

(3) Declaring the sale of appellant Virgilio San Agustin to appellants spouses, Isagani and Leticia Belarmino[,] as valid and
binding;

(4) Declaring appellants-spouses as buyers in good faith and for value and are the owners of the subject property.

No pronouncement as to costs.

SO ORDERED.23

Petitioners now come to this Court raising the following arguments: I. The Court of Appeals committed grave and reversible error
when it did not apply the second paragraph of Article 1317 of the New Civil Code insofar as ratification is concerned to the sale of
the 4/8 portion of the subject property executed by respondents San Agustin in favor of petitioners;

II. The Court of Appeals committed grave and reversible error in holding that respondents spouses Belarminos are in good
faith when they bought the subject property from respondent Virgilio San Agustin despite the findings of fact by the court a
quo that they were in bad faith which clearly contravenes the presence of long line of case laws upholding the task of giving
utmost weight and value to the factual findings of the trial court during appeals; [and]
 III. The Court of Appeals committed grave and reversible error in holding that respondents spouses Belarminos have
superior rights over the property in question than petitioners despite the fact that the latter were prior in possession
thereby misapplying the provisions of Article 1544 of the New Civil Code.24

The focal issue to be resolved is the status of the sale of the subject property by Eufemia and her co-heirs to the Pahuds. We find the
transaction to be valid and enforceable.

Article 1874 of the Civil Code plainly provides:

Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void.

Also, under Article 1878,25 a special power of attorney is necessary for an agent to enter into a contract by which the ownership of
an immovable property is transmitted or acquired, either gratuitously or for a valuable consideration. Such stringent statutory
requirement has been explained in Cosmic Lumber Corporation v. Court of Appeals:26

[T]he authority of an agent to execute a contract [of] sale of real estate must be conferred in writing and must give him specific
authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions
which are in the contract he did execute. A special power of attorney is necessary to enter into any contract by which the ownership
of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate required by law
to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a
sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power of
attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the
language so used conveys such power, no such construction shall be given the document.27

In several cases, we have repeatedly held that the absence of a written authority to sell a piece of land is, ipso jure, void,28 precisely
to protect the interest of an unsuspecting owner from being prejudiced by the unwarranted act of another.

Based on the foregoing, it is not difficult to conclude, in principle, that the sale made by Eufemia, Isabelita and her two brothers to
the Pahuds sometime in 1992 should be valid only with respect to the 4/8 portion of the subject property. The sale with respect to
the 3/8 portion, representing the shares of Zenaida, Milagros, and Minerva, is void because Eufemia could not dispose of the interest
of her co-heirs in the said lot absent any written authority from the latter, as explicitly required by law. This was, in fact, the ruling of
the CA.

Still, in their petition, the Pahuds argue that the sale with respect to the 3/8 portion of the land should have been deemed ratified
when the three co-heirs, namely: Milagros, Minerva, and Zenaida, executed their respective special power of attorneys29 authorizing
Eufemia to represent them in the sale of their shares in the subject property.30

While the sale with respect to the 3/8 portion is void by express provision of law and not susceptible to ratification,31 we
nevertheless uphold its validity on the basis of the common law principle of estoppel.

Article 1431 of the Civil Code provides:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied
or disproved as against the person relying thereon.

True, at the time of the sale to the Pahuds, Eufemia was not armed with the requisite special power of attorney to dispose of the 3/8
portion of the property. Initially, in their answer to the complaint in intervention,32 Eufemia and her other co-heirs denied having
sold their shares to the Pahuds. During the pre-trial conference, however, they admitted that they had indeed sold 7/8 of the
property to the Pahuds sometime in 1992.33 Thus, the previous denial was superseded, if not accordingly amended, by their
subsequent admission.34 Moreover, in their Comment,35 the said co-heirs again admitted the sale made to petitioners.36

Interestingly, in no instance did the three (3) heirs concerned assail the validity of the transaction made by Eufemia to the Pahuds on
the basis of want of written authority to sell. They could have easily filed a case for annulment of the sale of their respective shares
against Eufemia and the Pahuds. Instead, they opted to remain silent and left the task of raising the validity of the sale as an issue to
their co-heir, Virgilio, who is not privy to the said transaction. They cannot be allowed to rely on Eufemia, their attorney-in-fact, to
impugn the validity of the first transaction because to allow them to do so would be tantamount to giving premium to their sister’s
dishonest and fraudulent deed. Undeniably, therefore, the silence and passivity of the three co-heirs on the issue bar them from
making a contrary claim.

It is a basic rule in the law of agency that a principal is subject to liability for loss caused to another by the latter’s reliance upon a
deceitful representation by an agent in the course of his employment (1) if the representation is authorized; (2) if it is within the
implied authority of the agent to make for the principal; or (3) if it is apparently authorized, regardless of whether the agent was
authorized by him or not to make the representation.37

By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds to believe that they have indeed clothed Eufemia
with the authority to transact on their behalf. Clearly, the three co-heirs are now estopped from impugning the validity of the sale
from assailing the authority of Eufemia to enter into such transaction.

Accordingly, the subsequent sale made by the seven co-heirs to Virgilio was void because they no longer had any interest over the
subject property which they could alienate at the time of the second transaction.38 Nemo dat quod non habet. Virgilio, however,
could still alienate his 1/8 undivided share to the Belarminos.

The Belarminos, for their part, cannot argue that they purchased the property from Virgilio in good faith. As a general rule, a
purchaser of a real property is not required to make any further inquiry beyond what the certificate of title indicates on its
face.39 But the rule excludes those who purchase with knowledge of the defect in the title of the vendor or of facts sufficient to
induce a reasonable and prudent person to inquire into the status of the property.40 Such purchaser cannot close his eyes to facts
which should put a reasonable man on guard, and later claim that he acted in good faith on the belief that there was no defect in the
title of the vendor. His mere refusal to believe that such defect exists, or his obvious neglect by closing his eyes to the possibility of
the existence of a defect in the vendor’s title, will not make him an innocent purchaser for value, if afterwards it turns out that the
title was, in fact, defective. In such a case, he is deemed to have bought the property at his own risk, and any injury or prejudice
occasioned by such transaction must be borne by him.41

In the case at bar, the Belarminos were fully aware that the property was registered not in the name of the immediate transferor,
Virgilio, but remained in the name of Pedro San Agustin and Agatona Genil.42 This fact alone is sufficient impetus to make further
inquiry and, thus, negate their claim that they are purchasers for value in good faith.43 They knew that the property was still subject
of partition proceedings before the trial court, and that the compromise agreement signed by the heirs was not approved by the RTC
following the opposition of the counsel for Eufemia and her six other co-heirs.44 The Belarminos, being transferees pendente lite, are
deemed buyers in mala fide, and they stand exactly in the shoes of the transferor and are bound by any judgment or decree which
may be rendered for or against the transferor.45 Furthermore, had they verified the status of the property by asking the neighboring
residents, they would have been able to talk to the Pahuds who occupy an adjoining business establishment46 and would have
known that a portion of the property had already been sold. All these existing and readily verifiable facts are sufficient to suggest
that the Belarminos knew that they were buying the property at their own risk.

