FIRST DIVISION

[G.R. No. 15568. November 8, 1919. ]

W. G. PHILPOTTS, Petitioner, v. PHILIPPINE MANUFACTURING. COMPANY and F. N. BERRY, Respondents.

Lawrence & Ross for Petitioner.

Crossfield & O’Brien for defendants.

SYLLABUS
1. CORPORATIONS; EXAMINATION OF COMPANY’S AFFAIRS BY STOCKHOLDER; RIGHT OF STOCKHOLDER TO ACT THROUGH
REPRESENTATIVE. — The right of examination into corporate affairs which is conceded to the stockholder by section 51 of the
Corporation Law may be exercised either by the stockholder in person or by any duly authorized representative.

DECISION

STREET, J.  :

The petitioner, W. G.’ Philpotts, a stockholder in the Philippine Manufacturing Company, one of the respondents herein, seeks by
this proceeding to obtain a writ of mandamus to compel the respondents to permit the plaintiff, in person or by some authorized
agent or attorney, to inspect and examine the records of the business transacted by said company since January 1, 1918. The
petition is filed originally in this court under the authority of section 515 of the Code of Civil Procedure, which gives to this
tribunal concurrent jurisdiction with the Court of First Instance in cases, among others, where any corporation or person
unlawfully excludes the plaintiff from the use and enjoyment of some right to which he is entitled. The respondents interposed a
demurrer, and the controversy is now before us for the determination of the questions thus presented.

The first point made has reference to a supposed defect of parties, and it is said that the action can not be maintained jointly
against the corporation and its secretary without the addition of the allegation that the latter is the custodian of the business
records of the respondent company.

By the plain language of sections 515 and 222 of our Code of Civil Procedure, the right of action in such a proceeding as this is
given against the corporation; and the respondent corporation in this case was the only absolutely necessary party. In the Ohio
case of Cincinnati Volksblatt Co. v. Hoffmister (61 Ohio St., 432; 48 L. R. A., 735), only the corporation was named as
defendant, while the complaint, in language almost identical with that in the case at bar, alleged a demand upon and refusal by
the corporation.

Nevertheless the propriety of naming the secretary of the corporation as a codefendant cannot be questioned, since such official
is customarily charged with the custody of all documents, correspondence, and records of a corporation, and he is presumably
the person against whom the personal orders of the court would be made effective in case the relief sought should be granted.
Certainly there is nothing in the complaint to indicate that the secretary is an improper person to be joined. The petitioner might
have named the president of the corporation as a respondent also; and this official might be brought in later, even after
judgment rendered, if necessary to the effectuation of the order of the court.

Section 222 of our Code of Civil Procedure is taken from the California Code, and a decision of the California Supreme Court —
Barber v. Mulford (117 Cal., 356) — is quite clear upon the point that both the corporation and its officers may be joined as
defendants.

The real controversy which has brought these litigants into court is upon the question argued in connection with the second
ground of demurrer, namely, whether the right which the law concedes to a stockholder to inspect the records can be exercised
by a proper agent or attorney of the stockholder as well as by the stockholder in person. There is no pretense that the
respondent corporation or any of its officials has refused to allow the petitioner himself to examine anything relating to the
affairs of the company, and the petition prays for a peremptory order commanding the respondents to place the records of all
business transactions of the company, during a specified period, at the disposal of the plaintiff or his duly authorized agent or
attorney, it being evident that the Petitioner desires to exercise said right through an agent or attorney. In the argument in
support of the demurrer it is conceded by counsel for the respondents that there is a right of examination in the stockholder
granted under section 51 of the Corporation Law, but it is insisted that this right must be exercised in person.

The pertinent provision of our law is found in the second paragraph of section 51 of Act No. 1459, which reads as follows: "The
record of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of and
director, member, or stockholder of the corporation at reasonable hours."cralaw virtua1aw library

This provision is to be read of course in connection with the related provisions oœ sections 51 and 52, defining the duty of the
corporation in respect to the keeping of its records.

Now it is our opinion, and we accordingly hold, that the right of inspection given to a stockholder in the provision above quoted
can be exercised either by himself or by any proper representative or attorney in fact, and either with or without the attendance
of the stockholder. This is in conformity with the general rule that what a man may do in person he may do through another;
and we find nothing in the statute that would justify us in qualifying the right in the manner suggested by the respondents. This
conclusion is supported by the undoubted weight of authority in the United States, where it is generally held that the provisions
of law conceding the right of inspection to stockholders of corporations are to be liberally construed and that said right may be
 exercised through any other properly authorized person. As was said in Foster v. White (86 Ala., 467), "The right may be
regarded as personal, in the sense that only a stockholder may enjoy it; but the inspection and examination may be made by
another. Otherwise it would be unavailing in many instances." An observation to the same effect is contained in Martin v.
Bienville Oil Works Co. (28 La., 204), where it is said: "The possession of the right in question would be futile if the possessor of
it, through lack of knowledge necessary to exercise it, were debarred the right of procuring in his behalf the services of one who
could exercise it." In Deadreck v. Wilson (8 Baxt. [Tenn. ], 108), the court said: "That stockholders have the right to inspect the
books of the corporation, taking minutes from the same, at all reasonable times, and may be aided in this-by experts and
counsel, so as to make the inspection valuable to them, is a principle too well settled to need discussion." Authorities on this
point could be accumulated in great abundance, but as they may be found cited in any legal encyclopedia or treaties devoted to
the subject of corporations, it is unnecessary here to refer to other cases announcing the same rule.

In order that the rule above stated may not be taken in too sweeping a sense, we deem it advisable to say that there are some
things which a corporation may undoubtedly keep secret, notwithstanding the right of inspection given by law to the
stockholder; as, for instance, where a corporation, engaged in the business of manufacture, has acquired a formula or process,
not generally known, which has proved of utility to it in the manufacture of its products. It is not our intention to declare that
the authorities of the corporation, and more particularly the Board of Directors, might not adopt measures for the protection of
such process from publicity. There is, however, nothing in the petition which would indicate that the petitioner in this case is
seeking to discover anything which the corporation is entitled to keep secret; and if anything of the sort is involved in the case it
may be brought out at a more advanced stage of the proceedings.

The demurrer is overruled; and it is ordered that the writ of mandamus shall issue as prayed, unless within 5 days from
notification hereof the respondents answer to the merits. So ordered.

Arellano, C.J., Torres, Johnson, Araullo Malcolm and Avanceña, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
G.R. No. L-24332 January 31, 1978
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.

MUÑOZ PALMA, J.:

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion Rallos, sold the latter's
undivided share in a parcel of land pursuant to a power of attorney which the principal had executed in favor. The administrator
of the estate of the went to court to have the sale declared uneanforceable and to recover the disposed share. The trial court
granted the relief prayed for, but upon appeal the Court of Appeals uphold the validity of the sale and the complaint.

Hence, this Petition for Review on certiorari.

The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a
parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the
Registry of Cebu. On April 21, 1954, the sisters executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell for and in their behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955,
Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty
Corporation for the sum of P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu, TCT No. 11118 was
cancelled, and a new transfer certificate of Title No. 12989 was issued in the named of the vendee.

On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint docketed as Civil
Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that the sale of the undivided share of the deceased
Concepcion Rallos in lot 5983 be d unenforceable, and said share be reconveyed to her estate; (2) that the Certificate of 'title
issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled and another title be issued in the names of the
corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by way of
attorney's fees and payment of costs of suit. Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon
Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped from the complaint. The complaint was
amended twice; defendant Corporation's Answer contained a crossclaim against its co-defendant, Simon Rallos while the latter
filed third-party complaint against his sister, Gerundia Rallos While the case was pending in the trial court, both Simon and his
sister Gerundia died and they were substituted by the respective administrators of their estates.

After trial the court a quo rendered judgment with the following dispositive portion:

A. On Plaintiffs Complaint —

(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half pro-indiviso
share of Concepcion Rallos in the property in question, — Lot 5983 of the Cadastral Survey of
Cebu — is concerned;

(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title No.
12989 covering Lot 5983 and to issue in lieu thereof another in the names of FELIX GO CHAN
& SONS REALTY CORPORATION and the Estate of Concepcion Rallos in the proportion of one-
half (1/2) share each pro-indiviso;

(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an
undivided one-half (1/2) share of Lot 5983 to the herein plaintiff;

(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos,
to pay to plaintiff in concept of reasonable attorney's fees the sum of P1,000.00; and

(5) Ordering both defendants to pay the costs jointly and severally.

B. On GO CHANTS Cross-Claim:

(1) Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon
Rallos, to pay to defendant Felix Co Chan & Sons Realty Corporation the sum of P5,343.45,
representing the price of one-half (1/2) share of lot 5983;

(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to
pay in concept of reasonable attorney's fees to Felix Go Chan & Sons Realty Corporation the
sum of P500.00.
 C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon Rallos, against
Josefina Rallos special administratrix of the Estate of Gerundia Rallos:

(1) Dismissing the third-party complaint without prejudice to filing either a complaint against the regular
administrator of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos, covering
the same subject-matter of the third-party complaint, at bar. (pp. 98-100, Record on Appeal)

Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the foregoing judgment insofar as it
set aside the sale of the one-half (1/2) share of Concepcion Rallos. The appellate tribunal, as adverted to earlier, resolved the
appeal on November 20, 1964 in favor of the appellant corporation sustaining the sale in question.  1 The appellee administrator,
Ramon Rallos, moved for a reconsider of the decision but the same was denied in a resolution of March 4, 1965. 2

What is the legal effect of an act performed by an agent after the death of his principal? Applied more particularly to the instant
case, We have the query. is the sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was executed by
the agent after the death of his principal? What is the law in this jurisdiction as to the effect of the death of the principal on the
authority of the agent to act for and in behalf of the latter? Is the fact of knowledge of the death of the principal a material
factor in determining the legal effect of an act performed after such death?

Before proceedings to the issues, We shall briefly restate certain principles of law relevant to the matter tinder consideration.

1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of another without being
authorized by the latter, or unless he has by law a right to represent him.  3 A contract entered into in the name of another by
one who has no authority or the 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.4 Article 1403 (1) of the same Code also provides:

ART. 1403. The following contracts are unenforceable, unless they are justified:

(1) Those entered into in the name of another person by one who hi - been given no authority or legal
representation or who has acted beyond his powers; ...

Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby one party, caged
the principal (mandante), authorizes another, called the agent ( mandatario), to act for and in his behalf in transactions with
third persons. The essential elements of agency are: (1) there is consent, express or implied of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agents acts as a representative
and not for himself, and (4) the agent acts within the scope of his authority. 5

Agency is basically personal representative, and derivative in nature. The authority of the agent to act emanates from the
powers granted to him by his principal; his act is the act of the principal if done within the scope of the authority.  Qui facit per
alium facit se. "He who acts through another acts himself". 6

2. There are various ways of extinguishing agency, 7 but her We are concerned only with one cause — death of the principal
Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art. 1709 of the Spanish Civil Code provides:

ART. 1919. Agency is extinguished.

xxx xxx xxx

3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ... (Emphasis supplied)

By reason of the very nature of the relationship between Principal and agent, agency is extinguished by the death of the
principal or the agent. This is the law in this jurisdiction. 8

Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found in the juridical
basis of agency which is representation Them being an in. integration of the personality of the principal integration that of the
agent it is not possible for the representation to continue to exist once the death of either is establish. Pothier agrees with
Manresa that by reason of the nature of agency, death is a necessary cause for its extinction. Laurent says that the juridical tie
between the principal and the agent is severed ipso jure upon the death of either without necessity for the heirs of the fact to
notify the agent of the fact of death of the former. 9

The same rule prevails at common law — the death of the principal effects instantaneous and absolute revocation of the
authority of the agent unless the Power be coupled with an interest. 10 This is the prevalent rule in American Jurisprudence
where it is well-settled that a power without an interest confer. red upon an agent is dissolved by the principal's death, and any
attempted execution of the power afterward is not binding on the heirs or representatives of the deceased. 11

3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent extinguishes the agency, subject
to any exception, and if so, is the instant case within that exception? That is the determinative point in issue in this litigation. It
is the contention of respondent corporation which was sustained by respondent court that notwithstanding the death of the
principal Concepcion Rallos the act of the attorney-in-fact, Simeon Rallos in selling the former's sham in the property is valid and
enforceable inasmuch as the corporation acted in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.

ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been
constituted in the common interest of the latter and of the agent, or in the interest of a third person who has
accepted the stipulation in his favor.

ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause
which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have
contracted with him in good. faith.

Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon Rallos was not
coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal is valid and
effective only under two conditions, viz: (1) that the agent acted without knowledge of the death of the principal and (2) that
the third person who contracted with the agent himself acted in good faith . Good faith here means that the third person was
not aware of the death of the principal at the time he contracted with said agent. These two requisites must concur the absence
of one will render the act of the agent invalid and unenforceable.

In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at the time he sold
the latter's share in Lot No. 5983 to respondent corporation. The knowledge of the death is clearly to be inferred from the
pleadings filed by Simon Rallos before the trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a
finding of fact of the court a quo 13 and of respondent appellate court when the latter stated that Simon Rallos 'must have
known of the death of his sister, and yet he proceeded with the sale of the lot in the name of both his sisters Concepcion and
Gerundia Rallos without informing appellant (the realty corporation) of the death of the former. 14

On the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion Rallos,  Article 1931
of the Civil Code is inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of the
death of his principal; it is not enough that the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court
applying Article 1738 of the old Civil rode now Art. 1931 of the new Civil Code sustained the validity , of a sale made after the
death of the principal because it was not shown that the agent knew of his principal's demise . 15 To the same effect is the case
of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the words of Justice Jesus Barrera the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no
indication in the record, that the agent Luy Kim Guan was aware of the death of his principal at the time he
sold the property. The death 6f the principal does not render the act of an agent unenforceable, where the
latter had no knowledge of such extinguishment of the agency. (1 SCRA 406, 412)

4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned out that there is no provision
in the Code which provides that whatever is done by an agent having knowledge of the death of his principal is void even with
respect to third persons who may have contracted with him in good faith and without knowledge of the death of the principal. 16

We cannot see the merits of the foregoing argument as it ignores the existence of the general rule enunciated in Article 1919
that the death of the principal extinguishes the agency. That being the general rule it follows a fortiori that any act of an agent
after the death of his principal is void ab initio unless the same fags under the exception provided for in the aforementioned
Articles 1930 and 1931. Article 1931, being an exception to the general rule, is to be strictly construed, it is not to be given an
interpretation or application beyond the clear import of its terms for otherwise the courts will be involved in a process of
legislation outside of their judicial function.

5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the power of attorney
which was duly registered on the original certificate of title recorded in the Register of Deeds of the province of Cebu, that no
notice of the death was aver annotated on said certificate of title by the heirs of the principal and accordingly they must suffer
the consequences of such omission. 17

To support such argument reference is made to a portion in Manresa's  Commentaries which We quote:

If the agency has been granted for the purpose of contracting with certain persons, the revocation must be
made known to them. But if the agency is general iii nature, without reference to particular person with whom
the agent is to contract, it is sufficient that the principal exercise due diligence to make the revocation of the
agency publicity known.

In case of a general power which does not specify the persons to whom represents' on should be made, it is
the general opinion that all acts, executed with third persons who contracted in good faith, Without knowledge
of the revocation, are valid. In such case, the principal may exercise his right against the agent, who, knowing
of the revocation, continued to assume a personality which he no longer had. (Manresa Vol. 11, pp. 561 and
575; pp. 15-16, rollo)

The above discourse however, treats of revocation by an act of the principal as a mode of terminating an agency which is to be
distinguished from revocation by operation of law  such as death of the principal which obtains in this case. On page six of this
Opinion We stressed that by reason of the very nature of the relationship between principal and agent, agency is
extinguished ipso jure upon the death of either principal or agent. Although a revocation of a power of attorney to be effective
must be communicated to the parties concerned, 18 yet a revocation by operation of law, such as by death of the principal is, as
a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an execution of the
principal's continuing will. 19 With death, the principal's will ceases or is the of authority is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal What the Code provides in
Article 1932 is that, if the agent die his heirs must notify the principal thereof , and in the meantime adopt such measures as the
circumstances may demand in the interest of the latter. Hence, the fact that no notice of the death of the principal was
registered on the certificate of title of the property in the Office of the Register of Deeds, is not fatal to the cause of the estate
of the principal

6. Holding that the good faith of a third person in said with an agent affords the former sufficient protection, respondent court
drew a "parallel" between the instant case and that of an innocent purchaser for value of a land, stating that if a person
purchases a registered land from one who acquired it in bad faith — even to the extent of foregoing or falsifying the deed of
sale in his favor — the registered owner has no recourse against such innocent purchaser for value but only against the
forger. 20

To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et al., v. Nano and Vallejo , 61
Phil. 625. We quote from the brief:

In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a co-owner of lands
with Agustin Nano. The latter had a power of attorney supposedly executed by Vallejo Nano in his favor.
Vallejo delivered to Nano his land titles. The power was registered in the Office of the Register of Deeds. When
the lawyer-husband of Angela Blondeau went to that Office, he found all in order including the power of
attorney. But Vallejo denied having executed the power The lower court sustained Vallejo and the plaintiff
Blondeau appealed. Reversing the decision of the court a quo, the Supreme Court, quoting the ruling in the
case of Eliason v. Wilborn,  261 U.S. 457, held:

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
perpetuated. When Fernando de la Canters, a member of the Philippine Bar and the husband
of Angela Blondeau, the principal plaintiff, searched the registration record, he found them in
due form including the power of attorney of Vallajo 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 sent P12,000.00 to the defendant Vallejo.' 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
land.

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 coincidence bear the loss. (pp. 19-21)

The Blondeau decision, however, is not on all fours with the case before Us because here We are confronted with one who
admittedly was an agent of his sister and who sold the property of the latter after her death with full knowledge of such death.
The situation is expressly covered by a provision of law on agency the terms of which are clear and unmistakable leaving no
room for an interpretation contrary to its tenor, in the same manner that the ruling in Blondeau and the cases cited therein
found a basis in Section 55 of the Land Registration Law which in part provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever any voluntary instrument is presented for
registration shall be conclusive authority from the registered owner to the register of deeds to enter a new
certificate or to make a memorandum of registration in accordance with such instruments, and the new
certificate or memorandum Shall be binding upon the registered owner and upon all persons claiming under
him in favor of every purchaser for value and in good faith: Provided however, That in all cases of registration
provided by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud
without prejudice, however, to the right, of any innocent holder for value of a certificate of title. ... (Act No.
496 as amended)

7. One last point raised by respondent corporation in support of the appealed decision is an 1842 ruling of the Supreme Court of
Pennsylvania in Cassiday v. McKenzie  wherein payments made to an agent after the death of the principal were held to be
"good", "the parties being ignorant of the death". Let us take note that the Opinion of Justice Rogers was premised on the
statement that the parties were ignorant of the death of the principal.  We quote from that decision the following:

... Here the precise point is, whether a payment to an agent when the Parties are ignorant of the death is a
good payment. in addition to the case in Campbell before cited, the same judge Lord Ellenboruogh, has
decided in 5 Esp. 117, the general question that a payment after the death of principal is not good. Thus, a
payment of sailor's wages to a person having a power of attorney to receive them, has been held void when
the principal was dead at the time of the payment. If, by this case, it is meant merely to decide the general
proposition that by operation of law the death of the principal is a revocation of the powers of the attorney, no
objection can be taken to it. But if it intended to say that his principle applies where there was 110 notice of
death, or opportunity of twice I must be permitted to dissent from it.
 ... That a payment may be good today, or bad tomorrow, from the accident circumstance of the death of the
principal, which he did not know, and which by no possibility could he know? It would be unjust to the agent
and unjust to the debtor. In the civil law, the acts of the agent, done bona fide in ignorance of the death of his
principal  are held valid and binding upon the heirs of the latter. The same rule holds in the Scottish law, and I
cannot believe the common law is so unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)

To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may be made that the above
represents the minority view in American jurisprudence. Thus in Clayton v. Merrett, the Court said.—

There are several cases which seem to hold that although, as a general principle, death revokes an agency and
renders null every act of the agent thereafter performed, yet that where a payment has been made in
ignorance of the death, such payment will be good. The leading case so holding is that of  Cassiday v.
McKenzie, 4 Watts & S. (Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view ii broadly announced. It
is referred to, and seems to have been followed, in the case of  Dick v. Page, 17 Mo. 234, 57 AmD 267; but in
this latter case it appeared that the estate of the deceased principal had received the benefit of the money
paid, and therefore the representative of the estate might well have been held to be estopped from suing for it
again. . . . These cases, in so far, at least, as they announce the doctrine under discussion, are exceptional.
The Pennsylvania Case, supra (Cassiday v. McKenzie 4 Watts & S. 282, 39 AmD 76), is believed to stand
almost, if not quite, alone in announcing the principle in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J.
549)

So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion, except so far as it related to
the particular facts, was a mere dictum, Baldwin J. said:

The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial indication of his views
on the general subject, than as the adjudication of the Court upon the point in question. But accordingly all
power weight to this opinion, as the judgment of a of great respectability, it stands alone among common law
authorities and is opposed by an array too formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J.
549)

Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence, no such conflict exists in
our own for the simple reason that our statute, the Civil Code, expressly provides for two exceptions to the general rule that
death of the principal revokes ipso jure the agency, to wit: (1) that the agency is coupled with an interest (Art 1930), and (2)
that the act of the agent was executed without knowledge of the death of the principal and the third person who contracted
with the agent acted also in good faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, and again We stress
the indispensable requirement that the agent acted without knowledge or notice of the death of the principal In the case before
Us the agent Ramon Rallos executed the sale notwithstanding notice of the death of his principal Accordingly, the agent's act is
unenforceable against the estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, and We affirm en toto the judgment
rendered by then Hon. Amador E. Gomez of the Court of First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with
costs against respondent realty corporation at all instances.

So Ordered.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 76931             May 29, 1991
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,
vs.
COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents.
G.R. No. 76933             May 29, 1991
AMERICAN AIRLINES, INCORPORATED, petitioner,
vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, INCORPORATED, respondents.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.

PADILLA, J.:

This case is a consolidation of two (2) petitions for review on certiorari of a decision1 of the Court of Appeals in CA-G.R. No. CV-
04294, entitled "American Airlines, Inc. vs. Orient Air Services and Hotel Representatives, Inc." which affirmed, with
modification, the decision2 of the Regional Trial Court of Manila, Branch IV, which dismissed the complaint and granted therein
defendant's counterclaim for agent's overriding commission and damages.

The antecedent facts are as follows:

On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier offering passenger and air
cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives (hereinafter referred to as Orient Air),
entered into a General Sales Agency Agreement (hereinafter referred to as the Agreement), whereby the former authorized the
latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation. Pertinent
provisions of the agreement are reproduced, to wit:

WITNESSETH

In consideration of the mutual convenants herein contained, the parties hereto agree as follows:

1. Representation of American by Orient Air Services

Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the Philippines, including
any United States military installation therein which are not serviced by an Air Carrier Representation Office (ACRO), for
the sale of air passenger transportation. The services to be performed by Orient Air Services shall include:

(a) soliciting and promoting passenger traffic for the services of American and, if necessary, employing staff
competent and sufficient to do so;

(b) providing and maintaining a suitable area in its place of business to be used exclusively for the transaction
of the business of American;

(c) arranging for distribution of American's timetables, tariffs and promotional material to sales agents and the
general public in the assigned territory;

(d) servicing and supervising of sales agents (including such sub-agents as may be appointed by Orient Air
Services with the prior written consent of American) in the assigned territory including if required by American
the control of remittances and commissions retained; and

(e) holding out a passenger reservation facility to sales agents and the general public in the assigned territory.

In connection with scheduled or non-scheduled air passenger transportation within the United States, neither Orient Air
Services nor its sub-agents will perform services for any other air carrier similar to those to be performed hereunder for
American without the prior written consent of American. Subject to periodic instructions and continued consent from
American, Orient Air Services may sell air passenger transportation to be performed within the United States by other
scheduled air carriers provided American does not provide substantially equivalent schedules between the points
involved.

x x x           x x x          x x x

4. Remittances

Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders, less
commissions to which Orient Air Services is entitled hereunder, not less frequently than semi-monthly, on the 15th and
last days of each month for sales made during the preceding half month.
 All monies collected by Orient Air Services for transportation sold hereunder on American's ticket stock or on exchange
orders, less applicable commissions to which Orient Air Services is entitled hereunder, are the property of American and
shall be held in trust by Orient Air Services until satisfactorily accounted for to American.

5. Commissions

American will pay Orient Air Services commission on transportation sold hereunder by Orient Air Services or its sub-
agents as follows:

(a) Sales agency commission

American will pay Orient Air Services a sales agency commission for all sales of transportation by Orient Air Services or
its sub-agents over American's services and any connecting through air transportation, when made on American's ticket
stock, equal to the following percentages of the tariff fares and charges:

(i) For transportation solely between points within the United States and between such points and Canada: 7%
or such other rate(s) as may be prescribed by the Air Traffic Conference of America.

(ii) For transportation included in a through ticket covering transportation between points other than those
described above: 8% or such other rate(s) as may be prescribed by the International Air Transport Association.

(b) Overriding commission

In addition to the above commission American will pay Orient Air Services an overriding commission of 3% of the tariff
fares and charges for all sales of transportation over American's service by Orient Air Service or its sub-agents.

x x x           x x x          x x x

10. Default

If Orient Air Services shall at any time default in observing or performing any of the provisions of this Agreement or
shall become bankrupt or make any assignment for the benefit of or enter into any agreement or promise with its
creditors or go into liquidation, or suffer any of its goods to be taken in execution, or if it ceases to be in business, this
Agreement may, at the option of American, be terminated forthwith and American may, without prejudice to any of its
rights under this Agreement, take possession of any ticket forms, exchange orders, traffic material or other property or
funds belonging to American.

11. IATA and ATC Rules

The provisions of this Agreement are subject to any applicable rules or resolutions of the International Air Transport
Association and the Air Traffic Conference of America, and such rules or resolutions shall control in the event of any
conflict with the provisions hereof.

x x x           x x x          x x x

13. Termination

American may terminate the Agreement on two days' notice in the event Orient Air Services is unable to transfer to the
United States the funds payable by Orient Air Services to American under this Agreement. Either party may terminate
the Agreement without cause by giving the other 30 days' notice by letter, telegram or cable.

x x x           x x x          x x x3

On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the
net proceeds of sales for the months of January to March 1981 in the amount of US $254,400.40, American Air by itself
undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement in
accordance with Paragraph 13 thereof (Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit
against Orient Air with the Court of First Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or
Garnishment, Mandatory Injunction and Restraining Order 4 averring the aforesaid basis for the termination of the Agreement as
well as therein defendant's previous record of failures "to promptly settle past outstanding refunds of which there were available
funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff." 5

In its Answer6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material allegations of the complaint with
respect to plaintiff's entitlement to alleged unremitted amounts, contending that after application thereof to the commissions
due it under the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions. Further, the
defendant contended that the actions taken by American Air in the course of terminating the Agreement as well as the
termination itself were untenable, Orient Air claiming that American Air's precipitous conduct had occasioned prejudice to its
business interests.

Finding that the record and the evidence substantiated the allegations of the defendant, the trial court ruled in its favor,
rendering a decision dated 16 July 1984, the dispositive portion of which reads:
 WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in favor of defendant and against
plaintiff dismissing the complaint and holding the termination made by the latter as affecting the GSA agreement illegal
and improper and order the plaintiff to reinstate defendant as its general sales agent for passenger tranportation in the
Philippines in accordance with said GSA agreement; plaintiff is ordered to pay defendant the balance of the overriding
commission on total flown revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of
US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission per month
commencing from January 1, 1981 until such reinstatement or said amounts in its Philippine peso equivalent legally
prevailing at the time of payment plus legal interest to commence from the filing of the counterclaim up to the time of
payment. Further, plaintiff is directed to pay defendant the amount of One Million Five Hundred Thousand
(Pl,500,000.00) pesos as and for exemplary damages; and the amount of Three Hundred Thousand (P300,000.00)
pesos as and by way of attorney's fees.

Costs against plaintiff.7

On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January 1986, affirmed
the findings of the court a quo on their material points but with some modifications with respect to the monetary awards
granted. The dispositive portion of the appellate court's decision is as follows:

WHEREFORE, with the following modifications —

1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of the latter's overriding
commission covering the period March 16, 1977 to December 31, 1980, or its Philippine peso equivalent in accordance
with the official rate of exchange legally prevailing on July 10, 1981, the date the counterclaim was filed ;

2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's overriding commission per month starting
January 1, 1981 until date of termination, May 9, 1981 or its Philippine peso equivalent in accordance with the official
rate of exchange legally prevailing on July 10, 1981, the date the counterclaim was filed

3) American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date the answer with
counterclaim was filed, until full payment;

4) American is ordered to pay Orient exemplary damages of P200,000.00;

5) American is ordered to pay Orient the sum of P25,000.00 as attorney's fees.

the rest of the appealed decision is affirmed.

Costs against American.8

American Air moved for reconsideration of the aforementioned decision, assailing the substance thereof and arguing for its
reversal. The appellate court's decision was also the subject of a Motion for Partial Reconsideration by Orient Air which prayed
for the restoration of the trial court's ruling with respect to the monetary awards. The Court of Appeals, by resolution
promulgated on 17 December 1986, denied American Air's motion and with respect to that of Orient Air, ruled thus:

Orient's motion for partial reconsideration is
exemplary damages and attorney's fees, but
January 27, 1986 is modified in paragraphs
mentioned therein shall be at their Philippine
prevailing on the date of actual payment.9
denied insofar as it prays for affirmance of the trial court's award of
granted insofar as the rate of exchange is concerned. The decision of
(1) and (2) of the dispositive part so that the payment of the sums
peso equivalent in accordance with the official rate of exchange legally

Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air as petitioner in G.R. No. 76931
and American Air as petitioner in G.R. No. 76933. By resolution 10 of this Court dated 25 March 1987 both petitions were
consolidated, hence, the case at bar.

The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding commission. It is the stand
of American Air that such commission is based only on sales of its services actually negotiated or transacted by Orient Air,
otherwise referred to as "ticketed sales." As basis thereof, primary reliance is placed upon paragraph 5(b) of the Agreement
which, in reiteration, is quoted as follows:

5. Commissions

a) . . .

b) Overriding Commission

In addition to the above commission, American will pay Orient Air Services an overriding commission of 3% of the tariff
fees and charges for all sales of transportation over American's services by Orient Air Services  or its sub-
agents. (Emphasis supplied)

Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to appoint any
sub-agents, it is American Air's contention that Orient Air can claim entitlement to the disputed overriding commission based
only on ticketed sales. This is supposed to be the clear meaning of the underscored portion of the above provision. Thus, to be
entitled to the 3% overriding commission, the sale must be made by Orient Air and the sale must be done with the use of
American Air's ticket stocks.

On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission covers the total revenue
of American Air and not merely that derived from ticketed sales undertaken by Orient Air. The latter, in justification of its
submission, invokes its designation as the exclusive General Sales Agent of American Air, with the corresponding obligations
arising from such agency, such as, the promotion and solicitation for the services of its principal. In effect, by virtue of such
exclusivity, "all sales of transportation over American Air's services are necessarily by Orient Air." 11

It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into consideration to
ascertain the meaning of its provisions. 12 The various stipulations in the contract must be read together to give effect to
all.13 After a careful examination of the records, the Court finds merit in the contention of Orient Air that the Agreement, when
interpreted in accordance with the foregoing principles, entitles it to the 3% overriding commission based on total revenue, or
as referred to by the parties, "total flown revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and marketing of
American Air's services for air passenger transportation, and the solicitation of sales therefor. In return for such efforts and
services, Orient Air was to be paid commissions of two (2) kinds: first, a sales agency commission, ranging from 7-8% of tariff
fares and charges from sales by Orient  Air when made on American Air ticket stock ; and second, an overriding commission of
3% of tariff fares and charges for all sales of passenger transportation over American Air services. It is immediately observed
that the precondition attached to the first type of commission does not obtain for the second type of commissions. The latter
type of commissions would accrue for sales of American Air services made not on its ticket stock but on the ticket stock of other
air carriers sold by such carriers or other authorized ticketing facilities or travel agents. To rule otherwise,  i.e., to limit the basis
of such overriding commissions to sales from American Air ticket stock would erase any distinction between the two (2) types of
commissions and would lead to the absurd conclusion that the parties had entered into a contract with meaningless provisions.
Such an interpretation must at all times be avoided with every effort exerted to harmonize the entire Agreement.

An additional point before finally disposing of this issue. It is clear from the records that American Air was the party responsible
for the preparation of the Agreement. Consequently, any ambiguity in this "contract of adhesion" is to be taken " contra
proferentem", i.e., construed against the party who caused the ambiguity and could have avoided it by the exercise of a little
more care. Thus, Article 1377 of the Civil Code provides that the interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity. 14 To put it differently, when several interpretations of a provision are
otherwise equally proper, that interpretation or construction is to be adopted which is most favorable to the party in whose
favor the provision was made and who did not cause the ambiguity. 15 We therefore agree with the respondent appellate court's
declaration that:

Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read against the party
who drafted it.16

We now turn to the propriety of American Air's termination of the Agreement. The respondent appellate court, on this issue,
ruled thus:

It is not denied that Orient withheld remittances but such action finds justification from paragraph 4 of the Agreement,
Exh. F, which provides for remittances to American less commissions to which Orient is entitled, and from paragraph
5(d) which specifically allows Orient to retain the full amount of its commissions. Since, as stated ante, Orient is entitled
to the 3% override. American's premise, therefore, for the cancellation of the Agreement did not exist. . . ."

We agree with the findings of the respondent appellate court. As earlier established, Orient Air was entitled to an overriding
commission based on total flown revenue. American Air's perception that Orient Air was remiss or in default of its obligations
under the Agreement was, in fact, a situation where the latter acted in accordance with the Agreement—that of retaining from
the sales proceeds its accrued commissions before remitting the balance to American Air. Since the latter was still obligated to
Orient Air by way of such commissions. Orient Air was clearly justified in retaining and refusing to remit the sums claimed by
American Air. The latter's termination of the Agreement was, therefore, without cause and basis, for which it should be held
liable to Orient Air.

On the matter of damages, the respondent appellate court modified by reduction the trial court's award of exemplary damages
and attorney's fees. This Court sees no error in such modification and, thus, affirms the same.

It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the trial court. 1âwphi1 We
refer particularly to the lower court's decision ordering American Air to "reinstate defendant as its general sales agent for
passenger transportation in the Philippines in accordance with said GSA Agreement."

By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend its personality to
Orient Air. Such would be violative of the principles and essence of agency, defined by law as a contract whereby "a person
binds himself to render some service or to do something in representation or on behalf of another, WITH THE CONSENT OR
AUTHORITY OF THE LATTER .17 (emphasis supplied) In an agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform
all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal, which
must not, in any way, be compelled by law or by any court. The Agreement itself between the parties states that "either party
may terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or cable." (emphasis
supplied) We, therefore, set aside the portion of the ruling of the respondent appellate court reinstating Orient Air as general
sales agent of American Air.
WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and resolution of the respondent Court of
Appeals, dated 27 January 1986 and 17 December 1986, respectively. Costs against petitioner American Air.

