G.R. No. 137686           February 8, 2000 within the reglementary-period after it was duly served with summons.
ry-period after it was duly served with summons. On April 26,
RURAL BANK OF MILAOR (CAMARINES SUR), petitioner, vs.FRANCISCA
OCFEMIA, ROWENA BARROGO, MARIFE O. NIÑO, FELICISIMO OCFEMIA,
RENATO OCFEMIA JR, and WINSTON OCFEMIA, respondents.
PANGANIBAN, J.:
When a bank, by its acts and failure to act, has clearly clothed its manager with
apparent authority to sell an acquired asset in the normal course of business, it is
legally obliged to confirm the transaction by issuing a board resolution to enable the
buyers to register the property in their names. It has a duty to perform necessary
and lawful acts to enable the other parties to enjoy all benefits of the contract which
it had authorized.
The Case
Before this Court is a Petition for Review on Certiorari challenging the December 18,
1998 Decision of the Court of Appeals 1 (CA) in CA-GR SP No. 46246, which
affirmed the May 20, 1997 Decision 2 of the Regional Trial Court (RTC) of Naga City
(Branch 28). The CA disposed as follows:
Wherefore, premises considered, the Judgment appealed from is hereby
AFFIRMED. Costs against the respondent-appellant. 3
The dispositive portion of the judgment affirmed by the CA ruled in this wise:
WHEREFORE, in view of all the foregoing findings, decision is hereby rendered
whereby the [petitioner] Rural Bank of Milaor (Camarines Sur), Inc. through its Board
of Directors is hereby ordered to immediately issue a Board Resolution confirming
the Deed of Sale it executed in favor of Renato Ocfemia marked Exhibits C, C-1 and
C-2); to pay [respondents] the sum of FIVE HUNDRED (P500.00) PESOS as actual
damages; TEN THOUSAND (P10,000.00) PESOS as attorney's fees; THIRTY
THOUSAND (P30,000.00) PESOS as moral damages; THIRTY THOUSAND
(P30,000.00) PESOS as exemplary damages; and to pay the costs. 4
5
Also assailed is the February 26, 1999 CA Resolution which denied petitioner's
Motion for Reconsideration.
The Facts
The trial court's summary of the undisputed facts was reproduced in the CA Decision
as follows:
This is an action for mandamus with damages. On April 10, 1996, [herein petitioner]
was declared in default on motion of the [respondents] for failure to file an answer
1996, [herein petitioner] filed a motion to set aside the order of default with objection
thereto filed by [herein respondents].
On June 17, 1996, an order was issued denying [petitioner's] motion to set aside the
order of default. On July 10, 1996, the defendant filed a motion for reconsideration of
the order of June 17, 1996 with objection thereto by [respondents]. On July 12,
1996, an order was issued denying [petitioner's] motion for reconsideration. On July
31, 1996, [respondents] filed a motion to set case for hearing. A copy thereof was
duly furnished the [petitioner] but the latter did not file any opposition and so
[respondents] were allowed to present their evidence ex-parte. A certiorari case was
filed by the [petitioner] with the Court of Appeals docketed as CA GR No. 41497-SP
but the petition was denied in a decision rendered on March 31, 1997 and the same
is now final.
The evidence presented by the [respondents] through the testimony of Marife O.
Niño, one of the [respondents] in this case, show[s] that she is the daughter of
Francisca Ocfemia, a co-[respondent] in this case, and the late Renato Ocfemia who
died on July 23, 1994. The parents of her father, Renato Ocfemia, were Juanita
Arellano Ocfemia and Felicisimo Ocfemia. Her other co-[respondents] Rowena O.
Barrogo, Felicisimo Ocfemia, Renato Ocfemia, Jr. and Winston Ocfemia are her
brothers and sisters.1âwphi1.nêt
Marife O. Niño knows the five (5) parcels of land described in paragraph 6 of the
petition which are located in Bombon, Camarines Sur and that they are the ones
possessing them which [were] originally owned by her grandparents, Juanita
Arellano Ocfemia and Felicisimo Ocfemia. During the lifetime of her grandparents,
[respondents] mortgaged the said five (5) parcels of land and two (2) others to the
[petitioner] Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage
(Exhs. A and A-1) and the Promissory Note (Exh. B).
The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to
redeem the mortgaged properties consisting of seven (7) parcels of land and so the
mortgage was foreclosed and thereafter ownership thereof was transferred to the
[petitioner] bank. Out of the seven (7) parcels that were foreclosed, five (5) of them
are in the possession of the [respondents] because these five (5) parcels of land
described in paragraph 6 of the petition were sold by the [petitioner] bank to the
parents of Marife O. Niño as evidenced by a Deed of Sale executed in January 1988
(Exhs. C, C-1 and C-2).
The aforementioned five (5) parcels of land subject of the deed of sale (Exh. C),
have not been, however transferred in the name of the parents of Merife O. Niño
after they were sold to her parents by the [petitioner] bank because according to the
Assessor's Office the five (5) parcels of land, subject of the sale, cannot be
transferred in the name of the buyers as there is a need to have the document of
sale registered with the Register of Deeds of Camarines Sur.
In view of the foregoing, Marife O. Niño went to the Register of Deeds of Camarines
Sur with the Deed of Sale (Exh. C) in order to have the same registered. The
Register of Deeds, however, informed her that the document of sale cannot be
registered without a board resolution of the [petitioner] Bank. Marife Niño then went
to the bank, showed to if the Deed of Sale (Exh. C), the tax declaration and receipt
of tax payments and requested the [petitioner] for a board resolution so that the
property can be transferred to the name of Renato Ocfemia the husband of
petitioner Francisca Ocfemia and the father of the other [respondents] having died
already.
The [petitioner] bank refused her request for a board resolution and made many
alibi[s]. She was told that the [petitioner] bank ha[d] a new manager and it had no
record of the sale. She was asked and she complied with the request of the
[petitioner] for a copy of the deed of sale and receipt of payment. The president of
the [petitioner] bank told her to get an authority from her parents and other
[respondents] and receipts evidencing payment of the consideration appearing in the
deed of sale. She complied with said requirements and after she gave all these
documents, Marife O. Niño was again told to wait for two (2) weeks because the
[petitioner] bank would still study the matter.
After two (2) weeks, Marife O. Niño returned to the [petitioner] bank and she was
told that the resolution of the board would not be released because the [petitioner]
bank ha[d] no records from the old manager. Because of this, Marife O. Niño
brought the matter to her lawyer and the latter wrote a letter on December 22, 1995
to the [petitioner] bank inquiring why no action was taken by the board of the request
for the issuance of the resolution considering that the bank was already fully paid
[for] the consideration of the sale since January 1988 as shown by the deed of sale
itself (Exh. D and D-1 ).