WHEREFORE, premises considered, the April 23, 2003 Decision of the Court of Appeals as well as its October 8, 2003 Resolution in
CA-G.R. CV No. 59426, are REVERSED and SET ASIDE. Accordingly, the January 14, 1998 Decision of Branch 92 of the Regional Trial
Court of Calamba, Laguna is REINSTATED with the MODIFICATION that the sale made by respondent Virgilio San Agustin to
respondent spouses Isagani Belarmino and Leticia Ocampo is valid only with respect to the 1/8 portion of the subject property. The
trial court is ordered to proceed with the partition of the property with dispatch.
G.R. No. L-20145             November 15, 1923

VICENTE VERZOSA and RUIZ, REMENTERIA Y CIA., S. en C., plaintiffs-appellants, 

vs.
SILVINO LIM and SIY CONG BIENG and COMPANY, INC., defendants-appellants.

Ramon Sotelo for plaintiffs-appellants.

Gabriel La O for defendants-appellants.

STREET, J.:

This action was instituted in the Court of first Instance of the City of Manila by Vicente Versoza and Ruiz, Rementeria y Compania, as
owners of the coastwise vessel Perla, against Silvino Lim and Siy Cong Bieng & Company, Inc., as owner and agent, respectively, of
the vessel Ban Yek, for the purpose of recovering a sum of money alleged to be the damages resulting to the plaintiffs from a
collision which occurred on March 9, 1921, between the two vessels mentioned, it being alleged that said collision was due to the
experience, carelessness and lack of skill on the part of the captain of the Ban Yek and to his failure to observe the rules of
navigation appropriate to the case. The defendants answered with a general denial, and by way of special defense asserted, among
other things, that the collision was due exclusively to the inexperience and carelessness of the captain and officers of the
steamship Perla; for which reason the defendants in turn, by way of counterclaim, prayed judgment for the damages suffered by
the Ban Yek from the same collision. At the hearing the trial judge absolved the defendants from the complaint and likewise
absolved the plaintiffs from the defendants' counterclaim. From this judgment both parties appealed.

It appears in evidence that at about five o'clock in the afternoon of March 9, 1921, the coastwise steamer Ban Yekleft the port of
Naga on the Bicol River, in the Province of Camarines Sur, with destination to the City of Manila. At the time of her departure from
said port the sea was approaching to high tide but the current was still running in through the Bicol River, with the result that
the Ban Yek had the current against her. As the ship approached the Malbong bend of the Bicol River, in the municipality of Gainza,
another vessel, the Perla, was sighted coming up the river on the way to Naga. While the boats were yet more than a kilometer
apart, the Ban Yek gave two blasts with her whistle, thus indicating an intention to pass on the left, or to her own port side. In reply
to this signal thePerla gave a single blast, thereby indicating that she disagreed with the signal given by the Ban Yek and would
maintain her position on the right, that is, would keep to the starboard. The Ban Yek made no reply to this signal. As the Perla was
navigating with the current, then running in from the sea, this vessel, under paragraph 163 of Customs Marine Circular No. 53, had
the right of way over the Ban Yek, and the officers of the Perla interpreted the action of the Ban Yek in not replying to
the Perla's signal as an indication of acquiescene of the officers of theBan Yek in the determination of the Perla to keep to the
starboard.

The river at this point is about two hundred and fifty feet wide, and the courses thus being respectively pursued by the two vessels
necessarily tended to bring them into a head-on collision. When the danger of such an occurrence became imminent, Captain
Garrido of the Perla, seeing that he was shut off by the Ban Yek from passing to the right, put his vessel to port, intending to avoid
collision or minimize its impact by getting farther out into the stream. An additional reason for this maneuver, as stated by Captain
Carrido, is that the captain of theBan Yek waived his hand to Garrido, indicating that the latter should turn his vessel towards the
middle of the stream. At about the same time that the Perla was thus deflected from her course the engine on the Ban Yek was
reversed and three blasts were given by this vessel to indicate that she was backing.

Now, it appears that when the engine is reversed, a vessel swings to the right or left in accordance with the direction in which the
blades of the propeller are set; and as the Ban Yek began to back, her bow was thrown out into the stream, a movement which was
assisted by the current of the river. By this means the Ban Yek was brought to occupy an oblique position across the stream at the
moment the Perla was passing; and the bow of theBan Yek crashed into the starboard bumpers of the Perla, carrying away external
parts of the ship and inflicting material damage on the hull. To effect the repairs thus made necessary to the Perla cost her owners
the sum of P17,827, including expenses of survey.

The first legal point presented in the case has reference to the sufficiency of the protest. In this connection it appears that within
twenty-four hours after the arrival of the Perla at the port of Naga, Captain Garrido appeared before Vicente Rodi, the auxiliary
justice of the peace of the municipality of Naga, and made before that officer the sworn protest which is in evidence as Exhibit B.
This protest is sufficient in our opinion to answer all the requirements of article 835 of the Code of Commerce. A regular justice of
the peace would without doubt be competent to take a marine protest, and the same authority must be conceded to the auxiliary
justice in the absence of any showing in the record to the effect that the justice of the peace himself was acting at the time in the
municipality (Adm. Code, sec. 211; sec. 334, Code of Civ. Proc., subsecs. 14, 15). We note that in his certificate to this protest Vicente
Rodi added to the appellation of auxiliary justice of the peace, following his name, the additional designation "notary public ex-
officio." However, under subsection (c) of section 242 of the Administrative Code, it is plain that an auxiliary justice of the peace is
not an ex-officio  notary public. It results that the taking of this protest must be ascribed to the officer in his character as auxiliary
justice of the peace and not in the character of notary public ex-officio. It is hardly necessary to add that this court takes judicial
notice of the fact that Naga is not a port of entry and that no customs official of rank is there stationed who could have taken
cognizance of this protest.