SO ORDERED.

Melencio-Herrera, and Regalado, JJ., concur.

Paras, J., took no part. Son is a partner in one of the counsel.
Sarmiento, J., is on leave.
FIRST DIVISION

G.R. No. 144805 June 8, 2006

EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,

vs.
ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A. and FAR
EAST BANK & TRUST COMPANY, Respondents.

DECISION

CALLEJO, SR., J.:

On appeal via a Petition for Review on Certiorari is the Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 51022, which
affirmed the Decision of the Regional Trial Court (RTC), Pasig City, Branch 165, in Civil Case No. 54887, as well as the
Resolution2 of the CA denying the motion for reconsideration thereof.

The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws. Since 1950, it had been
engaged in the manufacture of roofing materials and pipe products. Its manufacturing operations were conducted on eight
parcels of land with a total area of 47,233 square meters. The properties, located in Mandaluyong City, Metro Manila, were
covered by Transfer Certificates of Title Nos. 451117, 451118, 451119, 451120, 451121, 451122, 451124 and 451125 under the
name of Far East Bank & Trust Company, as trustee. Ninety (90%) percent of the shares of stocks of EC were owned by
Eteroutremer S.A. Corporation (ESAC), a corporation organized and registered under the laws of Belgium. 3 Jack Glanville, an
Australian citizen, was the General Manager and President of EC, while Claude Frederick Delsaux was the Regional Director for
Asia of ESAC. Both had their offices in Belgium.

In 1986, the management of ESAC grew concerned about the political situation in the Philippines and wanted to stop its
operations in the country. The Committee for Asia of ESAC instructed Michael Adams, a member of EC’s Board of Directors, to
dispose of the eight parcels of land. Adams engaged the services of realtor/broker Lauro G. Marquez so that the properties
could be offered for sale to prospective buyers. Glanville later showed the properties to Marquez.

Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of the Litonjua &
Company, Inc. In a Letter dated September 12, 1986, Marquez declared that he was authorized to sell the properties
for P27,000,000.00 and that the terms of the sale were subject to negotiation. 4

Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and his brother Antonio K.
Litonjua. The Litonjua siblings offered to buy the property for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua
siblings’ offer and relayed the same to Delsaux in Belgium, but the latter did not respond. On October 28, 1986, Glanville
telexed Delsaux in Belgium, inquiring on his position/ counterproposal to the offer of the Litonjua siblings. It was only on
February 12, 1987 that Delsaux sent a telex to Glanville stating that, based on the "Belgian/Swiss decision," the final offer was
"US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to final liquidation." 5

Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr. accepted the counterproposal of
Delsaux. Marquez conferred with Glanville, and in a Letter dated February 26, 1987, confirmed that the Litonjua siblings had
accepted the counter-proposal of Delsaux. He also stated that the Litonjua siblings would confirm full payment within 90 days
after execution and preparation of all documents of sale, together with the necessary governmental clearances. 6

The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company, Ermita Branch, and
drafted an Escrow Agreement to expedite the sale.7

Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would be implemented. In a telex
dated April 22, 1987, Glanville informed Delsaux that he had met with the buyer, which had given him the impression that "he is
prepared to press for a satisfactory conclusion to the sale." 8 He also emphasized to Delsaux that the buyers were concerned
because they would incur expenses in bank commitment fees as a consequence of prolonged period of inaction. 9

Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines, the political situation in
the Philippines had improved. Marquez received a telephone call from Glanville, advising that the sale would no longer proceed.
Glanville followed it up with a Letter dated May 7, 1987, confirming that he had been instructed by his principal to inform
Marquez that "the decision has been taken at a Board Meeting not to sell the properties on which Eternit Corporation is
situated."10

Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had decided not to proceed
with the sale of the subject land, to wit:

May 22, 1987

Mr. L.G. Marquez
L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines
Dear Sir:
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far as the
Philippines are (sic) concerned. Considering [the] new political situation since the departure of MR. MARCOS and a certain
stabilization in the Philippines, the Committee has decided not to stop our operations in Manila. In fact, production has started
again last week, and (sic) to recognize the participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later state, we would
consult you again.
xxx
Yours sincerely,
(Sgd.)
C.F. DELSAUX
cc. To: J. GLANVILLE (Eternit Corp.)11

When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment for damages they had
suffered on account of the aborted sale. EC, however, rejected their demand.

The Litonjuas then filed a complaint for specific performance and damages against EC (now the Eterton Multi-Resources
Corporation) and the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City. An amended complaint was filed, in
which defendant EC was substituted by Eterton Multi-Resources Corporation; Benito C. Tan, Ruperto V. Tan, Stock Ha T. Tan
and Deogracias G. Eufemio were impleaded as additional defendants on account of their purchase of ESAC shares of stocks and
were the controlling stockholders of EC.

In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not doing business in the Philippines, it
cannot be subject to the jurisdiction of Philippine courts; the Board and stockholders of EC never approved any resolution to sell
subject properties nor authorized Marquez to sell the same; and the telex dated October 28, 1986 of Jack Glanville was his own
personal making which did not bind EC.

On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed the amended complaint. 12 The fallo of
the decision reads:

WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer, S.A. is
dismissed on the ground that there is no valid and binding sale between the plaintiffs and said defendants.

The complaint as against Far East Bank and Trust Company is likewise dismissed for lack of cause of action.

The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer, S.A. is also dismissed for
lack of merit.13

The trial court declared that since the authority of the agents/realtors was not in writing, the sale is void and not merely
unenforceable, and as such, could not have been ratified by the principal. In any event, such ratification cannot be given any
retroactive effect. Plaintiffs could not assume that defendants had agreed to sell the property without a clear authorization from
the corporation concerned, that is, through resolutions of the Board of Directors and stockholders. The trial court also pointed
out that the supposed sale involves substantially all the assets of defendant EC which would result in the eventual total
cessation of its operation.14

The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court erred in concluding that the real estate broker
in the instant case needed a written authority from appellee corporation and/or that said broker had no such written authority;
and (2) the lower court committed grave error of law in holding that appellee corporation is not legally bound for specific
performance and/or damages in the absence of an enabling resolution of the board of directors." 15 They averred that Marquez
acted merely as a broker or go-between and not as agent of the corporation; hence, it was not necessary for him to be
empowered as such by any written authority. They further claimed that an agency by estoppel was created when the
corporation clothed Marquez with apparent authority to negotiate for the sale of the properties. However, since it was a bilateral
contract to buy and sell, it was equivalent to a perfected contract of sale, which the corporation was obliged to consummate.

In reply, EC alleged that Marquez had no written authority from the Board of Directors to bind it; neither were Glanville and
Delsaux authorized by its board of directors to offer the property for sale. Since the sale involved substantially all of the
corporation’s assets, it would necessarily need the authority from the stockholders.

On June 16, 2000, the CA rendered judgment affirming the decision of the RTC.  16 The Litonjuas filed a motion for
reconsideration, which was also denied by the appellate court.

The CA ruled that Marquez, who was a real estate broker, was a special agent within the purview of Article 1874 of the New
Civil Code. Under Section 23 of the Corporation Code, he needed a special authority from EC’s board of directors to bind such
corporation to the sale of its properties. Delsaux, who was merely the representative of ESAC (the majority stockholder of EC)
had no authority to bind the latter. The CA pointed out that Delsaux was not even a member of the board of directors of EC.
Moreover, the Litonjuas failed to prove that an agency by estoppel had been created between the parties.

In the instant petition for review, petitioners aver that

 I

THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE.

II

THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT MARQUEZ NEEDED A WRITTEN AUTHORITY
FROM RESPONDENT ETERNIT BEFORE THE SALE CAN BE PERFECTED.

III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND DELSAUX HAVE THE NECESSARY AUTHORITY TO
SELL THE SUBJECT PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED BY RESPONDENT ETERNIT TO DO
ACTS WITHIN THE SCOPE OF AN APPARENT AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSING
POWER TO SELL THE SAID PROPERTIES. 17

Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale of the parcels of land and the
improvements thereon for "US$1,000,000.00 plus P2,500,000.00 to cover obligations prior to final liquidation." Petitioners insist
that they had accepted the counter-offer of respondent EC and that before the counter-offer was withdrawn by respondents,
the acceptance was made known to them through real estate broker Marquez.

Petitioners assert that there was no need for a written authority from the Board of Directors of EC for Marquez to validly act as
broker/middleman/intermediary. As broker, Marquez was not an ordinary agent because his authority was of a special and
limited character in most respects. His only job as a broker was to look for a buyer and to bring together the parties to the
transaction. He was not authorized to sell the properties or to make a binding contract to respondent EC; hence, petitioners
argue, Article 1874 of the New Civil Code does not apply.

In any event, petitioners aver, what is important and decisive was that Marquez was able to communicate both the offer and
counter-offer and their acceptance of respondent EC’s counter-offer, resulting in a perfected contract of sale.

Petitioners posit that the testimonial and documentary evidence on record amply shows that Glanville, who was the President
and General Manager of respondent EC, and Delsaux, who was the Managing Director for ESAC Asia, had the necessary
authority to sell the subject property or, at least, had been allowed by respondent EC to hold themselves out in the public as
having the power to sell the subject properties. Petitioners identified such evidence, thus:

1. The testimony of Marquez that he was chosen by Glanville as the then President and General Manager of Eternit, to
sell the properties of said corporation to any interested party, which authority, as hereinabove discussed, need not be
in writing.

2. The fact that the NEGOTIATIONS for the sale of the subject properties spanned SEVERAL MONTHS, from 1986 to
1987;

3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its properties to the Petitioners;

4. The GOOD FAITH of Petitioners in believing Eternit’s offer to sell the properties as evidenced by the Petitioners’
ACCEPTANCE of the counter-offer;

5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the Security Bank and that an ESCROW
agreement was drafted over the subject properties;

6. Glanville’s telex to Delsaux inquiring "WHEN WE (Respondents) WILL IMPLEMENT ACTION TO BUY AND SELL";

7. More importantly, Exhibits "G" and "H" of the Respondents, which evidenced the fact that Petitioners’ offer was
allegedly REJECTED by both Glanville and Delsaux.18

Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer to petitioners’ offer and thereafter
reject such offer unless they were authorized to do so by respondent EC. Petitioners insist that Delsaux confirmed his authority
to sell the properties in his letter to Marquez, to wit:

Dear Sir,

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far as the
Philippines are (sic) concerned. Considering the new political situation since the departure of MR. MARCOS and a certain
stabilization in the Philippines, the Committee has decided not to stop our operations in Manila[.] [I]n fact production started
again last week, and (sic) to reorganize the participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later stage we would
consult you again.

In the meantime, I remain

Yours sincerely,

C.F. DELSAUX19

Petitioners further emphasize that they acted in good faith when Glanville and Delsaux were knowingly permitted by respondent
EC to sell the properties within the scope of an apparent authority. Petitioners insist that respondents held themselves to the
public as possessing power to sell the subject properties.

By way of comment, respondents aver that the issues raised by the petitioners are factual, hence, are proscribed by Rule 45 of
the Rules of Court. On the merits of the petition, respondents EC (now EMC) and ESAC reiterate their submissions in the CA.
They maintain that Glanville, Delsaux and Marquez had no authority from the stockholders of respondent EC and its Board of
Directors to offer the properties for sale to the petitioners, or to any other person or entity for that matter. They assert that the
decision and resolution of the CA are in accord with law and the evidence on record, and should be affirmed in toto.

Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and Delsaux, conformed to the written
authority of Marquez to sell the properties. The authority of Glanville and Delsaux to bind respondent EC is evidenced by the
fact that Glanville and Delsaux negotiated for the sale of 90% of stocks of respondent EC to Ruperto Tan on June 1, 1997.
Given the significance of their positions and their duties in respondent EC at the time of the transaction, and the fact that
respondent ESAC owns 90% of the shares of stock of respondent EC, a formal resolution of the Board of Directors would be a
mere ceremonial formality. What is important, petitioners maintain, is that Marquez was able to communicate the offer of
respondent EC and the petitioners’ acceptance thereof. There was no time that they acted without the knowledge of
respondents. In fact, respondent EC never repudiated the acts of Glanville, Marquez and Delsaux.

The petition has no merit.

Anent the first issue, we agree with the contention of respondents that the issues raised by petitioner in this case are factual.
Whether or not Marquez, Glanville, and Delsaux were authorized by respondent EC to act as its agents relative to the sale of the
properties of respondent EC, and if so, the boundaries of their authority as agents, is a question of fact. In the absence of
express written terms creating the relationship of an agency, the existence of an agency is a fact question. 20 Whether an agency
by estoppel was created or whether a person acted within the bounds of his apparent authority, and whether the principal is
estopped to deny the apparent authority of its agent are, likewise, questions of fact to be resolved on the basis of the evidence
on record.21 The findings of the trial court on such issues, as affirmed by the CA, are conclusive on the Court, absent evidence
that the trial and appellate courts ignored, misconstrued, or misapplied facts and circumstances of substance which, if
considered, would warrant a modification or reversal of the outcome of the case. 22

It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules of Court because the Court is
not a trier of facts. It is not to re-examine and assess the evidence on record, whether testimonial and documentary. There are,
however, recognized exceptions where the Court may delve into and resolve factual issues, namely:

(1) When the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2) when the inference made
is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the
findings of the Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts
not disputed by the parties, which, if properly considered, would justify a different conclusion; and (10) when the findings of
fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record. 23

We have reviewed the records thoroughly and find that the petitioners failed to establish that the instant case falls under any of
the foregoing exceptions. Indeed, the assailed decision of the Court of Appeals is supported by the evidence on record and the
law.

It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that it had empowered
Adams, Glanville and Delsaux or Marquez to offer the properties for sale to prospective buyers and to accept any counter-offer.
Petitioners likewise failed to prove that their counter-offer had been accepted by respondent EC, through Glanville and Delsaux.
It must be stressed that when specific performance is sought of a contract made with an agent, the agency must be established
by clear, certain and specific proof.24

Section 23 of Batas Pambansa Bilang 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.

Indeed, a corporation is a juridical person separate and distinct from its members or stockholders and is not affected by the
personal rights,
obligations and transactions of the latter. 25 It 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.26

Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject to the limitations
prescribed by law and the Constitution, as follows:

SEC. 36. Corporate powers and capacity. – Every corporation incorporated under this Code has the power and capacity:

xxxx

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and
personal property, including securities and bonds of other corporations, as the transaction of a lawful business of the
corporation may reasonably and necessarily require, subject to the limitations prescribed by the law and the Constitution.

The property of a corporation, however, is not the property of the stockholders or members, and as such, may not be sold
without express authority from the board of directors. 27 Physical acts, like the offering of the properties of the corporation for
sale, or the acceptance of a counter-offer of prospective buyers of such properties and the execution of the deed of sale
covering such property, can be performed by the corporation only by officers or agents duly authorized for the purpose by
corporate by-laws or by specific acts of the board of directors. 28 Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with, the
performance of authorized duties of such director, are not binding on the corporation. 29

While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to be with the
board of directors through its officers and agents as authorized by a board resolution or by its by-laws. 30 An unauthorized act of
an officer of the corporation is not binding on it unless the latter ratifies the same expressly or impliedly by its board of
directors. Any sale of real property of a corporation by a person purporting to be an agent thereof but without written authority
from the corporation is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent
of his/her authority.31

By the contract of agency, a person binds himself to render some service or to do something in representation on behalf of
another, with the consent or authority of the latter. 32 Consent of both principal and agent is necessary to create an agency. The
principal must intend that the agent shall act for him; the agent must intend to accept the authority and act on it, and the
intention of the parties must find expression either in words or conduct between them. 33

An agency may be expressed or implied from the act 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. Acceptance by the agent may be
expressed, or implied from his acts which carry out the agency, or from his silence or inaction according to the
circumstances.34 Agency may be oral unless the law requires a specific form. 35 However, to create or convey real rights over
immovable property, a special power of attorney is necessary. 36 Thus, when a sale of a piece of land or any portion thereof is
through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void. 37

In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the Board of Directors of
respondent EC empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the
eight parcels of land owned by respondent EC including the improvements thereon. The bare fact that Delsaux may have been
authorized to sell to Ruperto Tan the shares of stock of respondent ESAC, on June 1, 1997, cannot be used as basis for
petitioners’ claim that he had likewise been authorized by respondent EC to sell the parcels of land.

Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of Delsaux, who, in turn, acted on
the authority of respondent ESAC, through its Committee for Asia, 38 the Board of Directors of respondent ESAC, 39 and the
Belgian/Swiss component of the management of respondent ESAC. 40 As such, Adams and Glanville engaged the services of
Marquez to offer to sell the properties to prospective buyers. Thus, on September 12, 1986, Marquez wrote the petitioner that
he was authorized to offer for sale the property for P27,000,000.00 and the other terms of the sale subject to negotiations.
When petitioners offered to purchase the property for P20,000,000.00, through Marquez, the latter relayed petitioners’ offer to
Glanville; Glanville had to send a telex to Delsaux to inquire the position of respondent ESAC to petitioners’ offer. However, as
admitted by petitioners in their Memorandum, Delsaux was unable to reply immediately to the telex of Glanville because
Delsaux had to wait for confirmation from respondent ESAC. 41 When Delsaux finally responded to Glanville on February 12,
1987, he made it clear that, based on the "Belgian/Swiss decision" the final offer of respondent ESAC was US$1,000,000.00
plus P2,500,000.00 to cover all existing obligations prior to final liquidation. 42 The offer of Delsaux emanated only from the
"Belgian/Swiss decision," and not the entire management or Board of Directors of respondent ESAC. While it is true that
petitioners accepted the counter-offer of respondent ESAC, respondent EC was not a party to the transaction between them;
hence, EC was not bound by such acceptance.

While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were members of its Board
of Directors, the three acted for and in behalf of respondent ESAC, and not as duly authorized agents of respondent EC; a board
resolution evincing the grant of such authority is needed to bind EC to any agreement regarding the sale of the subject
properties. Such board resolution is not a mere formality but is a condition sine qua non to bind respondent EC. Admittedly,
respondent ESAC owned 90% of the shares of stocks of respondent EC; however, the mere fact that a corporation owns a
majority of the shares of stocks of another, or even all of such shares of stocks, taken alone, will not justify their being treated
as one corporation.43
It bears stressing that in an agent-principal relationship, the personality of the principal is extended through the facility of the
agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have
him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by
law or by any court.44

The petitioners cannot feign ignorance of the absence of any regular and valid authority of respondent EC empowering Adams,
Glanville or Delsaux to offer the properties for sale and to sell the said properties to the petitioners. A person dealing with a
known agent is not authorized, under any circumstances, blindly to trust the agents; 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.45 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. 46 In this case, the petitioners failed to discharge their
burden; hence, petitioners are not entitled to damages from respondent EC.

It appears that Marquez acted not only as real estate broker for the petitioners but also as their agent. As gleaned from the
letter of Marquez to Glanville, on February 26, 1987, he confirmed, for and in behalf of the petitioners, that the latter had
accepted such offer to sell the land and the improvements thereon. However, we agree with the ruling of the appellate court
that Marquez had no authority to bind respondent EC to sell the subject properties. A real estate broker is one who negotiates
the sale of real properties. His business, generally speaking, is only to find a purchaser who is willing to buy the land upon
terms fixed by the owner. He has no authority to bind the principal by signing a contract of sale. Indeed, an authority to find a
purchaser of real property does not include an authority to sell. 47

Equally barren of merit is petitioners’ contention that respondent EC is estopped to deny the existence of a principal-agency
relationship between it and Glanville or Delsaux. For an agency by estoppel to exist, the following must be established: (1) the
principal manifested a representation of the agent’s authority or knowlingly allowed the agent to assume such authority; (2) the
third person, in good faith, relied upon such representation; (3) relying upon such representation, such third person has
changed his position to his detriment. 48 An agency by estoppel, which is similar to the doctrine of apparent authority, requires
proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in
reliance.49 Such proof is lacking in this case. In their communications to the petitioners, Glanville and Delsaux positively and
unequivocally declared that they were acting for and in behalf of respondent ESAC.

Neither may respondent EC be deemed to have ratified the transactions between the petitioners and respondent ESAC, through
Glanville, Delsaux and Marquez. The transactions and the various communications inter se were never submitted to the Board of
Directors of respondent EC for ratification.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.
 FIRST DIVISION
G.R. No. 149353             June 26, 2006
JOCELYN B. DOLES, Petitioner,
vs.
MA. AURA TINA ANGELES, Respondent.
DECISION

AUSTRIA-MARTINEZ, J.:

This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the Decision 1 dated April 30,
2001 of the Court of Appeals (CA) in C.A.-G.R. CV No. 66985, which reversed the Decision dated July 29, 1998 of the Regional
Trial Court (RTC), Branch 21, City of Manila; and the CA Resolution 2 dated August 6, 2001 which denied petitioner’s Motion for
Reconsideration.

The antecedents of the case follow:

On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific Performance with Damages
against Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-82716. Respondent alleged that petitioner was indebted to
the former in the concept of a personal loan amounting to P405,430.00 representing the principal amount and interest; that on
October 5, 1996, by virtue of a "Deed of Absolute Sale", 3 petitioner, as seller, ceded to respondent, as buyer, a parcel of land,
as well as the improvements thereon, with an area of 42 square meters, covered by Transfer Certificate of Title No.
382532,4 and located at a subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her
personal loan with respondent; that this property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to
secure petitioner’s loan in the sum of P337,050.00 with that entity; that as a condition for the foregoing sale, respondent shall
assume the undue balance of the mortgage and pay the monthly amortization of P4,748.11 for the remainder of the 25 years
which began on September 3, 1994; that the property was at that time being occupied by a tenant paying a monthly rent
of P3,000.00; that upon verification with the NHMFC, respondent learned that petitioner had incurred arrearages amounting
to P26,744.09, inclusive of penalties and interest; that upon informing the petitioner of her arrears, petitioner denied that she
incurred them and refused to pay the same; that despite repeated demand, petitioner refused to cooperate with respondent to
execute the necessary documents and other formalities required by the NHMFC to effect the transfer of the title over the
property; that petitioner collected rent over the property for the month of January 1997 and refused to remit the proceeds to
respondent; and that respondent suffered damages as a result and was forced to litigate.

Petitioner, then defendant, while admitting some allegations in the Complaint, denied that she borrowed money from
respondent, and averred that from June to September 1995, she referred her friends to respondent whom she knew to be
engaged in the business of lending money in exchange for personal checks through her capitalist Arsenio Pua. She alleged that
her friends, namely, Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed
money from respondent and issued personal checks in payment of the loan; that the checks bounced for insufficiency of funds;
that despite her efforts to assist respondent to collect from the borrowers, she could no longer locate them; that, because of
this, respondent became furious and threatened petitioner that if the accounts were not settled, a criminal case will be filed
against her; that she was forced to issue eight checks amounting to  P350,000 to answer for the bounced checks of the
borrowers she referred; that prior to the issuance of the checks she informed respondent that they were not sufficiently funded
but the latter nonetheless deposited the checks and for which reason they were subsequently dishonored; that respondent then
threatened to initiate a criminal case against her for violation of Batas Pambansa Blg.  22; that she was forced by respondent to
execute an "Absolute Deed of Sale" over her property in Bacoor, Cavite, to avoid criminal prosecution; that the said deed had no
valid consideration; that she did not appear before a notary public; that the Community Tax Certificate number on the deed was
not hers and for which respondent may be prosecuted for falsification and perjury; and that she suffered damages and lost
rental as a result.

The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is valid; second; if valid, whether petitioner is
obliged to sign and execute the necessary documents to effect the transfer of her rights over the property to the respondent;
and third, whether petitioner is liable for damages.

On July 29, 1998, the RTC rendered a decision the dispositive portion of which states:

WHEREFORE, premises considered, the Court hereby orders the dismissal of the complaint for insufficiency of evidence. With
costs against plaintiff.

SO ORDERED.

The RTC held that the sale was void for lack of cause or consideration: 5

Plaintiff Angeles’ admission that the borrowers are the friends of defendant Doles and further admission that the checks issued
by these borrowers in payment of the loan obligation negates [sic] the cause or consideration of the contract of sale executed
by and between plaintiff and defendant. Moreover, the property is not solely owned by defendant as appearing in Entry No.
9055 of Transfer Certificate of Title No. 382532 (Annex A, Complaint), thus:

"Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the share of Teodorico Doles on the parcel of land
described in this certificate of title by virtue of the special power of attorney to mortgage, executed before the notary public,
etc."
The rule under the Civil Code is that contracts without a cause or consideration produce no effect whatsoever. (Art. 1352, Civil
Code).

Respondent appealed to the CA. In her appeal brief, respondent interposed her sole assignment of error:

THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF [sic] THE DEED OF SALE BETWEEN THE
PARTIES HAS NO CONSIDERATION OR INSUFFICIENCY OF EVIDENCE. 6

On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which reads:

WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The Decision of the lower court dated July 29,
1998 is REVERSED and SET ASIDE. A new one is entered ordering defendant-appellee to execute all necessary documents to
effect transfer of subject property to plaintiff-appellant with the arrearages of the former’s loan with the NHMFC, at the latter’s
expense. No costs.

SO ORDERED.

The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the amount borrowed from the respondent to
her friends. Hence, the Deed of Absolute Sale was supported by a valid consideration, which is the sum of money petitioner
owed respondent amounting to P405,430.00, representing both principal and interest.

The CA took into account the following circumstances in their entirety: the supposed friends of petitioner never presented
themselves to respondent and that all transactions were made by and between petitioner and respondent; 7 that the money
borrowed was deposited with the bank account of the petitioner, while payments made for the loan were deposited by the latter
to respondent’s bank account;8 that petitioner herself admitted in open court that she was "re-lending" the money loaned from
respondent to other individuals for profit; 9 and that the documentary evidence shows that the actual borrowers, the friends of
petitioner, consider her as their creditor and not the respondent. 10

Furthermore, the CA held that the alleged threat or intimidation by respondent did not vitiate consent, since the same is
considered just or legal if made to enforce one’s claim through competent authority under Article 1335 11 of the Civil Code;12 that
with respect to the arrearages of petitioner on her monthly amortization with the NHMFC in the sum of  P26,744.09, the same
shall be deemed part of the balance of petitioner’s loan with the NHMFC which respondent agreed to assume; and that the
amount of P3,000.00 representing the rental for January 1997 supposedly collected by petitioner, as well as the claim for
damages and attorney’s fees, is denied for insufficiency of evidence. 13

On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing that respondent categorically admitted in
open court that she acted only as agent or representative of Arsenio Pua, the principal financier and, hence, she had no legal
capacity to sue petitioner; and that the CA failed to consider the fact that petitioner’s father, who co-owned the subject
property, was not impleaded as a defendant nor was he indebted to the respondent and, hence, she cannot be made to sign
the documents to effect the transfer of ownership over the entire property.

On August 6, 2001, the CA issued its Resolution denying the motion on the ground that the foregoing matters had already been
passed upon.

On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28, 2001, petitioner filed the present Petition
and raised the following issues:

I.

WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE RESPONDENT.

II.

WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO COLLECT DEBT IN HIS BEHALF
COULD DIRECTLY COLLECT PAYMENT FROM THE DEBTOR.

III.

WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE. 14

Although, as a rule, it is not the business of this Court to review the findings of fact made by the lower courts, jurisprudence has
recognized several exceptions, at least three of which are present in the instant case, namely: when the judgment is based on a
misapprehension of facts; when the findings of facts of the courts a quo  are conflicting; and when the CA manifestly overlooked
certain relevant facts not disputed by the parties, which, if properly considered, could justify a different conclusion. 15 To arrive
at a proper judgment, therefore, the Court finds it necessary to re-examine the evidence presented by the contending parties
during the trial of the case.

The Petition is meritorious.

The principal issue is whether the Deed of Absolute Sale is supported by a valid consideration.
1. Petitioner argues that since she is merely the agent or representative of the alleged debtors, then she is not a party to the
loan; and that the Deed of Sale executed between her and the respondent in their own names, which was predicated on that
pre-existing debt, is void for lack of consideration.

Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a price certain in money 16 and that
this sum indisputably pertains to the debt in issue. This Court has consistently held that a contract of sale is null and void and
produces no effect whatsoever where the same is without cause or consideration. 17 The question that has to be resolved for the
moment is whether this debt can be considered as a valid cause or consideration for the sale.

To restate, the CA cited four instances in the record to support its holding that petitioner "re-lends" the amount borrowed from
respondent to her friends: first, the friends of petitioner never presented themselves to respondent and that all transactions
were made by and between petitioner and respondent; 18 second; the money passed through the bank accounts of petitioner
and respondent;19 third, petitioner herself admitted that she was "re-lending" the money loaned to other individuals for
profit;20 and fourth, the documentary evidence shows that the actual borrowers, the friends of petitioner, consider her as their
creditor and not the respondent.21

On the first, third, and fourth points, the CA cites the testimony of the petitioner, then defendant, during her cross-
examination:22

Atty. Diza:
q. You also mentioned that you were not the one indebted to the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria Luisa Inocencio, Zenaida
Romulo, they are your friends?
witness:
a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they were just referred.
Atty. Diza:
q. And you have transact[ed] with the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. What is that transaction?
witness:
a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.
Atty. Diza:
q. Did the plaintiff personally see the transactions with your friends?
witness:
a. No, sir.
Atty. Diza:
q. Your friends and the plaintiff did not meet personally?
witness:
a. Yes, sir.
Atty. Diza:
q. You are intermediaries?
witness:
a. We are both intermediaries. As evidenced by the checks of the debtors they were deposited to the name of Arsenio
Pua because the money came from Arsenio Pua.
xxxx
Atty. Diza:
q. Did the plaintiff knew [sic] that you will lend the money to your friends specifically the one you mentioned [a] while
ago?
witness:
a. Yes, she knows the money will go to those persons.
Atty. Diza:
q. You are re-lending the money?
witness:
a. Yes, sir.
Atty. Diza:
q. What profit do you have, do you have commission?
witness:
a. Yes, sir.
Atty. Diza:
q. How much?
witness:
a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none, sir.
Based on the foregoing, the CA concluded that petitioner is the real borrower, while the respondent, the real lender.
But as correctly noted by the RTC, respondent, then plaintiff, made the following admission during her cross
examination:23
Atty. Villacorta:
q. Who is this Arsenio Pua?
witness:
a. Principal financier, sir.
 Atty. Villacorta:
q. So the money came from Arsenio Pua?
witness:
a. Yes, because I am only representing him, sir.
Other portions of the testimony of respondent must likewise be considered: 24
Atty. Villacorta:
q. So it is not actually your money but the money of Arsenio Pua?
witness:
a. Yes, sir.
Court:
q. It is not your money?
witness:
a. Yes, Your Honor.
Atty. Villacorta:
q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodate somebody, are you aware of
that?
witness:
a. I am aware of that.
Atty. Villacorta:
q. More or less she [accommodated] several friends of the defendant?
witness:
a. Yes, sir, I am aware of that.
xxxx
Atty. Villacorta:
q. And these friends of the defendant borrowed money from you with the assurance of the defendant?
witness:
a. They go direct to Jocelyn because I don’t know them.
xxxx
Atty. Villacorta:
q. And is it not also a fact Madam witness that everytime that the defendant borrowed money from you her friends who
[are] in need of money issued check[s] to you? There were checks issued to you?
witness:
a. Yes, there were checks issued.
Atty. Villacorta:
q. By the friends of the defendant, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of your assistance, the friends of the defendant who are in need of money were able to obtain loan to
[sic] Arsenio Pua through your assistance?
witness:
a. Yes, sir.
Atty. Villacorta:
q. So that occasion lasted for more than a year?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And some of the checks that were issued by the friends of the defendant bounced, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of that Arsenio Pua got mad with you?
witness:
a. Yes, sir.

Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, her disclosed principal. She is also
estopped to deny that petitioner acted as agent for the alleged debtors, the friends whom she (petitioner) referred.

This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is representation. 25 The question of
whether an agency has been created is ordinarily a question which may be established in the same way as any other fact, either
by direct or circumstantial evidence. The question is ultimately one of intention. 26 Agency may even be implied from the words
and conduct of the parties and the circumstances of the particular case. 27 Though the fact or extent of authority of the agents
may not, as a general rule, be established from the declarations of the agents alone, if one professes to act as agent for
another, she may be estopped to deny her agency both as against the asserted principal and the third persons interested in the
transaction in which he or she is engaged. 28

In this case, petitioner knew that the financier of respondent is Pua; and respondent knew that the borrowers are friends of
petitioner.

The CA is incorrect when it considered the fact that the "supposed friends of [petitioner], the actual borrowers, did not present
themselves to [respondent]" as evidence that negates the agency relationship—it is sufficient that petitioner disclosed to
respondent that the former was acting in behalf of her principals, her friends whom she referred to respondent. For an agency
to arise, it is not necessary that the principal personally encounter the third person with whom the agent interacts. The law in
fact contemplates, and to a great degree, impersonal dealings where the principal need not personally know or meet the third
person with whom her agent transacts: precisely, the purpose of agency is to extend the personality of the principal through the
facility of the agent.29

In the case at bar, both petitioner and respondent have undeniably disclosed to each other that they are representing someone
else, and so both of them are estopped to deny the same. It is evident from the record that petitioner merely refers actual
borrowers and then collects and disburses the amounts of the loan upon which she received a commission; and that respondent
transacts on behalf of her "principal financier", a certain Arsenio Pua. If their respective principals do not actually and personally
know each other, such ignorance does not affect their juridical standing as agents, especially since the very purpose of agency
is to extend the personality of the principal through the facility of the agent.

With respect to the admission of petitioner that she is "re-lending" the money loaned from respondent to other individuals for
profit, it must be stressed that the manner in which the parties designate the relationship is not controlling . If an act done by
one person in behalf of another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he
or she is not so called. 30 The question is to be determined by the fact that one represents and is acting for another, and if
relations exist which will constitute an agency, it will be an agency whether the parties understood the exact nature of the
relation or not.31

That both parties acted as mere agents is shown by the undisputed fact that the friends of petitioner issued checks in payment
of the loan in the name of Pua. If it is true that petitioner was "re-lending", then the checks should have been drawn in her
name and not directly paid to Pua.

With respect to the second point, particularly, the finding of the CA that the disbursements and payments for the loan were
made through the bank accounts of petitioner and respondent,

suffice it to say that in the normal course of commercial dealings and for reasons of convenience and practical utility it can be
reasonably expected that the facilities of the agent, such as a bank account, may be employed, and that a sub-agent be
appointed, such as the bank itself, to carry out the task, especially where there is no stipulation to the contrary. 32

In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan between their principals.
Since the sale is predicated on that loan, then the sale is void for lack of consideration.