On January 15, 1996 the [petitioner] bank answered [respondents'] lawyer's letter
(Exh. D and D-1) informing the latter that the request for board resolution ha[d]
already been referred to the board of directors of the [petitioner] bank with another
request that the latter should be furnished with a certified machine copy of the
receipt of payment covering the sale between the [respondents] and the [petitioner]
(Exh. E). This request of the [petitioner] bank was already complied [with] by Marife
O. Niño even before she brought the matter to her lawyer.
On January 23, 1996 [respondents'] lawyer wrote back the branch manager of the
[petitioner] bank informing the latter that they were already furnished the receipts the
bank was asking [for] and that the [respondents] want[ed] already to know the stand
of the bank whether the board [would] issue the required board resolution as the
deed of sale itself already show[ed] that the [respondents were] clearly entitled to the
land subject of the sale (Exh. F). The manager of the [petitioner] bank received the
letter which was served personally to him and the latter told Marife O. Niño that
since he was the one himself who received the letter he would not sign anymore a
copy showing him as having already received said letter (Exh. F).
After several days from receipt of the letter (Exh. F) when Marife O. Niño went to the
[petitioner] again and reiterated her request, the manager of the [petitioner] bank told
her that they could not issue the required board resolution as the [petitioner] bank
ha[d] no records of the sale. Because of this Merife O. Niño already went to their
lawyer and ha[d] this petition filed.
The [respondents] are interested in having the property described in paragraph 6 of
the petition transferred to their names because their mother and co-petitioner,
Francisca Ocfemia, is very sickly and they want to mortgage the property for the
medical expenses of Francisca Ocfemia. The illness of Francisca Ocfemia beg[a]n
after her husband died and her suffering from arthritis and pulmonary disease
already became serious before December 1995.
Marife O. Niño declared that her mother is now in serious condition and they could
not have her hospitalized for treatment as they do not have any money and this is
causing the family sleepless nights and mental anguish, thinking that their mother
may die because they could not submit her for medication as they do not have
money. 6
The trial court granted the Petition. As noted earlier, the CA affirmed the RTC
Decision.
Hence, this recourse. 7 In a Resolution dated June 23, 1999, this Court issued a
Temporary Restraining Order directing the trial court "to refrain and desist from
executing [pending appeal] the decision dated May 20, 1997 in Civil Case No. RTC-
96-3513, effective immediately until further orders from this Court." 8
Ruling of the Court of Appeals
The CA held that herein respondents were "able to prove their present cause of
action" against petitioner. It ruled that the RTC had jurisdiction over the case,
because (1) the Petition involved a matter incapable of pecuniary estimation; (2)
mandamus fell within the jurisdiction of RTC; and (3) assuming that the action was
for specific performance as argued by the petitioner, it was still cognizable by the
said court.
Issues
In its Memorandum, 9 the bank posed the following questions:
1. Question of Jurisdiction of the Regional Trial Court. — Has a Regional Trial Court
original jurisdiction over an action involving title to real property with a total assessed
value of less than P20,000.00?
2. Question of Law. — May the board of directors of a rural banking corporation be
compelled to confirm a deed of absolute sale of real property owned by the
corporation which deed of sale was executed by the bank manager without prior
authority of the board of directors of the rural banking corporation? 10
This Court's Ruling
The present Petition has no merit.
First Issue:Jurisdiction of the Regional Trial Court
Petitioner submits that the RTC had no jurisdiction over the case. Disputing the
ruling of the appellate court that the present action was incapable of pecuniary
estimation, petitioner argues that the matter in fact involved title to real property
worth less than P20,000. Thus, under RA 7691, the case should have been filed
before a metropolitan trial court, a municipal trial court or a municipal circuit trial
court.
We disagree. The well-settled rule is that jurisdiction is determined by the allegations
of the complaint. 11 In the present case, the Petition for Mandamus filed by
respondents before the trial court prayed that petitioner-bank be compelled to issue
a board resolution confirming the Deed of Sale covering five parcels of unregistered
land, which the bank manager had executed in their favor. The RTC has jurisdiction
over such action pursuant to Section 21 of BP 129, which provides:
Sec. 21. Original jurisdiction in other cases. — Regional Trial Courts shall exercise
original jurisdiction;
(1) in the issuance of writ of certiorari, prohibition, mandamus, quo warranto, habeas
corpus and injunction which may be enforced in any part of their respective regions;
and
(2) In actions affecting ambassadors and other public ministers and consuls.
A perusal of the Petition shows that the respondents did not raise any question
involving the title to the property, but merely asked that petitioner's board of directors
be directed to issue the subject resolution. Moreover, the bank did not controvert the
allegations in the said Petition. To repeat, the issue therein was not the title to the
property; it was respondents' right to compel the bank to issue a board resolution
confirming the Deed of Sale.
Second Issue:Authority of the Bank Manager
Respondents initiated the present proceedings, so that they could transfer to their
names the subject five parcels of land; and subsequently, to mortgage said lots and
to use the loan proceeds for the medical expenses of their ailing mother. For the
property to be transferred in their names, however, the register of deeds required the
submission of a board resolution from the bank confirming both the Deed of Sale
and the authority of the bank manager, Fe S. Tena, to enter into such transaction.
Petitioner refused. After being given the runaround by the bank, respondents sued in
exasperation.
Allegations in the Petition for Mandamus Deemed Admitted
Respondents based their action before the trial court on the Deed of Sale, the
substance of which was alleged in and a copy thereof was attached to the Petition
for Mandamus. The Deed named Fe S. Tena as the representative of the bank.
Petitioner, however, failed to specifically deny under oath the allegations in that
contract. In fact, it filed no answer at all, for which reason it was declared in default.
Pertinent provisions of the Rules of Court read:
Sec. 7. Action or defense based on document. — Whenever an action or defense is
based upon a written instrument or document, the substance of such instrument or
document shall be set forth in the pleading, and the original or a copy thereof shall
be attached to the pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may with like effect be set forth in the pleading.
Sec. 8. How to contest genuineness of such documents.— When an action or
defense is founded upon a written instrument, copied in or attached to the
corresponding pleading as provided in the preceding section, the genuineness and
due execution of the instrument shall be deemed admitted unless the adverse party,
under oath, specifically denies them, and sets forth what he claims to be the facts;
but this provision does not apply when the adverse party does not appear to be a
party to the instrument or when compliance with an order for an inspection of the
original instrument is refused. 12
In failing to file its answer specifically denying under oath the Deed of Sale, the bank
admitted the due execution of the said contract. Such admission means that it
acknowledged that Tena was authorized to sign the Deed of Sale on its behalf. 13
Thus, defenses that are inconsistent with the due execution and the genuineness of
the written instrument are cut off by an admission implied from a failure to make a
verified specific denial.