Upon the point of responsibility for the collision we have no hesitancy in finding that the fault is to be attributed exclusively to the
negligence and inattention of the captain and pilot in charge of the Ban Yek. The Perlaundoubtedly had the right of way, since this
vessel was navigating with the current, and the officers in charge of the Perla were correct in assuming, from the failure of the Ban
Yek to respond to the single blast of the Perla, that the officers in charge of the Ban Yek recognized that the Perla had a right of way
and acquiesced in her resolution to keep to the right. The excuse urged for the Ban Yek is that this vessel is somewhat larger than
the Perla and that it was desirable for the Ban Yek to keep on the side of the long arc of the curve of the river; and in this connection
it is suggested that the river is deeper on the outer edge of the bend than on the inner edge. It is also stated that on a certain
previous occasion the Ban Yek on coming out from this port had gotten stuck in the mud in this bend by keeping too far to the right.
Moreover, it is said to be the practice of ships in navigating this stream to keep nearer the outside than to the inside of the bend.
These suggestions are by no means convincing. It appears in evidence that the river bottom here is composed of mud and silt, and as
the tide at the time of this incident was nearly at its flood, there was ample depth of water to have accommodated the Ban Yek if
she had kept to that part of the stream which it was proper for her to occupy. We may further observe that the disparity in the size
of the vessels was not such as to dominate the situation and deprive the Perla of the right of way under the conditions stated. Blame
for the collision must therefore, as already stated, be attributed to the Ban Yek.

On the other hand no fault can be attributed to the officers navigating the Perla either in maintaining the course which had been
determined upon for that vessel in conformity with the marine regulations applicable to the case or in deflecting the vessel towards
the middle of the stream after the danger of collision became imminent. The trial judge suggests in his opinion that when Captain
Garrido saw that the Ban Yek was holding her course to the left, he (Garrido) should have changed the course of the Perla to port
more promptly. The validity of this criticism cannot be admitted. Among rules applicable to navigation none is better founded on
reason and experience than that which requires the navigating officers of any vessel to assume that an approaching vessel will
observe the regulations prescribed for navigation (G. Urrutia & Co. vs. Baco River Plantation Co., 26 Phil., 632, 637). Any other rule
would introduce guess work into the control of ships and produce uncertainty in the operation of the regulations.

Our conclusion is that his Honor, the trial judge, was in error in not awarding damages to the Perla; but no error was committed in
absolving the plaintiffs from the defendants' cross-complaint.

The sum of P17,827 in our opinion represents the limit of the plaintiffs' right of recovery. In the original complaint recovery is sought
for an additional amount of P18,000, most of which consists of damages supposed to have been incurred from the inability of
the Perla to maintain her regular schedule while laid up in the dock undergoing repairs. The damages thus claimed, in addition to
being somewhat of a speculative nature, are in our opinion not sufficiently proved to warrant the court in allowing the
same. lawphil.net

Having determined the amount which the plaintiffs are entitled to recover, it becomes necessary to consider the person, or persons,
who must respond for these damages. Upon this point we note that Silvino Lim is impleaded as owner; and Siy Cong Bieng & Co. is
impleaded as the shipping agent (casa naviera), or person in responsible control of the Ban Yek at the time of the accident. We note
further that in article 826 of the Code of Commerce it is declared that the owner  of any vessel shall be liable for the indemnity due
to any other vessel injured by the fault, negligence, or lack of skill of the captain of the first. We say "owner," which is the word used
in the current translation of this article in the Spanish Code of Commerce. It is to be observed, however, that the Spanish text itself
uses the word naviero; and there is some ambiguity in the use of said word in this article, owing to the fact that naviero in Spanish
has several meanings. The author of the article which appears under the word naviero in the Enciclopedia Juridica Española  tells us
that in Spanish it may mean either owner, outfitter, charterer, or agent, though he says that the fundamental and correct meaning of
the word is that of "owner." That naviero, as used in the Spanish text of article 826, means owner is further to be inferred from
article 837, which limits the civil liability expressed in article 826 to the value of the vessel with all her appurtenances and all the
freight earned during the voyage. There would have been no propriety in limiting liability to the value of the vessel unless the owner
were understood to be the person liable. It is therefore clear that by special provision of the Code of Commerce the owner is made
responsible for the damage caused by an accident of the kind under consideration in this case; and in more than one case this court
has held the owner liable, when sued alone (Philippine Shipping Co. vs.Garcia Vergara, 6 Phil., 281; G. Urrutia & Co. vs. Baco River
Plantation Co., 26 Phil., 632).

But while it is thus demonstrated that Silvino Lim is liable for these damages in the character of owner, it does not necessarily
follows that Siy Cong Bieng & Co., as character or agent (casa naviera), is exempt from liability; and we are of the opinion that both
the owner and agent can be held responsible where both are impleaded together. In Philippine Shipping Co., vs. Garcia Vergara (6
Phil., 281), it seems to have been accepted as a matter of course that both owner and agent of the offending vessel are liable for the
damage done; and this must, we think, be true. The liability of the naviero, in the sense of charterer or agent, if not expressed in
article 826 of the Code of Commerce, is clearly deducible from the general doctrine of jurisprudence stated in article 1902 of the
Civil Code, and it is also recognized, but more especially as regards contractual obligations, in article 586 of the Code of Commerce.
Moreover, we are of the opinion that both the owner and agent (naviero) should be declared to be jointly and severally liable, since
the obligation which is the subject of this action had its origin in a tortious act and did not arise from contract. Article 1137 of the
Civil Code, declaring that joint obligations shall be apportionable unless otherwise provided, has no application to obligation arising
from tort.

For the reasons stated the judgment appealed from will be affirmed in so far as it absolves the plaintiffs from the defendants' cross-
complaint but will be reversed in so far as it absolves the defendants from the plaintiffs' complaint; and judgment will be entered for
the plaintiffs to recover jointly and severally from the defendants Silvino Lim and Siy Cong Bieng & Co. the sum of seventeen
thousand eight hundred and twenty-seven pesos (P17,827), with interest from the date of the institution of the action, without
special pronouncement as to costs of either instance. So ordered.
G.R. No. 115024             February 7, 1996

MA. LOURDES VALENZUELA, petitioner, 

vs.
COURT OF APPEALS, RICHARD LI and ALEXANDER COMMERCIAL, INC., respondents.

x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x

G.R. No. 117944             February 7, 1996

RICHARD LI, petitioner, 
vs.
COURT OF APPEALS and LOURDES VALENZUELA, respondents.