2. A further scrutiny of the record shows, however, that the sale might have been backed up by another consideration that is
separate and distinct from the debt: respondent averred in her complaint and testified that the parties had agreed that as a
condition for the conveyance of the property the respondent shall assume the balance of the mortgage loan which petitioner
allegedly owed to the NHMFC. 33 This Court in the recent past has declared that an assumption of a mortgage debt may
constitute a valid consideration for a sale. 34

Although the record shows that petitioner admitted at the time of trial that she owned the property described in the TCT, 35 the
Court must stress that the Transfer Certificate of Title No. 382532 36 on its face shows that the owner of the property which
admittedly forms the subject matter of the Deed of Absolute Sale refers neither to the petitioner nor to her father, Teodorico
Doles, the alleged co-owner. Rather, it states that the property is registered in the name of "Household Development
Corporation." Although there is an entry to the effect that the petitioner had been granted a special power of attorney "covering
the shares of Teodorico Doles on the parcel of land described in this certificate," 37 it cannot be inferred from this bare notation,
nor from any other evidence on the record, that the petitioner or her father held any direct interest on the property in question
so as to validly constitute a mortgage thereon 38 and, with more reason, to effect the delivery of the object of the sale at the
consummation stage.39 What is worse, there is a notation that the TCT itself has been "cancelled." 40

In view of these anomalies, the Court cannot entertain the

possibility that respondent agreed to assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC,
especially since the record is bereft of any factual finding that petitioner was, in the first place, endowed with any ownership
rights to validly mortgage and convey the property. As the complainant who initiated the case, respondent bears the burden of
proving the basis of her complaint. Having failed to discharge such burden, the Court has no choice but to declare the sale void
for lack of cause. And since the sale is void, the Court finds it unnecessary to dwell on the issue of whether duress or
intimidation had been foisted upon petitioner upon the execution of the sale.

Moreover, even assuming the mortgage validly exists, the Court notes respondent’s allegation that the mortgage with the
NHMFC was for 25 years which began September 3, 1994. Respondent filed her Complaint for Specific Performance in 1997.
Since the 25 years had not lapsed, the prayer of respondent to compel petitioner to execute necessary documents to effect the
transfer of title is premature.

WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE.
The complaint of respondent in Civil Case No. 97-82716 is DISMISSED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167552             April 23, 2007
EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,
vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
DECISION

CHICO-NAZARIO, J.:

Before Us is a petition for review by certiorari assailing the Decision 1 of the Court of Appeals dated 10 August 2004 and its
Resolution2 dated 17 March 2005 in CA-G.R. SP No. 71397 entitled, "Eurotech Industrial Technologies, Inc. v. Hon. Antonio T.
Echavez." The assailed Decision and Resolution affirmed the Order 3 dated 29 January 2002 rendered by Judge Antonio T.
Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.

The generative facts of the case are as follows:

Petitioner is engaged in the business of importation and distribution of various European industrial equipment for customers
here in the Philippines. It has as one of its customers Impact Systems Sales ("Impact Systems") which is a sole proprietorship
owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact Systems and was impleaded
in the court a quo in said capacity.

From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to ninety-one thousand
three hundred thirty-eight (₱91,338.00) pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge
pump valued at ₱250,000.00 with respondents making a down payment of fifty thousand pesos (₱50,000.00). 4 When the sludge
pump arrived from the United Kingdom, petitioner refused to deliver the same to respondents without their having fully settled
their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de Jesus, general manager of
petitioner, executed a Deed of Assignment of receivables in favor of petitioner, the pertinent part of which states:

1.) That ASSIGNOR 5 has an outstanding receivables from Toledo Power Corporation in the amount of THREE HUNDRED
SIXTY FIVE THOUSAND (₱365,000.00) PESOS as payment for the purchase of one unit of Selwood Spate 100D Sludge
Pump;

2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE 6 the said receivables from
Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (₱365,000.00) PESOS which
receivables the ASSIGNOR is the lawful recipient;

3.) That the ASSIGNEE does hereby accept this assignment. 7

Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as shown by Invoice
No. 12034 dated 30 June 1995.8

Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment, proceeded to collect from
Toledo Power Company the amount of ₱365,135.29 as evidenced by Check Voucher No. 0933 9 prepared by said power company
and an official receipt dated 15 August 1995 issued by Impact Systems. 10 Alarmed by this development, petitioner made several
demands upon respondents to pay their obligations. As a result, respondents were able to make partial payments to petitioner.
On 7 October 1996, petitioner’s counsel sent respondents a final demand letter wherein it was stated that as of 11 June 1996,
respondents’ total obligations stood at ₱295,000.00 excluding interests and attorney’s fees. 11 Because of respondents’ failure to
abide by said final demand letter, petitioner instituted a complaint for sum of money, damages, with application for preliminary
attachment against herein respondents before the Regional Trial Court of Cebu City. 12

On 8 January 1997, the trial court granted petitioner’s prayer for the issuance of writ of preliminary attachment. 13

On 25 June 1997, respondent EDWIN filed his Answer 14 wherein he admitted petitioner’s allegations with respect to the sale
transactions entered into by Impact Systems and petitioner between January and April 1995. 15 He, however, disputed the total
amount of Impact Systems’ indebtedness to petitioner which, according to him, amounted to only ₱220,000.00. 16

By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this case.
According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner
and the latter was very much aware of this fact. In support of this argument, petitioner points to paragraphs 1.2 and 1.3 of
petitioner’s Complaint stating –

1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the proprietor of a single
proprietorship business known as Impact Systems Sales ("Impact Systems" for brevity), with office located at 46-A del
Rosario Street, Cebu City, where he may be served summons and other processes of the Honorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. He is the Sales Manager of
Impact Systems and is sued in this action in such capacity. 17
On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary Judgment. The trial
court granted petitioner’s motion to declare respondent ERWIN in default "for his failure to answer within the prescribed period
despite the opportunity granted"18 but it denied petitioner’s motion for summary judgment in its Order of 31 August 2001 and
scheduled the pre-trial of the case on 16 October 2001. 19 However, the conduct of the pre-trial conference was deferred
pending the resolution by the trial court of the special and affirmative defenses raised by respondent EDWIN. 20

After the filing of respondent EDWIN’s Memorandum 21 in support of his special and affirmative defenses and petitioner’s
opposition22 thereto, the trial court rendered its assailed Order dated 29 January 2002 dropping respondent EDWIN as a party
defendant in this case. According to the trial court –

A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted in behalf of or
represented [Impact] Systems Sales; that [Impact] Systems Sale is a single proprietorship entity and the complaint shows that
defendant Erwin H. Cuizon is the proprietor; that plaintiff corporation is represented by its general manager Alberto de Jesus in
the contract which is dated June 28, 1995. A study of Annex "H" to the complaint reveals that [Impact] Systems Sales which is
owned solely by defendant Erwin H. Cuizon, made a down payment of ₱50,000.00 that Annex "H" is dated June 30, 1995 or two
days after the execution of Annex "G", thereby showing that [Impact] Systems Sales ratified the act of Edwin B. Cuizon; the
records further show that plaintiff knew that [Impact] Systems Sales, the principal, ratified the act of Edwin B. Cuizon, the
agent, when it accepted the down payment of ₱50,000.00. Plaintiff, therefore, cannot say that it was deceived by defendant
Edwin B. Cuizon, since in the instant case the principal has ratified the act of its agent and plaintiff knew about said ratification.
Plaintiff could not say that the subject contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact]
Systems Sales made a down payment of ₱50,000.00 two days later.

In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party defendant. 23

Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which, however,
affirmed the 29 January 2002 Order of the court a quo. The dispositive portion of the now assailed Decision of the Court of
Appeals states:

WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by the public respondent in his Order
dated January 29, 2002, it is hereby AFFIRMED. 24

Petitioner’s motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17 March 2005.
Hence, the present petition raising, as sole ground for its allowance, the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT RESPONDENT EDWIN CUIZON, AS AGENT
OF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE
SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD. 25

To support its argument, petitioner points to Article 1897 of the New Civil Code which states:

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.

Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN’s act of collecting the receivables from the
Toledo Power Corporation notwithstanding the existence of the Deed of Assignment signed by EDWIN on behalf of Impact
Systems. While said collection did not revoke the agency relations of respondents, petitioner insists that ERWIN’s action
repudiated EDWIN’s power to sign the Deed of Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as
an agent, petitioner claims that he should be made personally liable for the obligations of his principal. 26

Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it into selling the one unit of
sludge pump to Impact Systems and signing the Deed of Assignment. Petitioner directs the attention of this Court to the fact
that respondents are bound not only by their principal and agent relationship but are in fact full-blooded brothers whose
successive contravening acts bore the obvious signs of conspiracy to defraud petitioner. 27

In his Comment,28 respondent EDWIN again posits the argument that he is not a real party in interest in this case and it was
proper for the trial court to have him dropped as a defendant. He insists that he was a mere agent of Impact Systems which is
owned by ERWIN and that his status as such is known even to petitioner as it is alleged in the Complaint that he is being sued
in his capacity as the sales manager of the said business venture. Likewise, respondent EDWIN points to the Deed of
Assignment which clearly states that he was acting as a representative of Impact Systems in said transaction.

We do not find merit in the petition.

In a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of
another with the latter’s consent. 29 The underlying principle of the contract of agency is to accomplish results by using the
services of others – to do a great variety of things like selling, buying, manufacturing, and transporting. 30 Its purpose is to
extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to
act.31 It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters
within the scope of his authority and said acts have the same legal effect as if they were personally executed by the
principal.32 By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence – qui
facit per alium facit per se.33
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself;
(4) the agent acts within the scope of his authority. 34

In this case, the parties do not dispute the existence of the agency relationship between respondents ERWIN as principal and
EDWIN as agent. The only cause of the present dispute is whether respondent EDWIN exceeded his authority when he signed
the Deed of Assignment thereby binding himself personally to pay the obligations to petitioner. Petitioner firmly believes that
respondent EDWIN acted beyond the authority granted by his principal and he should therefore bear the effect of his deed
pursuant to Article 1897 of the New Civil Code.

We disagree.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he
contracts. The same provision, however, presents two instances when an agent becomes personally liable to a third person. The
first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In the last instance,
the agent can be held liable if he does not give the third party sufficient notice of his powers. We hold that respondent EDWIN
does not fall within any of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact Systems. As
discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad powers with which to conduct
the business of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position
presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in
transactions and concerns which are incidental or appurtenant to the business entrusted to his care and management. In the
absence of an agreement to the contrary, a managing agent may enter into any contracts that he deems reasonably necessary
or requisite for the protection of the interests of his principal entrusted to his management. x x x. 35

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority when he signed the Deed
of Assignment. To recall, petitioner refused to deliver the one unit of sludge pump unless it received, in full, the payment for
Impact Systems’ indebtedness. 36 We may very well assume that Impact Systems desperately needed the sludge pump for its
business since after it paid the amount of fifty thousand pesos (₱50,000.00) as down payment on 3 March 1995, 37 it still
persisted in negotiating with petitioner which culminated in the execution of the Deed of Assignment of its receivables from
Toledo Power Company on 28 June 1995. 38 The significant amount of time spent on the negotiation for the sale of the sludge
pump underscores Impact Systems’ perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind
that respondent EDWIN’s participation in the Deed of Assignment was "reasonably necessary" or was required in order for him
to protect the business of his principal. Had he not acted in the way he did, the business of his principal would have been
adversely affected and he would have violated his fiduciary relation with his principal.

We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN, the principal,
and EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon which petitioner anchors its claim
against respondent EDWIN "does not hold that in case of excess of authority, both the agent and the principal are liable to the
other contracting party."39 To reiterate, the first part of Article 1897 declares that the principal is liable in cases when the agent
acted within the bounds of his authority. Under this, the agent is completely absolved of any liability. The second part of the
said provision presents the situations when the agent himself becomes liable to a third party when he expressly binds himself or
he exceeds the limits of his authority without giving notice of his powers to the third person. However, it must be pointed out
that in case of excess of authority by the agent, like what petitioner claims exists here, the law does not say that a third person
can recover from both the principal and the agent. 40

As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right nor incur any
liability arising from the Deed of Assignment, it follows that he is not a real party in interest who should be impleaded in this
case. A real party in interest is one who "stands to be benefited or injured by the judgment in the suit, or the party entitled to
the avails of the suit."41 In this respect, we sustain his exclusion as a defendant in the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August 2004 and Resolution dated
17 March 2005 of the Court of Appeals in CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional
Trial Court, Branch 8, Cebu City, is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the continuation of the
proceedings against respondent Erwin Cuizon.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 148187             April 16, 2008
PHILEX MINING CORPORATION, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari of the June 30, 2000 Decision 1 of the Court of Appeals in CA-G.R. SP No. 49385, which
affirmed the Decision2 of the Court of Tax Appeals in C.T.A. Case No. 5200. Also assailed is the April 3, 2001
Resolution3 denying the motion for reconsideration.

The facts of the case are as follows:

On April 16, 1971, petitioner Philex Mining Corporation (Philex Mining), entered into an agreement 4 with Baguio Gold Mining
Company ("Baguio Gold") for the former to manage and operate the latter’s mining claim, known as the Sto. Nino mine, located
in Atok and Tublay, Benguet Province. The parties’ agreement was denominated as "Power of Attorney" and provided for the
following terms:

4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make available to the MANAGERS
(Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in such amounts as from time to time may be
required by the MANAGERS within the said 3-year period, for use in the MANAGEMENT of the STO. NINO MINE. The
said ELEVEN MILLION PESOS (P11,000,000.00) shall be deemed, for internal audit purposes, as the owner’s account in
the Sto. Nino PROJECT. Any part of any income of the PRINCIPAL from the STO. NINO MINE, which is left with the Sto.
Nino PROJECT, shall be added to such owner’s account.

5. Whenever the MANAGERS shall deem it necessary and convenient in connection with the MANAGEMENT of the STO.
NINO MINE, they may transfer their own funds or property to the Sto. Nino PROJECT, in accordance with the following
arrangements:

(a) The properties shall be appraised and, together with the cash, shall be carried by the Sto. Nino PROJECT as
a special fund to be known as the MANAGERS’ account.

(b) The total of the MANAGERS’ account shall not exceed P11,000,000.00, except with prior approval of the
PRINCIPAL; provided, however, that if the compensation of the MANAGERS as herein provided cannot be paid
in cash from the Sto. Nino PROJECT, the amount not so paid in cash shall be added to the MANAGERS’
account.

(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJECT until termination of
this Agency.

(d) The MANAGERS’ account shall not accrue interest. Since it is the desire of the PRINCIPAL to extend to the
MANAGERS the benefit of subsequent appreciation of property, upon a projected termination of this Agency,
the ratio which the MANAGERS’ account has to the owner’s account will be determined, and the corresponding
proportion of the entire assets of the STO. NINO MINE, excluding the claims, shall be transferred to the
MANAGERS, except that such transferred assets shall not include mine development, roads, buildings, and
similar property which will be valueless, or of slight value, to the MANAGERS. The MANAGERS can, on the
other hand, require at their option that property originally transferred by them to the Sto. Nino PROJECT be re-
transferred to them. Until such assets are transferred to the MANAGERS, this Agency shall remain subsisting.

xxxx

12. The compensation of the MANAGER shall be fifty per cent (50%) of the net profit of the Sto. Nino PROJECT before
income tax. It is understood that the MANAGERS shall pay income tax on their compensation, while the PRINCIPAL
shall pay income tax on the net profit of the Sto. Nino PROJECT after deduction therefrom of the MANAGERS’
compensation.

xxxx

16. The PRINCIPAL has current pecuniary obligation in favor of the MANAGERS and, in the future, may incur other
obligations in favor of the MANAGERS. This Power of Attorney has been executed as security for the payment and
satisfaction of all such obligations of the PRINCIPAL in favor of the MANAGERS and as a means to fulfill the same.
Therefore, this Agency shall be irrevocable while any obligation of the PRINCIPAL in favor of the MANAGERS is
outstanding, inclusive of the MANAGERS’ account. After all obligations of the PRINCIPAL in favor of the MANAGERS
have been paid and satisfied in full, this Agency shall be revocable by the PRINCIPAL upon 36-month notice to the
MANAGERS.
 17. Notwithstanding any agreement or understanding between the PRINCIPAL and the MANAGERS to the contrary, the
MANAGERS may withdraw from this Agency by giving 6-month notice to the PRINCIPAL. The MANAGERS shall not in
any manner be held liable to the PRINCIPAL by reason alone of such withdrawal. Paragraph 5(d) hereof shall be
operative in case of the MANAGERS’ withdrawal.

x x x x5

In the course of managing and operating the project, Philex Mining made advances of cash and property in accordance with
paragraph 5 of the agreement. However, the mine suffered continuing losses over the years which resulted to petitioner’s
withdrawal as manager of the mine on January 28, 1982 and in the eventual cessation of mine operations on February 20,
1982.6

Thereafter, on September 27, 1982, the parties executed a "Compromise with Dation in Payment" 7 wherein Baguio Gold
admitted an indebtedness to petitioner in the amount of P179,394,000.00 and agreed to pay the same in three segments by
first assigning Baguio Gold’s tangible assets to petitioner, transferring to the latter Baguio Gold’s equitable title in its Philodrill
assets and finally settling the remaining liability through properties that Baguio Gold may acquire in the future.

On December 31, 1982, the parties executed an "Amendment to Compromise with Dation in Payment" 8 where the parties
determined that Baguio Gold’s indebtedness to petitioner actually amounted to P259,137,245.00, which sum included liabilities
of Baguio Gold to other creditors that petitioner had assumed as guarantor. These liabilities pertained to long-term loans
amounting to US$11,000,000.00 contracted by Baguio Gold from the Bank of America NT & SA and Citibank N.A. This time,
Baguio Gold undertook to pay petitioner in two segments by first assigning its tangible assets for P127,838,051.00 and then
transferring its equitable title in its Philodrill assets for P16,302,426.00. The parties then ascertained that Baguio Gold had a
remaining outstanding indebtedness to petitioner in the amount of P114,996,768.00.

Subsequently, petitioner wrote off in its 1982 books of account the remaining outstanding indebtedness of Baguio Gold by
charging P112,136,000.00 to allowances and reserves that were set up in 1981 and P2,860,768.00 to the 1982 operations.

In its 1982 annual income tax return, petitioner deducted from its gross income the amount of P112,136,000.00 as "loss on
settlement of receivables from Baguio Gold against reserves and allowances." 9 However, the Bureau of Internal Revenue (BIR)
disallowed the amount as deduction for bad debt and assessed petitioner a deficiency income tax of P62,811,161.39.

Petitioner protested before the BIR arguing that the deduction must be allowed since all requisites for a bad debt deduction
were satisfied, to wit: (a) there was a valid and existing debt; (b) the debt was ascertained to be worthless; and (c) it was
charged off within the taxable year when it was determined to be worthless.

Petitioner emphasized that the debt arose out of a valid management contract it entered into with Baguio Gold. The bad debt
deduction represented advances made by petitioner which, pursuant to the management contract, formed part of Baguio Gold’s
"pecuniary obligations" to petitioner. It also included payments made by petitioner as guarantor of Baguio Gold’s long-term
loans which legally entitled petitioner to be subrogated to the rights of the original creditor.

Petitioner also asserted that due to Baguio Gold’s irreversible losses, it became evident that it would not be able to recover the
advances and payments it had made in behalf of Baguio Gold. For a debt to be considered worthless, petitioner claimed that it
was neither required to institute a judicial action for collection against the debtor nor to sell or dispose of collateral assets in
satisfaction of the debt. It is enough that a taxpayer exerted diligent efforts to enforce collection and exhausted all reasonable
means to collect.

On October 28, 1994, the BIR denied petitioner’s protest for lack of legal and factual basis. It held that the alleged debt was not
ascertained to be worthless since Baguio Gold remained existing and had not filed a petition for bankruptcy; and that the
deduction did not consist of a valid and subsisting debt considering that, under the management contract, petitioner was to be
paid fifty percent (50%) of the project’s net profit. 10

Petitioner appealed before the Court of Tax Appeals (CTA) which rendered judgment, as follows:

WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby DENIED for lack of merit. The
assessment in question, viz: FAS-1-82-88-003067 for deficiency income tax in the amount of P62,811,161.39 is hereby
AFFIRMED.

ACCORDINGLY, petitioner Philex Mining Corporation is hereby ORDERED to PAY respondent Commissioner of Internal
Revenue the amount of P62,811,161.39, plus, 20% delinquency interest due computed from February 10, 1995, which
is the date after the 20-day grace period given by the respondent within which petitioner has to pay the deficiency
amount x x x up to actual date of payment.

SO ORDERED.11

The CTA rejected petitioner’s assertion that the advances it made for the Sto. Nino mine were in the nature of a loan. It instead
characterized the advances as petitioner’s investment in a partnership with Baguio Gold for the development and exploitation of
the Sto. Nino mine. The CTA held that the "Power of Attorney" executed by petitioner and Baguio Gold was actually a
partnership agreement. Since the advanced amount partook of the nature of an investment, it could not be deducted as a bad
debt from petitioner’s gross income.
The CTA likewise held that the amount paid by petitioner for the long-term loan obligations of Baguio Gold could not be allowed
as a bad debt deduction. At the time the payments were made, Baguio Gold was not in default since its loans were not yet due
and demandable. What petitioner did was to pre-pay the loans as evidenced by the notice sent by Bank of America showing that
it was merely demanding payment of the installment and interests due. Moreover, Citibank imposed and collected a "pre-
termination penalty" for the pre-payment.

The Court of Appeals affirmed the decision of the CTA. 12 Hence, upon denial of its motion for reconsideration, 13 petitioner took
this recourse under Rule 45 of the Rules of Court, alleging that:

I.

The Court of Appeals erred in construing that the advances made by Philex in the management of the Sto. Nino Mine
pursuant to the Power of Attorney partook of the nature of an investment rather than a loan.

II.

The Court of Appeals erred in ruling that the 50%-50% sharing in the net profits of the Sto. Nino Mine indicates that
Philex is a partner of Baguio Gold in the development of the Sto. Nino Mine notwithstanding the clear absence of any
intent on the part of Philex and Baguio Gold to form a partnership.

III.

The Court of Appeals erred in relying only on the Power of Attorney and in completely disregarding the Compromise
Agreement and the Amended Compromise Agreement when it construed the nature of the advances made by Philex.

IV.

The Court of Appeals erred in refusing to delve upon the issue of the propriety of the bad debts write-off. 14

Petitioner insists that in determining the nature of its business relationship with Baguio Gold, we should not only rely on the
"Power of Attorney", but also on the subsequent "Compromise with Dation in Payment" and "Amended Compromise with Dation
in Payment" that the parties executed in 1982. These documents, allegedly evinced the parties’ intent to treat the advances and
payments as a loan and establish a creditor-debtor relationship between them.

The petition lacks merit.

The lower courts correctly held that the "Power of Attorney" is the instrument that is material in determining the true nature of
the business relationship between petitioner and Baguio Gold. Before resort may be had to the two compromise agreements,
the parties’ contractual intent must first be discovered from the expressed language of the primary contract under which the
parties’ business relations were founded. It should be noted that the compromise agreements were mere collateral documents
executed by the parties pursuant to the termination of their business relationship created under the "Power of Attorney". On the
other hand, it is the latter which established the juridical relation of the parties and defined the parameters of their dealings
with one another.

The execution of the two compromise agreements can hardly be considered as a subsequent or contemporaneous act that is
reflective of the parties’ true intent. The compromise agreements were executed eleven years after the "Power of Attorney" and
merely laid out a plan or procedure by which petitioner could recover the advances and payments it made under the "Power of
Attorney". The parties entered into the compromise agreements as a consequence of the dissolution of their business
relationship. It did not define that relationship or indicate its real character.

An examination of the "Power of Attorney" reveals that a partnership or joint venture was indeed intended by the parties. Under
a contract of partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund,
with the intention of dividing the profits among themselves. 15 While a corporation, like petitioner, cannot generally enter into a
contract of partnership unless authorized by law or its charter, it has been held that it may enter into a joint venture which is
akin to a particular partnership:

The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generally
understood to mean an organization formed for some temporary purpose. x x x It is in fact hardly distinguishable from
the partnership, since their elements are similar – community of interest in the business, sharing of profits and losses,
and a mutual right of control. x x x The main distinction cited by most opinions in common law jurisdictions is that the
partnership contemplates a general business with some degree of continuity, while the joint venture is formed for the
execution of a single transaction, and is thus of a temporary nature. x x x This observation is not entirely accurate in
this jurisdiction, since under the Civil Code, a partnership may be particular or universal, and a particular partnership
may have for its object a specific undertaking. x x x It would seem therefore that under Philippine law, a joint venture
is a form of partnership and should be governed by the law of partnerships. The Supreme Court has however
recognized a distinction between these two business forms, and has held that although a corporation cannot enter into
a partnership contract, it may however engage in a joint venture with others. x x x (Citations omitted) 16

Perusal of the agreement denominated as the "Power of Attorney" indicates that the parties had intended to create a
partnership and establish a common fund for the purpose. They also had a joint interest in the profits of the business as shown
by a 50-50 sharing in the income of the mine.
Under the "Power of Attorney", petitioner and Baguio Gold undertook to contribute money, property and industry to the
common fund known as the Sto. Niño mine. 17 In this regard, we note that there is a substantive equivalence in the respective
contributions of the parties to the development and operation of the mine. Pursuant to paragraphs 4 and 5 of the agreement,
petitioner and Baguio Gold were to contribute equally to the joint venture assets under their respective accounts. Baguio Gold
would contribute P11M under its owner’s account plus any of its income that is left in the project, in addition to its actual
mining claim. Meanwhile, petitioner’s contribution would consist of its expertise in the management and operation of mines,
as well as the manager’s account which is comprised of P11M in funds and property and petitioner’s "compensation" as
manager that cannot be paid in cash.

However, petitioner asserts that it could not have entered into a partnership agreement with Baguio Gold because it did not
"bind" itself to contribute money or property to the project; that under paragraph 5 of the agreement, it was only optional for
petitioner to transfer funds or property to the Sto. Niño project "(w)henever the MANAGERS shall deem it necessary and
convenient in connection with the MANAGEMENT of the STO. NIÑO MINE." 18

The wording of the parties’ agreement as to petitioner’s contribution to the common fund does not detract from the fact that
petitioner transferred its funds and property to the project as specified in paragraph 5, thus rendering effective the other
stipulations of the contract, particularly paragraph 5(c) which prohibits petitioner from withdrawing the advances until
termination of the parties’ business relations. As can be seen, petitioner became bound by its contributions once the transfers
were made. The contributions acquired an obligatory nature as soon as petitioner had chosen to exercise its option under
paragraph 5.

There is no merit to petitioner’s claim that the prohibition in paragraph 5(c) against withdrawal of advances should not be taken
as an indication that it had entered into a partnership with Baguio Gold; that the stipulation only showed that what the parties
entered into was actually a contract of agency coupled with an interest which is not revocable at will and not a partnership.

In an agency coupled with interest, it is the agency that cannot be revoked or withdrawn by the principal due to an interest
of a third party that depends upon it, or the mutual interest of both principal and agent. 19 In this case, the non-revocation or
non-withdrawal under paragraph 5(c) applies to the advances made by petitioner who is supposedly the agent and not the
principal under the contract. Thus, it cannot be inferred from the stipulation that the parties’ relation under the agreement is
one of agency coupled with an interest and not a partnership.

Neither can paragraph 16 of the agreement be taken as an indication that the relationship of the parties was one of agency and
not a partnership. Although the said provision states that "this Agency shall be irrevocable while any obligation of the
PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS’ account," it does not necessarily follow that
the parties entered into an agency contract coupled with an interest that cannot be withdrawn by Baguio Gold.

It should be stressed that the main object of the "Power of Attorney" was not to confer a power in favor of petitioner to contract
with third persons on behalf of Baguio Gold but to create a business relationship between petitioner and Baguio Gold, in which
the former was to manage and operate the latter’s mine through the parties’ mutual contribution of material resources and
industry. The essence of an agency, even one that is coupled with interest, is the agent’s ability to represent his principal and
bring about business relations between the latter and third persons. 20 Where representation for and in behalf of the principal is
merely incidental or necessary for the proper discharge of one’s paramount undertaking under a contract, the latter may not
necessarily be a contract of agency, but some other agreement depending on the ultimate undertaking of the parties. 21

In this case, the totality of the circumstances and the stipulations in the parties’ agreement indubitably lead to the conclusion
that a partnership was formed between petitioner and Baguio Gold.

First, it does not appear that Baguio Gold was unconditionally obligated to return the advances made by petitioner under the
agreement. Paragraph 5 (d) thereof provides that upon termination of the parties’ business relations, "the ratio which the
MANAGER’S account has to the owner’s account will be determined, and the corresponding proportion of the entire assets of the
STO. NINO MINE, excluding the claims" shall be transferred to petitioner. 22 As pointed out by the Court of Tax Appeals,
petitioner was merely entitled to a proportionate return of the mine’s assets upon dissolution of the parties’ business relations.
There was nothing in the agreement that would require Baguio Gold to make payments of the advances to petitioner as would
be recognized as an item of obligation or "accounts payable" for Baguio Gold.

Thus, the tax court correctly concluded that the agreement provided for a distribution of assets of the Sto. Niño mine upon
termination, a provision that is more consistent with a partnership than a creditor-debtor relationship. It should be pointed out
that in a contract of loan, a person who receives a loan or money or any fungible thing acquires ownership thereof and
is bound to pay the creditor an equal amount of the same kind and quality. 23 In this case, however, there was no stipulation for
Baguio Gold to actually repay petitioner the cash and property that it had advanced, but only the return of an amount pegged at
a ratio which the manager’s account had to the owner’s account.

In this connection, we find no contractual basis for the execution of the two compromise agreements in which Baguio Gold
recognized a debt in favor of petitioner, which supposedly arose from the termination of their business relations over the Sto.
Nino mine. The "Power of Attorney" clearly provides that petitioner would only be entitled to the return of a proportionate share
of the mine assets to be computed at a ratio that the manager’s account had to the owner’s account. Except to provide a basis
for claiming the advances as a bad debt deduction, there is no reason for Baguio Gold to hold itself liable to petitioner under the
compromise agreements, for any amount over and above the proportion agreed upon in the "Power of Attorney".

Next, the tax court correctly observed that it was unlikely for a business corporation to lend hundreds of millions of pesos to
another corporation with neither security, or collateral, nor a specific deed evidencing the terms and conditions of such loans.
The parties also did not provide a specific maturity date for the advances to become due and demandable, and the manner of
payment was unclear. All these point to the inevitable conclusion that the advances were not loans but capital contributions to a
partnership.

The strongest indication that petitioner was a partner in the Sto Niño mine is the fact that it would receive 50% of the net
profits as "compensation" under paragraph 12 of the agreement. The entirety of the parties’ contractual stipulations simply
leads to no other conclusion than that petitioner’s "compensation" is actually its share in the income of the joint venture.

Article 1769 (4) of the Civil Code explicitly provides that the "receipt by a person of a share in the profits of a business is  prima
facie evidence that he is a partner in the business." Petitioner asserts, however, that no such inference can be drawn against it
since its share in the profits of the Sto Niño project was in the nature of compensation or "wages of an employee", under the
exception provided in Article 1769 (4) (b).24

On this score, the tax court correctly noted that petitioner was not an employee of Baguio Gold who will be paid "wages"
pursuant to an employer-employee relationship. To begin with, petitioner was the manager of the project and had put
substantial sums into the venture in order to ensure its viability and profitability. By pegging its compensation to profits,
petitioner also stood not to be remunerated in case the mine had no income. It is hard to believe that petitioner would take the
risk of not being paid at all for its services, if it were truly just an ordinary employee.

Consequently, we find that petitioner’s "compensation" under paragraph 12 of the agreement actually constitutes its share in
the net profits of the partnership. Indeed, petitioner would not be entitled to an equal share in the income of the mine if it were
just an employee of Baguio Gold. 25 It is not surprising that petitioner was to receive a 50% share in the net profits, considering
that the "Power of Attorney" also provided for an almost equal contribution of the parties to the St. Nino mine. The
"compensation" agreed upon only serves to reinforce the notion that the parties’ relations were indeed of partners and not
employer-employee.

All told, the lower courts did not err in treating petitioner’s advances as investments in a partnership known as the Sto. Nino
mine. The advances were not "debts" of Baguio Gold to petitioner inasmuch as the latter was under no unconditional obligation
to return the same to the former under the "Power of Attorney". As for the amounts that petitioner paid as guarantor to Baguio
Gold’s creditors, we find no reason to depart from the tax court’s factual finding that Baguio Gold’s debts were not yet due and
demandable at the time that petitioner paid the same. Verily, petitioner pre-paid Baguio Gold’s outstanding loans to its bank
creditors and this conclusion is supported by the evidence on record. 26

In sum, petitioner cannot claim the advances as a bad debt deduction from its gross income. Deductions for income tax
purposes partake of the nature of tax exemptions and are strictly construed against the taxpayer, who must prove by convincing
evidence that he is entitled to the deduction claimed. 27 In this case, petitioner failed to substantiate its assertion that the
advances were subsisting debts of Baguio Gold that could be deducted from its gross income. Consequently, it could not claim
the advances as a valid bad debt deduction.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 49385 dated June 30, 2000,
which affirmed the decision of the Court of Tax Appeals in C.T.A. Case No. 5200 is AFFIRMED. Petitioner Philex Mining
Corporation is ORDERED to PAY the deficiency tax on its 1982 income in the amount of P62,811,161.31, with 20%
delinquency interest computed from February 10, 1995, which is the due date given for the payment of the deficiency income
tax, up to the actual date of payment.