Other Acts of the Bank
In any event, the bank acknowledged, by its own acts or failure to act, the authority
of Fe S. Tena to enter into binding contracts. After the execution of the Deed of Sale,
respondents occupied the properties in dispute and paid the real estate taxes due
thereon. If the bank management believed that it had title to the property, it should
have taken some measures to prevent the infringement or invasion of its title thereto
and possession thereof.
Likewise, Tena had previously transacted business on behalf of the bank, and the
latter had acknowledged her authority. A bank is liable to innocent third persons
where representation is made in the course of its normal business by an agent like
Manager Tena, even though such agent is abusing her authority. 14 Clearly, persons
dealing with her could not be blamed for believing that she was authorized to
transact business for and on behalf of the bank. Thus, this Court has ruled in Board
of Liquidators v. Kalaw: 15
Settled jurisprudence has it that where similar acts have been approved by the
directors as a matter of general practice, custom, and policy, the general manager
may bind the company without formal authorization of the board of directors. In
varying language, existence of such authority is established, by proof of the course
of business, the usages and practices of the company and by the knowledge which
the board of directors has, or must be presumed to have, of acts and doings of its
subordinates in and about the affairs of the corporation. So also,
. . . authority to act for and bind a corporation may be presumed from acts of
recognition in other instances where the power was in fact exercised.
. . . Thus, when, in the usual course of business of a corporation, an officer has been
allowed in his official capacity to manage its affairs, his authority to represent the
corporation may be implied from the manner in which he has been permitted by the
directors to manage its business.
Notwithstanding the putative authority of the manager to bind the bank in the Deed
of Sale, petitioner has failed to file an answer to the Petition below within the
reglementary period, let alone present evidence controverting such authority.
Indeed, when one of herein respondents, Marife S. Nino, went to the bank to ask for
the board resolution, she was merely told to bring the receipts. The bank failed to
categorically declare that Tena had no authority. This Court stresses the following:
. . . Corporate transactions would speedily come to a standstill were every person
dealing with a corporation held duty-bound to disbelieve every act of its responsible
officers, no matter how regular they should appear on their face. This Court has
observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that —
In passing upon the liability of a corporation in cases of this kind it is always well to
keep in mind the situation as it presents itself to the third party with whom the
contract is made. Naturally he can have little or no information as to what occurs in
corporate meetings; and he must necessarily rely upon the external manifestation of
corporate consent. The integrity of commercial transactions can only be maintained
by holding the corporation strictly to the liability fixed upon it by its agents in
accordance with law; and we would be sorry to announce a doctrine which would
permit the property of man in the city of Paris to be whisked out of his hands and
carried into a remote quarter of the earth without recourse against the corporation
whose name and authority had been used in the manner disclosed in this case. As
already observed, it is familiar doctrine that if a corporation knowingly permits one of
its officers, or any other agent, to do acts within the scope of an apparent authority,
and thus holds him out to the public as possessing power to do those acts, the
corporation will, as against any one who has in good faith dealt with the corporation
through such agent, be estopped from denying his authority; and where it is said "if
the corporation permits this means the same as "if the thing is permitted by the
directing power of the corporation." 16
In this light, the bank is estopped from questioning the authority of the bank manager
to enter into the contract of sale. If a corporation knowingly permits one of its officers
or any other agent to act within the scope of an apparent authority, it holds the agent
out to the public as possessing the power to do those acts; thus, the corporation will,
as against anyone who has in good faith dealt with it through such agent, be
estopped from denying the agent's authority. 17
Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale.
Accordingly, it has a clear legal duty to issue the board resolution sought by
respondent's. Having authorized her to sell the property, it behooves the bank to
confirm the Deed of Sale so that the buyers may enjoy its full use.
The board resolution is, in fact, mere paper work. Nonetheless, it is paper work
necessary in the orderly operations of the register of deeds and the full enjoyment of
respondents' rights. Petitioner-bank persistently and unjustifiably refused to perform
its legal duty. Worse, it was less than candid in dealing with respondents regarding
this matter. In this light, the Court finds it proper to assess the bank treble costs, in
addition to the award of damages.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision and
Resolution AFFIRMED. The Temporary Restraining Order issued by this Court is
hereby LIFTED. Treble costs against petitioner.
SO ORDERED.
Melo, Purisima and Gonzaga-Reyes, JJ., concur.Vitug, J., please see concurring
opinion.
Separate Opinions
VITUG, J., concurring opinion;
I share the views expressed in the ponencia written for the Court by our esteemed
colleague Mr. Justice Artemio V. Panganiban. There is just a brief clarificatory
statement that I thought could be made.
The Civil Code, being a law of general application, can be suppletory to special laws
and certainly not preclusive of those that govern commercial transactions. Indeed, in
its generic sense, civil law can rightly be said to encompass commercial law. Jus
civile, in ancient Rome, was merely used to distinguish it from jus gentium or the law
common to all the nations within the empire and, at some time later, only in contrast
to international law. In more recent times, civil law is so referred to as private law in
distinction from public law and criminal law. Today, it may not be totally inaccurate to
consider commercial law, among some other special laws, as being a branch of civil
law.