DECISION

KAPUNAN, J.:

These two petitions for review on certiorari under Rule 45 of the Revised Rules of Court stem from an action to recover damages by
petitioner Lourdes Valenzuela in the Regional Trial Court of Quezon City for injuries sustained by her in a vehicular accident in the
early morning of June 24, 1990. The facts found by the trial court are succinctly summarized by the Court of Appeals below:

This is an action to recover damages based on quasi-delict, for serious physical injuries sustained in a vehicular accident.

Plaintiff's version of the accident is as follows: At around 2:00 in the morning of June 24, 1990, plaintiff Ma. Lourdes
Valenzuela was driving a blue Mitsubishi lancer with Plate No. FFU 542 from her restaurant at Marcos highway to her home
at Palanza Street, Araneta Avenue. She was travelling along Aurora Blvd. with a companion, Cecilia Ramon, heading towards
the direction of Manila. Before reaching A. Lake Street, she noticed something wrong with her tires; she stopped at a
lighted place where there were people, to verify whether she had a flat tire and to solicit help if needed. Having been told
by the people present that her rear right tire was flat and that she cannot reach her home in that car's condition, she
parked along the sidewalk, about 1-1/2 feet away, put on her emergency lights, alighted from the car, and went to the rear
to open the trunk. She was standing at the left side of the rear of her car pointing to the tools to a man who will help her fix
the tire when she was suddenly bumped by a 1987 Mitsubishi Lancer driven by defendant Richard Li and registered in the
name of defendant Alexander Commercial, Inc. Because of the impact plaintiff was thrown against the windshield of the car
of the defendant, which was destroyed, and then fell to the ground. She was pulled out from under defendant's car.
Plaintiff's left leg was severed up to the middle of her thigh, with only some skin and sucle connected to the rest of the
body. She was brought to the UERM Medical Memorial Center where she was found to have a "traumatic amputation, leg,
left up to distal thigh (above knee)". She was confined in the hospital for twenty (20) days and was eventually fitted with an
artificial leg. The expenses for the hospital confinement (P120,000.00) and the cost of the artificial leg (P27,000.00) were
paid by defendants from the car insurance.

In her complaint, plaintiff prayed for moral damages in the amount of P1 million, exemplary damages in the amount of
P100,000.00 and other medical and related expenses amounting to a total of P180,000.00, including loss of expected
earnings.

Defendant Richard Li denied that he was negligent. He was on his way home, travelling at 55 kph; considering that it was
raining, visibility was affected and the road was wet. Traffic was light. He testified that he was driving along the inner
portion of the right lane of Aurora Blvd. towards the direction of Araneta Avenue, when he was suddenly confronted, in the
vicinity of A. Lake Street, San Juan, with a car coming from the opposite direction, travelling at 80 kph, with "full bright
lights". Temporarily blinded, he instinctively swerved to the right to avoid colliding with the oncoming vehicle, and bumped
plaintiff's car, which he did not see because it was midnight blue in color, with no parking lights or early warning device, and
the area was poorly lighted. He alleged in his defense that the left rear portion of plaintiff's car was protruding as it was
then "at a standstill diagonally" on the outer portion of the right lane towards Araneta Avenue (par. 18, Answer). He
confirmed the testimony of plaintiff's witness that after being bumped the car of the plaintiff swerved to the right and hit
another car parked on the sidewalk. Defendants counterclaimed for damages, alleging that plaintiff was reckless or
negligent, as she was not a licensed driver.
 The police investigator, Pfc. Felic Ramos, who prepared the vehicular accident report and the sketch of the three cars
involved in the accident, testified that the plaintiff's car was "near the sidewalk"; this witness did not remember whether
the hazard lights of plaintiff's car were on, and did not notice if there was an early warning device; there was a street light
at the corner of Aurora Blvd. and F. Roman, about 100 meters away. It was not mostly dark, i.e. "things can be seen" (p. 16,
tsn, Oct. 28, 1991).

A witness for the plaintiff, Rogelio Rodriguez, testified that after plaintiff alighted from her car and opened the trunk
compartment, defendant's car came approaching very fast ten meters from the scene; the car was "zigzagging". The rear
left side of plaintiff's car was bumped by the front right portion of defendant's car; as a consequence, the plaintiff's car
swerved to the right and hit the parked car on the sidewalk. Plaintiff was thrown to the windshield of defendant's car,
which was destroyed, and landed under the car. He stated that defendant was under the influence of liquor as he could
"smell it very well" (pp. 43, 79, tsn, June 17, 1991).

After trial, the lower court sustained the plaintiff's submissions and found defendant Richard Li guilty of gross negligence and liable
for damages under Article 2176 of the Civil Code. The trial court likewise held Alexander Commercial, Inc., Li's employer, jointly and
severally liable for damages pursuant to Article 2180. It ordered the defendants to jointly and severally pay the following amounts:

1. P41,840.00, as actual damages, representing the miscellaneous expenses of the plaintiff as a result of her severed left leg;

2. The sums of (a) P37,500.00, for the unrealized profits because of the stoppage of plaintiff's Bistro La Conga restaurant
three (3) weeks after the accident on June 24, 1990; (b) P20,000.00, a month, as unrealized profits of the plaintiff in her
Bistro La Conga restaurant, from August, 1990 until the date of this judgment and (c) P30,000.00, a month for unrealized
profits in plaintiff's two (2) beauty salons from July, 1990 until the date of this decision;

3. P1,000,000.00, in moral damages;

4. P50,000.00, as exemplary damages;

5. P60,000.00, as reasonable attorney's fees; and

6. Costs.

As a result of the trial court's decision, defendants filed an Omnibus Motion for New Trial and for Reconsideration, citing testimony
in Criminal Case O.C. No. 804367 (People vs. Richard Li), tending to show that the point of impact, as depicted by the pieces of
glass/debris from the parties' cars, appeared to be at the center of the right lane of Aurora Blvd. The trial court denied the motion.
Defendants forthwith filed an appeal with the respondent Court of Appeals. In a Decision rendered March 30, 1994, the Court of
Appeals found that there was "ample basis from the evidence of record for the trial court's finding that the plaintiff's car was
properly parked at the right, beside the sidewalk when it was bumped by defendant's car."1 Dismissing the defendants' argument
that the plaintiff's car was improperly parked, almost at the center of the road, the respondent court noted that evidence which was
supposed to prove that the car was at or near center of the right lane was never presented during the trial of the case.2 The
respondent court furthermore observed that:

Defendant Li's testimony that he was driving at a safe speed of 55 km./hour is self serving; it was not corroborated. It was in
fact contradicted by eyewitness Rodriguez who stated that he was outside his beerhouse located at Aurora Boulevard after
A. Lake Street, at or about 2:00 a.m. of June 24, 1990 when his attention was caught by a beautiful lady (referring to the
plaintiff) alighting from her car and opening the trunk compartment; he noticed the car of Richard Li "approaching very fast
ten (10) meters away from the scene"; defendant's car was zigzagging", although there were no holes and hazards on the
street, and "bumped the leg of the plaintiff" who was thrown against the windshield of defendant's care, causing its
destruction. He came to the rescue of the plaintiff, who was pulled out from under defendant's car and was able to say
"hurting words" to Richard Li because he noticed that the latter was under the influence of liquor, because he "could smell
it very well" (p. 36, et. seq., tsn, June 17, 1991). He knew that plaintiff owned a beerhouse in Sta. Mesa in the 1970's, but
did not know either plaintiff or defendant Li before the accident.

In agreeing with the trial court that the defendant Li was liable for the injuries sustained by the plaintiff, the Court of Appeals, in its
decision, however, absolved the Li's employer, Alexander Commercial, Inc. from any liability towards petitioner Lourdes Valenzuela
and reduced the amount of moral damages to P500,000.00. Finding justification for exemplary damages, the respondent court
allowed an award of P50,000.00 for the same, in addition to costs, attorney's fees and the other damages. The Court of Appeals,
likewise, dismissed the defendants' counterclaims.3

Consequently, both parties assail the respondent court's decision by filing two separate petitions before this Court. Richard Li, in G.R.
No. 117944, contends that he should not be held liable for damages because the proximate cause of the accident was Ma. Lourdes
Valenzuela's own negligence. Alternatively, he argues that in the event that this Court finds him negligent, such negligence ought to
be mitigated by the contributory negligence of Valenzuela.

On the other hand, in G.R. No. 115024, Ma. Lourdes Valenzuela assails the respondent court's decision insofar as it absolves
Alexander Commercial, Inc. from liability as the owner of the car driven by Richard Li and insofar as it reduces the amount of the
actual and moral damages awarded by the trial court.4

As the issues are intimately related, both petitions are hereby consolidated.

It is plainly evident that the petition for review in G.R. No. 117944 raises no substantial questions of law. What it, in effect, attempts
to have this Court review are factual findings of the trial court, as sustained by the Court of Appeals finding Richard Li grossly
negligent in driving the Mitsubishi Lancer provided by his company in the early morning hours of June 24, 1990. This we will not do.
As a general rule, findings of fact of the Court of Appeals are binding and conclusive upon us, and this Court will not normally disturb
such factual findings unless the findings of fact of the said court are palpably unsupported by the evidence on record or unless the
judgment itself is based on a misapprehension of facts.5

In the first place, Valenzuela's version of the incident was fully corroborated by an uninterested witness, Rogelio Rodriguez, the
owner-operator of an establishment located just across the scene of the accident. On trial, he testified that he observed a car being
driven at a "very fast" speed, racing towards the general direction of Araneta Avenue.6 Rodriguez further added that he was standing
in front of his establishment, just ten to twenty feet away from the scene of the accident, when he saw the car hit Valenzuela,
hurtling her against the windshield of the defendant's Mitsubishi Lancer, from where she eventually fell under the defendant's car.
Spontaneously reacting to the incident, he crossed the street, noting that a man reeking with the smell of liquor had alighted from
the offending vehicle in order to survey the incident.7 Equally important, Rodriguez declared that he observed Valenzuela's car
parked parallel and very near the sidewalk,8 contrary to Li's allegation that Valenzuela's car was close to the center of the right lane.
We agree that as between Li's "self-serving" asseverations and the observations of a witness who did not even know the accident
victim personally and who immediately gave a statement of the incident similar to his testimony to the investigator immediately
after the incident, the latter's testimony deserves greater weight. As the court emphasized:

The issue is one of credibility and from Our own examination of the transcript, We are not prepared to set aside the trial
court's reliance on the testimony of Rodriguez negating defendant's assertion that he was driving at a safe speed. While
Rodriguez drives only a motorcycle, his perception of speed is not necessarily impaired. He was subjected to cross-
examination and no attempt was made to question .his competence or the accuracy of his statement that defendant was
driving "very fast". This was the same statement he gave to the police investigator after the incident, as told to a newspaper
report (Exh. "P"). We see no compelling basis for disregarding his testimony.

The alleged inconsistencies in Rodriguez' testimony are not borne out by an examination of the testimony. Rodriguez
testified that the scene of the accident was across the street where his beerhouse is located about ten to twenty feet away
(pp. 35-36, tsn, June 17, 1991). He did not state that the accident transpired immediately in front of his establishment. The
ownership of the Lambingan se Kambingan is not material; the business is registered in the name of his mother, but he
explained that he owns the establishment (p. 5, tsn, June 20, 1991). Moreover, the testimony that the streetlights on his
side of Aurora Boulevard were on the night the accident transpired (p. 8) is not necessarily contradictory to the testimony
of Pfc. Ramos that there was a streetlight at the corner of Aurora Boulevard and F. Roman Street (p. 45, tsn, Oct. 20, 1991).