SO ORDERED.
 264 Phil. 15

DIVISION
[ GR No. L-45985, May 18, 1990 ]
CHINA AIR LINES v. CA +
DECISION

REGALADO, J.:

These consolidated petitions seek the review of the decision of respondent court in CA-G.R. No. 53023-R entitled "Jose
E. Pagsibigan, Plaintiff-Appellant, vs. Philippine Air Lines, Inc. and Roberto Espiritu, Defendants-Appellants; China Air Lines, Ltd.,
Defendant-Appellee,"[1] the dispositive portion of which declares:

"WHEREFORE, except for a modification of the judgment in the sense that the award of P20,000.00  in favor of the plaintiff shall
be in the concept of nominal damages instead of exemplary damages, and that defendant China Air Lines, Ltd. shall likewise be
liable with its two co-defendants in a joint and solidary capacity, the judgment appealed from is hereby affirmed in all other
respects, without costs."[2]
The challenged decision of respondent court contains a synthesis of the facts that spawned these cases and the judgment of the
court a quo which it affirmed with modifications, thus:

"On June 4, 1968, plaintiff Jose E. Pagsibigan, then vice-president and general manager of Rentokil (Phils.) Inc., a local firm
dealing in insecticides, pesticides and related services appurtenant thereto, purchased a plane ticket for a Manila-Taipei-
Hongkong-Manila flight from the Transaire Travel Agency.  The said agency, through its Cecille Baron, contacted the Manila
Hotel branch of defendant Philippine Air Lines which at that time was a sales and ticketing agent of defendant China Air
Lines.  On June 6, 1968, PAL, through its ticketing clerk defendant Roberto Espiritu, cut and issued CAL Ticket No. 017991 for a
Manila-Taipei-Hongkong-Manila flight.  According to the plane ticket, the plaintiff was booked on CAL CI Flight No. 812 to depart
from Manila for Taipei on June 10, 1968 at 1720 hours (5:20 p.m.), Exhibit A.
"On June 10, 1968, one hour before the scheduled time of the flight as stated in his ticket, the plaintiff arrived at the airport to
check in for CI Flight No. 812.  Upon arriving at the airport, the plaintiff was informed that the plane he was supposed to take
for Taipei had left at 10:20 in the morning of that day.  The PAL employees at the airport made appropriate arrangements for
the plaintiff to take PAL's flight to Taipei the following day, June 11, 1968.  The plaintiff took said flight and arrived in Taipei
around noontime of the said date.
"On July 8, 1968, the plaintiff, through counsel, made formal demand on defendant PAL for moral damages in not less than
P125,000.00 for what the plaintiff allegedly suffered as a result of his failure to take the flight as stated in his plane
ticket.  (Exhibit E) After a series of negotiations among the plaintiff, PAL and CAL failed to reach an amicable settlement, the
plaintiff instituted this action in the Court of First Instance of Rizal, on September 22, 1969.  In his complaint, plaintiff prays for
the recovery of P125,000.00 as moral damages and P25,000.00 for and as attorney's fees.  The moral damages allegedly arose
from the gross negligence of defendant Roberto Espiritu in stating on the plane ticket that the time of departure was 1720
hours, instead of 1020 hours which was the correct time of departure in the revised summer schedule of CAL.   Plaintiff claims
that by reason of his failure to take the plane, he suffered besmirched reputation, embarrassment, mental anguish, wounded
feelings and sleepless nights, inasmuch as when he went to the airport, he was accompanied by his business associates, close
friends and relatives.  He further averred that his trip to Taipei was for the purpose of conferring with a certain  Peng Siong Lim,
president of the Union Taiwan Chemical Corporation, scheduled at 9:00 a.m. on June 11, 1968.
"Defendant Philippine Air Lines alleges in its answer that the departure time indicated by Espiritu in the ticket was furnished and
confirmed by the reservation office of defendant China Air Lines.  It further avers that CAL had not informed PAL's Manila Hotel
Branch of the revised schedule of its flight, nor provided it with revised timetable:   that when the travel agency sought to
purchase the ticket for the plaintiff on CAL CI Flight No. 812 for June 10, 1968,  Espiritu who was then the ticketing clerk on
duty, checked with the reservation office of CAL on the availability of space, the date and the time of said flight; that  CAL's Dory
Chan informed Espiritu that the departure time of Flight No. 812 on June 10, 1968 was at  5:20 in the afternoon of said
date.  PAL asserted a cross-claim against CAL for attorney's fees and for reimbursement of whatever amount the court may
adjudge PAL to be liable to the plaintiff.  Defendant Espiritu adopted the defenses of his co-defendant PAL.
"Defendant China Air Lines, for its part, disclaims liability for the negligence and incompetence of the employees of PAL.   It
avers that it had revised its schedule since April 1, 1968, the same to be effective on April 20, 1968, and the said revised
schedule was adopted only after proper petition with and approval of the Civil Aeronautics Board of which all airlines, including
defendant PAL, were notified; that both printed copies of the international timetable and of the mimeographed notices of the
official schedule and flight departure schedules were distributed to all its sales agents, including PAL; that after the  effectivity of
the new time schedules.  PAL's Manila Hotel office had been issuing and selling tickets based on the revised time schedule; and
that, assuming that the plaintiff is entitled to recover damages, the liability is on PAL and not on CAL.   A cross-claim was
likewise asserted by CAL against its co?defendant PAL.
"After due trial, the Court a quo rendered judgment laying the blame for the erroneous entry in the ticket as to the time of
departure to defendant Roberto Espiritu, ticketing agent of defendant PAL, and that no employee of CAL contributed to such
erroneous entry.  It was further ruled that the plaintiff had no reason to claim moral damages but may be entitled to recover
exemplary damages.  The dispositive portion of the decision makes the following adjudication:
'WHEREFORE, premises considered, judgment is hereby rendered sentencing the defendants Philippine Air Lines, Inc. and
Roberto Espiritu, to pay to plaintiff Jose Pagsibigan jointly and severally, by way of exemplary damages, the sum of Twenty
Thousand Pesos (P20,000.00) plus Two Thousand Pesos (P2,000.00) as reimbursement for attorney's fees and the costs.

'The complaint is dismissed with respect to the defendant China Air Lines, Ltd.  The cross-claim filed by defendant PAL
and Espiritu against defendant CAL as well as the cross-claim filed by the defendant CAL against defendant PAL and  Espiritu are
also hereby dismissed.' "[3]

From said decision of the court below, all the parties, except China Air Lines, Ltd. appealed to respondent court which, however,
sustained the ruling of the trial court denying Pagsibigan's claim for moral damages.  It concluded that
Roberto Espiritu did not act with malice or in bad faith in making a wrong entry of the time of departure on the ticket, and that
the mistake committed by Espiritu appears to be an honest one done in good faith.
Respondent court also ruled out the claim for exemplary damages for lack of legal basis.  Nonetheless, as earlier noted, it
awarded Pagsibigan P20,000.00 as nominal damages, under Article 2221 of the Civil Code, for the vindication of a legal wrong
committed against him.

As regards the liability of the parties, respondent court held:

"There can be little question as to the liability of PAL and Espiritu for the damage caused to the plaintiff due to the erroneous
entry in the plane ticket made by the latter.  They seek to justify the erroneous statement as to the time of departure on the
ground that such was the time given by Dory Chan to Espiritu when the latter called up for the reservation in favor of
plaintiff.  Aside from the fact that Dory Chan had vigorously disclaimed having given such information to Espiritu, We are
convinced that, as the trial court had found, CAL had no share in the error committed by  Espiritu in indicating the time of
departure of Flight No. 812.  PAL had shown through the testimony of Carmen Ibazeta Gallaga, ticket representative of PAL at
the Manila Hotel Office, that they received circulars and timetables of airlines in the PAL main office.   It further appears that on
two occasions, defendant PAL cut and issued tickets for CAL based on the new schedule even before June 10, 1968.   As a
matter of fact, the other entries of time departures in the ticket issued to the plaintiff  are in accordance with the revised
schedule, and that the only error therein was with respect to the departure from Manila on June 10, 1968.
"However in proving that the fault lied with Espiritu, defendant CAL derives no solace nor gains an advantage.  It may not claim
exemption from liability by reason thereof.  Espiritu was an employee of PAL and whatever negligence was committed by him is
attributable to PAL.  It is an admitted fact hat PAL is an authorized agent of CAL.  In this relationship, the responsibility of
defendant PAL for the tortious act of its agent or representative is inescapable. x x x
x x x
"A similar principle is recognized in our Civil Code in its Art. 2180 x x x.  Unlike in the doctrine of respondeat superior, however,
the Civil Code permits the employer to escape this liability upon proof of having observed all the diligence of a good father of a
family to prevent the
damage, We find the evidence of defendant CAL to be insufficient to overcome the presumption of negligence on its part for the 
act done by defendant Roberto Espiritu. (Emphasis supplied)
"The liability for the damage sustained by the plaintiff should, therefore, be borne by all of the defendants in a joint
and solidary capacity (Art. 2194).  The liability of an employer under Art. 2180 is primary and direct. x x x
x x x
"It appearing that defendant CAL, as employer or principal, did not contribute to the negligence committed by defendants PAL
and Roberto Espiritu, its liability to the plaintiff could be passed on to said defendants.  Defendant CAL, however, did not take
an appeal and did not, therefore, take exception to the dismissal of its cross-claim against defendants PAL and  Espiritu.  This
serves as an obstacle for a rendition of judgment favorable to CAL on its said counterclaim." [4]
In its petition for review on certiorari in G.R. No. L-45985, petitioner China Air Lines, Ltd. (CAL) relied on the following grounds:

1.  A principal can not be held liable, much less solidarily, for the negligence of the sub-agent, where the former never
participated in, ratified or authorized the latter's act or omission.
2.  Dismissal of the cross-claim of petitioner against the private respondents Philippine Air Lines, Inc. and Roberto Espiritu will
not prevent the release of the petitioner from liability to the private respondent Pagsibigan.
3.  The award of damages was unwarranted both legally and factually. [5]
On their part, petitioners Philippine Air Lines, Inc. (PAL) and Roberto Espiritu made the following submissions in G.R. No. L-
46036, to wit:

1.  The respondent Court of Appeals erred in not holding that respondent China Air Lines, Ltd., being the principal, is solely
liable to respondent Pagsibigan.
2.  The respondent Court of Appeals erred in awarding respondent Pagsibigan the sum of P20,000.00 as nominal damages.[6]
In G.R. No. L-45985, respondent Pagsibigan contends, by way of refutation, that CAL's liability is based on breach of contract of
transportation which was the proximate result of the negligence and/or error committed by PAL and Espiritu, that even
assuming that CAL has no share in the negligence of PAL and Espiritu; the liability of CAL does not cease upon proof that it
exercised all the diligence of a good father of a family in the selection and supervision of its employees.  Traversing such
contentions, CAL argues that it can not be made liable under Article 2180 of the  Civil Code because of the absence of employer-
employee relationship between it and PAL.

On the other hand, in G.R. No. L-46036, respondent Pagsibigan claims that PAL is liable under Article 1909 of the said code
which holds an agent 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.  PAL, however, maintains that for lack
of privity with Pagsibigan, the suit for breach of contract should have been directed against CAL.

What surfaces as a procedural maneuver taken by respondent Pagsibigan in the course of the proceedings in these cases has
confused the real issues in the controversy subject of both petitions before us.

Respondent Pagsibigan has opted to seek redress by pursuing two remedies at the same time, that is, to enforce the civil
liability of CAL for breach of contract and, likewise, to recover from PAL and  Espiritu for tort or culpa aquiliana.  What he has
overlooked is the proscription against double recovery under Article 2177 of the Civil Code which, while not preventing recourse
to any appropriate remedy, prevents double relief for a single wrong.

To avoid inequitable effects under such confluence of remedies, the true nature of the action instituted by
respondent Pagsibigan must be determined.  A careful perusal of the complaint of respondent Pagsibigan will readily disclose
that the allegations thereof clearly and unmistakably make out a case for a quasi-delict in this wise:

"4.  That at all pertinent times particularly in June of 1968, defendant China Air Lines Ltd. has been operating regular scheduled
flights to and from Manila, and has offered accommodations thereon through, among others, defendant  PAL as its authorized
sales agent and/or ticketing agent, such that China Airlines Ltd. is here impleaded as being the principal of defendant PAL;
"5.  That at all pertinent times, particularly in June of 1968, defendant Roberto Espiritu has been in the employ of
defendant PAL at its sales counter at the PAL Manila Hotel branch office and is here  impleaded as defendant as being
the proximate malfeasor in this cause of action;
x   x  x
"12.  That plaintiff missed the initial Manila-Taipei leg (CI Flight 812) on June 10, 1968, as set forth in his ticket (Annex
'A') solely and exclusively by reason of gross incompetence and inexcusable negligence amounting to bad faith of defendant PAL
- acting, through its sales representative, the defendant Roberto Espiritu, of its Manila Hotel branch office - in the discharge of
its duties as sales agent and/or ticketing agent for defendant China Airlines Ltd. as principal;
"13.  That as a direct result of culpable incompetence and negligence of defendant Roberto Espiritu as sales representative of
defendant PAL, plaintiff was unable to attend to previously scheduled business commitments in Taipei x x x resulting in direct
and indirect prejudice to plaintiff that has yet to be fully assessed:" (Emphasis supplied) [7]
x   x  x
Had the intention of respondent Pagsibigan been to maintain an action based on breach of contract of carriage, he could have
sued CAL alone considering that PAL is not a real party to the contract.  Moreover, in cases of such nature, the aggrieved party
does not have to prove that the common carrier was at fault or was negligent.  All he has to prove is the existence of the
contract and the fact of its non-performance by the carrier. [8]

The records disclose that the trial court delved much into the issues of who was at fault, and its decision is primarily anchored
on its factual findings regarding the civil liability arising from culpa aquiliana of the erring party, to this effect:

"Plaintiff said that the erroneous entry in his ticket which made it appear that his CAL flight of June 10, 1968  was to be at 5:20
in the afternoon was due to the fault or negligence of PAL's Roberto Espiritu, a co-defendant herein, as well as the employees of
the defendant CAL.  In making CAL co-responsible, plaintiff appears to rely on the doctrine that the principal is responsible for
the act of an agent done within the scope of the agency.
"There is no proof extant that any of the employees of CAL had contributed to the erroneous entry in plaintiff's CAL ticket for
Taipei which placed his time of departure to 5:20 o'clock in the afternoon of June 10, 1968.   Only defendant
Roberto Espiritu appears to be solely and exclusively responsible for such error and therefore the conclusion becomes inevitable
that CAL must be absolved from any blame because defendant Roberto Espiritu who committed the error is not an employee or
agent of the defendant CAL."[9]
It,  therefore, becomes evident that respondent Pagsibigan, having sensed that he can not hold CAL liable on a quasi-delict,
decided on appeal to instead make a sinistral detour, so to speak, by claiming that his action against CAL is based on a breach
of contract of carriage.

We can not permit respondent Pagsibigan to change his theory at this stage; it would be unfair to the adverse party who would
have no more opportunity to present further evidence, material to the new theory, which it could have done had it been aware
earlier of the new theory at the time of the hearing before the trial court.[10]

There is indeed no basis whatsoever to hold CAL liable on a quasi-delict or culpa aquiliana.  As hereinbefore stated, the
court a quo absolved CAL of any liability for fault or negligence.  This finding was shared by respondent court when it concluded
that defendant CAL did not contribute to the negligence committed by therein defendants-appellants PAL and Roberto Espiritu.

Respondent Pagsibigan insists that CAL was barred from proving that it observed due diligence in the selection and supervision
of its employees.  This argument is obviously misplaced.  CAL is not the employer of PAL
or Espiritu.  In Duavit vs. The Hon. Court of Appeals, et al.,[11] we have stressed the need of first establishing the existence of an
employer-employee relationship before an employer may be vicariously liable under Article 2180 of the Civil Code.

With respect to PAL and Espiritu, they disclaim any liability on the theory that the former is merely an agent of CAL and that the
suit should have been directed against CAL alone.  There is no question that the contractual relation between both air lines is
one of agency.  Suffice it to say, however, that in an action premised on the employee's negligence, whereby
respondent Pagsibigan seeks recovery for the resulting damages from both PAL and Espiritu without qualification, what is
sought to be imposed is the direct and primary liability of PAL as an employer under said Article 2180.

When an injury is caused by the negligence of an employee, there instantly arises a presumption of law that there was
negligence on the part of the employer either in the selection of the employee or in the supervision over him after such
selection.  The presumption, however, may be rebutted by a clear showing on the part of the employer that it has exercised the
care and diligence of a good father of a family in the selection and supervision of his employee. [12]

Hence, to escape solidary liability for the quasi-delict committed by Espiritu, it is imperative that PAL must adduce sufficient
proof that it exercised such degree of care.  PAL failed to overcome the presumption.  As found by respondent court, CAL had
revised its schedule of flights since April 1, 1968; that after the Civil Aeronautics Board had approved the revised schedule of
flights, PAL was duly informed thereof and, in fact, PAL's Manila Hotel branch office had been issuing and selling tickets based
on the revised time schedule before June 10, 1968.

PAL'S main defense is that it is only an agent.  As a general proposition, an agent who duly acts as such is not personally liable
to third persons.  However, there are admitted exceptions, as in this case where the agent is being sued for damages arising
from a tort committed by his employee.

The respondent court found that the mistake committed by Espiritu was done in good faith.  While there is no evidence that he
acted with malice, we can not entirely condone his actuations.  As an employee of PAL, the nature of his functions requires him
to observe for the protection of the interests of another person that degree of care, precaution  and vigilance which the
circumstances justly demand.  He committed a clear neglect of duty.

Ergo, for his negligence, Espiritu is primarily liable to respondent Pagsibigan under Article 2176 of the Civil Code.  For the failure
of PAL to rebut the legal presumption of negligence in the selection and supervision of its employee, it is also primarily liable
under Article 2180 of the same code which explicitly provides that employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.

Under the aforesaid provision, all that is required is that the employee, by his negligence, committed a quasi-delict  which
caused damage to another, and this suffices to hold the employer primarily and solidarily responsible for the tortious act of the
employee.  PAL, however, can demand from Espiritu reimbursement of the amount which it will have to pay the offended
party's claim.[13]
On the issue of damages, we agree, except as to the amount, that nominal damages may be awarded to
respondent Pagsibigan to vindicate the legal wrong committed against him.  It appearing that the wrong committed was
immediately rectified when PAL promptly booked him for the next morning's flight to Taipei where he arrived before noon of
June 11, 1968 and was able to attend his scheduled conference, and considering the concept and purpose of nominal damages,
the award of P20,000,00 must accordingly be reduced to an amount equal or at least commensurate to the injury sustained.

WHEREFORE, the decision of respondent Court of Appeals is MODIFIED accordingly.  China Air Lines, Ltd. is hereby absolved
from liability.  Philippine Air Lines, Inc. and Roberto Espiritu are declared jointly and severally liable to pay the sum of
P10,000.00 by way of nominal damages, without prejudice to the right of Philippine Air Lines, Inc. to recover from
Roberto Espiritu reimbursement of the damages that it may pay respondent Jose Pagsibigan.

SO ORDERED.

Melencio-Herrera, (Chairman), Paras, Padilla, and Sarmiento, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
 
G.R. No. 45985 May 18, 1990
CHINA AIR LINES, LTD., petitioner,
vs.
COURT OF APPEALS, JOSE PAGSIBIGAN, PHILIPPINE AIR LINES, INC. and ROBERTO ESPIRITU, respondents.
G.R. No. 46036 May 18, 1990
PHILIPPINE AIR LINES, INC. and ROBERTO ESPIRITU, petitioners,
vs.
COURT OF APPEALS, JOSE PAGSIBIGAN and CHINA AIR LINES, LTD., respondents.
Balgos & Perez Law Offices for petitioner China Air Lines, Ltd.
Siguion Reyna, Montecillo & Ongsiako for petitioners in G.R. No. 46036.
Syquia Law Offices for Jose Pagsibigan.

REGALADO, J.:

These consolidated petitions seek the review of the decision of respondent court in CA-G.R. No. 53023-R entitled "Jose E.
Pagsibigan, Plaintiff-Appellant, vs. Philippine Air Lines, Inc. and Roberto Espiritu, Defendants-Appellants; China Air Lines, Ltd.,
Defendant-Appellee," 1 the dispositive portion of which declares:

WHEREFORE, except for a modification of the judgment in the sense that the award of P20,000.00 in favor of
the plaintiff shall be in the concept of nominal damages instead of exemplary damages, and that defendant
China Air Lines, Ltd. shall likewise be liable with its two co-defendants in a joint and solidary capacity, the
judgment appealed from is hereby affirmed in all other respects, without costs. 2

The challenged decision of respondent court contains a synthesis of the facts that spawned these cases and the judgment of the
court a quo  which it affirmed with modifications, thus:

On June 4, 1968, plaintiff Jose E. Pagsibigan, then Vice-President and General Manager of Rentokil (Phils.)
Inc., a local firm dealing in insecticides, pesticides and related services appurtenant thereto, purchased a plane
ticket for a Manila-Taipei-Hongkong-Manila flight from the Transaire Travel Agency. The said agency, through
its Cecille Baron, contacted the Manila Hotel branch of defendant Philippine Air Lines which at that time was a
sales and ticketing agent of defendant China Air lines. On June 6, 1968, PAL, through its ticketing clerk
defendant Roberto Espiritu, cut and issued PAL Ticket No. 01 7991 for a Manila-Taipei-Hongkong-Manila flight.
According to the plane ticket, the plaintiff was booked on CAL CI Flight No. 812 to depart from Manila for
Taipei on June 10, 1968 at 17:20 hours (5:20 p.m.), Exhibit A.

On June 10, 1968, one hour before the scheduled time of the flight as stated in his ticket, the plaintiff arrived
at the airport to check in for CI Flight No. 812. Upon arriving at the airport, the plaintiff was informed that the
plane he was supposed to take for Taipei had left at 10:20 in the morning of that day. The PAL employees at
the airport made appropriate arrangements for the plaintiff to take PAL's flight to Taipei the following day,
June 11, 1968. The plaintiff took said flight and arrived in Taipei around noontime of the said date.

On July 8, 1968, the plaintiff, through counsel, made formal demand on defendant PAL, for moral damages in
not less than P125,000.00 for what the plaintiff allegedly suffered as a result of his failure to take the flight as
stated in his plane ticket. (Exhibit E) After a series of negotiations among the plaintiff, PAL and CAL failed to
reach an amicable settlement, the plaintiff instituted this action in the Court of First Instance of Rizal on
September 22, 1969. In his complaint, plaintiff prays for the recovery of P125,000.00 as moral damages and
P25,000.00 for and as attorney's fees. The moral damages allegedly arose from the gross negligence of
defendant Roberto Espiritu in stating on the plane ticket that the time of departure was 17:20 hours, instead of
10:20 hours which was the correct time of departure in the revised summer schedule of CAL. Plaintiff claims
that by reason of his failure to take the plane, he suffered besmirched reputation, embarrassment, mental
anguish, wounded feelings and sleepless nights, inasmuch as when he went to the airport, he was
accompanied by his business associates, close friends and relatives. He further averred that his trip to Taipei
was for the purpose of conferring with a certain Peng Siong Lim, President of the Union Taiwan Chemical
Corporation, scheduled at 9:00 a.m. on June 11, 1968.

Defendant Philippine Air Lines alleged in its answer that the departure time indicated by Espiritu in the ticket
was furnished and confirmed by the reservation office of defendant China Air Lines. It further averred that CAL
had not informed PAL's Manila Hotel Branch of the revised schedule of its flight, nor provided it with revised
timetable; that when the travel agency sought to purchase the ticket for the plaintiff on CAL CI Flight No. 812
for June 10, 1968, Espiritu who was then the ticketing clerk on duty, checked with the reservation office of CAL
on the availability of space, the date and the time of said flight; that CAL's Dory Chan informed Espiritu that
the departure time of Flight No. 812 on June 10, 1968 was at 5:20 in the afternoon of said date. PAL asserted
a cross-claim against CAL for attorney's fees and for reimbursement of whatever amount the court may
adjudge PAL to be liable to the plaintiff. Defendant Espiritu adopted the defenses of his co-defendant PAL.

Defendant China Air Lines, for its part, disclaims liability for the negligence and incompetence of the employees
of PAL. It avers that it had revised its schedule since April 1, 1968, the same to be effective on April 20, 1968,
 and the said revised schedule was adopted only after proper petition with and approval of the Civil Aeronautics
Board of which all airlines, including defendant PAL, were notified; that both printed copies of the international
timetable and of the mimeographed notices of the official schedule and flight departure schedules were
distributed to all its sales agents, including PAL, that after the effectivity of the new time schedules, PAL's
Manila Hotel office had been issuing and selling tickets based on the revised time schedule; and that, assuming
that the plaintiff is entitled to recover damages, the liability is on PAL and not on CAL. A cross-claim was
likewise asserted by CAL against its co-defendant PAL.

After due trial, the Court a quo  rendered judgment laying the blame for the erroneous entry in the ticket as to
the time of departure to defendant Roberto Espiritu, ticketing agent of defendant PAL, and that no employee
of CAL contributed to such erroneous entry. It was further ruled that the plaintiff had no reason to claim moral
damages but may be entitled to recover exemplary damages. The dispositive portion of the decision makes the
following adjudication:

WHEREFORE, premises considered, judgment is hereby rendered sentencing the defendants

Philippine Air Lines, Inc. and Roberto Espiritu, to pay to plaintiff Jose Pagsibigan jointly and
severally, by way of exemplary damages, the sum of Twenty Thousand Pesos (P20,000.00)
plus Two Thousand Pesos (P2,000.00) as reimbursement for attorney's fees and the costs.

The complaint is dismissed with respect to the defendant China Air Lines, Ltd. The cross-claim
filed by defendant PAL and Espiritu against defendant CAL as well as the cross-claim filed by
the defendant CAL against defendant PAL and Espiritu are also hereby dismissed. 3

From said decision of the court below, all the parties, except China Air Lines, Ltd. appealed to respondent court which, however,
sustained the ruling of the trial court denying Pagsibigan's claim for moral damages. It concluded that Roberto Espiritu did not
act with malice or in bad faith in making a wrong entry of the time of departure on the ticket, and that the mistake committed
by Espiritu appears to be an honest one done in good faith.

Respondent court also ruled out the claim for exemplary damages for lack of legal basis. Nonetheless, as earlier noted, it
awarded Pagsibigan P20,000.00 as nominal damages, under Article 2221 of the Civil Code, for the vindication of a legal wrong
committed against him. As regards the liability of the parties, respondent court held:

There can be little question as to the liability of PAL and Espiritu for the damage caused to the plaintiff due to
the erroneous entry in the plane ticket made by the latter. They seek to justify the erroneous statement as to
the time of departure on the ground that such was the time given by Dory Chan to Espiritu when the latter
called up for the reservation in favor of plaintiff. Aside from the fact that Dory Chan had vigorously disclaimed
having given such information to Espiritu, We are convinced that, as the trial court had found, CAL had no
share in the error committed by Espiritu in indicating the time of departure of Flight No. 812. PAL had shown
through the testimony of Carmen Ibazeta Gallaga, ticket representative of PAL at the Manila Hotel Office, that
they received circulars and timetables of airlines in the PAL main office. It further appears that on two
occasions, defendant PAL cut and issued tickets for CAL based on the new schedule even before June 10,
1968. As a matter of fact, the other entries of time departures in the ticket issued to the plaintiff are in
accordance with the revised schedule, and that the only error therein was with respect to the departure from
Manila on June 10, 1968.

However, in proving that the fault lied with Espiritu, defendant CAL derives no solace nor gains an advantage.
It may not claim exemption from liability by reason thereof. Espiritu was an employee of PAL and whatever
negligence was committed by him is attributable to PAL. It is an admitted fact that PAL is an authorized agent
of CAL. In this relationship, the responsibility of defendant PAL for the tortious act of its agent or
representative is inescapable. . . .

xxx xxx xxx

A similar principle is recognized in our Civil Code in its Art. 2180 . . . . Unlike in the doctrine of  respondeat
superior, however, the Civil Code permits the employer to escape this liability upon proof of having observed
all the diligence of a good father of a family to prevent the damage. We find the evidence of defendant CAL to
be insufficient to overcome the presumption of negligence on its part for the act done by defendant Roberto
Espiritu. (Emphasis supplied)

The liability for the damage sustained by the plaintiff should, therefore, be borne by all of the defendants in a
joint and solidary capacity (Art. 2194). The liability of an employer under Art. 2180 is primary and direct. . . .

xxx xxx xxx

It appearing that defendant CAL, as employer or principal, did not contribute to the negligence committed by
defendants PAL and Roberto Espiritu, its liability to the plaintiff could be passed on to said defendants.
Defendant CAL, however, did not take an appeal and did not, therefore, take exception to the dismissal of its
cross-claim against defendants PAL and Espiritu. This serves as an obstacle for a rendition of judgment
favorable to CAL on its said counterclaim. 4

In its petition for review on certiorari in G.R. No. L-45985, petitioner China Air Lines, Ltd. (CAL) relied on the following grounds:
 1. A principal cannot be held liable, much less solidarily, for the negligence of the sub-agent, where the former
never participated in, ratified or authorized the latter's act or omission.

2. Dismissal of the cross-claim of petitioner against the private respondents Philippine Air Lines, Inc. and
Roberto Espiritu will not prevent the release of the petitioner from liability to the private respondent
Pagsibigan.

3. The award of damages was unwarranted both legally and factually. 5

On their part, petitioners Philippine Air Lines, Inc. (PAL) and Roberto Espiritu made the following submissions in G.R. No. L-
46036, to wit:

1. The respondent Court of Appeals erred in not holding that respondent China Air Lines, Ltd., being the
principal, is solely liable to respondent Pagsibigan.

2. The respondent Court of Appeals erred in awarding respondent Pagsibigan the sum of P20,000.00 as
nominal damages. 6

In G.R. No. L-45985, respondent Pagsibigan contends, by way of refutation, that CAL's liability is based on breach of contract of
transportation which was the proximate result of the negligence and/or error committed by PAL and Espiritu; that even
assuming that CAL has no share in the negligence of PAL and Espiritu, the liability of CAL does not cease upon proof that it
exercised all the diligence of a good father of a family in the selection and supervision of its employees. Traversing such
contentions, CAL argues that it can not be made liable under Article 2180 of the Civil Code because of the absence of employer-
employee relationship between it and PAL.

On the other hand, in G.R. No. L-46036, respondent Pagsibigan claims that PAL is liable under Article 1909 of the said code
which holds an agent 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. PAL, however, maintains that for lack of privity
with Pagsibigan, the suit for breach of contract should have been directed against CAL.

What surfaces as a procedural maneuver taken by respondent Pagsibigan in the course of the proceedings in these cases has
confused the real issues in the controversy subject of both petitions before us.

Respondent Pagsibigan has opted to seek redress by pursuing two remedies at the same time, that is, to enforce the civil
liability of CAL for breach of contract and, likewise, to recover from PAL and Espiritu for tort or  culpa aquiliana. What he has
overlooked is the proscription against double recovery under Article 2177 of the Civil Code which, while not preventing recourse
to any appropriate remedy, prevents double relief for a single wrong.

To avoid inequitable effects under such confluence of remedies, the true nature of the action instituted by respondent
Pagsibigan must be determined. A careful perusal of the complaint of respondent Pagsibigan will readily disclose that the
allegations thereof clearly and unmistakably make out a case for a quasi-delict in this wise:

4. That at all pertinent times particularly in June of 1968, defendant China Air Lines Ltd. has been operating
regular scheduled flights to and from Manila, and has offered accommodations thereon through, among others,
defendant PAL as its authorized sales agent and/or ticketing agent, such that China Airlines Ltd. is here
impleaded as being the principal of defendant PAL;

5. That at all pertinent times, particularly in June of 1968, defendant Roberto Espiritu has been in the employ
of defendant PAL at its sales counter at the PAL Manila Hotel branch office and is here impleaded as defendant
as being the proximate malfeasor in this cause of action;

xxx xxx xxx

12. That plaintiff missed the initial Manila-Taipei leg (CI Flight 812) on June 10, 1968, as set forth in his ticket
(Annex "A") solely and exclusively by reason of gross incompetence and inexcusable negligence  amounting to
bad faith of defendant PAL — acting, through its sales representative, the defendant Roberto Espiritu, of its
Manila Hotel branch office — in the discharge of its duties as sales agent and/or ticketing agent for defendant
China Airlines Ltd. as principal.

13. That as a direct result of culpable incompetence and negligence  of defendant Roberto Espiritu as sales
representative of defendant PAL, plaintiff was unable to attend to previously scheduled business commitments
in Taipei . . . resulting in direct and indirect prejudice to plaintiff that has yet to be fully assessed; (Emphasis
supplied) 7

xxx xxx xxx

Had the intention of respondent Pagsibigan been to maintain an action based on breach of contract of carriage, he could have
sued CAL alone considering that PAL is not a real party to the contract. Moreover, in cases of such nature, the aggrieved party
does not have to prove that the common carrier was at fault or was negligent. All he has to prove is the existence of the
contract and the fact of its non-performance by the carrier. 8
The records disclose that the trial court delved much into the issues of who was at fault, and its decision is primarily anchored
on its factual findings regarding the civil liability arising from culpa aquiliana  of the erring party, to this effect:

Plaintiff said that the erroneous entry in his ticket which made it appear that his CAL flight of June 10, 1968
was to be at 5:20 in the afternoon was due to the fault or negligence of PAL's Roberto Espiritu, a co-defendant
herein, as well as the employees of the defendant CAL. In making CAL co-responsible, plaintiff appears to rely
on the doctrine that the principal is responsible for the act of an agent done within the scope of the agency.

There is no proof extant that any of the employees of PAL had contributed to the erroneous entry in plaintiffs
PAL ticket for Taipei which placed his time of departure to 5:20 o'clock in the afternoon of June 10, 1968. Only
defendant Roberto Espiritu appears to be solely and exclusively responsible for such error and therefor the
conclusion becomes inevitable that CAL must be absolved from any blame because defendant Roberto Espiritu
who committed the error is not an employee or agent of the defendant CAL. 9

It, therefore, becomes evident that respondent Pagsibigan, having sensed that he can not hold CAL liable on a quasi-
delict, decided on appeal to instead make a sinistral detour, so to speak, by claiming that his action against CAL is based on a
breach of contract of carriage.

We can not permit respondent Pagsibigan to change his theory at this stage; it would be unfair to the adverse party who would
have no more opportunity to present further evidence, material to the new theory, which it could have done had it been aware
earlier of the new theory at the time of the hearing before the trial court. 10

There is indeed no basis whatsoever to hold CAL liable on a quasi-delict or culpa aquiliana.  As hereinbefore stated, the court a
quo absolved CAL  of any liability for fault or negligence. This finding was shared by respondent court when it concluded that
defendant CAL did not contribute to the negligence committed by therein defendants-appellants PAL and Roberto Espiritu.

Respondent Pagsibigan insists that CAL was barred from proving that it observed due diligence in the selection and supervision
of its employees. This argument is obviously misplaced. CAL is not the employer of PAL or Espiritu. In  Duavit vs. The
Hon. Court of Appeals, et al., 11 we have stressed the need of first establishing the existence of an employer-employee
relationship before an employer may be vicariously liable under Article 2180 of the Civil Code.

With respect to PAL and Espiritu, they disclaim any liability on the theory that the former is merely an agent of CAL and that the
suit should have been directed against CAL alone. There is no question that the contractual relation between both airlines is one
of agency. Suffice it to say, however, that in an action premised on the employee's negligence, whereby respondent Pagsibigan
seeks recovery for the resulting damages from both PAL and Espiritu without qualification, what is sought to be imposed is the
direct and primary liability of PAL as an employer under said Article 2180.

When an injury is caused by the negligence of an employee, there instantly arises a presumption of law that there was
negligence on the part of the employer either in the selection of the employee or in the supervision over him after such
selection. The presumption, however, may be rebutted by a clear showing on the part of the employer that it has exercised the
care and diligence of a good father of a family in the selection and supervision of his employee. 12

Hence, to escape solidary liability for the quasi-delict committed by Espiritu, it is imperative that PAL must adduce sufficient
proof that it exercised such degree of care. PAL failed to overcome the presumption. As found by respondent court, CAL had
revised its schedule of flights since April 1, 1968; that after the Civil Aeronautics Board had approved the revised schedule of
flights, PAL was duly informed thereof and, in fact, PAL's Manila Hotel branch office had been issuing and selling tickets based
on the revised time schedule before June 10, 1968.