Sec. 45 of the Corporation Code provides:
Sec. 45. Ultra vires acts of corporations. — No corporation under this Code shall
possess or exercise any corporate powers except those conferred by this Code or practices, such an act does not bind the corporation. The Board, however, acting
by its articles of incorporation and except such as are necessary or incidental to the within its competence, may ratify the unauthorized act of the corporate officer. So,
exercise of the powers so conferred. too, a corporation may be held in estoppel from denying as against innocent third
persons the authority of its officers or agents who have been clothed by it with
The language of the Code appears to confine the term ultra vires to an act outside or ostensible or apparent authority. 10
beyond express, implied and incidental corporate powers. Nevertheless, the concept
can also include those acts that may ostensibly be within such powers but are, by The Corporation Code itself has not been that explicit with respect to the
general or special laws, either proscribed or declared illegal. In general, although consequences of ultra vires acts; hence, the varied ascriptions to its effects
perhaps loosely, ultra vires has also been used to designate those acts of the board heretofore expressed. It may well be to consider futile any further attempt to have
of directors or of corporate officers when acting beyond their respective spheres of these situations bear any exact equivalence to the civil law precepts of defective
authority. In the context that the law has used the term in Article 45 of the contracts. Nevertheless, general statements could be made. Here reiterated, while
Corporation Code, an ultra vires act would be void and not susceptible to ratification. an act of the corporation which is either illegal or outside of express, implied or
1
In determining whether or not a corporation may perform an act, one considers the incidental powers as so provided by law or the charter would be void under Article 5
11
logical and necessary relation between the act assailed and the corporate purpose of the Civil Code, and the act is not susceptible to ratification, an unauthorized act
expressed by the law or in the charter. For if the act were one which is lawful in itself (if within corporate powers) of the board or a corporate officer, however, would only
or not otherwise prohibited and done for the purpose of serving corporate ends or be unenforceable conformably with Article 1403 12 of the Civil Code but, if the party
reasonably contributes to the promotion of those ends in a substantial and not with whom the agent has contracted is aware of the latter's limits of powers, the
merely in a remote and fanciful sense, it may be fairly considered within corporate unauthorized act is declared void by Article 1898 13 of the same Code, although still
powers. 2 susceptible thereunder to ratification by the principal. Any person dealing with
corporate boards and officers may be said to be charged with the knowledge that the
Sec. 23 of the Corporation Code states that the corporate powers are to be latter can only act within their respective limits of power, and he is put to notice
exercised, all business conducted, and all property of corporations controlled and accordingly. Thus, it would generally behoove such a person to look into the extent
held, by the Board of Directors. When the act of the board is within corporate powers of the authority of corporate agents since the onus would ordinarily be with
but it is done without the concurrence of the shareholders as and when such him.1âwphi1.nêt
approval is required by law 3 or when the act is beyond its competence to do, 4 the
act has been described as void 5 or, as unenforceable, 6 or as ineffective and not
legally binding. 7 These holdings notwithstanding, the act cannot accurately be
likened to an ultra vires act of the corporation itself defined in Section 45 of the
Code. Where the act is within corporate powers but the board has acted without
being competent to independently do so, the action is not necessarily and totally
devoid of effects, and it may generally be ratified expressly or impliedly. Thus, an
acceptance of benefits derived by the shareholders from an outside investment
made by the board without the required concurrence of the stockholders may,
nonetheless, be so considered as an effective investment. 8 It may be said, however,
that when the board resolution is yet executory, the act should aptly be deemed
inoperative and specific performance cannot be validly demanded but, if for any
reason, the contemplated action is carried out, such principles as ratification or
prescription when applicable, normally unknown in void contracts, can serve to
negate a claim for the total nullity thereof.

Corporate officers, in their case, may act on such matters as may be authorized
either expressly by the By-laws or Board Resolutions or impliedly such as by general
practice or policy or as are implied by express powers. When officers are allowed to
act in certain particular cases, their acts conformably therewith can bind the
company. Hence, a corporate officer entrusted with general management and
control of the business has the implied authority to act or contract for the corporation
which may be necessary or appropriate to conduct the ordinary business. 9 If the act
of corporate officers comes within corporate powers but it is done without any
express or implied authority therefor from the by-laws, board resolutions or corporate
G.R. No. 108957 June 14, 1993
PRUDENTIAL BANK, petitioner, vs.THE COURT OF APPEALS, AURORA CRUZ,
respondents.
Monique Q. Ignacio for petitioner.
Eduardo C. Tutaan for private respondent.
CRUZ, J.:
We deal here with another controversy involving the integrity of a bank.
The complaint in this case arose when private respondent Aurora F.Cruz, * with her
sister as co-depositor, invested P200,000.00 in Central Bank bills with the Prudential
Bank at its branch in Quezon Avenue, Quezon City, on June 23, 1986. The
placement was for 63 days at 13.75% annual interest. For this purpose, the amount
of P196,122.88 was withdrawn from the depositors' Savings Account No. 2546 and
applied to the investment. The difference of P3,877.07 represented the pre-paid
interest.
1
The transaction was evidenced by a Confirmation of Sale delivered to Cruz two
days later, together with a Debit Memo 2 in the amount withdrawn and applied to the
confirmed sale. These documents were issued by Susan Quimbo, the employee of
the bank to whom Cruz was referred and who was apparently in charge of such
transactions. 3
Upon maturity of the placement on August 25, 1986, Cruz returned to the bank to
"roll-over" or renew her investment. Quimbo, who again attended to her, prepared a
Credit Memo 4 crediting the amount of P200,000.00 in Cruz's savings account
passbook. She also prepared a Debit Memo for the amount of P196,122.88 to cover
the re-investment of P200,000.00 minus the prepaid interest of P3,877.02. 5
This time, Cruz was asked to sign a Withdrawal Slip 6 for P196,122.98, representing
the amount to be re-invested after deduction of the prepaid interest. Quimbo
explained this was a new requirement of the bank. Several days later, Cruz received
another Confirmation of Sale 7 and a copy of the Debit Memo. 8
On October 27, 1986, Cruz returned to the bank and sought to withdraw her
P200,000.00. After verification of her records, however, she was informed that the
investment appeared to have been already withdrawn by her on August 25, 1986.
There was no copy on file of the Confirmation of Sale and the Debit Memo allegedly
issued to her by Quimbo. Quimbo herself was not available for questioning as she
had not been reporting for the past week. Shocked by this information, Cruz became
hysterical and burst into tears. The branch manager, Roman Santos, assured her
that he would look into the matter. 9
Every day thereafter, Cruz went to the bank to inquire about her request to withdraw
her investment. She received no definite answer, not even to the letter she wrote the
bank which was received by Santos himself. 10 Finally, Cruz sent the bank a demand
letter dated November 12, 1986 for the amount of P200,000.00 plus interest. 11 In a
reply dated November 20, 1986, the bank's Vice President Lauro J. Jocson said that
there appeared to be an anomaly and requested Cruz to defer court action as they
hoped to settle the matter amicably. 12 Increasingly worried, Cruz sent another letter
reiterating her demand. 13 This time the reply of the bank was unequivocal and
negative. She was told that her request had to be denied because she had already
withdrawn the amount she was claiming. 14
Cruz's reaction was to file a complaint for breach of contract against Prudential Bank
in the Regional Trial Court of Quezon City. She demanded the return of her money
with interest, plus damages and attorney's fees. In its answer, the bank denied
liability, insisting that Cruz had withdrawn her investment. The bank also instituted a
third-party complaint against Quimbo, who did not file an answer and was declared
in default. 15 The bank, however, did not present any evidence against her.
After trial, Judge Rodolfo A. Ortiz rendered judgment in favor of the plaintiffs and
disposed as follows:
ACCORDINGLY, judgment is hereby rendered ordering the defendant/third-party
plaintiff to pay to the plaintiffs the following amounts:
1. P200,000.00, plus interest thereon at the rate of 13.75% per annum from October
27, 1986, until fully paid;
2. P30,000.00, as moral damages;
3. P20,000.00, as exemplary damages; and
4. P25,000.00, as reasonable attorney's fees.
The counterclaim and the third-party complaint of the defendant/third-party plaintiff
are dismissed.
With costs against the defendant/third-party plaintiff.
The decision was affirmed in toto on appeal to the respondent court.
The judgment of the Court of Appeals 16 is now faulted in this petition, mainly on the
ground that the bank should not have been found liable for a quasi-delict when it
was sued for breach of contract.
The petition shall fail. The petitioner is quibbling. It appears to be merely temporizing
to delay enforcement of the liability clearly established against it.