With respect to the weather condition, Rodriguez testified that there was only a drizzle, not a heavy rain and the rain has
stopped and he was outside his establishment at the time the accident transpired (pp. 64-65, tsn, June 17, 1991). This was
consistent with plaintiff's testimony that it was no longer raining when she left Bistro La Conga (pp. 10-11, tsn, April 29,
1991). It was defendant Li who stated that it was raining all the way in an attempt to explain why he was travelling at only
50-55 kph. (p. 11, tsn, Oct. 14, 1991). As to the testimony of Pfc. Ramos that it was raining, he arrived at the scene only in
response to a telephone call after the accident had transpired (pp. 9-10, tsn, Oct. 28, 1991). We find no substantial
inconsistencies in Rodriguez's testimony that would impair the essential integrity of his testimony or reflect on his honesty.
We are compelled to affirm the trial court's acceptance of the testimony of said eyewitness.
Against the unassailable testimony of witness Rodriguez we note that Li's testimony was peppered with so many inconsistencies
leading us to conclude that his version of the accident was merely adroitly crafted to provide a version, obviously self-serving, which
would exculpate him from any and all liability in the incident. Against Valenzuela's corroborated claims, his allegations were neither
backed up by other witnesses nor by the circumstances proven in the course of trial. He claimed that he was driving merely at a
speed of 55 kph. when "out of nowhere he saw a dark maroon lancer right in front of him, which was (the) plaintiff's car". He alleged
that upon seeing this sudden "apparition" he put on his brakes to no avail as the road was slippery.9

One will have to suspend disbelief in order to give credence to Li's disingenuous and patently self-serving asseverations. The average
motorist alert to road conditions  will have no difficulty applying the brakes to a car traveling at the speed claimed by Li. Given a light
rainfall, the visibility of the street, and the road conditions on a principal metropolitan thoroughfare like Aurora Boulevard, Li would
have had ample time to react to the changing conditions of the road if he were alert - as every driver should be - to those conditions.
Driving exacts a more than usual toll on the senses. Physiological "fight or flight" 10 mechanisms are at work, provided such
mechanisms were not dulled by drugs, alcohol, exhaustion, drowsiness, etc.11 Li's failure to react in a manner which would have
avoided the accident could therefore have been only due to either or both of the two factors: 1) that he was driving at a "very fast"
speed as testified by Rodriguez; and 2) that he was under the influence of alcohol.12 Either factor working independently would have
diminished his responsiveness to road conditions, since normally he would have slowed down prior to reaching Valenzuela's car,
rather than be in a situation forcing him to suddenly apply his brakes. As the trial court noted (quoted with approval by respondent
court):

Secondly, as narrated by defendant Richard Li to the San Juan Police immediately after the incident, he said that while
driving along Aurora Blvd., out of nowhere he saw a dark maroon lancer right in front of him which was plaintiff's car,
indicating, again, thereby that, indeed, he was driving very fast, oblivious of his surroundings and the road ahead of him,
because if he was not, then he could not have missed noticing at a still far distance the parked car of the plaintiff at the right
side near the sidewalk which had its emergency lights on, thereby avoiding forcefully bumping at the plaintiff who was then
standing at the left rear edge of her car.

Since, according to him, in his narration to the San Juan Police, he put on his brakes when he saw the plaintiff's car in front
of him, but that it failed as the road was wet and slippery, this goes to show again, that, contrary to his claim, he was,
indeed, running very fast. For, were it otherwise, he could have easily completely stopped his car, thereby avoiding the
bumping of the plaintiff, notwithstanding that the road was wet and slippery. Verily, since, if, indeed, he was running slow,
as he claimed, at only about 55 kilometers per hour, then, inspite of the wet and slippery road, he could have avoided
hitting the plaintiff by the mere expedient or applying his brakes at the proper time and distance.

It could not be true, therefore, as he now claims during his testimony, which is contrary to what he told the police
immediately after the accident and is, therefore, more believable, that he did not actually step on his brakes but simply
swerved a little to the right when he saw the on-coming car with glaring headlights, from the opposite direction, in order to
avoid it.

For, had this been what he did, he would not have bumped the car of the plaintiff which was properly parked at the right
beside the sidewalk. And, it was not even necessary for him to swerve a little to the right in order to safely avoid a collision
with the on-coming car, considering that Aurora Blvd. is a double lane avenue separated at the center by a dotted white
paint, and there is plenty of space for both cars, since her car was running at the right lane going towards Manila on the on-
coming car was also on its right lane going to Cubao.13

Having come to the conclusion that Li was negligent in driving his company-issued Mitsubishi Lancer, the next question for us to
determine is whether or not Valenzuela was likewise guilty of contributory negligence in parking her car alongside Aurora Boulevard,
which entire area Li points out, is a no parking zone.

We agree with the respondent court that Valenzuela was not guilty of contributory negligence.

Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which
falls below the standard to which he is required to conform for his own protection.14 Based on the foregoing definition, the standard
or act to which, according to petitioner Li, Valenzuela ought to have conformed for her own protection was not to park at all at any
point of Aurora Boulevard, a no parking zone. We cannot agree.

Courts have traditionally been compelled to recognize that an actor who is confronted with an emergency is not to be held up to the
standard of conduct normally applied to an individual who is in no such situation. The law takes stock of impulses of humanity when
placed in threatening or dangerous situations and does not require the same standard of thoughtful and reflective care from persons
confronted by unusual and oftentimes threatening conditions.15

Under the "emergency rule" adopted by this Court in Gan vs. Court of Appeals,16 an individual who suddenly finds himself in a
situation of danger and is required to act without much time to consider the best means that may be adopted to avoid the
impending danger, is not guilty of negligence if he fails to undertake what subsequently and upon reflection may appear to be a
better solution, unless the emergency was brought by his own negligence.17

Applying this principle to a case in which the victims in a vehicular accident swerved to the wrong lane to avoid hitting two children
suddenly darting into the street, we held, in Mc Kee vs. Intermediate Appellate Court,18 that the driver therein, Jose Koh, "adopted
the best means possible in the given situation" to avoid hitting the children. Using the "emergency rule" the Court concluded that
Koh, in spite of the fact that he was in the wrong lane when the collision with an oncoming truck occurred, was not guilty of
negligence.19