PAL's main defense is that it is only an agent. As a general proposition, an agent who duly acts as such is not personally liable
to third persons. However, there are admitted exceptions, as in this case where the agent is being sued for damages arising
from a tort committed by his employee.

The respondent court found that the mistake committed by Espiritu was done in good faith. While there is no evidence that he
acted with malice, we can not entirely condone his actuations. As an employee of PAL, the nature of his functions requires him
to observe for the protection of the interests of another person that degree of care, precaution and vigilance which the
circumstances justly demand. He committed a clear neglect of duty.

Ergo, for his negligence, Espiritu is primarily liable to respondent Pagsibigan under Article 2176 of the Civil Code. For the failure
of PAL to rebut the legal presumption of negligence in the selection and supervision of its employee, it is also primarily liable
under Article 2180 of the same code which explicitly provides that employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.

Under the aforesaid provision, all that is required is that the employee, by his negligence, committed a  quasi-delict which
caused damage to another, and this suffices to hold the employer primarily and solidarity responsible for the tortious act of the
employee. PAL, however, can demand from Espiritu reimbursement of the amount which it will have to pay the offended party's
claim. 13

On the issue of damages, we agree, except as to the amount, that nominal damages may be awarded to respondent Pagsibigan
to vindicate the legal wrong committed against him. It appearing that the wrong committed was immediately rectified when PAL
promptly booked him for the next morning's flight to Taipei where he arrived before noon of June 11, 1968 and was able to
attend his scheduled conference, and considering the concept and purpose of nominal damages, the award of P20,000.00 must
accordingly be reduced to an amount equal or at least commensurate to the injury sustained.

WHEREFORE, the decision of respondent Court of Appeals is MODIFIED accordingly. China Air Lines, Ltd. is hereby absolved
from liability. Philippine Air Lines, Inc. and Roberto Espiritu are declared jointly and severally liable to pay the sum of P10,000.00
by way of nominal damages, without prejudice to the right of Philippine Air Lines, Inc. to recover from Roberto Espiritu
reimbursement of the damages that it may pay respondent Jose Pagsibigan.

SO ORDERED.
 FIRST DIVISION

[G.R. No. 95703. August 3, 1992.]

RURAL BANK OF BOMBON (CAMARINES SUR), INC., Petitioner, v. HON. COURT OF APPEALS, EDERLINDA M.
GALLARDO, DANIEL MANZO and RUFINO S. AQUINO, Respondents.

L.M. Maggay & Associates for Petitioner.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; AGENT MAY BIND PRINCIPAL IN A REAL ESTATE MORTGAGE;
REQUISITE. — 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. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by
virtue of a power of attorney, if in fact the agent has acted in his own name and has set his own hand and seal to the
mortgage. This is especially true where the agent himself is a party to the instrument. However clearly the body of the
mortgage may show and intend that it shall be the act of the principal, yet, unless in fact it is executed by the agent for and on
behalf of his principal and as the act and deed of the principal, it is not valid as to the principal. (Philippine Sugar Estates
Development Co. v. Poizat, 48 Phil. 536)

2. ID.; ID.; ID.; ID.; CASE AT BAR. — In view of this rule, Aquino’s act of signing the Deed of Real Estate Mortgage in his name
alone as mortgagor, without any indication that he was signing for and in behalf of the property owner, Ederlinda Gallardo,
bound himself alone in his personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-fact of
Gallardo.

3. ID.; ID.; ID.; AGENT ACTING IN HIS PERSONAL CAPACITY IN EXECUTING A MORTGAGE CAN NOT BIND THE PROPERTIES
OF HIS PRINCIPAL; RATIONALE; CASE AT BAR. — Article 1883 of the Civil Code relied upon by the petitioner Bank, is not
applicable to the case at bar. Herein respondent Aquino acted purportedly as an agent of Gallardo, but actually acted in his
personal capacity. Involved herein are properties titled in the name of respondent Gallardo against which the Bank proposes to
foreclose the mortgage constituted by an agent (Aquino) acting in his personal capacity. Under these circumstances, we hold, as
we did in Philippine Sugar Estates Development Co. v. Poizat, supra, that Gallardo’s property is not liable on the real estate
mortgage: "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.

DECISION

GRIÑO-AQUINO, J.:

This petition for review seeks reversal of the decision dated September 18, 1990 of the Court of Appeals, reversing the decision
of the Regional Trial Court of Makati, Branch 150. which dismissed the private respondents’ complaint and awarded damages to
the petitioner, Rural Bank of Bombon.chanrobles virtual lawlibrary

On January 12, 1981, Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power of attorney in favor of Rufino S.
Aquino authorizing him:jgc:chanrobles.com.ph

"1. To secure a loan from any bank or lending institution for any amount or otherwise mortgage the property covered by
Transfer Certificate of Title No. S-79238 situated at Las Piñas, Rizal. the same being my paraphernal property and in that
connection. to sign, or execute any deed of mortgage and sign other document requisite and necessary in securing said loan
and to receive the, proceeds thereof in cash or in check and to sign the receipt therefor and thereafter endorse the check
representing the proceeds of loan." (p. 10, Rollo.)

Thereupon, Gallardo, delivered to Aquino both the special power of attorney and her owner’s copy of Transfer Certificate of Title
No. S-79238 (19963-A).

On August 26, 1981, a Deed of Real Estate Mortgage was executed by Rufino S. Aquino in favor of the Rural Bank of Bombon
(Camarines Sur). Inc. (hereafter, defendant Rural Bank) over the three parcels of land covered by TCT No. S-79238. The deed
stated that the property was being given as security for the payment of "certain loans, advances, or other accommodations
obtained by the mortgagor from the mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only (P350,000.00),
plus interest at the rate of fourteen (14%) per annum . . ." (p. 11, Rollo).

On January 6, 1984, the spouses Ederlinda Gallardo and Daniel Manzo filed an action against Rufino Aquino and the Bank
because Aquino-allegedly left his residence at San Pascual, Hagonoy, Bulacan, and transferred to an unknown place in Bicol.
She discovered that Aquino first resided at Sta. Isabel, Calabanga, Camarines Sur, and then later, at San Vicente, Calabanga,
Camarines Sur, and that they (plaintiffs) were allegedly surprised to discover that the property was, mortgaged to pay personal
loans obtained by Aquino from the Bank solely for personal use and benefit of Aquino that the mortgagor in the deed was
defendant Aquino instead of plaintiff Gallardo whose address up to now is Manuyo, Las Piñas, M. M. per the title (TCT No. S-
79238) and in the deed vesting power of attorney to Aquino; that correspondence relative to the mortgage was sent to Aquino’
address at "Sta. Isabel, Calabanga, Camarines Sur" instead of Gallardo’s postal address at Las Piñas, Metro Manila: and that
defendant Aquino, in the real estate mortgage, appointed defendant Rural Bank as attorney in fact, and in case of judicial
foreclosure as receiver with corresponding power to sell and that although without any express authority from Gallardo,
defendant Aquino waived Gallardo’s rights under Section 12, Rule 39, of the Rules of Court and the proper venue of the
foreclosure suit.

On January 23, 1984, the trial court, thru the Honorable Fernando P. Agdamag, temporarily restrained the Rural Bank "from
enforcing the real estate mortgage and from foreclosing it either judicially or extrajudically until further orders from the court"
(p. 36, Rollo).

Rufino S. Aquino in his answer said that the plaintiff authorized him to mortgage her property to a bank so that he could use the
proceeds to liquidate her obligation of P350,000 to him. The obligation to pay the Rural Bank devolved on Gallardo. Of late,
however, she asked him to pay the Bank but defendant Aquino set terms, and conditions which plaintiff did not agree to Aquino
asked for payment to him of moral damages in the sum of P50.000 and lawyer’s fees of P35,000.

The Bank moved to dismiss the complaint and filed counterclaim for litigation expenses, exemplary damages, and attorney’s
fees. It also filed a cross claim against Aquino for P350,000 with interest, other bank charges and damages if the mortgage be
declared unauthorized.chanrobles lawlibrary : rednad

Meanwhile, on August 30, 1984, the Bank filed a complaint against Ederlinda Gallardo and Rufino Aquino for "Foreclosure of
Mortgage" docketed as Civil Case No. 8330 in Branch 141, RTC Makati. On motion of the plaintiff, the foreclosure case and the
annulment case (Civil Case No. 6052) were consolidated.

On January 16, 1986, the trial court rendered a summary judgment in Civil Case No. 6062, dismissing the complaint for
annulment or mortgage and declaring the Rural Bank entitled to damages the amount of which will be determined in
appropriate proceedings. The court lifted the writ of preliminary injunction it previously issued.

On April 23, 1986, the trial court, in Civil Case No. 8330, issued an order suspending the foreclosure proceedings until after the
decision in the annulment case (Civil Case No. 6062) shall have become final and executory.

The plaintiff in Civil Case No. 6062 appealed to the Court of Appeals, which on September 18, 1990, reversed the trial court.
The dispositive portion of the decision reads:jgc:chanrobles.com.ph

"UPON ALL THESE, the summary judgment entered by the lower court is hereby REVERSED and in lieu thereof, judgment is
hereby RENDERED, declaring the deed of real estate mortgage dated August 26, 1981, executed, between Rufino S. Aquino
with the marital consent of his wife, Bibiana Aquino with the appellee Rural Bank of Bombon, Camarines Sur, unauthorized, void
and unenforceable against plaintiff Ederlinda Gallardo; ordering the reinstatement of the preliminary injunction issued at the
onset of the case and at the same time, ordering said injunction made permanent.

"Appellee Rural Bank to pay the costs." (p. 46, Rollo.)

Hence, this petition for review by the Rural Bank of Bombon, Camarines Sur, alleging that the Court of Appeals
erred:chanrob1es virtual 1aw library

1. in declaring that the Deed of Real Estate Mortgage was unauthorized, void, and unenforceable against the private respondent
Ederlinda Gallardo: and

2. in not upholding the validity of the Real Estate Mortgage executed by Rufino S. Aquino as attorney-in-fact for Gallardo, in
favor of the Rural Bank of Bombon, (Cam. Sur), Inc.

Both assignments of error boil down to the lone issue of the validity of the Deed of Real Estate Mortgage date August 26, 1981,
executed by Rufino S. Aquino, as attorney-in-fact of Ederlinda Gallardo, in favor of the Rural Bank of Bombon (Cam. Sur), Inc.

The Rural bank contends that the real estate mortgage executed by respondent Aquino is valid because he was expressly
authorized by Gallardo to mortgage her property under the special power of attorney she made in his favor which was duly
registered and annotated on Gallardo’s title. Since the Special Power of Attorney did not specify or indicate that the loan would
be for Gallardo’s benefit, then it could be for the use and benefit of one attorney-in-fact, Aquino.

However, the Court of Appeals ruled otherwise. It held:jgc:chanrobles.com.ph

"The Special Power of Attorney above quoted shows the extent of authority given by the plaintiff to defendant Aquino. But
defendant Aquino in executing the deed of Real Estate Mortgage in favor of the rural bank over the three parcels of land
covered by Gallardo’s title named himself as the mortgagor without stating that his signature on the deed was for and in behalf
of Ederlinda Gallardo in his capacity as her attorney-in-fact.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

"At the beginning of the deed mention was made of `attorney-in-fact of Ederlinda H. Gallardo thus: (T)his MORTGAGE executed
by Rufino S. Aquino attorney in fact of Ederlinda H. Gallardo, of legal age, Filipino, married to Bibiana Panganiban with postal
address at Sta. Isabel . . .,’ but which of itself, was merely descriptive of the person of defendant Aquino Defendant Aquino
even signed it plainly as mortgagor with the marital consent yet of his wife Bibiana P. Aquino who signed the deed as wife of
mortgagor.’

x       x       x
"The three (3) promissory notes respectively dated August 31, 1981. September 23, 1981 and October 23, 1981, were each
signed by Rufino Aquino on top of a line beneath which is written ‘signature of mortgagor’ and by, Bibiana P. Aquino on top of a
line under which is written ‘signature of spouse,’ without any mention that execution thereof was for and in behalf of the
plaintiff as mortgagor. It results, borne out from what were written on the deed, that the amounts were the personal loans of
defendant Aquino. As pointed out by the appellant, Aquino’s wife has not been appointed co-agent of defendant Aquino and her
signature on the deed and on the promissory notes can only mean that the obligation was personal by incurred by them and for
their own personal account.

"The deed of mortgage stipulated that the amount obtained from the loans shall be used or applied only for ‘fishpond bangus
and sugpo production).’ As pointed out by the plaintiff, the defendant Rural Bank in its Answer, had not categorically denied the
allegation in the complaint that defendant Aquino in the deed of mortgage was the intended user and beneficiary of the loans
and not the plaintiff. And the special power of attorney could not-be stretched to include the authority to obtain a loan in said
defendant Aquino’s own benefit." (pp. 40-41, Rollo.)

The decision of the Court of Appeals is correct. This case is governed by the general rule in the law of agency which this Court
applied in "Philippine Sugar Estates Development Co. v. Poizat," 48 Phil. 536, 538:jgc:chanrobles.com.ph

"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. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a power of
attorney, if in fact the agent has acted in his own name and has set his own hand and seal to the mortgage. This is especially
true where the agent himself is a party to the instrument. However clearly the body of the mortgage may show and intend that
it shall be the act of the principal, yet, unless in fact it is executed by the agent for and on behalf of his principal and as the act
and deed of the principal, it is not valid as to the principal."cralaw virtua1aw library

In view of this rule, ‘Aquino’s act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor, without any
indication that he was signing for and in behalf of the property owner, Ederlinda Gallardo, bound himself alone in his personal
capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-fact of Gallardo. The Court of Appeals further
observed:jgc:chanrobles.com.ph

"It will also be observed that the deed of mortgage was executed on August 26, 1981 therein clearly stipulating that it was
being executed as security for the payment of certain loans, advances, or other accommodation obtained by the Mortgagor from
the Mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only (P350,000.00) although at the time no such loan or
advance had been obtained. The promissory notes were dated August 26, 1981 which were subsequent to the execution of the
deed of mortgage. The appellant is correct in claiming that the defendant Rural Bank should not have agreed to extend or
constitute the mortgage on the properties of Gallardo who had no existing indebtedness with it at the time.chanrobles lawlibrary
: rednad

"Under the facts the defendant Rural Bank appeared to have ignored the representative capacity of Aquino and dealt with him
and his wife in their personal capacities. Said appellee Rural Bank also did not conduct an inquiry on whether the subject loans
were to benefit (plaintiff Gallardo) rather than that of the agent although the deed of mortgage was explicit that the loan was
for purpose of the bangus and sugpo production of defendant Aquino.

"In effect, with the execution of the mortgage under the circumstances and assuming it to be valid but because the loan taken
was to be used exclusively for Aquino’s business in the ‘bangus’ and ‘sugpo’ production. Gallardo in effect becomes a surety who
is made primarily answerable for loans taken by Aquino in his personal capacity in the event Aquino defaults in such payment.
Under Art. 1878 of the Civil Code, to obligate the principal as a guarantor or surety, a special power of attorney is required. No
such special power of attorney for Gallardo to be a surety of Aquino had been executed." (pp. 42-43, Rollo.)

Petitioner claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since it was executed in accordance with
Article 1883 which provides:jgc:chanrobles.com.ph

"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." cralaw virtua1aw library

The above provision of the Civil Code relied upon by the petitioner Bank, is not applicable to the case at bar. Herein respondent
Aquino acted purportedly as an agent of Gallardo, but actually acted in his personal capacity. Involved herein are properties
titled in the name of respondent Gallardo against which the Bank proposes to foreclose the mortgage constituted by an agent
(Aquino) acting in his personal capacity. Under these circumstances, we hold as we did in Philippine Sugar Estates Development
Co. v. Poizat, supra, that Gallardo’s property is not liable on the real estate mortgage: jgc:chanrobles.com.ph

"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." (p. 548.)chanrobles.com:cralaw:red

WHEREFORE, finding no reversible error in the decision of the Court of Appeals, we AFFIRM it in toto. Costs against the
petitioner.
SO ORDERED.
 FIRST DIVISION

[G.R. No. 95909. August 16, 1991.]

UNILAND RESOURCES, Petitioner, v. DEVELOPMENT BANK OF THE PHILIPPINES ** , Respondent.

Romeo G. Roxas for Petitioner.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL; PETITION FOR CERTIORARI AS A MODE OF APPEAL; RULE. — The rule is that
in petitions for certiorari as a mode of appeal, only questions of law distinctly set forth may be raised. Such questions have been
defined as those that do not call for any examination of the probative value of the evidence presently by the parties. (Goduco v.
Court of Appeals, Et Al., G.R. No. L-17647, 28 February 1964, 119 Phil. 531. See also Hernandez v. Court of Appeals, G.R. No.
L-39767, 31 March 1987, 149 SCRA 67)

2. ID.; EVIDENCE; FINDINGS OF FACT MADE BY COURT OF APPEALS; RULE. — It bears emphasizing that mere disagreement
between the Court of Appeals and the trial court as to the facts of a case does not of itself warrant this Court’s review of the
same. It has been held that the doctrine that the findings of fact made by the Court of Appeals, being conclusive in nature, are
binding on this Court, applies even if the Court of Appeals was in disagreement with the lower court as to the weight of
evidence with a consequent reversal of its findings of fact, so long as the findings of the Court of Appeals are borne out by the
record or based on substantial evidence.

3. CIVIL LAW; SPECIAL CONTRACTS; AGENCY; FOUNDED ON MUTUAL CONSENT. — The basic axiom in Civil Law that no one
may contract in the name of another without being authorized by the latter, unless the former has by law a right to represent
him (Art. 1317, Civil Code). From this principle, among others, springs the relationship of agency which, as with other contracts,
is one founded on mutual consent: the principal agrees to be bound by the acts of the agent and the latter in turn consents to
render service on behalf or in representation of the principal.

DECISION

GANCAYCO, J.:

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

As stated by the respondent Court of Appeals, 2 the ambient circumstances of this case are as follows: chanrob1es virtual 1aw
library

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

(2) Long before this case arose, Marinduque Mining Corporation obtained a loan from the DBP and as security therefor,
mortgaged certain real properties to the latter, among them two lots located in Makati, M.M., described as follows:chanrob1es
virtual 1aw library

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

(b) Lot covered by TCT No. 13279 with 12,355 sq. mts., located at Pasong Tamo, Makati, on which is constructed a
concrete/steel warehouse, etc., which, for brevity, shall be called the warehouse lot.

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

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

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

(4) Considering, however, that Caltex had required that both lots be redeemed, the bidding guidelines set by DBP provided that
any bid to purchase either of the two lots would be considered only should there be two bids or a bid; for the two items which,
when combined, would fully cover the sale of the two lots in question (Exh. "1").
(5) The aforesaid bidding was held on May 5, 1987 with only one bidder, the Counsel Realty Corp. [an affiliate of Glaxo,
Philippines, the client of petitioner], which offered a bid only for the warehouse lot in the amount of P23,900,000.00. Said bid
was thus rejected by DBP.

(6) Seeing, however, that it would make a profit if it redeemed the two lots and then offer them for sale, and as its right to
redeem said lots from Caltex would expire on May 8, 1987, DBP retrieved the account from APT and, on the last day for the
exercise of its right of redemption, May 8, 1987, redeemed said lots from Caltex for P33,096,321.62 (Exh. "5"), thus acquiring
them as its physical assets.

(7) In preparation for the sale of the two lots in question, DBP called a pre-bidding conference wherein a new set of bidding
guidelines were formulated (Exh. "3"). Then, on July 30, 1987, the public bidding for the sale of the two lots was held and
again, there was only one bidder, the Clarges Realty Corp. [another affiliate of Glaxo, Philippines], for only the warehouse lot
and for the amount of P24,070,000.00, which is slightly higher than the amount previously offered by Counsel Realty Corp.,
therefor at the May 5, 1987 bidding (see Exh. "5," p. 100, Rec.). No bid was submitted for the office building lot (id.).

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

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

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

"ORDERING [respondent DBP] to pay [petitioner] the sum of P1,203,500.00 which is the equivalent of [five percent] broker’s
fee plus legal interest thereto (sic) from the filing of the complaint on February 18, 1988 until fully paid and the sum of
P50,000.00 as and for attorney s fees. Costs against [respondent DBP]." (p. 122, Rec.) 3

On appeal, the Court of Appeals reversed the judgment of the lower court 4 and dismissed the complaint. The motion for
reconsideration filed by petitioner was also subsequently denied. 5

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

The rule is that in petitions for certiorari as a mode of appeal, only questions of law distinctly set forth may be raised. 8 Such
questions have been defined as those that do not call for any examination of the probative value of the evidence presented by
the parties. 9 Petitioner’s singular assignment of error would, however, have this Court go over the facts of this case because it
necessarily involves the examination of the evidence and its subsequent re-evaluation. Under the present proceeding, the same,
therefore, cannot be done.

It bears emphasizing that mere disagreement between the Court of Appeals and the trial court as to the facts of a case does not
of itself warrant this Court’s review of the same. It has been held that the doctrine that the findings of fact made by the Court
of Appeals, being conclusive in nature, are binding on this Court, applies even if the Court of Appeals was in disagreement with
the lower court as to the weight of evidence with a consequent reversal of its findings of fact, so long as the findings of the
Court of Appeals are borne out by the record or based on substantial evidence. 10 While the foregoing doctrine is not absolute,
petitioner has not sufficiently proved that his case falls under the known exceptions. 11

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

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

In its reply submitted pursuant to the resolution requiring the same, 13 petitioner also invokes Article 1869 of the new Civil
Code 14 in contending that an implied agency existed. Petitioner argues that it "should have been stopped, disauthorized and
outrightly prevented from dealing the 12,355 sq. m. (with warehouse) [sic] by the DBP from the inception." 15 On the contrary,
these steps were never necessary. In the course of petitioner’s dealings with the DBP, it was always made clear to petitioner
that only accredited brokers may look for buyers on behalf of respondent DBP. This is not a situation wherein a third party was
prejudiced by the refusal of respondent DBP to recognize petitioner as its broker. The controversy is only between the DBP and
petitioner, to whom it was emphasized in no uncertain terms that the arrangement sought did not exist. Article 1869, therefore,
has no room for operation in this case.

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

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

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

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

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

Petitioner claims the amount of P1,203,500.00 awarded by the trial court as commission computed at five percent of the sale
price of the warehouse property. Under the foregoing disquisition and following the precedent, as well as roughly the
proportion, set in Prats, the Court in equity grants petitioner the sum of One Hundred Thousand Pesos (P100,000.00) for the
role it played in the transaction between respondent DBP and buyer Glaxo, Philippines. It is emphasized, however, that the
circumstances that came into play in this case do not meet the minimum legal standards required for the existence of an agency
relationship and that the award is based purely on equity considerations. Accordingly, petitioner’s other arguments need not
now be discussed.

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

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-7089             August 31, 1954
DOMINGO DE LA CRUZ, plaintiff-appellant,
vs.
NORTHERN THEATRICAL ENTERPRISES INC., ET AL., defendants-appellees.
Conrado Rubio for appellant.
Ruiz, Ruiz, Ruiz, Ruiz, and Benjamin Guerrero for appellees.

MONTEMAYOR, J.:

The facts in this case based on an agreed statement of facts are simple. In the year 1941 the Northern Theatrical Enterprises
Inc., a domestic corporation operated a movie house in Laoag, Ilocos Norte, and among the persons employed by it was the
plaintiff DOMINGO DE LA CRUZ, hired as a special guard whose duties were to guard the main entrance of the cine, to maintain
peace and order and to report the commission of disorders within the premises. As such guard he carried a revolver. In the
afternoon of July 4, 1941, one Benjamin Martin wanted to crash the gate or entrance of the movie house. Infuriated by the
refusal of plaintiff De la Cruz to let him in without first providing himself with a ticket, Martin attacked him with a bolo. De la
Cruz defendant himself as best he could until he was cornered, at which moment to save himself he shot the gate crasher,
resulting in the latter's death.

For the killing, De la Cruz was charged with homicide in Criminal Case No. 8449 of the Court of First Instance of Ilocos Norte.
After a re-investigation conducted by the Provincial Fiscal the latter filed a motion to dismiss the complaint, which was granted
by the court in January 1943. On July 8, 1947, De la Cruz was again accused of the same crime of homicide, in Criminal Case
No. 431 of the same Court. After trial, he was finally acquitted of the charge on January 31, 1948. In both criminal cases De la
Cruz employed a lawyer to defend him. He demanded from his former employer reimbursement of his expenses but was
refused, after which he filed the present action against the movie corporation and the three members of its board of directors,
to recover not only the amounts he had paid his lawyers but also moral damages said to have been suffered, due to his worry,
his neglect of his interests and his family as well in the supervision of the cultivation of his land, a total of P15,000. On the basis
of the complaint and the answer filed by defendants wherein they asked for the dismissal of the complaint, as well as the
agreed statement of facts, the Court of First Instance of Ilocos Norte after rejecting the theory of the plaintiff that he was an
agent of the defendants and that as such agent he was entitled to reimbursement of the expenses incurred by him in
connection with the agency (Arts. 1709-1729 of the old Civil Code), found that plaintiff had no cause of action and dismissed
the complaint without costs. De la Cruz appealed directly to this Tribunal for the reason that only questions of law are involved
in the appeal.

We agree with the trial court that the relationship between the movie corporation and the plaintiff was not that of principal and
agent because the principle of representation was in no way involved. Plaintiff was not employed to represent the defendant
corporation in its dealings with third parties. He was a mere employee hired to perform a certain specific duty or task, that of
acting as special guard and staying at the main entrance of the movie house to stop gate crashers and to maintain peace and
order within the premises. The question posed by this appeal is whether an employee or servant who in line of duty and while in
the performance of the task assigned to him, performs an act which eventually results in his incurring in expenses, caused not
directly by his master or employer or his fellow servants or by reason of his performance of his duty, but rather by a third party
or stranger not in the employ of his employer, may recover said damages against his employer.

The learned trial court in the last paragraph of its decision dismissing the complaint said that "after studying many laws or
provisions of law to find out what law is applicable to the facts submitted and admitted by the parties, has found none and it
has no other alternative than to dismiss the complaint." The trial court is right. We confess that we are not aware of any law or
judicial authority that is directly applicable to the present case, and realizing the importance and far-reaching effect of a ruling
on the subject-matter we have searched, though vainly, for judicial authorities and enlightenment. All the laws and principles of
law we have found, as regards master and servants, or employer and employee, refer to cases of physical injuries, light or
serious, resulting in loss of a member of the body or of any one of the senses, or permanent physical disability or even death,
suffered in line of duty and in the course of the performance of the duties assigned to the servant or employee, and these cases
are mainly governed by the Employer's Liability Act and the Workmen's Compensation Act. But a case involving damages caused
to an employee by a stranger or outsider while said employee was in the performance of his duties, presents a novel question
which under present legislation we are neither able nor prepared to decide in favor of the employee.

In a case like the present or a similar case of say a driver employed by a transportation company, who while in the course of
employment runs over and inflicts physical injuries on or causes the death of a pedestrian; and such driver is later charged
criminally in court, one can imagine that it would be to the interest of the employer to give legal help to and defend its
employee in order to show that the latter was not guilty of any crime either deliberately or through negligence, because should
the employee be finally held criminally liable and he is found to be insolvent, the employer would be subsidiarily liable. That is
why, we repeat, it is to the interest of the employer to render legal assistance to its employee. But we are not prepared to say
and to hold that the giving of said legal assistance to its employees is a legal obligation. While it might yet and possibly be
regarded as a normal obligation, it does not at present count with the sanction of man-made laws.

If the employer is not legally obliged to give, legal assistance to its employee and provide him with a lawyer, naturally said
employee may not recover the amount he may have paid a lawyer hired by him.

Viewed from another angle it may be said that the damage suffered by the plaintiff by reason of the expenses incurred by him
in remunerating his lawyer, is not caused by his act of shooting to death the gate crasher but rather by the filing of the charge
of homicide which made it necessary for him to defend himself with the aid of counsel. Had no criminal charge been filed
against him, there would have been no expenses incurred or damage suffered. So the damage suffered by plaintiff was caused
rather by the improper filing of the criminal charge, possibly at the instance of the heirs of the deceased gate crasher and by
the State through the Fiscal. We say improper filing, judging by the results of the court proceedings, namely, acquittal. In other
words, the plaintiff was innocent and blameless. If despite his innocence and despite the absence of any criminal responsibility
on his part he was accused of homicide, then the responsibility for the improper accusation may be laid at the door of the heirs
of the deceased and the State, and so theoretically, they are the parties that may be held responsible civilly for damages and if
this is so, we fail to see now this responsibility can be transferred to the employer who in no way intervened, much less initiated
the criminal proceedings and whose only connection or relation to the whole affairs was that he employed plaintiff to perform a
special duty or task, which task or duty was performed lawfully and without negligence.

Still another point of view is that the damages incurred here consisting of the payment of the lawyer's fee did not flow directly
from the performance of his duties but only indirectly because there was an efficient, intervening cause, namely, the filing of the
criminal charges. In other words, the shooting to death of the deceased by the plaintiff was not the proximate cause of the
damages suffered but may be regarded as only a remote cause, because from the shooting to the damages suffered there was
not that natural and continuous sequence required to fix civil responsibility.

In view of the foregoing, the judgment of the lower court is affirmed. No costs.

Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador, Concepcion, and Reyes, J.B.L., JJ.,  concur.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA
NOGUERA, respondents-appellees.

SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are beyond
dispute:

xxx xxx xxx

On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19,
1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc.,
represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the
Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for
the former-s use as a branch office. In the said contract the party of the third part held herself solidarily liable
with the party of the part for the prompt payment of the monthly rental agreed on. When the branch office
was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by
any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was
to be withheld by the Tourist World Service, Inc.

On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed
that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was
anyhow losing, the Tourist World Service considered closing down its office. This was firmed up by two
resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the
first abolishing the office of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch,
and the second,authorizing the corporate secretary to receive the properties of the Tourist World Service then
located at the said branch office. It further appears that on Jan. 3, 1962, the contract with the appellees for
the use of the Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the
appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to
comply with the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to
the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the
premises on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant Lina
Sevilla nor any of her employees could enter the locked premises, a complaint wall filed by the herein
appellants against the appellees with a prayer for the issuance of mandatory preliminary injunction. Both
appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court
ordered the dismissal of the case without prejudice.

The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the
court a quo, in an order dated June 8, 1963, granted permitting her to present evidence in support of her
counterclaim.

On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were
joined, the reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were
jointly heard following which the court a quo ordered both cases dismiss for lack of merit, on the basis of
which was elevated the instant appeal on the following assignment of errors:

I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-APPELLANT MRS. LINA O.
SEVILLA'S COMPLAINT.

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH
APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN
FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED
FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE,
INC. EVEN AS AGAINST THE LATTER.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT
MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.

V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR
APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.

VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED
MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be resolved are:

1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on
Ermita;

2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and

3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or
TWS and the appellant.

In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between
her and appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to
the end that her relationship with TWS was one of a joint business venture appellant made declarations
showing:

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose
specialist as well as a imediately columnist had been in the travel business prior to the
establishment of the joint business venture with appellee Tourist World Service, Inc. and
appellee Eliseo Canilao, her compadre, she being the godmother of one of his children, with
her own clientele, coming mostly from her own social circle (pp. 3-6 tsn. February 16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A')
covering the premises at A. Mabini St., she expressly warranting and holding [sic] herself
'solidarily' liable with appellee Tourist World Service, Inc. for the prompt payment of the
monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).

3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc.,
which had its own, separate office located at the Trade & Commerce Building; nor was she an
employee thereof, having no participation in nor connection with said business at the Trade &
Commerce Building (pp. 16-18 tsn Id.).

4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her
own business (and not for any of the business of appellee Tourist World Service, Inc.)
obtained from the airline companies. She shared the 7% commissions given by the airline
companies giving appellee Tourist World Service, Lic. 3% thereof aid retaining 4% for herself
(pp. 18 tsn. Id.)

5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St.
office, paying for the salary of an office secretary, Miss Obieta, and other sundry expenses,
aside from desicion the office furniture and supplying some of fice furnishings (pp. 15,18 tsn.
April 6,1965), appellee Tourist World Service, Inc. shouldering the rental and other expenses
in consideration for the 3% split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb.
16,1965).

6. It was the understanding between them that appellant Mrs. Sevilla would be given the title
of branch manager for appearance's sake only (p. 31 tsn. Id .), appellee Eliseo Canilao admit
that it was just a title for dignity (p. 36 tsn. June 18, 1965- testimony of appellee Eliseo
Canilao pp. 38-39 tsn April 61965-testimony of corporate secretary Gabino Canilao (pp- 2-5,
Appellants' Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World
Service, Inc. and as such was designated manager. 1

xxx xxx xxx

The trial court2 held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being
the true lessee, it was within its prerogative to terminate the lease and padlock the premises. 3 It likewise found the petitioner,
Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her
employer. 4 The respondent Court of Appeal 5 rendered an affirmance.

The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state:

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE
PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE
APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN
CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO
PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A"
PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.

II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT
SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND
COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)

III

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT
PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL
CODE ON RELATIONS.

IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL
APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD
SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED
UNILATERALLY BY TOURIST WORLD SERVICE INC.6

As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World
Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the
padlocking of the premises by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla
entitled the latter to the relief of damages prayed for and whether or not the evidence for the said appellant supports the
contention that the appellee Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the
telephone lines of the Ermita branch office of the appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the
other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and that
inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera. The petitioners contend,
however, that relation between the between parties was one of joint venture, but concede that "whatever might have been the
true relationship between Sevilla and Tourist World Service,"  the Rule of Law enjoined Tourist World Service and Canilao from
taking the law into their own hands, 8 in reference to the padlocking now questioned.

The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that
the relation between the parties was in the character of employer and employee, the courts would have been without
jurisdiction to try the case, labor disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of
Labor Relations, pursuant to statutes then in force. 9

In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In general, we
have relied on the so-called right of control test, "where the person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to be used in reaching such end." 10 Subsequently, however, we
have considered, in addition to the standard of right-of control, the existing economic conditions prevailing between the parties,
like the inclusion of the employee in the payrolls, in determining the existence of an employer-employee relationship. 11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World
Service, Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the first place, under
the contract of lease covering the Tourist Worlds Ermita office, she had bound herself in  solidum  as and for rental payments, an
arrangement that would be like claims of a master-servant relationship. True the respondent Court would later minimize her
participation in the lease as one of mere guaranty, 12 that does not make her an employee of Tourist World, since in any case, a
true employee cannot be made to part with his own money in pursuance of his employer's business, or otherwise, assume any
liability thereof. In that event, the parties must be bound by some other relation, but certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the
herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs.
Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as
to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline
bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee. As we said,
employment is determined by the right-of-control test and certain economic parameters. But titles are weak indicators.