The basic issues are factual. The private respondent claims she has not yet
collected her investment of P200,000.00 and has submitted in proof of their
contention the Confirmation of Sale and the Debit Memo issued to her by Quimbo on
the official forms of the bank. The petitioner denies her claim and points to the
Withdrawal Slip, which it says Cruz has not denied having signed. It also contends
that the Confirmation of Sale and the Debit Memo are fake and should not have
been given credence by the lower courts.
The findings of the trial court on these issues have been affirmed by the respondent
court and we see no reason to disturb them. The petitioner has not shown that they
have been reached arbitrarily or in disregard of the evidence of record. On the
contrary, we find substantial basis for the conclusion that the private respondents
signed the Withdrawal Slip only as part of the bank's new procedure of re-
investment. She did not actually receive the amount indicated therein, which she
was made to understand was being re-invested in her name. The bank itself so
assured her in the Confirmation of Sale and the Debit Memo later issued to her by
Quimbo.
Especially persuasive are the following observations of the trial court: 17
What is more, it could not be that plaintiff Aurora F. Cruz withdrew only the amount
of P196,122.98 from their savings account, if her only intention was to make such a
withdrawal. For, if, indeed, it was the desire of the plaintiffs to withdraw their money
from the defendant/third-party plaintiff, they could have withdrawn an amount in
round figures. Certainly, it is unbelievable that their withdrawal was in the irregular
amount of P196,122.98 if they really received it. On the contrary, this amount, which
is the price of the Central Bank bills rolled over, indicates that, as claimed by plaintiff
Aurora F. Cruz, she did not receive this money, but it was left by her with the
defendant/third-party plaintiff in order to buy Central Bank bills placement for another
sixty-three (63) days, for which she signed a withdrawal slip at the instance of third-
party defendant Susan Quimbo who told her that it was a new bank requirement for
the roll-over of a matured placement which she trustingly believed.
Indeed, the bank has not explained the remarkable coincidence that the amount
indicated in the withdrawal slip is exactly the same amount Cruz was re-investing
after deducting therefrom the pre-paid interest.
The bank has also not, succeeded in impugning the authenticity of the Confirmation
of Sale and the Debit Memo which were made on its official, forms. These are
admittedly not available to the general public or even its depositors and are handled
only by its personnel. Even assuming that they were not signed by its authorized
officials, as it claims, there was no obligation on the part of Cruz to verify their
authority because she had the right to presume it. The documents had been issued
in the office of the bank itself and by its own employees with whom she had
previously dealt. Such dealings had not been questioned before, much leas
invalidated. There was absolutely no reason why she should not have accepted their
authority to act on behalf of their employer.
It is also worthy of note — and wonder — that although the bank impleaded Quimbo
in a third-party complaint, it did not pursue its suit even when she failed to answer
and was declared in default. The bank did not introduce evidence against her
although it could have done so under the rules. No less remarkably, it did not call on
her to testify on its behalf, considering that under the circumstances claimed by it,
she would have been the best witness to show that Cruz had actually withdrawn her
P200,000.00 placement. Instead, the bank chose to rely on its other employees
whose testimony was less direct and categorical than the testimony Quimbo could
have given.
We do not find that the Court of Appeals held the bank liable on a quasi-delict. The
argument of the petitioner on this issue is pallid, to say the least, consisting as it
does only of the observation that the article cited by the respondent court on the
agent's liability falls under the heading in the Civil Code on quasi-delicts. On the
other hand, the respondent court clearly declared that:
The defendant/third-party plaintiff being liable for the return of the P200,000.00
placement of the plaintiffs, the extent of the liability of the defendant/third-party
plaintiff for damages resultant thereof, which is contractual, is for all damages which
may be reasonably attributed to the non-performance of the obligation, . . .
xxx xxx xxx
Because of the bad faith of the defendant/third-party plaintiff in its breach of its
contract with the plaintiffs, the latter are, therefore, entitled to an award of moral
damages . . . (Emphasis supplied)
There is no question that the petitioner was made liable for its failure or refusal to
deliver to Cruz the amount she had deposited with it and which she had a right to
withdraw upon its maturity. That investment was acknowledged by its own
employees, who had the apparent authority to do so and so could legally bind it by
its acts vis-a-vis Cruz. Whatever might have happened to the investment — whether
it was lost or stolen by whoever — was not the concern of the depositor. It was the
concern of the bank.
As far as Cruz was concerned, she had the right to withdraw her P200,000.00
placement when it matured pursuant to the terms of her investment as
acknowledged and reflected in the Confirmation of Sale. The failure of the bank to
deliver the amount to her pursuant to the Confirmation of Sale constituted its breach
of their contract, for which it should be held liable.
The liability of the principal for the acts of the agent is not even debatable. Law and
jurisprudence are clearly and absolutely against the petitioner.
Such liability dates back to the Roman Law maxim, Qui per alium facit per seipsum
facere videtur. "He who does a thing by an agent is considered as doing it himself."
This rule is affirmed by the Civil Code thus:
Art. 1910. The principal must comply with all the obligations which the agent may
have contracted within the scope of his authority.
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full
powers.
Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent's apparent representation yields to
the principal's true representation and the contract is considered as entered into
between the principal and the third person. 18
A bank is liable for wrongful acts of its officers done in the interests of the bank or in
the course of dealings of the officers in their representative capacity but not for acts
outside the scope of their authority. (9 c.q.s. p. 417) A bank holding out its officers
and agent as worthy of confidence will not be permitted to profit by the frauds they
may thus be enabled to perpetrate in the apparent scope of their employment; nor
will it be permitted to shirk its responsibility for such frauds, even though no benefit
may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking
corporation is liable to innocent third persons where the representation is made in
the course of its business by an agent acting within the general scope of his
authority even though, in the particular case, the agent is secretly abusing his
authority and attempting to perpetrate a fraud upon his principal or some other
person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204
NW 818, 40 ALR 1021.)
Cruz naturally suffered anxious moments and mental anguish over the loss of the
investment. The amount of P200,000.00 is not small even by present standards. By
unjustly withholding it from her on the unproved defense that she had already
withdrawn it, the bank violated the trust she had reposed in it and thus subjected
itself to further liability for moral and exemplary damages.
If a person dealing with a bank does not read the fine print in the contract, it is
because he trusts the bank and relies on its integrity. The ordinary customer
applying for a loan or even making a deposit (and so himself extending the loan to
the bank) does not bother with the red tape requirements and the finicky conditions
in the documents he signs. His feeling is that he does not have to be wary of the
bank because it will deal with him fairly and there is no reason to suspect its
motives. This is an attitude the bank must justify.