While the emergency rule applies to those cases in which reflective thought, or the opportunity to adequately weigh a threatening
situation is absent, the conduct which is required of an individual in such cases is dictated not exclusively by the suddenness of the
event which absolutely negates thoroughful care, but by the over-all nature of the circumstances. A woman driving a vehicle
suddenly crippled by a flat tire on a rainy night will not be faulted for stopping at a point which is both convenient for her to do so
and which is not a hazard to other motorists. She is not expected to run the entire boulevard in search for a parking zone or turn on
a dark street or alley where she would likely find no one to help her. It would be hazardous for her not to stop and assess the
emergency (simply because the entire length of Aurora Boulevard is a no-parking zone) because the hobbling vehicle would be both
a threat to her safety and to other motorists. In the instant case, Valenzuela, upon reaching that portion of Aurora Boulevard close
to A. Lake St., noticed that she had a flat tire. To avoid putting herself and other motorists in danger, she did what was best under
the situation. As narrated by respondent court: "She stopped at a lighted place where there were people, to verify whether she had
a flat tire and to solicit help if needed. Having been told by the people present that her rear right tire was flat and that she cannot
reach her home she parked along the sidewalk, about 1 1/2 feet away, behind a Toyota Corona Car."20 In fact, respondent court
noted, Pfc. Felix Ramos, the investigator on the scene of the accident confirmed that Valenzuela's car was parked very close to the
sidewalk.21 The sketch which he prepared after the incident showed Valenzuela's car partly straddling the sidewalk, clear and at a
convenient distance from motorists passing the right lane of Aurora Boulevard. This fact was itself corroborated by the testimony of
witness Rodriguez.22

Under the circumstances described, Valenzuela did exercise the standard reasonably dictated by the emergency and could not be
considered to have contributed to the unfortunate circumstances which eventually led to the amputation of one of her lower
extremities. The emergency which led her to park her car on a sidewalk in Aurora Boulevard was not of her own making, and it was
evident that she had taken all reasonable precautions.

Obviously in the case at bench, the only negligence ascribable was the negligence of Li on the night of the accident. "Negligence, as it
is commonly understood is conduct which creates an undue risk of harm to others."23It is the failure to observe that degree of care,
precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury.24 We stressed, in Corliss
vs. Manila Railroad Company,25 that negligence is the want of care required by the circumstances.

The circumstances established by the evidence adduced in the court below plainly demonstrate that Li was grossly negligent in
driving his Mitsubishi Lancer. It bears emphasis that he was driving at a fast speed at about 2:00 A.M. after a heavy downpour had
settled into a drizzle rendering the street slippery. There is ample testimonial evidence on record to show that he was under the
influence of liquor. Under these conditions, his chances of effectively dealing with changing conditions on the road were significantly
lessened. As Presser and Keaton emphasize:

[U]nder present day traffic conditions, any driver of an automobile must be prepared for the sudden appearance of
obstacles and persons on the highway, and of other vehicles at intersections, such as one who sees a child on the curb may
be required to anticipate its sudden dash into the street, and his failure to act properly when they appear may be found to
amount to negligence.26

Li's obvious unpreparedness to cope with the situation confronting him on the night of the accident was clearly of his own making.

We now come to the question of the liability of Alexander Commercial, Inc. Li's employer. In denying liability on the part of
Alexander Commercial, the respondent court held that:
 There is no evidence, not even defendant Li's testimony, that the visit was in connection with official matters. His functions
as assistant manager sometimes required him to perform work outside the office as he has to visit buyers and company
clients, but he admitted that on the night of the accident he came from BF Homes Paranaque he did not have "business
from the company" (pp. 25-26, ten, Sept. 23, 1991). The use of the company car was partly required by the nature of his
work, but the privilege of using it for non-official business is a "benefit", apparently referring to the fringe benefits attaching
to his position.

Under the civil law, an employer is liable for the negligence of his employees in the discharge of their respective duties, the
basis of which liability is not respondeat superior, but the relationship of pater familias, which theory bases the liability of
the master ultimately on his own negligence and not on that of his servant (Cuison v. Norton and Harrison Co., 55 Phil. 18).
Before an employer may be held liable for the negligence of his employee, the act or omission which caused damage must
have occurred while an employee was in the actual performance of his assigned tasks or duties (Francis High School vs.
Court of Appeals, 194 SCRA 341). In defining an employer's liability for the acts done within the scope of the employee's
assigned tasks, the Supreme Court has held that this includes any act done by an employee, in furtherance of the interests
of the employer or for the account of the employer at the time of the infliction of the injury or damage (Filamer Christian
Institute vs. Intermediate Appellate Court, 212 SCRA 637). An employer is expected to impose upon its employees the
necessary discipline called for in the performance of any act "indispensable to the business and beneficial to their
employer" (at p. 645).

In light of the foregoing, We are unable to sustain the trial court's finding that since defendant Li was authorized by the
company to use the company car "either officially or socially or even bring it home", he can be considered as using the
company car in the service of his employer or on the occasion of his functions. Driving the company car was not among his
functions as assistant manager; using it for non-official purposes would appear to be a fringe benefit, one of the perks
attached to his position. But to impose liability upon the employer under Article 2180 of the Civil Code, earlier quoted,
there must be a showing that the damage was caused by their employees in the service of the employer or on the occasion
of their functions. There is no evidence that Richard Li was at the time of the accident performing any act in furtherance of
the company's business or its interests, or at least for its benefit. The imposition of solidary liability against defendant
Alexander Commercial Corporation must therefore fail.27

We agree with the respondent court that the relationship in question is not based on the principle of respondeat superior, which
holds the master liable for acts of the servant, but that of pater familias, in which the liability ultimately falls upon the employer, for
his failure to exercise the diligence of a good father of the family in the selection and supervision of his employees. It is up to this
point, however, that our agreement with the respondent court ends. Utilizing the bonus pater familias standard expressed in Article
2180 of the Civil Code, 28 we are of the opinion that Li's employer, Alexander Commercial, Inc. is jointly and solidarily liable for the
damage caused by the accident of June 24, 1990.

First, the case of St. Francis High School vs. Court of Appeals29 upon which respondent court has placed undue reliance, dealt with
the subject of a school and its teacher's supervision of students during an extracurricular activity. These cases now fall under the
provision on special parental authority found in Art. 218 of the Family Code which generally encompasses all authorized school
activities, whether inside or outside school premises.

Second, the employer's primary liability under the concept of pater familias embodied by Art 2180 (in relation to Art. 2176) of the
Civil Code is quasi-delictual or tortious in character. His liability is relieved on a showing that he exercised the diligence of a good
father of the family in the selection and supervision of its employees. Once evidence is introduced showing that the employer
exercised the required amount of care in selecting its employees, half of the employer's burden is overcome. The question of
diligent supervision, however, depends on the circumstances of employment.

Ordinarily, evidence demonstrating that the employer has exercised diligent supervision of its employee during the performance of
the latter's assigned tasks would be enough to relieve him of the liability imposed by Article 2180 in relation to Article 2176 of the
Civil Code. The employer is not expected to exercise supervision over either the employee's private activities or during the
performance of tasks either unsanctioned by the former or unrelated to the employee's tasks. The case at bench presents a situation
of a different character, involving a practice utilized by large companies with either their employees of managerial rank or their
representatives.