In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina Sevilla's own, that
is, that the parties had embarked on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did not
recognize the existence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World
Service, Inc.'s] right to stop the operation of your branch office 14 in effect, accepting Tourist World Service, Inc.'s control over
the manner in which the business was run. A joint venture, including a partnership, presupposes generally a of standing
between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital or property
contributed 15 and where each party exercises equal rights in the conduct of the business. 16 furthermore, the parties did not hold
themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc.  17in lieu of
a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist
World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract
that the agent renders services "in representation or on behalf of another. 18 In the case at bar, Sevilla solicited airline fares, but
she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in
the concept of commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her
principal's authority as owner of the business undertaking. We are convinced, considering the circumstances and from the
respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a joint
managament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the
parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for
mutual interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such,
she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the
operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name,
after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of
her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is
an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should
entitle the petitioner, Lina Sevilla, to damages.

As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking
incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no evidence showing that the
Tourist World Service, Inc. disconnected the telephone lines at the branch office.  20 Yet, what cannot be denied is the fact that
Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the
disconnection now complained of, it had clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility
therefor.

The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World
Service, Inc. was the lessee named in the lease con-tract did not accord it any authority to terminate that contract without
notice to its actual occupant, and to padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla,
had acquired a personal stake in the business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla
was not a stranger to that contract having been explicitly named therein as a third party in charge of rental payments (solidarily
with Tourist World, Inc.). She could not be ousted from possession as summarily as one would eject an interloper.

The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina
Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the respondent court speaks of
alleged business losses to justify the closure '21 but there is no clear showing that Tourist World Ermita Branch had in fact
sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the
other hand, is that following such an information (that Sevilla was working for another company), Tourist World's board of
directors adopted two resolutions abolishing the office of 'manager" and authorizing the corporate secretary, the respondent
Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the private respondents ended the
lease over the branch office premises, incidentally, without notice to her.

It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the
respondent Canilao, on the pretext that it was necessary to Protect the interests of the Tourist World Service. "  22 It is strange
indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease five months earlier. While Tourist
World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but surely, it was aware that
after office hours, she could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's
telephone lines, paralyzing completely its business operations, and in the process, depriving Sevilla articipation therein.

This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be
disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play.

We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist World Service,
Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be awarded for "breaches of contract
where the defendant acted ... in bad faith. 23

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

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

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

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages in a solidary
capacity.

Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that she had
connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot therefore be held liable as a
cotortfeasor.

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

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the
respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and
Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral
damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or
temperate damages.

Costs against said private respondents.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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.

Arellano, C.J., Johnson, Moreland and Trent, JJ.,  concur.

 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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 the  casco 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.

Arellano, C.J., Torres, Johnson, Araullo, Street and Malcolm, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
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.

SO ORDERED.

Aquino, Concepcion, Jr., Escolin and Cuevas, JJ., concur.

Makasiar (Chairman), reserves his vote.

 EN BANC

[G.R. No. L-30573. October 29, 1971.]

VICENTE M. DOMINGO, represented by his heirs, ANTONIA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR,
AMELIA, VICENTE JR., SALVADOR, IRENE and JOSELITO, all surnamed DOMINGO, Petitioners-Appellants, v.
GREGORIO M. DOMINGO, intervenor-respondent.

Teofilo Leonin for Petitioners-Appellants.

Osorio, Osorio & Osorio for Respondent-Appellee.

Teofilo P. Purisima in his own behalf as intervenor-respondent.

SYLLABUS

1. CIVIL LAW; AGENCY; ARTICLES 1891 AND 1909 OF THE NEW CIVIL CODE; DUTY OF AGENT TO PRINCIPAL. — The duties
and liabilities of a broker to his employer are essentially those which an agent owes to his principal. Consequently, the decisive
legal provisions are found in Articles 1891 and 1909 of the New Civil Code. 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 duly 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. ID.; ID.; ID.; ID.; EFFECT OF BREACH OF LOYALTY. — 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. ID.; ID.; ID.; ID.; ID.; TAKING OF SECRET PROFIT, TANTAMOUNT TO BREACH. — 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 his principal,
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.

4. ID.; ID.; ID.; ID.; ID.; LIABILITY FOR ESTAFA. — 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.

5. ID.; ID.; ID.; ID.; ID.; ID.; PRINCIPAL ENTITLED TO RECOVERY OF COMMISSIONS PAID. — 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. 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.

6. ID.; ID.; ID.; ID.; ID.; ACCOUNTABILITY OF AGENT FOR ALL PROFITS RECEIVED. — 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.

7. ID.; ID.; ID.; ID.; WHEN INAPPLICABLE. — 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 thereto.
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 herein petitioner-appellant was not
aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio Domingo form the prospective buyer; much less did
he consent to his agent’s accepting such a gift.

DECISION
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 legal 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:chanrob1es virtual 1aw library

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 a purchaser 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. When the deed of sale was not executed on August 1,
1956 as stipulated in Exhibit "C" nor on August 16, 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 Exhibit "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 the 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", a deed of sale executed on September 17, 1956
by Amparo Diaz, wife of Oscar de Leon, over their house and lot at No. 40 Denver Street, Cubao, Quezon City, in favor of
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 writing 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 (P104,000.00). 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 5% 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 the 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 prospective 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 or disadvantageous to him. On the other
hand, Justice Gatmaitan, with whom Justice Antonio Cañizares concurred, 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 found in 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."cralaw virtua1aw library

x       x       x

"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."cralaw virtua1aw library

Article 1891 of the New Civil Code amends Article 1720 of the old Spanish Civil Code which provides that: jgc:chanrobles.com.ph

"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." cralaw virtua1aw library

The modification contained in the first paragraph of 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:jgc:chanrobles.com.ph

"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." cralaw virtua1aw library

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 his principal, 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 of estafa. 4 An administrator of an estate was likewise liable 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 under 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 of his operations to his principal
was reiterated in Duhart, etc. v. 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.

x       x       x

"In discussing the right of the principal to recover commissions retained by an unfaithful agent, the court in Little v. Phipps
(1911) 208 Mass. 33l, 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 v. 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.’

x       x       x

"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
v. 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 supplied.) 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 a 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 than 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 thereto 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) and 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 the 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.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo and Villamor, JJ., con
 SECOND DIVISION

[G.R. No. 85302. March 31, 1989.]

BICOL SAVINGS AND LOAN ASSOCIATION, Petitioner, v. HON. COURT OF APPEALS, CORAZON DE JESUS, LYDIA
DE JESUS, NELIA DE JESUS, JOSE DE JESUS, AND PABLO DE JESUS, Respondents.

Contreras & Associates for Petitioner.

Reynaldo A. Feliciano for Private Respondents.

SYLLABUS

1. CIVIL LAW; AGENCY; SALE PROSCRIBED BY A SPECIAL POWER TO MORTGAGE UNDER ARTICLE 1879 OF CIVIL CODE, A
VOLUNTARY AND INDEPENDENT CONTRACT AND NOT AN AUCTION SALE RESULTING FROM EXTRAJUDICIAL FORECLOSURE.
— The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and independent contract, and not an
auction sale resulting from extrajudicial foreclosure, which is precipitated by the default of a mortgagor. Absent that default, no
foreclosure results.

2. ID.; ID.; STIPULATION GRANTING AUTHORITY TO EXTRAJUDICIALLY FORECLOSE A MORTGAGE, AN ANCILLARY

STIPULATION. — The stipulation granting an authority to extrajudicially foreclose a mortgage is an ancillary stipulation
supported by the same cause or consideration for the mortgage and forms an essential or inseparable part of that bilateral
agreement (Perez v. Philippine National Bank, No. L-21813, July 30, 1966, 17 SCRA 833, 839).

3. ID.; ID.; POWER TO FORECLOSURE; NOT AN ORDINARY AGENCY BUR PRIMARILY AN AUTHORITY CONFERRED UPON
MORTGAGEE FOR LATTER’S OWN PROTECTION; SUCH POWER SURVIVES DEATH OF MORTGAGOR. — The power to foreclose
is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an
authority conferred upon the mortgagee for the latter’s own protection. That power survives the death of the mortgagor (Perez
v. PNB, supra).

4. REMEDIAL LAW; SPECIAL PROCEEDINGS; SETTLEMENT OF ESTATE OF DECEASED PERSONS; CLAIMS AGAINST ESTATE;
REMEDIES GRANTED TO A MORTGAGEE ALTERNATIVELY PURSUED IN CASE MORTGAGOR DIES, CITED. — Section 7, Rule 86
of the Rules of Court, which grants to a mortgagee three remedies that can be alternatively pursued in case the mortgagor dies,
to wit: (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) to
foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively,
foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency.

DECISION

MELENCIO-HERRERA, J.:

This Petition for Review on Certiorari was filed by Bicol Savings and Loan Association, seeking the reversal of the Decision * of
the respondent Court of Appeals in CA-G.R. CV No. 02213, dated 11 August 1988, which ruled adversely against it. The
pleadings disclose the following factual milieu:chanrob1es virtual 1aw library

Juan de Jesus was the owner of a parcel of land, containing an area of 6,870 sq. ms., more or less, situated in Naga City. On 31
March 1976, he executed a Special Power of Attorney in favor of his son, Jose de Jesus, "To negotiate, mortgage my real
property in any bank either private or public entity preferably in the Bicol Savings Bank, Naga City, in any amount that may be
agreed upon between the bank and my attorney-in-fact." (CA Decision, p. 44, Rollo)

By virtue thereof, Jose de Jesus obtained a loan of twenty thousand pesos (P20,000.00) from petitioner bank on 13 April 1976.
To secure payment, Jose de Jesus executed a deed of mortgage on the real property referred to in the Special Power of
Attorney, which mortgage contract carried, inter alia, the following stipulation:jgc:chanrobles.com.ph

"b) If at any time the Mortgagor shall refuse to pay the obligations herein secured, or any of the amortizations of such
indebtedness when due, or to comply with any of the conditions and stipulations herein agreed . . . . then all the obligations of
the Mortgagor secured by this Mortgage, all the amortizations thereof shall immediately become due, payable and defaulted and
the Mortgagee may immediately foreclose this mortgage in accordance with the Rules of Court, or extrajudicially in accordance
with Act No. 3135, as amended, or Act No. 1508. For the purpose of extrajudicial foreclosure, the Mortgagor hereby appoints
the Mortgagee his attorney-in-fact to sell the property mortgaged . . . ." (CA Decision, pp. 47-48, Rollo)

Juan de Jesus died in the meantime on a date that does not appear of record.

By reason of his failure to pay the loan obligation even during his lifetime, petitioner bank caused the mortgage to be
extrajudicially foreclosed on 16 November 1978. In the subsequent public auction, the mortgaged property was sold to the bank
as the highest bidder to whom a Provisional Certificate of Sale was issued.cralawnad

Private respondents herein, including Jose de Jesus, who are all the heirs of the late Juan de Jesus, failed to redeem the
property within one year from the date of the registration of the Provisional Certificate of Sale on 21 November 1980. Hence, a
Definite Certificate of Sale was issued in favor of the bank on 7 September 1982.
Notwithstanding, private respondents still negotiated with the bank for the repurchase of the property. Offers and counter-offers
were made, but no agreement was reached, as a consequence of which, the bank sold the property instead to other parties in
installments. Conditional deeds of sale were executed between the bank and these parties. A Writ of Possession prayed for by
the bank was granted by the Regional Trial Court.

On 31 January 1983 private respondents herein filed a Complaint with the then Court of First Instance of Naga City for the
annulment of the foreclosure sale or for the repurchase by them of the property. That Court, noting that the action was
principally for the annulment of the Definite Deed of Sale issued to petitioner bank, dismissed the case, ruling that the title of
the bank over the mortgaged property had become absolute upon the issuance and registration of the said deed in its favor in
September 1982. The Trial Court also held that herein private respondents were guilty of laches by failing to act until 31
January 1983 when they filed the instant Complaint.

On appeal, the Trial Court was reversed by respondent Court of Appeals. In so ruling, the Appellate Court applied Article 1879 of
the Civil Code and stated that since the special power to mortgage granted to Jose de Jesus did not include the power to sell, it
was error for the lower Court not to have declared the foreclosure proceedings and auction sale held in 1978 null and void
because the Special Power of Attorney given by Juan de Jesus to Jose de Jesus was merely to mortgage his property, and not
to extrajudicially foreclose the mortgage and sell the mortgaged property in the said extrajudicial foreclosure. The Appellate
Court was also of the opinion that petitioner bank should have resorted to judicial foreclosure. A Decision was thus handed
down annulling the extrajudicial foreclosure sale; the Provisional and Definite Deeds of Sale, the registration thereof, and the
Writ of Possession issued to petitioner bank.

From this ruling, the bank filed this petition to which the Court gave due course.

The pivotal issue is the validity of the extrajudicial foreclosure sale of the mortgaged property instituted by petitioner bank
which, in turn, hinges on whether or not the agent-son exceeded the scope of his authority in agreeing to a stipulation in the
mortgage deed that petitioner bank could extrajudicially foreclose the mortgaged property.

Article 1879 of the Civil Code, relied on by the Appellate Court in ruling against the validity of the extrajudicial foreclosure sale,
reads:jgc:chanrobles.com.ph

"Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the
power to sell."cralaw virtua1aw library

We find the foregoing provision inapplicable herein.

The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and independent contract, and not an
auction sale resulting from extrajudicial foreclosure, which is precipitated by the default of a mortgagor. Absent that default, no
foreclosure results. The stipulation granting an authority to extrajudicially foreclose a mortgage is an ancillary stipulation
supported by the same cause or consideration for the mortgage and forms an essential or inseparable part of that bilateral
agreement (Perez v. Philippine National Bank, No. L-21813, July 30, 1966, 17 SCRA 833, 839).

The power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent
but is primarily an authority conferred upon the mortgagee for the latter’s own protection. That power survives the death of the
mortgagor (Perez v. PNB, supra). In fact, the right of the mortgagee bank to extrajudicially foreclose the mortgage after the
death of the mortgagor Juan de Jesus, acting through his attorney-in-fact, Jose de Jesus, did not depend on the authorization in
the deed of mortgage executed by the latter. That right existed independently of said stipulation and is clearly recognized in
Section 7, Rule 86 of the Rules of Court, which grants to a mortgagee three remedies that can be alternatively pursued in case
the mortgagor dies, to wit: (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary
claim; (2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage
exclusively, foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency. It
is this right of extrajudicial foreclosure that petitioner bank had availed of, a right that was expressly upheld in the same case of
Perez v. Philippine National Bank (supra), which explicitly reversed the decision in Pasno v. Ravina (54 Phil. 382) requiring a
judicial foreclosure in the same factual situation. The Court in the aforesaid PNB case pointed out that the ruling in the Pasno
case virtually wiped out the third alternative, which precisely includes extrajudicial foreclosure, a result not warranted by the
text of the Rule.chanrobles.com:cralaw:red

It matters not that the authority to extrajudicially foreclose was granted by an attorney-in-fact and not by the mortgagor
personally. The stipulation in that regard, although ancillary, forms an essential part of the mortgage contract and is inseparable
therefrom. No creditor will agree to enter into a mortgage contract without that stipulation intended for its protection.

Petitioner bank, therefore, in effecting the extrajudicial foreclosure of the mortgaged property, merely availed of a right
conferred by law. The auction sale that followed in the wake of that foreclosure was but a consequence thereof.

WHEREFORE, the Decision of respondent Court of Appeals in CA-G.R. CV No. 02213 is SET ASIDE, and the extrajudicial
foreclosure of the subject mortgaged property, as well as the Deeds of Sale, the registration thereof, and the Writ of Possession
in petitioner bank’s favor, are hereby declared VALID and EFFECTIVE.cralawnad

SO ORDERED.
 SECOND DIVISION

[G.R. No. 102737. August 21, 1996.]

FRANCISCO A. VELOSO, Petitioner, v. COURT OF APPEALS, AGLALOMA B. ESCARIO, assisted by her husband

GREGORIO L. ESCARIO, the REGISTER OF DEEDS FOR THE CITY OF MANILA, Respondents.

SYLLABUS

1. CIVIL LAW; AGENCY; A 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. — 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.

2. ID.; SALE; PURCHASER IN GOOD FAITH; DEFINED; HIS REMEDY IN CASE OF FRAUD. — 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. "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."cralaw virtua1aw library

3. REMEDIAL LAW; EVIDENCE; FORGERY CANNOT BE PRESUMED. — Mere variance of the signatures cannot be considered as
conclusive proof that the same were forged. Forgery cannot be presumed. Forgery should be proved by clear and convincing
evidence and whoever allege it has the burden of proving the same.

4. ID.; ID.; NOTARIZED DOCUMENTS ARE PRESUMED TO BE VALID AND DULY EXECUTED. — 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.

5. CIVIL LAW; PRINCIPLE OF EQUITABLE ESTOPPEL, DEFINED. — 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.

DECISION

TORRES, JR., J.:

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

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

The following are the antecedent facts:chanrob1es virtual 1aw library

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 canceled 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 is 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 posses 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 of it was
he who made the wrong possible. Thus:jgc:chanrobles.com.ph

"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."cralaw virtua1aw library

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 a 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:chanrob1es virtual 1aw library

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:jgc:chanrobles.com.ph

"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:jgc:chanrobles.com.ph

"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."cralaw virtua1aw library

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 v. Sandiganbayan 19 (quoting Osborn, The Problem of Proof)
that:jgc:chanrobles.com.ph

"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."cralaw virtua1aw library

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 v. Court of Appeals, 20 it was held, viz:jgc:chanrobles.com.ph

"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."c 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:jgc:chanrobles.com.ph

"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. SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-36585 July 16, 1984
MARIANO DIOLOSA and ALEGRIA VILLANUEVA-DIOLOSA, petitioners,
vs.
THE HON. COURT OF APPEALS, and QUIRINO BATERNA (As owner and proprietor of QUIN BATERNA
REALTY), respondents.
Enrique L. Soriano for petitioners.
Domingo Laurea for private respondent.

RELOVA, J.:

Appeal by certiorari from a decision of the then Court of Appeals ordering herein petitioners to pay private respondent "the sum
of P10,000.00 as damages and the sum of P2,000.00 as attorney's fees, and the costs."

This case originated in the then Court of First Instance of Iloilo where private respondents instituted a case of recovery of
unpaid commission against petitioners over some of the lots subject of an agency agreement that were not sold. Said complaint,
docketed as Civil Case No. 7864 and entitled: "Quirino Baterna vs. Mariano Diolosa and Alegria Villanueva-Diolosa", was
dismissed by the trial court after hearing. Thereafter, private respondent elevated the case to respondent court whose decision
is the subject of the present petition.

The parties — petitioners and respondents-agree on the findings of facts made by respondent court which are based largely on
the pre-trial order of the trial court, as follows:

PRE-TRIAL ORDER

When this case was called for a pre-trial conference today, the plaintiff, assisted by Atty. Domingo Laurea,
appeared and the defendants, assisted by Atty. Enrique Soriano, also appeared.

A. — During the pre-trial conference the parties, in addition to what have been admitted in the pleadings, have
agreed and admitted that the following facts are attendant in this case and that they will no longer adduce
evidence to prove them:

1. That the plaintiff was and still is a licensed real estate broker, and as such licensed real
estate broker on June 20, 1968, an agreement was entered into between him as party of the
second part and the defendants spouses as party of the first part, whereby the former was
constituted as exclusive sales agent of the defendants, its successors, heirs and assigns, to
dispose of, sell, cede, transfer and convey the lots included in VILLA ALEGRE SUBDIVISION
owned by the defendants, under the terms and conditions embodied in Exhibit "A", and
pursuant to said agreement (Exhibit "A"), the plaintiff acted for and in behalf of the
defendants as their agent in the sale of the lots included in the VILLA ALEGRE SUBDIVISION;

2. That on September 27, 1968, the defendants terminated the services of plaintiff as their
exclusive sales agent per letter marked as Exhibit "B", for the reason stated in the latter.

B. — During the trial of this case on the merit, the plaintiff will adduce by competent evidence the following
facts:

1. That as a real estate broker, he had sold the lots comprised in several subdivisions, to wit:
Greenfield Subdivision, the Villa Beach Subdivision, the Juntado Subdivision, the St. Joseph
Village, the Ledesma Subdivision, the Brookside Subdivision, the Villa Alegre Subdivision, and
Cecilia Subdivision, all in the City of Iloilo except St. Joseph which is in Pavia Iloilo.

2. That the plaintiff, as a licensed real estate broker, has been seriously damaged by the
action of the defendants in rescinding, by Exhibit "B", the contract (Exhibit "A") for which the
plaintiff suffered moral damages in the amount of P50,000.00, damages to his good will in the
amount of P100,000.00, for attorney's fees in the amount of P10,000.00 to protect his rights
and interests, plus exemplary damages to be fixed by the Court.

3. That the plaintiff is entitled to a commission on the lots unsold because of the rescission of
the contract.

C. — The defendants during the trial will ill prove by competent evidence the following:

1. That the plaintiff's complaint was filed to make money out of the suit from defendants, to
harrass and to molest defendants;
 2. That because of the unjustified and unfounded complaint of the plaintiff, the defendants
suffered moral damages in the amount of P50,000.00, and that for the public good, the court
may order the plaintiff to pay the defendants exemplary damages in the amount of
P20,000.00, plus attorney's fees of P10,000.00.

D.— Contentions of the parties:

1. The plaintiff contends:

(a) That under the terms of the contract (Exhibit "A") the plaintiff had
unrevocable authority to sell all the lots included in the Villa Alegre
Subdivision and to act as exclusive sales agent of the defendants until all the
lots shall have been disposed of;

(b) That the rescission of the contract under Exhibit "B", contravenes the
agreement of the parties.

2. The defendants contend:

(a) That they were within their legal right to terminate the agency on the
ground that they needed the undisposed lots for the use of the family;

(b) That the plaintiff has no right in law to case for commission on lots that
they have not sold.

E. — The parties hereby submit to the Court the following issues:

1. Whether under the terms of Exhibit "A" the plaintiff has the irrevocable right to sen or
dispose of all the lots included within Villa Alegre Subdivision;

2. Can the defendants terminate their agreement with the plaintiff by a letter like Exhibit "B"?

F. — The plaintiff submitted the following exhibits which were admitted by the defendants:

Exhibit "A" — agreement entered into between the parties on June 20, 1968 whereby the
plaintiff had the authority to sell the subdivision lots included in Villa Alegre subdivision;

Exhibit "B" — Letter of the defendant Alegria V. Diolosa dated September 27, 1968 addressed
to the plaintiff terminating the agency and rescinding Exhibit "A" for the reason that the lots
remained unsold lots were for reservation for their grandchildren.

The Court will decide this case based on the facts admitted in the pleadings, those agreed by the parties
during the pre-trial conference, and those which they can prove during the trial of this case, in accordance with
the contention of the parties based on the issues submitted by them during the pre-trial conference.

SO ORDERED.

Iloilo City, Philippines, August 14, 1969.

(SGD) VALERIO V.
ROVIRA
Judge
(pp. 22-25, Rollo)

The only issue in this case is whether the petitioners could terminate the agency agreement, Exhibit "A", without paying
damages to the private respondent. Pertinent portion of said Exhibit "A" reads:

That the PARTY OF THE FIRST PART is the lawful and absolute owner in fee simple of VILLA ALEGRE
SUBDIVISION situated in the District of Mandurriao, Iloilo City, which parcel of land is more particularly
described as follows, to wit:

A parcel of land, Lot No. 2110-b-2-C, PSD 74002, Transfer Certificate of Title No. T_____
situated in the District of Mandurriao, Iloilo, Philippines, containing an area of 39016 square
meters, more or less, with improvements thereon.

That the PARTY OF THE FIRST PART by virtue of these presents, to enhance the sale of the lots of the above-
described subdivision, is engaging as their EXCLUSIVE SALES AGENT the PARTY OF THE SECOND PART, its
successors, heirs and assigns to dispose of, sell, cede, transfer and convey the above-described property in
whatever manner and nature the PARTY OF THE SECOND PART, with the concurrence of the PARTY OF THE
 FIRST PART, may deem wise and proper under the premises, whether it be in cash or installment basis,  until
all the subject property as subdivided is fully disposed of.  (p. 7 of Petitioner's brief. Emphasis supplied).

Respondent court, in its decision which is the subject of review said:

Article 1920 of the Civil Code of the Philippines notwithstanding, the defendants could not terminate the
agency agreement, Exh. "A", at will without paying damages. The said agency agreement expressly
stipulates ... until all the subject property as subdivided is fully disposed of ..." The testimony of Roberto
Malundo(t.s.n. p. 99) that the plaintiff agreed to the intention of Mrs. Diolosa to reserve some lots for her own
famay use cannot prevail over the clear terms of the agency agreement. Moreover, the plaintiff denied that
there was an agreement to reserve any of the lots for the family of the defendants. (T.s.n. pp. 16).

There are twenty seven (27) lots of the subdivision remaining unsold on September 27, 1968 when the
defendants rescinded the agency agreement, Exhibit "A". On that day the defendants had only six
grandchildren. That the defendants wanted to reserve the twenty seven remaining lots for the six
grandchildren is not a legal reason for defendants rescind the agency agreement. Even if the grandchildren
were to be given one lot each, there would still be twenty-one lots available for sale. Besides it is undisputed
that the defendants have other lands which could be reserved for their grandchildren. (pp. 26-27, Rollo)

The present appeal is manifestly without merit.

Under the contract, Exhibit "A", herein petitioners allowed the private respondent "to dispose of, sell, cede, transfer and
convey ... until out the subject property as subdivided is fully disposed of." The authority to sell is not extinguished until all the
lots have been disposed of. When, therefore, the petitioners revoked the contract with private respondent in a letter, Exhibit "B"
—

Dear Mr. Baterna:

Please be informed that we have finally decided to reserve the remaining unsold lots, as of this date of our
VILLA ALEGRE Subdivision for our grandchildren.

In view thereof, notice is hereby served upon you to the effect that our agreement dated June 20, 1968 giving
you the authority to sell as exclusive sales agent of our subdivision is hereby rescinded.

Please be duly guided.

Very truly yours,

(SGD) ALEGRIA V. DIOLOSA

Subdivision Owner

(p. 11 of Petitioner's Brief)

they become liable to the private respondent for damages for breach of contract.

And, it may be added that since the agency agreement, Exhibit "A", is a valid contract, the same may be rescinded only on
grounds specified in Articles 1381 and 1382 of the Civil Code, as follows:

ART. 1381. The following contracts are rescissible:

(1) Those which are entered in to by guardians whenever the wards whom they represent
suffer lesion by more than one-fourth of the value of the things which are the object thereof;

(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in
the preceding number;

(3) Those undertaken in fraud of creditors when the latter cannot in any other name collect
the claims due them;

(4) Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial
authority;

(5) All other contracts specially declared by law to be subject to rescission.

ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be
compelled at the time they were effected, are also rescissible."
In the case at bar, not one of the grounds mentioned above is present which may be the subject of an action of rescission,
much less can petitioners say that the private respondent violated the terms of their agreement-such as failure to deliver to
them (Subdivision owners) the proceeds of the purchase price of the lots.

ACCORDINGLY, the petition is hereby dismissed without pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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.

Torres, Mapa, Johnson and Carson, JJ., concur.

 SECOND DIVISION

[G.R. No. 41420. July 10, 1992.]

CMS LOGGING, INC., Petitioner, v. THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, Respondents.

Sison, Dominguez & Associates for Petitioner.

Dominadorm R. Aytona and Juan O. Marfil, Jr. for Private Respondent.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE COURT OF APPEALS, GENERALLY FINAL AND CONCLUSIVE. — The
arguments of CMS Logging, Inc. (CMS) question the findings of fact made by the Court of Appeals, which are final and
conclusive and can not be reviewed on appeal to the Supreme Court.

2. ID.; ID.; HEARSAY; TESTIMONY NARRATED BY OTHERS, INADMISSIBLE; CASE AT BAR. — The fact that Shinko received the
commissions in question was not established by the testimony of Atty. Teodoro R. Dominguez to the effect that Shinko’s
president and director told him that Shinko received a commission of U.S. $1.00 for every 1,000 board feet of logs sold, since
the same is hearsay. Similarly, the letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd. is also hearsay since Mr. Shibata was not
presented to testify on his letter.

3. ID.; ID.; STATEMENT NOT AN ADMISSION WHERE IT DOES NOT ADMIT THE FACT SOUGHT TO BE PROVEN. — The
statements made in the memorandum of Atty. Simplicio R. Ciocon to DRACOR dated May 31, 1965, the letter dated February 2,
1963 of Daniel R. Aguinaldo, president of DRACOR, and the reply-letter dated January 9, 1964 by DRACOR’s counsel Atty. V. E.
Del Rosario to CMS’s demand letter dated September 25, 1963 can not be categorized as admissions that Shinko did receive the
commissions in question since neither statements declared categorically that Shinko did in fact receive the commissions and that
these arose from the sale of CMS’s logs. As correctly stated by the appellate court: "It is a rule that ‘a statement is not
competent as an admission where it does not, under a reasonable construction, appear to admit or acknowledge the fact which
is sought to be proved by it.’ An admission or declaration to be competent must have been expressed in definite, certain and
unequivocal language (Bank of the Philippine Islands v. Fidelity & Surety Co., 51 Phil. 57, 64)."cralaw virtua1aw library

4. CIVIL LAW; AGENCY; PRINCIPAL WITH ABSOLUTE RIGHT TO REVOKE AGENCY. — The principal may revoke a contract of
agency at will, and such revocation may be express, or implied, and may be availed of even if the period fixed in the contract of
agency has not yet expired. As the principal has this absolute right to revoke the agency, the agent can not object thereto;
neither may he claim damages arising from such revocation, unless it is shown that such was done in order to evade the
payment of agent’s commission.

5. ID.; ID.; ID.; ACT CONSTITUTING IMPLIED REVOCATION. — In the case at bar, CMS appointed DRACOR as its agent for the
sale of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs
directly to several Japanese firms. This act constituted an implied revocation of the contract of agency under Article 1924 of the
Civil Code.

6. ID.; ID.; ID.; ID.; AGENT NOT ENTITLED TO A COMMISSION NOR DAMAGES THEREFOR. — Since the contract of agency
was revoked by CMS when it sold its logs to Japanese firms without the intervention of DRACOR, the latter is no longer entitled
to its commission from the proceeds of such sale and is not entitled to retain whatever moneys it may have received as its
commission for said transactions. Neither would DRACOR be entitled to collect damages from CMS, since damages are generally
not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the exception
mentioned, which is to evade the payment of the agent’s commission.

DECISION

NOCON, J.:

This is a petition for review on certiorari from the decision dated July 31, 1975 of the Court of Appeals in CA-G.R. No. 47763-R
which affirmed in toto the decision of the Court of First Instance of Manila, Branch VII, in Civil Case No. 56355 dismissing the
complaint filed by petitioner CMS Logging, Inc. (CMS, for brevity) against private respondent D.R. Aguinaldo Corporation
(DRACOR, for brevity) and ordering the former to pay the latter attorney’s fees in the amount of P1,000.00 and the costs.

The facts of the case are as follows: Petitioner CMS is a forest concessionaire engaged in the logging business, while private
respondent DRACOR is engaged in the business of exporting and selling logs and lumber. On August 28, 1957, CMS and
DRACOR entered into a contract of agency 1 whereby the former appointed the latter as its exclusive export and sales agent for
all logs that the former may produce, for a period of five (5) years. The pertinent portions of the agreement, which was drawn
up by DRACOR, 2 are as follows:jgc:chanrobles.com.ph

"1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export sales agent with full authority, subject to the
conditions and limitations hereinafter set forth, to sell and export under a firm sales contract acceptable to SISON, all logs
produced by SISON for a period of five (5) years commencing upon the execution of the agreement and upon the terms and
conditions hereinafter provided and DRACOR hereby accepts such appointment;
x       x       x

"3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of all export sales of SISON with the buyers and
arrange the procurement and schedules of the vessel or vessels for the shipment of SISON’s logs in accordance with SISON’s
written requests, but DRACOR shall not in anyway [sic] be liable or responsible for any delay, default or failure of the vessel or
vessels to comply with the schedules agreed upon;chanrobles virtual lawlibrary

x       x       x

"9. It is expressly agreed by the parties hereto that DRACOR shall receive five (5%) per cent commission of the gross sales of
logs of SISON based on F.O.B. invoice value which commission shall be deducted from the proceeds of any and/or all moneys
received by DRACOR for and in behalf and for the account of SISON;"

By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs in Japan,
from September 20, 1957 to April 4, 1962.

About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS’s president, Atty. Carlos Moran
Sison, and general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered that DRACOR had used Shinko Trading
Co., Ltd. (Shinko for brevity) as agent, representative or liaison officer in selling CMS’s logs in Japan for which Shinko earned a
commission of U.S. $1.00 per 1,000 board feet from the buyer of the logs. Under this arrangement, Shinko was able to collect a
total of U.S. $77,264.67. 3

CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to this amount
as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the 5% commission under the
agreement, it is no longer entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving double
compensation for the services it rendered.

After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90, 4 directly to several firms in Japan
without the aid or intervention of DRACOR.

CMS sued DRACOR for the commission received by Shinko and for moral and exemplary damages, while DRACOR
counterclaimed for its commission, amounting to P144,167.59, from the sales made by CMS of logs to Japanese firms. In its
reply, CMS averred as a defense to the counterclaim that DRACOR had retained the sum of P101,167.59 as part of its
commission for the sales made by CMS. 5 Thus, as its counterclaim to DRACOR’s counterclaim, CMS demanded DRACOR return
the amount it unlawfully retained. DRACOR later filed an amended counterclaim, alleging that the balance of its commission on
the sales made by CMS was P42,630.82, 6 thus impliedly admitting that it retained the amount alleged by CMS.chanrobles law
library

In dismissing the complaint, the trial court ruled that no evidence was presented to show that Shinko received the commission
of U.S. $77,264.67 arising from the sale of CMS’s logs in Japan, though the trial court stated that "Shinko was able to collect the
total amount of $77,264.67 US Dollars (Exhs. M and M-1)." 7 The counterclaim was likewise dismissed, as it was shown that
DRACOR had waived its rights to the balance of its commission in a letter dated February 2, 1963 to Atty. Carlos Moran Sison,
president of CMS. 8 From said decision, only CMS appealed to the Court of Appeals.