While this is not to say that bank regulations are meaningless or have no binding
effect, they should, however, not be used for covering up the fault of bank
employees when they blunder or, worse, intentionally cheat him. The misdeeds of
such employees must be readily acknowledged and rectified without delay. The
bank must always act in good faith. The ordinary customer does not feel the need for
a lawyer by his side every time he deals with a bank because he is certain that it is
not a predator or a potential adversary. The bank should show that there is really no
reason for any apprehension because it truly deserves his faith in it.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED,
with costs against the petitioner. It is so ordered.

Application of these principles in especially necessary because banks have a Griño-Aquino, Bellosillo and Quiason, JJ., concur.
fiduciary relationship with the public and their stability depends on the confidence of
the people in their honesty and efficiency. Such faith will be eroded where banks do
not exercise strict care in the selection and supervision of its employees, resulting in
prejudice to their depositors.

It would appear from the facts established in the case before us that the petitioner
was less than eager to present Quimbo at the trial or even to establish her liability
although it made the initial effort — which it did not pursue — to hold her answerable
in the third-party complaint. What ever happened to her does not appear in the
record. Her absence from the proceedings feeds the suspicion of her possible
misdeed, which the bank seems to have studiously ignored by its insistence that the
missing money had been actually withdrawn by Cruz. By such insistence, the bank
is absolving not only itself but also, in effect and by extension, the disappeared
Quimbo who apparently has much to explain.

We agree with the lower courts that the petitioner acted in bad faith in denying Cruz
the obligation she was claiming against it. It was obvious that an irregularity had
been committed by the bank's personnel, but instead of repairing the injury to Cruz
by immediately restoring her money to her, it sought to gloss over the anomaly in its
own operations.
G.R. No. 95641 September 22, 1994
SANTOS B. AREOLA and LYDIA D. AREOLA, petitioners-appellants, vs.COURT
OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC.,
respondents-appellees.
Gutierrez, Cortes & Gonzales for petitioners.
Bengzon, Bengzon, Baraan & Fernandez Law Offices for private respondent.  On December 17, 1984, respondent insurance company issued collector's
ROMERO, J.:
On June 29, 1985, seven months after the issuance of petitioner Santos Areola's
Personal Accident Insurance Policy No. PA-20015, respondent insurance company
unilaterally cancelled the same since company records revealed that petitioner-
insured failed to pay his premiums.
On August 3, 1985, respondent insurance company offered to reinstate same policy
it had previously cancelled and even proposed to extend its lifetime to December 17,
1985, upon a finding that the cancellation was erroneous and that the premiums
were paid in full by petitioner-insured but were not remitted by Teofilo M. Malapit,
respondent insurance company's branch manager.
These, in brief, are the material facts that gave rise to the action for damages due to
breach of contract instituted by petitioner-insured beforeBranch 40 RTC, Dagupan
City against respondent insurance company.
There are two issues for resolution in this case:
(1) Did the erroneous act of cancelling subject insurance policy entitle petitioner-
insured to payment of damages?
(2) Did the subsequent act of reinstating the wrongfully cancelled insurance policy by
respondent insurance company, in an effort to rectify such error, obliterate whatever
liability for damages it may have to bear, thus absolving it therefrom?
From the factual findings of the trial court, it appears that petitioner-insured, Santos
Areola, a lawyer from Dagupan City, bought, throughthe Baguio City branch of
Prudential Guarantee and Assurance, Inc. (hereinafter referred to as Prudential), a
personal accident insurance policy covering the one-year period between noon of
November 28, 1984 and noon of November 28, 1985. 1 Under the terms of the
statement of account issued by respondent insurance company, petitioner-insured
was supposed to pay the total amount of P1,609.65 which included the premium of
P1,470.00, documentary stamp of P110.25 and 2% premium tax of P29.40. 2 At the
lower left-hand corner of the statement of account, the following is legibly printed:
This Statement of Account must not be considered a receipt. Official Receipt will be
issued to you upon payment of this account.
If payment is made to our representative, demand for a Provisional Receipt and if
our Official Receipts is (sic) not received by you within 7 days please notify us.
If payment is made to our office, demand for an OFFICIAL RECEIPT.
provisional receipt No. 9300 to petitioner-insured for the amount of P1,609.65 3 On
the lower portion of the receipt the following is written in capital letters:
Note: This collector's provisional receipt will be confirmed by our official receipt. If
our official receipt is not received by you within 7 days, please notify us. 4
On June 29, 1985, respondent insurance company, through its Baguio City
manager, Teofilo M. Malapit, sent petitioner-insured EndorsementNo. BG-002/85
which "cancelled flat" Policy No. PA BG-20015 "for non-payment of premium
effective as of inception dated." 5 The same endorsement also credited "a return
premium of P1,609.65 plus documentary stamps and premium tax" to the account of
the insured.
Shocked by the cancellation of the policy, petitioner-insured confronted Carlito Ang,
agent of respondent insurance company, and demanded the issuance of an official
receipt. Ang told petitioner-insured that the cancellation of the policy was a mistake
but he would personally see to its rectification. However, petitioner-insured failed to
receive any official receipt from Prudential.
Hence, on July 15, 1985, petitioner-insured sent respondent insurance company a
letter demanding that he be insured under the same terms and conditions as those
contained in Policy No. PA-BG-20015 commencing upon its receipt of his letter, or
that the current commercial rate of increase on the payment he had made under
provisional receipt No. 9300 be returned within five days. 6 Areola also warned that
should his demands be unsatisfied, he would sue for damages.
On July 17, 1985, he received a letter from production manager Malapit informing
him that the "partial payment" of P1,000.00 he had made on the policy had been
"exhausted pursuant to the provisions of the Short Period Rate Scale" printed at the
back of the policy. Malapit warned Areola that should be fail to pay the balance, the
company's liability would cease to operate. 7
In reply to the petitioner-insured's letter of July 15, 1985, respondent insurance
company, through its Assistant Vice-President Mariano M. Ampil III, wrote Areola a
letter dated July 25, 1985 stating that the company was verifying whether the
payment had in fact been issued therefor. Ampil emphasized that the official receipt
should have been issued seven days from the issuance of the provisional receipt but
because no official receipt had been issued in Areola's name, there was reason to
believe that no payment had been made. Apologizing for the inconvenience, Ampil
expressed the company's concern by agreeing "to hold you cover (sic) under the
terms of the referenced policy until such time that this matter is cleared." 8
On August 3, 1985, Ampil wrote Areola another letter confirming that the amount of
P1,609.65 covered by provisional receipt No. 9300 was in fact received by
Prudential on December 17, 1984. Hence, Ampil informedAreola that Prudential was
"amenable to extending PGA-PA-BG-20015 up to December 17, 1985 or one year
from the date when payment was received." Apologizing again for the inconvenience
caused Areola, Ampil exhorted him to indicate his conformity to the proposal by
signing on the space provided for in the letter. 9
The letter was personally delivered by Carlito Ang to Areola onAugust 13, 1985 10
but unfortunately, Areola and his wife, Lydia, as early as August 6, 1985 had filed a
complaint for breach of contract with damages before the lower court.