It is customary for large companies to provide certain classes of their employees with courtesy vehicles. These company cars are
either wholly owned and maintained by the company itself or are subject to various plans through which employees eventually
acquire their vehicles after a given period of service, or after paying a token amount. Many companies provide liberal "car plans" to
enable their managerial or other employees of rank to purchase cars, which, given the cost of vehicles these days, they would not
otherwise be able to purchase on their own.

Under the first example, the company actually owns and maintains the car up to the point of turnover of ownership to the
employee; in the second example, the car is really owned and maintained by the employee himself. In furnishing vehicles to such
employees, are companies totally absolved of responsibility when an accident involving a company-issued car occurs during private
use after normal office hours?

Most pharmaceutical companies, for instance, which provide cars under the first plan, require rigorous tests of road worthiness from
their agents prior to turning over the car (subject of company maintenance) to their representatives. In other words, like a good
father of a family, they entrust the company vehicle only after they are satisfied that the employee to whom the car has been given
full use of the said company car for company or private purposes will not be a threat or menace to himself, the company or to
others. When a company gives full use and enjoyment of a company car to its employee, it in effect guarantees that it is, like every
good father, satisfied that its employee will use the privilege reasonably and responsively.

In the ordinary course of business, not all company employees are given the privilege of using a company-issued car. For large
companies other than those cited in the example of the preceding paragraph, the privilege serves important business purposes
either related to the image of success an entity intends to present to its clients and to the public in general, or - for practical and
utilitarian reasons - to enable its managerial and other employees of rank or its sales agents to reach clients conveniently. In most
cases, providing a company car serves both purposes. Since important business transactions and decisions may occur at all hours in
all sorts of situations and under all kinds of guises, the provision for the unlimited use of a company car therefore principally serves
the business and goodwill of a company and only incidentally the private purposes of the individual who actually uses the car, the
managerial employee or company sales agent. As such, in providing for a company car for business use and/or for the purpose of
furthering the company's image, a company owes a responsibility to the public to see to it that the managerial or other employees
to whom it entrusts virtually unlimited use of a company issued car are able to use the company issue capably and responsibly.

In the instant case, Li was an Assistant Manager of Alexander Commercial, Inc. In his testimony before the trial court, he admitted
that his functions as Assistant Manager did not require him to scrupulously keep normal office hours as he was required quite often
to perform work outside the office, visiting prospective buyers and contacting and meeting with company clients. 30 These meetings,
clearly, were not strictly confined to routine hours because, as a managerial employee tasked with the job of representing his
company with its clients, meetings with clients were both social as well as work-related functions. The service car assigned to Li by
Alexander Commercial, Inc. therefore enabled both Li - as well as the corporation - to put up the front of a highly successful entity,
increasing the latter's goodwill before its clientele. It also facilitated meeting between Li and its clients by providing the former with
a convenient mode of travel.

Moreover, Li's claim that he happened to be on the road on the night of the accident because he was coming from a social visit with
an officemate in Paranaque was a bare allegation which was never corroborated in the court below. It was obviously self-serving.
Assuming he really came from his officemate's place, the same could give rise to speculation that he and his officemate had just
been from a work-related function, or they were together to discuss sales and other work related strategies.

In fine, Alexander Commercial, inc. has not demonstrated, to our satisfaction, that it exercised the care and diligence of a good
father of the family in entrusting its company car to Li. No allegations were made as to whether or not the company took the steps
necessary to determine or ascertain the driving proficiency and history of Li, to whom it gave full and unlimited use of a company
car.31 Not having been able to overcome the burden of demonstrating that it should be absolved of liability for entrusting its
company car to Li, said company, based on the principle of bonus pater familias, ought to be jointly and severally liable with the
former for the injuries sustained by Ma. Lourdes Valenzuela during the accident.

Finally, we find no reason to overturn the amount of damages awarded by the respondent court, except as to the amount of moral
damages. In the case of moral damages, while the said damages are not intended to enrich the plaintiff at the expense of a
defendant, the award should nonetheless be commensurate to the suffering inflicted. In the instant case we are of the opinion that
the reduction in moral damages from an amount of P1,000,000.00 to P800,000,00 by the Court of Appeals was not justified
considering the nature of the resulting damage and the predictable sequelae of the injury.

As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic amputation of her left lower extremity at the distal left
thigh just above the knee. Because of this, Valenzuela will forever be deprived of the full ambulatory functions of her left extremity,
even with the use of state of the art prosthetic technology. Well beyond the period of hospitalization (which was paid for by Li), she
will be required to undergo adjustments in her prosthetic devise due to the shrinkage of the stump from the process of healing.
These adjustments entail costs, prosthetic replacements and months of physical and occupational rehabilitation and therapy. During
her lifetime, the prosthetic devise will have to be replaced and re-adjusted to changes in the size of her lower limb effected by the
biological changes of middle-age, menopause and aging. Assuming she reaches menopause, for example, the prosthetic will have to
be adjusted to respond to the changes in bone resulting from a precipitate decrease in calcium levels observed in the bones of all
post-menopausal women. In other words, the damage done to her would not only be permanent and lasting, it would also be
permanently changing and adjusting to the physiologic changes which her body would normally undergo through the years. The
replacements, changes, and adjustments will require corresponding adjustive physical and occupational therapy. All of these
adjustments, it has been documented, are painful.

The foregoing discussion does not even scratch the surface of the nature of the resulting damage because it would be highly
speculative to estimate the amount of psychological pain, damage and injury which goes with the sudden severing of a vital portion
of the human body. A prosthetic device, however technologically advanced, will only allow a reasonable amount of functional
restoration of the motor functions of the lower limb. The sensory functions are forever lost. The resultant anxiety, sleeplessness,
psychological injury, mental and physical pain are inestimable.

As the amount of moral damages are subject to this Court's discretion, we are of the opinion that the amount of P1,000,000.00
granted by the trial court is in greater accord with the extent and nature of the injury - physical and psychological - suffered by
Valenzuela as a result of Li's grossly negligent driving of his Mitsubishi Lancer in the early morning hours of the accident.

WHEREFORE, PREMISES CONSIDERED, the decision of the Court of Appeals is modified with the effect of REINSTATING the judgment
of the Regional Trial Court.