The Court of Appeals, in a 3 to 2 decision, 9 affirmed the dismissal of the complaint since" [t]he trial court could not have made
a categorical finding that Shinko collected commissions from the buyers of Sison’s logs in Japan, and could not have held that
Sison is entitled to recover from Dracor the amount collected by Shinko as commissions, plaintiff-appellant having failed to
prove by competent evidence its claims." 10

Moreover, the appellate court held:jgc:chanrobles.com.ph

"There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-appellee out of its own commission of 5%, as
indicated in the letter of its president to the president of Sison, dated February 2, 1963 (Exhibit "N"), and in the Agreement
between Aguinaldo Development Corporation (ADECOR) and Shinko Trading Co., Ltd. (Exhibit "9"). Daniel R. Aguinaldo stated
in his said letter:jgc:chanrobles.com.ph

"‘. . ., I informed you that if you wanted to pay me for the service, then it would be no more than at the standard rate of 5%
commission because in our own case, we pay our Japanese agents 2-1/2%. Accordingly, we would only add a similar amount of
2-1/2% for the service which we would render you in the Philippines.’" 11

Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari, alleging (1) that the Court of Appeals erred
in not making a complete findings of fact; (2) that the testimony of Atty. Teodoro R. Dominguez, regarding the admission by
Shinko’s president and director that it collected a commission of U.S. $1.00 per 1,000 board feet of logs from the Japanese
buyers, is admissible against DRACOR; (3) that the statement of DRACOR’s chief legal counsel in his memorandum dated May
31, 1965, Exhibit "K", is an admission that Shinko was able to collect the commission in question; (4) that the fact that Shinko
received the questioned commissions is deemed admitted by DRACOR by its silence under Section 23, Rule 130 of the Rules of
Court when it failed to reply to Atty. Carlos Moran Sison’s letter dated February 6, 1962; (5) that DRACOR is not entitled to its
5% commission arising from the direct sales made by CMS to buyers in Japan; and (6) that DRACOR is guilty of fraud and bad
faith in its dealings with CMS.

With regard to CMS’s arguments concerning whether or not Shinko received the commission in question, We find the same
unmeritorious.
To begin with, these arguments question the findings of fact made by the Court of Appeals, which are final and conclusive and
can not be reviewed on appeal to the Supreme Court. 12

Moreover, while it is true that the evidence adduced establishes the fact that Shinko is DRACOR’s agent or liaison in Japan, 13
there is no evidence which established the fact that Shinko did receive the amount of U.S. $77,264.67 as commission arising
from the sale of CMS’s logs to various Japanese firms.

The fact that Shinko received the commissions in question was not established by the testimony of Atty. Teodoro R. Dominguez
to the effect that Shinko’s president and director told him that Shinko received a commission of U.S. $1.00 for every 1,000
board feet of logs sold, since the same is hearsay. Similarly, the letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd. 14 is also
hearsay since Mr. Shibata was not presented to testify on his letter.cralawnad

CMS’s other evidence have little or no probative value at all. The statements made in the memorandum of Atty. Simplicio R.
Ciocon to DRACOR dated May 31, 1965, 15 the letter dated February 2, 1963 of Daniel R. Aguinaldo, 16 president of DRACOR,
and the reply-letter dated January 9, 1964 17 by DRACOR’s counsel Atty. V. E. Del Rosario to CMS’s demand letter dated
September 25, 1963 can not be categorized as admissions that Shinko did receive the commissions in question.

The alleged admission made by Atty. Ciocon, to wit —

"Furthermore, as per our records, our shipment of logs to Toyo Menka Kaisha, Ltd., is only for a net volume of 67,747,732
board feet which should enable Shinko to collect a commission of US $67,747.73 only."cralaw virtua1aw library

can not be considered as such since the statement was made in the context of questioning CMS’s tally of logs delivered to
various Japanese firms.

Similarly, the statement of Daniel R. Aguinaldo, to wit —

". . . Knowing as we do that Toyo Menka is a large and reputable company, it is obvious that they paid Shinko for certain
services which Shinko must have satisfactorily performed for them in Japan otherwise they would not have paid Shinko."cralaw
virtua1aw library

and that of Atty. V. E. Del Rosario,

". . . It does not seem proper, therefore, for CMS Logging, Inc., as principal, to concern itself with, much less question, the right
of Shinko Trading Co., Ltd. with which our client dealt directly, to whatever benefits it might have derived form the ultimate
consumer/buyer of these logs, Toyo Menka Kaisha, Ltd. There appears to be no justification for your client’s contention that
these benefits, whether they can be considered as commissions paid by Toyo Menka Kaisha to Shinko Trading, are to be
regarded part of the gross sales."cralaw virtua1aw library

can not be considered admissions that Shinko received the questioned commissions since neither statements declared
categorically that Shinko did in fact receive the commissions and that these arose from the sale of CMS’s logs.

As correctly stated by the appellate court:jgc:chanrobles.com.ph

"It is a rule that ‘a statement is not competent as an admission where it does not, under a reasonable construction, appear to
admit or acknowledge the fact which is sought to be proved by it’. An admission or declaration to be competent must have been
expressed in definite, certain and unequivocal language (Bank of the Philippine Islands v. Fidelity & Surety Co., 51 Phil. 57, 64)."
18

CMS’s contention that DRACOR had admitted by its silence the allegation that Shinko received the commissions in question
when it failed to respond to Atty. Carlos Moran Sison’s letter dated February 6, 1963, is not supported by the evidence. DRACOR
did in fact reply to the letter of Atty. Sison, through the letter dated March 5, 1963 of F.A. Novenario, 19 which
stated:jgc:chanrobles.com.ph

"This is to acknowledge receipt of your letter dated February 6, 1963, and addressed to Mr. D. R. Aguinaldo, who is at present
out of the country.

x       x       x

"We have no record or knowledge of any such payment of commission made by Toyo Menka to Shinko. If the payment was
made by Toyo Menka to Shinko, as stated in your letter, we knew nothing about it and had nothing to do with it."cralaw
virtua1aw library

The finding of fact made by the trial court, i.e., that "Shinko was able to collect the total amount of $77,264.67 US Dollars," can
not be given weight since this was based on the summary prepared by CMS itself, Exhibits "M" and "M-1."cralaw virtua1aw
library

Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled thereto since
these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS’s
logs.

However, We find merit in CMS’s contention that the appellate court erred in holding that DRACOR was entitled to its
commission from the sales made by CMS to Japanese firms.chanrobles lawlibrary : rednad
The principal may revoke a contract of agency at will, and such revocation may be express, or implied, 20 and may be availed
of even if the period fixed in the contract of agency as not yet expired. 21 As the principal has this absolute right to revoke the
agency, the agent can not object thereto; neither may he claim damages arising from such revocation, 22 unless it is shown
that such was done in order to evade the payment of agent’s commission. 23

In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence of
the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This act constituted an
implied revocation of the contract of agency under Article 1924 of the Civil Code, which provides:jgc:chanrobles.com.ph

"Art. 1924 — The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with
third persons."cralaw virtua1aw library

In New Manila Lumber Company, Inc. v. Republic of the Philippines, 24 this Court ruled that the act of a contractor, who, after
executing powers of attorney in favor of another empowering the latter to collect whatever amounts may be due to him from
the Government, and thereafter demanded and collected from the government the money the collection of which he entrusted
to his attorney-in-fact, constituted revocation of the agency in favor of the attorney-in-fact.

Since the contract of agency was revoked by CMS when its sold its logs to Japanese firms without the intervention of DRACOR,
the latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to retain whatever moneys it
may have received as its commission for said transactions. Neither would DRACOR be entitled to collect damages from CMS,
since damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling
under the exception mentioned, which is to evade the payment of the agent’s commission.

Regarding CMS’s contention that the Court of Appeals erred in not finding that DRACOR had committed acts of fraud and bad
faith, We find the same unmeritorious. Like the contention involving Shinko and the questioned commissions, the findings of the
Court of Appeals on the matter were based on its appreciation of the evidence, and these findings are binding on this Court.

In fine, We affirm the ruling of the Court of Appeals that there is no evidence to support CMS’s contention that Shinko earned a
separate commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of CMS’s logs. However, We reverse the
ruling of the Court of Appeals with regard to DRACOR’s right to retain the amount of P101,536.77 as part of its commission from
the sale of logs by CMS, and hold that DRACOR has no right to its commission. Consequently, DRACOR is hereby ordered to
remit to CMS the amount of P101,536.77.

WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the preceding paragraph. Costs de officio.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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, 2 specifically the
portion thereof condemning Gold Star Mining Co., Inc. to pay Marta Lim Vda. de Jimena, et al., the sum of P30,691.92 solidarily
with Ananias Isaac Lincallo for violation of an injunction this appeal is taken.

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

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

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

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

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

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

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

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

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

IN VIEW WHEREOF, judgment is rendered:

1. Declaring the plaintiffs —

(a) as successors in interest of Victor Jimena to be entitled to 1/2 of the 45% share of the royalties of
defendant Lincallo under the latter's contract with Gold Star, Exh. D or Exh. D-l, dated September 19, 1951;
 (b) to 1/2 of the 43% shares of the rental of defendant Lincallo under his contract with Jesus (Jacob) Cabarrus
assigned to Marinduque Iron Mines, and his contract with Alejandro Marquez, dated December 5, 1951, and
February 29, 1952, Exhs. J and J-1; .

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

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

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

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

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

(d) P1,000.00 as attorneys fees;

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

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

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

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

7. The counterclaims of defendants are dismissed;

8. Costs against defendant Lincallo.

SO ORDERED. (Emphasis supplied.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano, JJ.,  concur.
Zaldivar, J., is on leave.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-5236             January 10, 1910
PEDRO MARTINEZ, plaintiff-appellee,
vs.
ONG PONG CO and ONG LAY, defendants.
ONG PONG CO., appellant.
Fernando de la Cantera for appellant.
O'Brien and DeWitt for appellee.
ARELLANO, C.J.:

On the 12th of December, 1900, the plaintiff herein delivered P1,500 to the defendants who, in a private document,
acknowledged that they had received the same with the agreement, as stated by them, "that we are to invest the amount in a
store, the profits or losses of which we are to divide with the former, in equal shares."

The plaintiff filed a complaint on April 25, 1907, in order to compel the defendants to render him an accounting of the
partnership as agreed to, or else to refund him the P1,500 that he had given them for the said purpose. Ong Pong Co alone
appeared to answer the complaint; he admitted the fact of the agreement and the delivery to him and to Ong Lay of the P1,500
for the purpose aforesaid, but he alleged that Ong Lay, who was then deceased, was the one who had managed the business,
and that nothing had resulted therefrom save the loss of the capital of P1,500, to which loss the plaintiff agreed.

The judge of the Court of First Instance of the city of Manila who tried the case ordered Ong Pong Co to return to the plaintiff
one-half of the said capital of P1,500 which, together with Ong Lay, he had received from the plaintiff, to wit, P750, plus P90 as
one-half of the profits, calculated at the rate of 12 per cent per annum for the six months that the store was supposed to have
been open, both sums in Philippine currency, making a total of P840, with legal interest thereon at the rate of 6 per cent per
annum, from the 12th of June, 1901, when the business terminated and on which date he ought to have returned the said
amount to the plaintiff, until the full payment thereof with costs.

From this judgment Ong Pong Co appealed to this court, and assigned the following errors:

1. For not having taken into consideration the fact that the reason for the closing of the store was the ejectment from
the premises occupied by it.

2. For not having considered the fact that there were losses.

3. For holding that there should have been profits.

4. For having applied article 1138 of the Civil Code.

5. and 6. For holding that the capital ought to have yielded profits, and that the latter should be calculated 12 per cent
per annum; and

7. The findings of the ejectment.

As to the first assignment of error, the fact that the store was closed by virtue of ejectment proceedings is of no importance for
the effects of the suit. The whole action is based upon the fact that the defendants received certain capital from the plaintiff for
the purpose of organizing a company; they, according to the agreement, were to handle the said money and invest it in a store
which was the object of the association; they, in the absence of a special agreement vesting in one sole person the
management of the business, were the actual administrators thereof; as such administrators they were the agent of the
company and incurred the liabilities peculiar to every agent, among which is that of rendering account to the principal of their
transactions, and paying him everything they may have received by virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.)
Neither of them has rendered such account nor proven the losses referred to by Ong Pong Co; they are therefore obliged to
refund the money that they received for the purpose of establishing the said store — the object of the association. This was the
principal pronouncement of the judgment.

With regard to the second and third assignments of error, this court, like the court below, finds no evidence that the entire
capital or any part thereof was lost. It is no evidence of such loss to aver, without proof, that the effects of the store were
ejected. Even though this were proven, it could not be inferred therefrom that the ejectment was due to the fact that no rents
were paid, and that the rent was not paid on account of the loss of the capital belonging to the enterprise.

With regard to the possible profits, the finding of the court below are based on the statements of the defendant Ong Pong Co,
to the effect that "there were some profits, but not large ones." This court, however, does not find that the amount thereof has
been proven, nor deem it possible to estimate them to be a certain sum, and for a given period of time; hence, it can not admit
the estimate, made in the judgment, of 12 per cent per annum for the period of six months.

Inasmuch as in this case nothing appears other than the failure to fulfill an obligation on the part of a partner who acted as
agent in receiving money for a given purpose, for which he has rendered no accounting, such agent is responsible only for the
losses which, by a violation of the provisions of the law, he incurred. This being an obligation to pay in cash, there are no other
losses than the legal interest, which interest is not due except from the time of the judicial demand, or, in the present case,
from the filing of the complaint. (Arts. 1108 and 1100, Civil Code.) We do not consider that article 1688 is applicable in this
case, in so far as it provides "that the partnership is liable to every partner for the amounts he may have disbursed on account
of the same and for the proper interest," for the reason that no other money than that contributed as is involved.

As in the partnership there were two administrators or agents liable for the above-named amount, article 1138 of the Civil Code
has been invoked; this latter deals with debts of a partnership where the obligation is not a joint one, as is likewise provided by
article 1723 of said code with respect to the liability of two or more agents with respect to the return of the money that they
received from their principal. Therefore, the other errors assigned have not been committed.

In view of the foregoing judgment appealed from is hereby affirmed, provided, however, that the defendant Ong Pong Co shall
only pay the plaintiff the sum of P750 with the legal interest thereon at the rate of 6 per cent per annum from the time of the
filing of the complaint, and the costs, without special ruling as to the costs of this instance. So ordered.

Torres, Johnson, Carson, and Moreland, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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.
Eiguren and Razon for the appellant Garcia Bosque.
Benj. S. Ohnick for the appellants France and Goulette.
Fisher, DeWitt, Perkins and Brady and John R. McFie, jr., for appellee.

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.

Avanceña, C. J., Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.
 FIRST DIVISION

[G.R. No. 77356. July 15, 1991.]

TRAVEL WIDE ASSOCIATED SALES (PHILS.), INC., and TRANS WORLD AIRLINES, INC., Petitioners, v. COURT OF
APPEALS, DECISION SYSTEMS CORPORATION and MANUEL A. ALCUAZ, JR., Respondents.

Guerrero and Torres for petitioner Trans World Airlines, Inc.

Santos, Clacetas-Santos & Associates for Travel World Associated Sales (Phils.), Inc.

Carpio, Villaraza & Cruz for respondent Manuel Alcuaz.

Marius V. Sanqui for private respondent DSC.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; REAL PARTY-IN-INTEREST; DEFINED. — As defined, 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. Rule 3, Section 2 of
the Rules of Court provides explicitly that "every action must be prosecuted and defended in the name of the real party-in-
interest." The party-in-interest is one who prosecutes or defends and is benefited or injured. The term applies not only to the
plaintiff but to the defendant, and the suit may be dismissed if neither of them is a real party-in-interest.

2. ID.; ID.; MOTION TO DISMISS; FAILURE TO STATE A CAUSE OF ACTION; WHERE A SUIT IS NOT BROUGHT IN THE NAME
OF OR AGAINST THE REAL PARTY-IN-INTEREST. — If the suit is not brought in the name of or against the real party-in-
interest, a motion to dismiss may be filed on the ground that the complaint states no cause of action.

3. ID.; ID.; ID.; ID.; NOT DEEMED WAIVED FOR FAILURE TO INVOKE. — Even if the special defense was not invoked in the
motion to dismiss, it would still not be deemed waived because it is one of the two exceptions mentioned in Rule 9, Section 2,
to the omnibus motion rule. The first is lack of jurisdiction, which can be invoked at any time, even on appeal. The second is
lack of a cause of action, which can be raised even during the trial on the merits.

4. ID.; ID.; ID.; ID.; SUFFICIENCY OF CAUSE OF ACTION DETERMINED BY FACTS ALLEGED IN THE COMPLAINT. — In a
motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted to the court
for determination is the sufficiency of the allegations in the complaint itself. Whether those allegations are true or not is beside
the point, for their truth is hypothetically admitted by the motion. The issue rather is: admitting them to be true, may the court
render a valid judgment in accordance with the prayer of the complaint? Stated otherwise, the sufficiency of the cause of action
must appear on the face of the complaint in order to sustain a dismissal on this ground. No extraneous matter may be
considered nor facts not alleged, which would require evidence and therefore must be raised as defenses and await the trial. In
other words, to determine the sufficiency of the cause of action, only the facts alleged in the complaint, and no others should be
considered. (The Heirs of Juliana Clavano v. Genato,(80 SCRA 217)

5. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; LIABILITY OF AGENT. — If the petitioners were indeed acting as
agents of the passengers, as the brochure stipulates, they could still be held liable under Article 1909 of the Civil Code, which
provides: 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.

DECISION

CRUZ, J.:

What started out as an ordinary complaint for damages has developed into a controversy on procedure over which the Regional
Trial Court and the Court of Appeals have not agreed. The petitioners are now before us and ask that the issue be resolved.

The material facts are briefly related.

Sometime in March 1975, Decision Systems Corporation and its President, Manuel A. Alcuaz, Jr., filed a complaint in the
Regional Trial Court of Manila alleging that defendants Travel Wide Associated Sales (Phils.), Inc. and Trans World Airlines, Inc.
had failed to comply with their obligations under Travel Pass ‘73 U.S.A., a package deal consisting of a TWA ticket to Los
Angeles, New York and Boston, in the United States, and hotel accommodations, for which the plaintiffs had made the
corresponding payment in Manila.

Acting on a motion to dismiss filed by TWA on May 16, 1975, on the ground that the complaint did not state a cause of action,
the trial court ordered the plaintiffs to amend their complaint and particularize their averments The plaintiffs complied on June
27, 1975. On July 7, 1975, and July 11, 1975, respectively, TWA and Travel Wide filed separate motions to dismiss on the
ground that the amended complaint still did not state a cause of action. Both motions were denied on July 11, 1975, the trial
court holding that the allegations were now "sufficiently particular."cralaw virtua1aw library

On September 5, 1975, the defendants filed a joint answer in which they alleged the special defense that they were not the real
parties-in-interest because they had acted only as agents of a disclosed principal. They reiterated this argument at the pretrial
held on October 27, 1975. Subsequently, they filed a Joint Motion for Preliminary Hearing of Special Defense, which was
opposed by the Plaintiffs on the ground that the special defense was barred, not having been raised in the two motions to
dismiss the amended complaint. The joint motion was nevertheless granted.

After the preliminary hearing, Judge Bernardo P. Fernandez issued his order dated September 13, 1976, dismissing the
complaint. 1 His finding was that Travel Wide was only the general agent of TWA and that the latter was only an agent of a
disclosed principal, namely, Tour Services, Inc. As neither of the defendants was a real party-in-interest, there could be no
cause of action against them.chanrobles virtual lawlibrary

The motion for its reconsideration having been denied, the order was elevated to the then Intermediate Appellate Court, which,
on June 30, 1983, reversed the trial court. 2 The record does not show why the separate motions for reconsideration filed by
the appellees were resolved only on January 27, 1987. At any rate, the petitioners have seasonably come to this Court to ask
for the reversal instead of the respondent court and the reinstatement of the order of the trial court.

We find that the Court of Appeals did not err in setting aside the order of dismissal and remanding the case for further
proceedings. We disagree, however, with the reason for its decision.

The respondent court held that the appellees should have pleaded the special defense that they were not real parties-in interest
in their motion to dismiss, conformably to the omnibus motion rule. Not having done so, they are deemed to have waived that
ground, which therefore could not be used as the basis of the motion to dismiss.

The omnibus motion rule embodied in Rule 15, Section 8, of the Rules of Court reads as follows: chanrob1es virtual 1aw library

Sec. 8. Omnibus motion. — A motion attacking a pleading or a proceeding shall include all objections then available, and all
objections not so included shall be deemed waived.

This is reiterated in Rule 9, Section 2, which also provides for the exceptions thus: chanrob1es virtual 1aw library

Sec. 2. Defenses and objections not pleaded deemed waived. — Defenses and objections not pleaded either in a motion to
dismiss or in an answer are deemed waived, except the failure to state a cause of action which may be alleged in a latter
pleading, if one is permitted, or by motion for judgment on the pleadings, or at the trial on the merits; but in the last instance,
the motion shall be disposed of as provided in section 5, Rule 10 in the light of any evidence which may have been received.
Whenever it appears that the court has no jurisdiction over the subject matter, it shall dismiss the action.

The petitioners invoke Rule 16, Section 1, of the Rules of Court and argue that "the defense of not being a real party-in-
interest" is not one of the grounds enumerated therein for a motion to dismiss. Consequently, they could not have pleaded it in
their motion to dismiss but only in their answer as a special defense.

There seems to be a misconception here of the term "real party-in-interest."cralaw virtua1aw library

As defined, 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. 3 Rule 3, Section 2, of the Rules of Court provides explicitly that "every action must be
prosecuted and defended in the name of the real party-in-interest." The party-in-interest is one who prosecutes or defends and
is benefited or injured. The term applies not only to the plaintiff but to the defendant, and the suit may be dismissed if neither
of them is a real party-in-interest. 4 If the suit is not brought in the name of or against the real party-in-interest, a motion to
dismiss may be filed on the ground that the complaint states no cause of action. 5

Indeed, even if the special defense was not invoked in the motion to dismiss, it would still not be deemed waived because it is
one of the two exceptions mentioned in Rule 9, Section 2, to the omnibus motion rule. The first is lack of jurisdiction, which can
be invoked any time, even on appeal. The second is lack of a cause of action, which can be raised even during the trial on the
merits.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

It is understandable if in granting the motion for a preliminary hearing on the special defense, the trial judge relied on Rule 16,
Section 5, of the Rules of Court, providing as follows:chanrob1es virtual 1aw library

Section 5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal provided for in this rule, except
improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to
dismiss had been filed.

However, the following doctrine laid down in The Heirs of Juliana Clavano v. Genato 6 should have guided him to the contrary,
and correct, conclusion:chanrob1es virtual 1aw library

Besides, under this section a preliminary hearing may be had on the affirmative defenses as if a motion to dismiss had been
filed. During such preliminary hearing evidence may be admitted. Nevertheless, We believe that the respondent Judge
committed an error in conducting a preliminary hearing on the private respondent’s affirmative defenses. It is a well-settled rule
that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted to the
court for determination is the sufficiency of the allegations in the complaint itself. Whether those allegations are true or not is
beside the point, for their truth is hypothetically admitted by the motion. The issue rather is: admitting them to be true, may the
court render a valid judgment in accordance with the prayer of the complaint? Stated otherwise, the sufficiency of the cause of
action must appear on the face of the complaint in order to sustain a dismissal on this ground. No extraneous matter may be
considered nor facts not alleged, which would require evidence and therefore must be raised as defenses and await the trial. In
other words, to determine the sufficiency of the cause of action, only the facts alleged in the complaint, and no others should be
considered.
The respondent Judge departed from this rule in conducting a hearing and in receiving evidence in support of the private
respondent’s affirmative defense, that is, lack of cause of action.

But despite all the foregoing observations, we feel that the trial court may also have erred in holding that the petitioners were
mere agents of a disclosed principal and so could not be held liable on the complaint.

In disclaiming liability, the petitioners point to the stipulation on Responsibility in the Travel Pass ‘73 Plan brochure that "Tour
Services, Inc. and/or their agents" are acting "as agents for the passengers." They stress further that the Miscellaneous Charge
Order issued to Alcuaz indicated that the amount of $218.00 was payable to Tour Services, Inc. and not to either of them . This
would mean that, if at all, they were acting as agents of Tour Services, Inc. and not as principal obligors.

Without arriving at any factual conclusion, the Court believes it would be useful to make a careful appraisal of the evidence,
particularly the terms and conditions of the brochure distributed by the petitioners and the significance of the Miscellaneous
Charges Order which was issued by TWA. We note that even the trial court observed the active participation of TWA in the
promotion of the travel pass plan as an additional source of revenue for its airline business. chanrobles law library

It is also worth noting that if the petitioners were indeed acting as agents of the passengers, as the brochure stipulates, they
could still be held liable under Article 1909 of the Civil Code, which provides: chanrob1es virtual 1aw library

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 private respondent * is entitled to prove that the petitioners did not provide adequately for the pre-paid hotel
accommodations of Alcuaz, who had to incur additional expenses and was compelled to cut short his business trip because of
his depleted dollar allocation. It was not established that the petitioners received any confirmation of the hotel reservations they
sent and yet they did not follow up their request nor did they inform Alcuaz that they had not received confirmation. This
procedure should have been followed by the petitioners as so provided in the Travel Pass ‘73 USA.

We sustain the respondent court in ruling that the trial court should not have dismissed the complaint, albeit nor for the reasons
given in the challenged decision. Our finding is that, because the petitioners are real parties-in-interest as defendants in the suit
below, the motion to dismiss for lack of a cause of action should not have been granted.

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so ordered.

Narvasa, Griño-Aquino and Medialdea, JJ., concur.

Gancayco, J., is on leave.
 EN BANC

G.R. No. L-17043 January 31, 1961

NATIVIDAD HERRERA, assisted by her husband EMIGDIO SALAZAR, Plaintiffs-Appellants, vs. LUY KIM GUAN and
LINO BANGAYAN, Defendants-Appellees.

T. de los Santos for plaintiffs-appellants.

Rafael C. Climaco and Abelardo S. Fernandez for defendants-appellees.

BARRERA, J.:

This is an appeal from the decision of the Court of First Instance of Zamboanga City (a) dismissing plaintiff-appellant's complaint
for the recovery of three (3) parcels of land and their produce in the sum of P320,000.00; and (b) instead, sentencing plaintiff
to pay P2,000.00 for attorney's fees and P1,000.00 for expenses of litigation, to defendant Lino Bangayan, and P2,000.00 as
attorney's fees and P500.00 as expenses of litigation, to the other defendant Luy Kim Guan.

The pertinent facts as found by the trial court and upon which its decision was predicated are set forth in the following portion
of the decision appealed from:

The Plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased and who died in China sometime after
he went to that country in the last part of 1931 or early part of 1932. The said Luis Herrera in his lifetime was the owner of
three (3) parcels of land and their improvements, known as Lots 1740, 4465 and 4467 of Expediente No. 5, G.L.R.O. Record
477 and the area, nature, improvements and bound of each and every of these three (3) lots are sufficiently described in the
complaint filed by the plaintiffs.

Before leaving for China, however, Luis Herrera executed on December 1, 1931, a deed of General Power of Attorney, Exhibit
'B', which authorized and empowered the defendant Kim Guan, among others to administer and sell the properties of said Luis
Herrera.

Lot 1740 was originally covered by Original Certificate Title 8601 registered in the name of Luis Herrera, married to GO Bang.
This lot was sold by the defendant Luy Kim in his capacity as attorney-in-fact of the deceased Luis Her to Luy Chay on
September 11, 1939, as shown in Exhibit "2", corresponding deed of sale. Transfer Certificate of Title 3162, Exhibit "3", was
issued to Luy Chay by virtue of deed of sale. On August 28, 1941, to secure a loan of P2,00 a deed of mortgage to the
Zamboanga Mutual Building and Association was executed by Luy Chay, Exhibit "4". On January 31, 1947, the said Luy Chay
executed a deed of sale, Exhibit "E", in favor of Lino Bangayan. By virtue of this Transfer Certificate of Title T-2567 was issued
to Lino Bangayan on June 24, 1949, Exhibit "1":

Lots 4465 and 4467 were originally registered in the of Luis Herrera, married to Go Bang, under Original Certificate of Title No.
0-14360, Exhibit "5". On December 1, 1931, Luis Herrera sold one-half undivided share and to Herrera and Go Bang, the other
half , as shown by Exhibit "12" and Exhibit "12-A", the latter an annotation made the Register of Deeds of the City of
Zamboanga, in which stated as follows:

Cancelado el presente Certificado en virtud de una escritura de traspaso y en su lugar se ha expedido el Certificado de T No.
494-(T-13045) del Tomo 2 del Libro de Certificado de Transferencias.

(Fdo) R. D. MACROHON
Registrador de Titulos
Ciudad de Zamboanga

On July 23, 1937, Luis Herrera thru his attorney-in-fact Luy Kim Guan, one of the defendants, sold to Nicomedes Salazar his one
half participation in these two (2) lots, as shown in Exhibit "C", the corresponding deed of sale for P3,000.00 Transfer
Certificate of Title No. T-494-(T-13045) was is to Nicomedes Salazar and to the defendant Luy Kim Guan, Exhibit '7'. On August
4, 1937, the defendant Luy Kim Guan Nicomedes Salazar executed a deed of mortgage in favor of Bank of the Philippine Islands
to secure a loan of P3,500.00, Exhibit '6'. On August 17, 1937, the defendant Luy Kim Guan and Nicomedes Salazar sold Lot
4465 to Carlos Eijansantos for the sum of P100.00 as shown in Exhibit "9", the corresponding deed of sale, and Transfer
Certificate of Title No. T-2653 was issued on September 7, 1939 to Carlos Eijansantos, Exhibit "10". Nicomedes Salazar sold his
one half interest on Lot 4467 to the defendant Lino Bangayan for P3,000.00 on February 22, 1949, Exhibit 'B', and the
corresponding Transfer Certificate of Title T-2654 was issued to Lino Bangayan and to Luy Kim Guan, both are co-owners in
equal shares, Exhibit "8". Opinion of the City Attorney, Exhibit "p", and an affidavit of Atty. Jose T. Atilano, Exhibit "O", state
that Lino Bangayan is a Filipino citizen.

As admitted by both parties (plaintiffs and defendants), Luis Herrera is now deceased, but as to the specific and precise date of
his death the evidence of both parties failed to show.

It is the contention of plaintiff-appellant that all the transactions mentioned in the preceding quoted portion of the decision were
fraudulent and were executed after the death of Luis Herrera and, consequently, when the power of attorney was no longer
operative. It is also claimed that the defendants Lino Bangayan and Luy Kim Guan who now claim to be the owners of Lots Nos.
1740 and 4467 are Chinese by nationality and, therefore, are disqualified to acquire real properties. Plaintiff-appellant, in
addition, questions the supposed deed of sale allegedly executed by Luis Herrera on December 1, 1931 in favor of defendant
Luy Kim Guan, conveying one-half interest on the two lots, Nos. 4465 and 4467, asserting that what was actually executed on
that date, jointly with the general power of attorney, was a lease contract over the same properties for a period of 20 years for
which Luy Kim Guan paid the sum of P2,000.00.

We find all the contentions of plaintiff-appellant untenable. Starting with her claim that the second deed executed on December
1, 1931 by Luis Herrera was a lease contract instead of a deed of sale as asserted by defendant Luy Kim Guan, we find that the
only evidence in support of her contention is her own testimony and that of her husband to the effect that the deceased Luis
Herrera showed the said document to them, and they remembered the same to be a lease contract on the three properties for a
period of 20 years in consideration of P2,000.00. Their testimony was sought to be corroborated by the declaration of the clerk
of Atty. Enrique A. Fernandez, who allegedly notarized the document. Outside of this oral testimony, given more than 23 years
after the supposed instrument was read by them, no other evidence was adduced. On the other hand, defendant Luy Kim Gua
produced in evidence a certification 1 signed by the Register of Deeds of Dipolog, Zamboanga (Exh. 11) to the effect that a deed
of sale, dated December 1, 1931, was execute by Luis Herrera in favor of Luy Kim Guan and entered in the Primary Book No. 4
as duly registered on September 30, 1936 under Original Certificate of Title No. 14360. It is to be noted that the deed of sale
was registered shortly after the issuance in the name of Luis Herrera of Origin Certificate of Title No. 14360 pursuant to Decree
No. 59093, covering the two lots, Nos. 4465 and 4467 (Exh. 5) dated April 7, 1936. In virtue of said deed of sale of December
1, 1931, Original Certificate of Title No. 1436 was cancelled and Transfer Certificate of Title No. 1304 (Exh. 12) in the names of
the conjugal partnership of the spouses Luis Herrera and Go Bang, one-half share, an Luy Kim Guan, single, one-half share, was
issued on September 30, 1936. Later, or on July 23, 1937, Luy Kim Guan, in his capacity as attorney-in-fact of Luis Herrera, sold
the half interest of the latter in the two parcels o land, in favor of Nicomedes Salazar, whereupon TCT No. 13045 was cancelled
and TCT No. RT-657 (494-T-13045 (Exh. 7) was issued in the names of Luy Kim Guan an Nicomedes Salazar in undivided equal
shares. On August 4, 1937, both Luy Kim Guan and Nicomedes Salazar mortgaged the two parcels in favor of the Bank of the
Philippine Islands for the sum of P3,500.00 (Exh. 6). On August 17, 1937, Nicomedes Salazar and Luy Kim Gua sold their
respective shares in Lot No. 4465 to Carlo Eijansantos (Exh. 9), subject to the mortgage, resulting in the issuance of TCT No.
2653 (Exh. 10) covering the entire lot No. 4465 in the name of said Carlos Eijansantos. On February 23, 1949, Nicomedes
Salazar sold his shall share in Lot No. 4467 to Lino Bangayan, as a consequence of which, TCT No. 2654 (Exh. B) was issued
covering said Lot No. 4467 in the names of Luy Kim Guan and Lino Bangayan in undivided equal shares

With respect to Lot No. 1740, the same was sold by Luy Kim Guan, in his capacity as attorney-in-fact of Luis Herrera, on
September 11, 1939 to Luy Chay (See Exh. 2) who, in August, 1941, mortgaged the same (Exh. 4) to the Zamboanga Mutual
Loan and Building Association (See TCT No. 3162 [Exh. 3] issued in the name of Luy Chay). Later on, Luy Chay sold the entire
lot to defendant Lino Bangayan by virtue of the deed of sale dated January 31, 1947 (Exh. E), and as a consequence thereof,
TCT No. 2567 was issued in the name of said vendee. (See Exh. 1). As a result of these various transactions, duly recorded in
the corresponding office of the Register of Deeds, and covered by appropriate transfer certificates of title, the properties are
now registered in the following manner: Lot No. 1740, in the name of Lino Bangayan; Lot No. 4465, in the name of Carlos
Eijansantos; and Lot No. 4467, in the names of Lino Bangayan and Luy Kim Guan in undivided equal shares.

In the face of these documentary evidence presented by the defendants, the trial court correctly upheld the contention of the
defendants as against that of plaintiff-appellant who claims that the second deed executed by Luis Herrera in 1931 was a lease
contract. It is pertinent to note what the lower court stated in this regard, that is, if the second deed executed by Luis Herrera
was a lease contract covering, the 3 lots in question for a period of twenty (20) years, there would have been no purpose for
him to constitute Luy Kim Guan as. his attorney-in-fact to administer and take charge of the same properties already covered by
the lease contract.