In its Answer, respondent insurance company admitted that the cancellation of
petitioner-insured's policy was due to the failure of Malapit to turn over the premiums
collected, for which reason no official receipt was issued to him. However, it argued
that, by acknowledging the inconvenience caused on petitioner-insured and after
taking steps to rectify its omission by reinstating the cancelled policy prior to the
filing of the complaint, respondent insurance company had complied with its
obligation under the contract. Hence, it concluded that petitioner-insured no longer
has a cause of action against it. It insists that it cannot be held liable for damages
arising from breach of contract, having demonstrated fully well its fulfillment of its
obligation.
The trial court, on June 30, 1987, rendered a judgment in favor of petitioner-insured,
ordering respondent insurance company to pay the former the following:
a) P1,703.65 as actual damages;
b) P200,000.00 as moral damages; and
c) P50,000.00 as exemplary damages;
2. To pay to the plaintiff, as and for attorney's fees the amount of P10,000.00; and
3. To pay the costs.
In its decision, the court below declared that respondent insurance company acted in
bad faith in unilaterally cancelling subject insurance policy, having done so only after
seven months from the time that it had taken force and effect and despite the fact of
full payment of premiums and other charges on the issued insurance policy.
Cancellation from the date of the policy's inception, explained the lower court, meant
that the protection sought by petitioner-insured from the risks insured against was
never extended by respondent insurance company. Had the insured met an accident
at the time, the insurance company would certainly have disclaimed any liability
because technically, the petitioner could not have been considered insured.
Consequently, the trial court held that there was breach of contract on the part of
respondent insurance company, entitling petitioner-insured to an award of the
damages prayed for.
This ruling was challenged on appeal by respondent insurance company, denying
bad faith on its part in unilaterally cancelling subject insurance policy.
After consideration of the appeal, the appellate court issued a reversal of the
decision of the trial court, convinced that the latter had erred in finding respondent
insurance company in bad faith for the cancellation of petitioner-insured's policy.
According to the Court of Appeals, respondent insurance company was not
motivated by negligence, malice or bad faith in cancelling subject policy. Rather, the
cancellation of the insurance policy was based on what the existing records showed,
i.e., absence of an official receipt issued to petitioner-insured confirming payment of
premiums. Bad faith, said the Court of Appeals, is some motive of self-interest or ill-
will; a furtive design of ulterior purpose, proof of which must be established
convincingly. On the contrary, it further observed, the following acts indicate that
respondent insurance company did not act precipitately or willfully to inflict a wrong
on petitioner-insured:(a) the investigation conducted by Alfredo Bustamante to verify
if petitioner-insured had indeed paid the premium; (b) the letter of August 3, 1985
confirming that the premium had been paid on December 17, 1984; (c) the
reinstatement of the policy with a proposal to extend its effective period to December
17, 1985; and (d) respondent insurance company's apologies for the
"inconvenience" caused upon petitioner-insured. The appellate court added that
respondent insurance company even relieved Malapit, its Baguio City manager, of
his job by forcing him to resign.
Petitioner-insured moved for the reconsideration of the said decision which the Court
of Appeals denied. Hence, this petition for review on certiorari anchored on these
arguments:
I
Respondent Court of Appeals is guilty of grave abuse of discretion and committed a
serious and reversible error in not holding Respondent Prudential liable for the
cancellation of the insurance contract which was admittedly caused by the fraudulent
acts and bad faith of its own officers.
II
Respondent Court of Appeals committed serious and reversible error and abused its
discretion in ruling that the defenses of good faith and honest mistake can co-exist
with the admitted fraudulent acts and evident bad faith.
III
Respondent Court of Appeals committed a reversible error in not finding that even
without considering the fraudulent acts of its own officer in misappropriating the
premium payment, the act itself in cancelling the insurance policy was done with bad
faith and/or gross negligence and wanton attitude amounting to bad faith, because
among others, it wasMr. Malapit — the person who committed the fraud — who sent
and signed the notice of cancellation.
IV
Respondent Court of Appeals has decided a question of substance contrary to law
and applicable decision of the Supreme Court when it refused to award damages in
favor of herein Petitioner-Appellants.
It is petitioner-insured's submission that the fraudulent act of Malapit, manager of
respondent insurance company's branch office in Baguio, in misappropriating his
premium payments is the proximate cause of the cancellation of the insurance
policy. Petitioner-insured theorized that Malapit's act of signing and even sending
the notice of cancellation himself, notwithstanding his personal knowledge of
petitioner-insured's full payment of premiums, further reinforces the allegation of bad
faith. Such fraudulent act committed by Malapit, argued petitioner-insured, is
attributable to respondent insurance company, an artificial corporate being which
can act only through its officers or employees. Malapit's actuation, concludes
petitioner-insured, is therefore not separate and distinct from that of respondent-
insurance company, contrary to the view held by the Court of Appeals. It must,
therefore, bear the consequences of the erroneous cancellation of subject insurance
policy caused by the non-remittance by its own employee of the premiums paid.
Subsequent reinstatement, according to petitioner-insured, could not possibly
absolve respondent insurance company from liability, there being an obvious breach
of contract. After all, reasoned out petitioner-insured, damage had already been
inflicted on him and no amount of rectification could remedy the same.
Respondent insurance company, on the other hand, argues that where
reinstatement, the equitable relief sought by petitioner-insured was granted at an
opportune moment, i.e. prior to the filing of the complaint, petitioner-insured is left
without a cause of action on which to predicate his claim for damages.
Reinstatement, it further explained, effectively restored petitioner-insured to all his
rights under the policy. Hence, whatever cause of action there might have been
against it, no longer exists and the consequent award of damages ordered by the
lower court in unsustainable.
We uphold petitioner-insured's submission. Malapit's fraudulent act of
misappropriating the premiums paid by petitioner-insured is beyond doubt directly
imputable to respondent insurance company. A corporation, such as respondent
insurance company, acts solely thru its employees. The latters' acts are considered
as its own for which it can be held to account. 11 The facts are clear as to the
relationship between private respondent insurance company and Malapit. As
admitted by private respondent insurance company in its answer, 12 Malapit was the
manager of its Baguio branch. It is beyond doubt that he represented its interest and
acted in its behalf. His act of receiving the premiums collected is well within the
province of his authority. Thus, his receipt of said premiums is receipt by private
respondent insurance company who, by provision of law, particularly under Article
1910 of the Civil Code, is bound by the acts of its agent.
Article 1910 thus reads:
Art. 1910. The principal must comply with all the obligations which the agent may
have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly.