Coming now to the contention that these transactions are null and void and of no effect because they were executed by the
attorney-in-fact after the death of his Principal, suffice it to say that as found by the lower court, the date of death of Luis
Herrera has not been satisfactorily proven. The only evidence presented by the Plaintiff-appellant in this respect is a supposed
letter received from a certain "Candi", dated at Amoy in November, 1936, purporting to give information that Luis Herrera
(without mentioning his name) had died in August of that year. This piece of evidence was properly rejected by the lower court
for lack of identification. the other hand, we have the testimony of the witness Chung Lian to the effect that when he was in
Amoy the year 1940, Luis Herrera visited him and had a conversation with him, showing that the latter was still alive at the
time. Since the documents had been executed the attorney-in-fact one in 1937 and the other in 1939, it is evident, if we are to
believe this testimony, that the documents were executed during the lifetime of the principal. Be that as it may, even
granting arguendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no indication in the record, that
the age Luy Kim Guan was aware of the death of his prince at the time he sold the property. The death of the principal does not
render the act of an agent unenforceable, where the latter had no knowledge of such extinguishment the agency.

Appellants also raise the question of the legality of the titles acquired by Luy Chay and Lino Bangayan, on ground that they are
disqualified to acquire real properties in the Philippines. This point is similarly without me because there is no evidence to
support the claim. In fact, in the deed of sale as well as in TCT No. 3162 issued to Luy Chay, the latter was referred to as a
citizen of the Philippines. Nevertheless, the lower court acknowledged the probability that Luy Chay could have been actually a
Chinese citizens.3 At any rate, the property was subsequently purchased by Lino Bangayan, as a result which TCT No. 3162 in
the name of Luy Chay was cancelled and another certificate (TCT No. T-2567) was issued in favor of said vendee.

As to Bangayan's qualification, the lower court held that said defendant had sufficiently established his Philippine citizenship
through Exhibit P, concurred in by the Secretary of Justice. We find no reason to disturb such ruling.

With respect to Luy Kim Guan, while it is true that he is a Chinese citizen, nevertheless, inasmuch as he acquired his one-half
share in Lot No. 4467 in 1931, long before the Constitution was adopted, his ownership can not be attacked on account of his
citizenship.
Appellants, in this appeal, contest the judgment of the court a quo  awarding defendants Lino Bangayan and Luy Kim Guan
attorney's fees in the sum of P2,000.00 each, and expenses of litigation in the amounts of P1,000.00 and P500.00, respectively.
We agree with the appellant in this regard.

This Court has laid down the rule that in the absence of stipulation, a winning party may be awarded attorney's fees only in
case plaintiff's action or defendant's stand is so untenable as to amount to gross and evident bad faith. 4 The same thing
however, can not be said of the case at bar. As a matter of fact, the trial court itself declared that the complaint was filed in
good faith. Attorney's fees, therefore, can not be awarded to defendants simply because the judgment was favorable to them
and adverse to plaintiff, for it may amount to imposing a premium on the right to redress grievances in court. And so with
expenses of litigation. A winning party may be entitled to expenses of litigation only where he, by reason of plaintiff's clearly
unjustifiable claims or defendant's unreasonable refusal to his demands, was compelled to incur said expenditures. Evidently,
the facts of this case do not warrant the granting of such litigation expenses to defendants. In the absence of proof that the
action was intended for reasons other than honest, we may agree with the trial court that the same must have been instituted
by plaintiffs in their belief that they have a valid cause against the defendants.

WHEREFORE, and with the above modification, the decision appealed from is hereby affirmed in all other respects without
prejudice to appellants' right to demand from the agent (Luy Kim Guan) an accounting of proceeds of the agency, if such right
is still available. No costs. So ordered.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes and Dizon,  concur.
 THIRD DIVISION

[G.R. No. 82978. November 22, 1990.]

THE MANILA REMNANT CO., INC., Petitioner, v. THE HONORABLE COURT OF APPEALS and OSCAR VENTANILLA,
JR. and CARMEN GLORIA DIAZ, Respondents.

Bede S. Talingcos, for Petitioners.

Augusto Gatmaytan for Private Respondent.

SYLLABUS

1. CIVIL LAW; AGENCY; FAILURE OF THE PRINCIPAL TO CORRECT AN IRREGULARITY DESPITE KOWLEDGE THEREOF,
DEEMED A RATIFICATION OF THE ACT OF THE AGENT. — In the case at bar, the Valencia realty firm had clearly overstepped
the bounds of its authority as agent — and for that matter, even the law — when it undertook the double sale of the disputed
lots. Such being the case, the principal, Manila Remnant, would have been in the clear pursuant to Article 1897 of the Civil Code
which states that" (t)he agent who acts as such is not personally liable to that party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers." However,
the unique relationship existing between the principal and the agent at the time of the dual sale must be underscored. Bear in
mind that the president then of both firms was Artemio U. Valencia, the individual directly responsible for the sale scam. Hence,
despite the fact that the double sale was beyond the power of the agent, Manila Remnant as principal was chargeable with the
knowledge or constructive notice of that fact and not having done anything to correct such an irregularity was deemed to have
ratified the same. (See Art. 1910, Civil Code.)

2. ID.; ID.; PRINCIPLE OF ESTOPPEL; REASON AND EFFECT THEREOF; CASE AT BAR. — More in point, we find that by the
principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it had plenary powers. Article 1911
of the Civil Code provides: "Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if
the former allowed the latter to act as though he had full powers." The above-quoted article is new. It is intended to protect the
rights of innocent persons. In such a situation, both the principal and the agent may be considered as joint feasors whose
liability is joint and solidary (Verzosa v. Lim, 45 Phil. 416). Authority by estoppel has arisen in the instant case because by its
negligence, the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it.
That the principal might not have had actual knowledge of the agent’s misdeed is of no moment.

DECISION

FERNAN, J.:

Like any other couple, Oscar Ventanilla and his wife Carmen, both faculty members of the University of the Philippines and
renting a faculty unit, dreamed of someday owning a house and lot. Instead of attaining this dream, they became innocent
victims of deceit and found themselves in the midst of an ensuing squabble between a subdivision owner and its real estate
agent.

The facts as found by the trial court and adopted by the Appellate Court are as follows:chanrob1es virtual 1aw library

Petitioner Manila Remnant Co., Inc. is the owner of the parcels of land situated in Quezon City covered by Transfer Certificates
of Title Nos. 26400, 26401, 30783 and 31986 and constituting the subdivision known as Capital Homes Subdivision Nos. I and
II. On July 25, 1972, Manila Remnant and A.U. Valencia & Co. Inc. entered into a written agreement entitled "Confirmation of
Land Development and Sales Contract" to formalize an earlier verbal agreement whereby for a consideration of 17 and 1/2%
fee, including sales commission and management fee, A.U. Valencia and Co., Inc. was to develop the aforesaid subdivision with
authority to manage the sales thereof, execute contracts to sell to lot buyers and issue official receipts. 1

At that time the President of both A.U. Valencia and Co. Inc. and Manila Remnant Co., Inc. was Artemio U. Valencia. cralawnad

On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed two "contracts to sell" covering Lots 1 and 2 of Block
17 in favor of Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract price of P66,571.00 payable monthly for ten
years. 2 As thus agreed in the contracts to sell, the Ventanillas paid the down payments on the two lots even before the formal
contract was signed on March 3, 1970.

Ten (10) days after the signing of the contracts with the Ventanillas or on March 13, 1970, Artemio U. Valencia, as President of
Manila Remnant, and without the knowledge of the Ventanilla couple, sold Lots 1 and 2 of Block 17 again, this time in favor of
Carlos Crisostomo, one of his sales agents without any consideration. 3 Artemio Valencia then transmitted the fictitious
Crisostomo contracts to Manila Remnant while he kept in his files the contracts to sell in favor of the Ventanillas. All the
amounts paid by the Ventanillas were deposited in Valencia’s bank account.

Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly payments of the Ventanillas were remitted to Manila
Remnant as payments of Crisostomo for which the former issued receipts in favor of Crisostomo. Since Valencia kept the
receipts in his files and never transmitted the same to Crisostomo, the latter and the Ventanillas remained ignorant of Valencia’s
scheme. Thus, the Ventanillas continued paying their monthly installments.chanrobles virtual lawlibrary
Subsequently, the harmonious business relationship between Artemio Valencia and Manila Remnant ended. On May 30, 1973,
Manila Remnant, through its General Manager Karl Landahl, wrote Artemio Valencia informing him that Manila Remnant was
terminating its existing collection agreement with his firm on account of the considerable amount of discrepancies and
irregularities discovered in its collections and remittances by virtue of confirmations received from lot buyers. 4 As a
consequence, on June 6, 1973, Artemio Valencia was removed as President by the Board of Directors of Manila Remnant.
Therefore, from May of 1973, Valencia stopped transmitting Ventanilla’s monthly installments which at that time had already
amounted to P17,925.40 for Lot 1 and P18,141.95 for Lot 2, (which appeared in Manila Remnant’s record as credited in the
name of Crisostomo). 5

On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before Branch 19 of the then Court of First Instance of Manila 6
to impugn the abrogation of their agency agreement. On June 10 and July 10, 1973, said court ordered all lot buyers to deposit
their monthly amortizations with the court. 7 But on July 17, 1973, A.U. Valencia and Co. wrote the Ventanillas that it was still
authorized by the court to collect the monthly amortizations and requested them to continue remitting their amortizations with
the assurance that said payments would be deposited later in court. 8 On May 22, 1974, the trial court issued an order
prohibiting A.U. Valencia and Co. from collecting the monthly installments. 9 On July 22, 1974 and February 6, 1976 the same
court ordered the Valencia firm to furnish the court with a complete list of all lot buyers who had already made down payments
to Manila Remnant before December 1972. 10 Valencia complied with the court’s order on August 6, 1974 by submitting a list
which excluded the name of the Ventanillas. 11

Since A.U. Valencia and Co. failed to forward its collections after May 1973, Manila Remnant caused on August 20, 1976 the
publication in the Times Journal of a notice cancelling the contracts to sell of some lot buyers including that of Carlos
Crisostomo in whose name the payments of the Ventanillas had been credited. 12

To prevent the effective cancellation of their contracts, Artemio Valencia instigated on September 22, 1976 the filing by Carlos
Crisostomo and seventeen (17) other lot vendees of a complaint for specific performance with damages against Manila Remnant
before the Court of First Instance of Quezon City. The complaint alleged that Crisostomo had already paid a total of P17,922.40
and P18,136.85 on Lots 1 and 2, respectively. 13

It was not until March 1978 when the Ventanillas, after learning of the termination of the agency agreement between Manila
Remnant and A.U. Valencia & Co., decided to stop paying their amortizations to the latter. The Ventanillas, believing that they
had already remitted P37,007.00 for Lot 1 and P36,911.00 for Lot 2 or a grand total, inclusive of interest, of P73,122.35 for the
two lots, thereby leaving a balance of P13,531.58 for Lot 1 and P13,540.22 for Lot 2, went directly to Manila Remnant and
offered to pay the entire outstanding balance of the purchase price. 14 To their shock and utter consternation, they discovered
from Gloria Caballes, an accountant of Manila Remnant, that their names did not appear in the records of A.U. Valencia and Co.
as lot buyers. Caballes showed the Ventanillas copies of the contracts to sell in favor of Carlos Crisostomo, duly signed by
Artemio U. Valencia as President of Manila Remnant. 15 Whereupon, Manila Remnant refused the offer of the Ventanillas to pay
for the remainder of the contract price because they did not have the personality to do so. Furthermore, they were shown the
published Notice of Cancellation in the January 29, 1978 issue of the Times Journal rescinding the contracts of delinquent
buyers including Crisostomo.

Thus, on November 21, 1978, the Ventanillas commenced an action for specific performance, annulment of deeds and damages
against Manila Remnant, A.U. Valencia and Co. and Carlos Crisostomo before the Court of First Instance of Quezon City, Branch
17-B. 16 Crisostomo was declared in default for failure to file an answer.chanrobles.com:cralaw:red

On November 17, 1980, the trial court rendered a decision 1) declaring the contracts to sell issued in favor of the Ventanillas
valid and subsisting and annulling the contracts to sell in Crisostomo’s favor; 2) ordering Manila Remnant to execute in favor of
the Ventanillas an Absolute Deed of Sale free from all liens and encumbrances; and 3) condemning defendants A.U. Valencia
and Co. Inc., Manila Remnant and Carlos Crisostomo jointly and severally to pay the Ventanillas the amount of P100,000.00 as
moral damages, P100,000.00 as exemplary damages, and P100,000.00 as attorney’s fees. The lower court also added that if,
for any legal reason, the transfer of the lots could no longer be effected, the defendants should reimburse jointly and severally
to the Ventanillas the total amount of P73,122.35 representing the total amount paid for the two lots plus legal interest thereon
from March 1970 plus damages as aforestated. With regard to the cross claim of Manila Remnant against Valencia, the court
found that Manila Remnant could have not been dragged into this suit without the fraudulent manipulations of Valencia. Hence,
it adjudged A.U. Valencia and Co. to pay the Manila Remnant P5,000.00 as moral damages and exemplary damages and
P5,000.00 as attorney’s fees. 17

Subsequently, Manila Remnant and A.U. Valencia and Co. elevated the lower court’s decision to the Court of Appeals through
separate appeals. On October 13, 1987, the Appellate Court affirmed in toto the decision of the lower court. Reconsideration
sought by petitioner Manila Remnant was denied, hence the instant petition.

There is no question that the contracts to sell in favor of the Ventanilla spouses are valid and subsisting. The only issue
remaining is whether or not petitioner Manila Remnant should be held solidarily liable together with A.U. Valencia and Co. and
Carlos Crisostomo for the payment of moral, exemplary damages and attorney’s fees in favor of the Ventanillas. 18

While petitioner Manila Remnant has not refuted the legality of the award of damages per se, it believes that it cannot be made
jointly and severally liable with its agent A.U. Valencia and Co. since it was not aware of the illegal acts perpetrated nor did it
consent or ratify said acts of its agent.

The argument is devoid of merit.

In the case at bar, the Valencia realty firm had clearly overstepped the bounds of its authority as agent — and for that matter,
even the law — when it undertook the double sale of the disputed lots. Such being the case, the principal, Manila Remnant,
would have been in the clear pursuant to Article 1897 of the Civil Code which states that" (t)he agent who acts as such is not
personally liable to that party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers." chanrobles.com.ph : virtual law library
However, the unique relationship existing between the principal and the agent at the time of the dual sale must be underscored.
Bear in mind that the president then of both firms was Artemio U. Valencia, the individual directly responsible for the sale scam.
Hence, despite the fact that the double sale was beyond the power of the agent, Manila Remnant as principal was chargeable
with the knowledge or constructive notice of that fact and not having done anything to correct such an irregularity was deemed
to have ratified the same. 19

More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it
had plenary powers. Article 1911 of the Civil Code provides:jgc:chanrobles.com.ph

"Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter
to act as though he had full powers." (Emphasis supplied)

The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a situation, both the principal
and the agent may be considered as joint feasors whose liability is joint and solidary. 20

Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila Remnant, has permitted its
agent, A.U. Valencia and Co., to exercise powers not granted to it. That the principal might not have had actual knowledge of
the agent’s misdeed is of no moment. Consider the following circumstances: chanrob1es virtual 1aw library

Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia and Co. in the sale and disposition of the
subdivision lots. As a disclosed principal in the contracts to sell in favor of the Ventanilla couple, there was no doubt that they
were in fact contracting with the principal. Section 7 of the Ventanillas’ contracts to sell states: jgc:chanrobles.com.ph

"7. That all payments whether deposits, down payment and monthly installment agreed to be made by the vendee shall be
payable to A.U. Valencia and Co., Inc. It is hereby expressly understood that unauthorized payments made to real estate
brokers or agents shall be the sole and exclusive responsibility and at the risk of the vendee and any and all such payments
shall not be recognized by the vendors unless the official receipts therefor shall have been duly signed by the vendors’ duly
authorized agent, A.U. Valencia and Co., Inc." ( Emphasis supplied)

Indeed, once Manila Remnant had been furnished with the usual copies of the contracts to sell, its only participation then was
to accept the collections and pay the commissions to the agent. The latter had complete control of the business arrangement.
21

Secondly, it is evident from the records that Manila Remnant was less than prudent in the conduct of its business as a
subdivision owner. For instance, Manila Remnant failed to take immediate steps to avert any damage that might be incurred by
the lot buyers as a result of its unilateral abrogation of the agency contract. The publication of the cancelled contracts to sell in
the Times Journal came three years after Manila Remnant had revoked its agreement with A.U. Valencia and Co. chanrobles
virtual lawlibrary

Moreover, Manila Remnant also failed to check the records of its agent immediately after the revocation of the agency contract
despite the fact that such revocation was due to reported anomalies in Valencia’s collections. Altogether, as pointed out by the
counsel for the Ventanillas, Manila Remnant could and should have devised a system whereby it could monitor and require a
regular accounting from A.U. Valencia and Co., its agent. Not having done so, Manila Remnant has made itself liable to those
who have relied on its agent and the representation that such agent was clothed with sufficient powers to act on behalf of the
principal.

Even assuming that Manila Remnant was as much a victim as the other innocent lot buyers, it cannot be gainsaid that it was
precisely its negligence and laxity in the day to day operations of the real estate business which made it possible for the agent
to deceive unsuspecting vendees like the Ventanillas.

In essence, therefore, the basis for Manila Remnant’s solidary liability is estoppel which, in turn, is rooted in the principal’s
neglectfulness in failing to properly supervise and control the affairs of its agent and to adopt the needed measures to prevent
further misrepresentation. As a consequence, Manila Remnant is considered estopped from pleading the truth that it had no
direct hand in the deception employed by its agent. 22

A final word. The Court cannot help but be alarmed over the reported practice of supposedly reputable real estate brokers of
manipulating prices by allowing their own agents to "buy" lots in their names in the hope of reselling the same at a higher price
to the prejudice of bona fide lot buyers, as precisely what the agent had intended to happen in the present case. This is a
serious matter that must be looked into by the appropriate government housing authority.chanrobles.com.ph : virtual law library

WHEREFORE, in view of the foregoing, the appealed decision of the Court of Appeals dated October 13, 1987 sustaining the
decision of the Quezon City trial court dated November 17, 1980 is AFFIRMED. This judgment is immediately executory. Costs
against petitioner.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
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 2 of the trial court, the decretal
portion of which reads:

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

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

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

Costs against both defendants.

SO ORDERED. (p. 22, Rollo)

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

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

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

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

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

Plaintiff was therefore constrained to file the instant complaint.

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

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

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

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

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

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

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

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

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

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

SO ORDERED.

Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

 FIRST DIVISION

[G.R. No. 66715. September 18, 1990.]

PHILIPPINE NATIONAL BANK, Petitioner, v. THE HONORABLE INTERMEDIATE APPELLATE COURT (First Civil
Cases Division) and ROMEO ALCEDO, Respondents.

Juan D. Diaz, Benjamin C. Del Rosario and Pedro R. Lazo for Petitioner.

Carlos S. Ayeng, Augustus C. Rallos and Orlando S. Ayeng for Private Respondent.

DECISION

GRIÑO-AQUINO, J.:

This is a petition for certiorari which seeks to set aside: (a) the decision dated November 29, 1983 of the Intermediate Appellate
Court (now Court of Appeals) in CA-G.R. CV No. 68021 which affirmed the decision of the Court of First Instance of Negros
Occidental (now Regional Trial Court), Branch IV, Bacolod City, in Civil Case No. 11393; and (b) respondent court’s resolution
dated February 29,1984 denying petitioner Philippine National Bank’s (PNB for short) motion for reconsideration.

The facts of the case are the following:chanrob1es virtual 1aw library

On March 20, 1968, Leticia de la Vina-Sepe executed a real estate mortgage in favor of PNB, San Carlos Branch, over a lot
registered in her name under TCT No. T-31913 to secure the payment of a sugar crop loan of P3,400. Later, Leticia Sepe, acting
as attorney-in-fact for her brother-in-law, private respondent Romeo Alcedo, executed an amended real estate mortgage to
include his (Alcedo’s) Lot No. 1626 (being a portion of Lot No. 1402, covered by TCT 52705 of the Isabela Cadastre) as
additional collateral for Sepe’s increased loan of P16,500 (pp. 5-6, PNB’s Brief, p. 74, Rollo). Leticia Sepe and private respondent
Alcedo verbally agreed to split fifty-fifty (50-50) the proceeds of the loan (p. 94, Rollo) but failing to receive his one-half share
from her, Alcedo wrote a letter on May 12,1970 to the PNB, San Carlos Branch, revoking the Special Power of Attorney which he
had given to Leticia Sepe to mortgage his Lot No. 1626 (p. 95, Rollo).

Replying on May 22, 1970, the PNB Branch Manager, Jose T. Gellegani, advised Alcedo that his land had already been included
as collateral for Sepe’s 1970-71 sugar crop loan, which the latter had already availed of, nevertheless, he assured Alcedo that
the bank would exclude his lot as collateral for Sepe’s forthcoming (1971-72) sugar crop loan (p. 95, Rollo). The letter
reads:jgc:chanrobles.com.ph

"May 22, 1970.

"Mr. Romeo Alcedo

Mamballo, M. Padilla

Negros Occidental

"Dear Mr. Alcedo:jgc:chanrobles.com.ph

"This is to acknowledge receipt of your letter dated May 12, 1970, requesting us to revoke the ‘Special Power of Attorney’ you
have executed in favor of Mrs. Leticia de la Vina-Sepe, on February 18, 1969, on Lot No. 1402, Isabela Cadastre, covered by
Transfer Certificate of Title No. 52705, with an area of 20.9200 hectares.

"In this connection, we wish to advise you that the aforementioned parcel of land had been included as collateral to secure the
1970-71 sugar crop loan of Mrs. Leticia de la Vina-Sepe, which she had already availed of In view of your late request, please
be advised and assured that we shall exclude the aforementioned lot as a collateral of Leticia de la Vina-Sepe in our
recommendation for her 1971-72 sugar crop loan.

"For your information, we enclose a copy of our letter to Mrs. Sepe, which is self-explanatory.

"Thank you.

"Very truly yours,

"(Sgd.) JOSE T. GELLEGANI

"Manager"

(pp. 6-7, Record on Appeal, p. 75, Rollo.)

On the same day, May 22, 1970, PNB advised Sepe in writing to replace Lot No. 1402 with another collateral of equal or higher
value.

"May 22, 1970

"Mrs. Leticia de la Vina-Sepe

Canla-on City

"Dear Mrs. Sepe:jgc:chanrobles.com.ph

"We wish to advice you that Mr. Romeo Alcedo, in a letter written to us, has plans to revoke the ‘Special Power of Attorney’ he
executed in 1969 in your favor, affecting Lot No. 1402, Isabela Cadastre, covered by Transfer Certificate of Title No. 52705 with
an area of 20.9200 Hectares. Our record shows that this parcel of land is mortgaged to us to secure the agricultural sugar crop
loans we have granted you.

"Mr. Alcedo made us understand that this said property shall serve as security for your 1969/70 sugar crop loan only. As it
already secures your 1970-71 crop loan, which you have already availed, the same may be excluded as security for future crop
loans. In the meantime, it is requested that you replace Lot No. 1402, above-mentioned, with the same or more appraised
value.chanrobles virtual lawlibrary

"Kindly call on us regarding this matter at your earliest convenience.

"Thank you.

"Very truly yours,

"(Sgd.) JOSE T. GELLEGANI

"Manager"

(pp. 7-8, Record on Appeal, p. 75, Rollo.)

Despite the above advice from PNB, Sepe was still able to obtain an additional loan from PNB increasing her debt of P16,500 to
P56,638.69 on the security of Alcedo’s property as collateral. On January 15,1974, Alcedo received two (2) letters from PNB: (1)
informing him of Sepe’s failure to pay her loan in the total amount of P56,638.69; and (2) giving him six (6) days to settle
Sepe’s outstanding obligation, as otherwise, foreclosure proceedings would be commenced against his property (p. 33, Rollo).
Alcedo requested Sepe to pay her accounts to forestall foreclosure proceedings against his property, but to no avail (p. 15,
Rollo).

On April 17, 1974, Alcedo sued Sepe and PNB in the Court of First Instance of Negros Occidental for collection and injunction
with damages (p. 33, Rollo).

During the pendency of the case, PNB filed in the Office of the Sheriff at Pasig, Metro Manila, a petition for extrajudicial
foreclosure of its real estate mortgage on Alcedo’s land. On November 19, 1974, the property was sold to PNB as the highest
bidder in the sale. The corresponding Sheriff’s Certificate of Sale was issued to the Bank (p. 33, Rollo).

On October 18, 1975, Alcedo filed an amended complaint against Leticia and her husband Elias Sepe, and the Provincial Sheriff
of Negros Occidental praying additionally for annulment of the extrajudicial foreclosure sale and reconveyance of the land to
him free from liens and encumbrances, with damages.

With leave of court, Alcedo filed a second amended complaint withdrawing his action to collect his one-half share (amounting to
P28,319.34) out of the proceeds of the sugar crop loans obtained by Sepe (p. 34, Rollo).

In its answer, PNB alleged that it had no knowledge of the agreement between Mrs. Sepe and Alcedo to split the crop loan
proceeds between them. It required Sepe to put up other collaterals when it granted her an additional loan because Alcedo
informed the Bank that he was revoking the Special Power of Attorney he gave Sepe; that the revocation was not formalized in
accordance with law; and that in any event, the revocation of the Special Power of Attorney on May 12, 1970 by Alcedo did not
impair the real estate mortgage earlier executed on April 28, 1969 by Sepe in favor of the Bank (p. 36, Rollo).

On March 14, 1980, the trial court rendered judgment in favor of Alcedo —

"1. Declaring the public auction sale and the certificate of sale executed by the Provincial Sheriff of Negros Occidental relative to
Lot No. 1626, Isabela Cadastre (TCT No. T-52705), as null and void;

"2. Ordering the defendant Philippine National Bank to reconvey to plaintiff the title to aforesaid Lot No. 1626 free from all liens
and encumbrances relative to the loans obtained by defendant Leticia de la Vina-Sepe;

"3. Ordering defendant spouses Leticia de la Vina-Sepe and Elias Sepe and the Philippine National Bank, in solidum, to pay to
the plaintiff moral damages in the sum of P10,000.00, and another sum of P5,000.00 as attorney’s fees and expenses of
litigation;

"4. On the cross-claim of defendant PNB against Leticia de la Vina-Sepe, considering that no evidence has been adduced
regarding the updated actual accountability of the latter with the former, it is hereby directed that PNB proceed to collect
against the cross-defendant whatever outstanding obligation the latter owes the former arising from transactions in connection
with the instant case.

"No pronouncement as to costs." (pp. 10-11, Rollo.).

The bank appealed but to no avail for on November 29, 1983, the Intermediate Appellate Court affirmed in toto the judgment of
the trial court (p. 54, Rollo.) The appellate court reasoned out that the Bank was estopped from foreclosing the mortgage on
Alcedo’s lot to pay Sepe’s 1971-72 sugar crop loan, after having assured Alcedo on May 22, 1970 "that we shall exclude the
aforementioned lot as a collateral of Leticia de la Vina-Sepe in our recommendation for her 1971-72 sugar crop loan" (p. 37,
Rollo). The Court of Appeals held:jgc:chanrobles.com.ph

". . . Plaintiff-appellee’s letter was unequivocal and clear to the effect that defendant Leticia de la Vina Sepe was no longer
empowered to bind, encumber or mortgage his property. Although We may not hold this revocation to retroact to April 28, 1969
which was the date of the original mortgage, We can neither interpret it in any other way than that from the moment of notice
to the PNB, it was the absolute intention of the owner to withdraw all authority from said defendant to further bind or encumber
his property. This was clearly understood by the defendant-appellant PNB. There was no question on its part that Leticia de la
Vina Sepe was no longer authorized to offer plaintiff-appellee’s property as collateral for her contract of mortgage with the PNB.
Defendant-appellant, therefore, acknowledged this revocation of the agency and in no uncertain terms assured the plaintiff-
appellee that indeed, the latter’s property will no longer be accepted by it as collateral for the sugar crop loan of the
aforementioned defendant for the year 1971 to 1972. This meeting of the minds between the plaintiff-appellee and defendant-
appellant took place not through verbal communications only, but in writing, as shown by their letters dated May 12, 1970 and
May 22, 1970, respectively. . . .

"x       x       x

". . . To Our minds, the aforementioned act and declaration of defendant-appellant PNB as embodied in said letter binds said
bank under the principle of estoppel by deed and defined as follows:jgc:chanrobles.com.ph

"‘A doctrine in American jurisprudence whereby a party creating an appearance of fact which is not true is held bound by that
appearance as against another person who has acted on the faith of it. (Strong v. Gutierrez Repide, 6 Phil. 685).

which is provided for in Articles 1431 and 1433 of the New Civil Code in conjunction with Section 3, paragraph (a), Rule 131 of
the Rules of Court, all of which provide:chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

"‘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.’

"‘Art. 1433. Estoppel may be in pais or by deed.’

"‘Sec. 3. Conclusive presumptions. — The following are instances of conclusive presumptions:jgc:chanrobles.com.ph

"‘(a) Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a
particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act, or omission, be
permitted to falsify it.’

and which was enunciated in the following decisions of the Supreme Court:jgc:chanrobles.com.ph

"‘Whenever a party has, by his own declaration, act or omission intentionally and deliberately led another to believe a particular
thing true and to act upon such belief, he cannot, in any litigation arising out of such declaration, act, or omission, be permitted
to falsify it.

"‘Estoppel arises when one, by his acts, representations, or admissions, or by his silence when he ought to speak out,
intentionally or through culpable negligence induces another to believe certain facts to exist and such other rightfully relies and
acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts (Huyatid v.
Huyatid, 47265-R, Jan. 4, 1928).

"‘The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is to
forbid one to speak against his own act, representations, or commitments to the injury of one to whom they were directed and
who reasonably relied thereon. Said doctrine springs from equitable principles and the equities of the case. It is designed to aid
the law in the administration of justice where without its aid injustice might result.’ (Philippine National Bank v. Court of
Appeals, L-30831, November 21, 1979, 94 SCRA 368).

"By its letter dated May 22,1970, Defendant-Appellant PNB led plaintiff-appellee to believe that his property covered by TCT T-
52705 would no longer be included as collateral in the sugar crop loan of defendant Leticia de la Vina Sepe for the year 1971-
72. It led said plaintiff-appellee to believe that his property as of said year will no longer be encumbered and will be free from
any lien or mortgage. Plaintiff-appellee had the right to rely on said belief, because of the aforementioned act and declaration of
defendant-appellant bank. Under the laws and jurisprudence aforequoted, Defendant-Appellant bank can no longer be allowed
to deny or falsify its act or declaration, or to renege from it. This is one of the conclusive presumptions provided for by the
Rules of Court." (pp. 37, 38-39, Rollo.).

PNB seeks a review of that decision on the grounds that:chanrob1es virtual 1aw library

1. the doctrine of promissory estoppel does not apply to this case;

2. PNB was a mortgagee in good faith and for value; and

3. PNB adduced substantial evidence in support of its cross-claim against defendant Leticia Sepe (p. 15, Rollo).

These issues boil down to whether or not PNB validly foreclosed the real estate mortgage on Alcedo’s property despite notice of
Alcedo’s revocation of the Special Power of Attorney authorizing Leticia Sepe to mortgage his property as security for her sugar
crop loans and despite the Bank’s written assurance to Alcedo that it would exclude his property as collateral for Sepe’s future
loan obligations.

After careful deliberation, the Court is not persuaded to disturb the decisions of the trial court and the Court of Appeals in this
case.

We agree with the opinion of the appellate court that under the doctrine of promissory estoppel enunciated in the case of
Republic Flour Mills, Inc. v. Central Bank, L-23542, August 11, 1979, the act and assurance given by the PNB to Alcedo "that we
shall exclude the aforementioned lot [Lot No. 1402] as a collateral of Leticia de la Vina-Sepe in our recommendation for her
1971-72 sugar crop loan" (p. 37, Rollo) is binding on the bank. Having given that assurance, the bank may not turn around and
do the exact opposite of what it said it would not do. One may not take inconsistent positions (Republic v. Court of Appeals, 133
SCRA 505). A party may not go back on his own acts and representations to the prejudice of the other party who relied upon
them (Lazo v. Republic Surety & Insurance Co., Inc., 31 SCRA 329.).

In the case of Philippine National Bank v. Court of Appeals (94 SCRA 357), where the bank manager assured the heirs of the
debtor-mortgagor that they would be allowed to pay the remaining obligation of their deceased parents, the Supreme Court
held that the bank must abide by its representations.

"On equitable principles, particularly on the ground of estoppel, we must rule against petitioner Bank. The doctrine of estoppel
is based upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against
its own act, representations, or commitments to the injury of one to whom they were directed and who reasonably relied
thereon. The doctrine of estoppel springs from equitable principles and the equities in the case. It is designed to aid the law in
the administration of justice where without its aid injustice might result. It has been applied by this Court wherever and
whenever the special circumstances of a case so demands."cralaw virtua1aw library

In the case at bar, since PNB had promised to exclude Alcedo’s property as collateral for Sepe’s 1971-72 sugar crop loan, it
should have released the property to Alcedo. The mortgage which Sepe gave to the bank on Alcedo’s lot as collateral for her
1971-72 sugar crop loan was null and void for having been already disauthorized by Alcedo. Since Alcedo’s property secured
only P13,100.00 of Sepe’s 1970-71 sugar crop loan of P16,500.00 (because P3,400 was secured by Sepe’s own property),
Alcedo’s property may be held to answer for only the unpaid balance, if any, of Sepe’s 1970-71 loan, but not the 1971-72 crop
loan.

While Article 1358 of the New Civil Code requires that the revocation of Alcedo’s Special Power of Attorney to mortgage his
property should appear in a public instrument:jgc:chanrobles.com.ph

"Art. 1358. The following must appear in a public document:chanrob1es virtual 1aw library

(1) Acts or contracts which have for their object the creation, transmission, modification or extinguishment of real rights over
immovable property; sales of real property or of an interest therein are governed by Articles 1403, No. 2 and 1405."cralaw
virtua1aw library

nevertheless, a revocation embodied in a private writing is valid and binding between the parties (Doliendo v. Depino, 12 Phil.
758; Hawaiian-Philippines Co. v. Hernaez, 45 Phil. 746) for —

"The legalization by a public writing and the recording of the same in the registry are not essential requisites of a contract
entered into, as between the parties, but mere conditions of form or solemnities which the law imposes in order that such
contract may be valid as against third persons, and to insure that a publicly executed and recorded agreement shall be
respected by the latter." (Alano, Et. Al. v. Babasa, 10 Phil. 511.)

The PNB acted with bad faith in proceeding against Alcedo’s property to satisfy Sepe’s unpaid 1971-72 sugar crop loan. The
extrajudicial foreclosure being null and void ab initio, the certificate of sale which the Sheriff delivered to PNB as the highest
bidder at the sale is also null and void.

WHEREFORE, finding no reversible error in the decision of the Court of Appeals, the petition for review is denied for lack of
merit.

SO ORDERED.