Malapit's failure to remit the premiums he received cannot constitute a defense for
private respondent insurance company; no exoneration from liability could result
therefrom. The fact that private respondent insurance company was itself defrauded
due to the anomalies that took place in its Baguio branch office, such as the non-
accrual of said premiums to its account, does not free the same from its obligation to
petitioner Areola. As held in Prudential Bank v. Court of Appeals 13 citing the ruling in
McIntosh v. Dakota Trust Co.: 14
A bank is liable for wrongful acts of its officers done in the interests of the bank or in
the course of dealings of the officers in their representative capacity but not for acts
outside the scope of their authority. A bank holding out its officers and agent as
worthy of confidence will not be permitted to profit by the frauds they may thus be
enabled to perpetrate in the apparent scope of their employment; nor will it be
permitted to shirk its responsibility for such frauds, even though no benefit may
accrue to the bank therefrom. Accordingly, a banking corporation is liable to innocent
third persons where the representation is made in the course of its business by an
agent acting within the general scope of his authority even though, in the particular
case, the agent is secretly abusing his authority and attempting to perpetrate a fraud
upon his principal or some other person, for his own ultimate benefit.
Consequently, respondent insurance company is liable by way of damages for the
fraudulent acts committed by Malapit that gave occasion to the erroneous
cancellation of subject insurance policy. Its earlier act of reinstating the insurance
policy can not obliterate the injury inflicted on petitioner-insured. Respondent
company should be reminded that a contract of insurance creates reciprocal
obligations for both insurer and insured. Reciprocal obligations are those which arise
from the same cause and in which each party is both a debtor and a creditor of the
other, such that the obligation of one is dependent upon the obligation of the other. 15
Under the circumstances of instant case, the relationship as creditor and debtor
between the parties arose from a common cause: i.e., by reason of their agreement
to enter into a contract of insurance under whose terms, respondent insurance
company promised to extend protection to petitioner-insured against the risk insured
for a consideration in the form of premiums to be paid by the latter. Under the law
governing reciprocal obligations, particularly the second paragraph of Article 1191, 16
the injured party, petitioner-insured in this case, is given a choice between fulfillment
or rescission of the obligation in case one of the obligors, such as respondent
insurance company, fails to comply with what is incumbent upon him. However, said
article entitles the injured party to payment of damages, regardless of whether he
demands fulfillment or rescission of the obligation. Untenable then is reinstatement
insurance company's argument, namely, that reinstatement being equivalent to
fulfillment of its obligation, divests petitioner-insured of a rightful claim for payment of
damages. Such a claim finds no support in our laws on obligations and contracts.

The nature of damages to be awarded, however, would be in the form of nominal

damages 17 contrary to that granted by the court below. Although the erroneous
cancellation of the insurance policy constituted a breach of contract, private
respondent insurance company, within a reasonable time took steps to rectify the
wrong committed by reinstating the insurance policy of petitioner. Moreover, no
actual or substantial damage or injury was inflicted on petitioner Areola at the time
the insurance policy was cancelled. Nominal damages are "recoverable where a
legal right is technically violated and must be vindicated against an invasion that has
produced no actual present loss of any kind, or where there has been a breach of
contract and no substantial injury or actual damages whatsoever have been or can
be shown. 18

WHEREFORE, the petition for review on certiorari is hereby GRANTED and the
decision of the Court of Appeals in CA-G.R. No. 16902 on May 31, 1990,
REVERSED. The decision of Branch 40, RTC Dagupan City, in Civil Case No. D-
7972 rendered on June 30, 1987 is hereby REINSTATED subject to the following
modifications: (a) that nominal damages amounting to P30,000.00 be awarded
petitioner in lieu of the damages adjudicated by court a quo; and (b) that in the
satisfaction of the damages awarded therein, respondent insurance company is
ORDERED to pay the legal rate of interest computed from date of filing of complaint
until final payment thereof.

SO ORDERED.

Feliciano, Melo and Vitug, JJ., concur.

Bidin, J., is on leave.

[G.R. No. 153743.  March 18, 2005]

NORMA B. DOMINGO, petitioner, vs. YOLANDA ROBLES; and MICHAEL
MALABANAN ROBLES, MARICON MALABANAN ROBLES,
MICHELLE MALABANAN ROBLES, All Minors Represented by
Their Mother, YOLANDA ROBLES, respondents.
DECISION
PANGANIBAN, J.:
Forgery must be proven by the party alleging it; it cannot be presumed.  To
prevent a forged transfer from being registered, the Torrens Act requires, as a
prerequisite to registration, the production of the owner’s certificate of title and the
instrument of conveyance.  A registered owner who places in the hands of another
an executed document of transfer of registered land effectively represents to a third
party that the holder of such document is authorized to deal with the property.[1]
The Case
Before us is a Petition for Review[2] under Rule 45 of the Rules of Court,
challenging the May 27, 2002 Decision[3] of the Court of Appeals (CA) in CA-GR CV
No. 53842.  The decretal portion of the assailed Decision reads:
“IN VIEW OF ALL THE FOREGOING, [there being] no reversible error in the
challenged decision, the same is hereby AFFIRMED, in toto, and the instant appeal
ordered DISMISSED.  Costs against the [petitioner].”[4]
On the other hand, the affirmed Decision[5] of the Regional Trial Court (RTC),
Branch 272 of Marikina, disposed as follows:
“WHEREFORE, premises considered, the complaint subject of this decision is
hereby DISMISSED.”[6]
The Facts
The facts are narrated by the CA as follows:
“The historical backdrop shows that [petitioner] and her husband, Valentino
Domingo, were the registered owners of Lot 19, Block 1, subdivision plan (LRC)
Psd-15706 located at Cristina Subdivision, Concepcion, Marikina and covered by
Transfer Certificate of Title No. 53412.  On this lot, [Petitioner] Norma B. Domingo
discontinued the construction of her house allegedly for failure of her husband to
send the necessary financial support.  So, she decided to dispose of the property.
“A friend, Flor Bacani, volunteered to act as [petitioner’s] agent in selling the lot.  The CA held that respondents were purchasers in good faith and for value.
Trusting Bacani, [petitioner] delivered their owner’s copy of Transfer Certificate of
Title No. 53412 to him (Bacani).  Later, the title was said to have been lost.  In the
petition for its reconstitution, [petitioner] gave Bacani all her receipts of payment for
real estate taxes.  At the same time, Bacani asked [petitioner] to sign what she
recalled was a record of exhibits.  Thereafter, [petitioner] waited patiently but Bacani
did not show up any more.
“On November 1, 1994, [Petitioner] Norma Domingo visited the lot and was
surprised to see the [respondents] (Robles, for short) starting to build a house on
the subject lot.  A verification with the Register of Deeds revealed that the
reconstituted Transfer Certificate of Title No. 53412 had already been cancelled with
the registration of a Deed of Absolute Sale dated May 9, 1991 signed by Norma B.
Domingo and her husband Valentino Domingo, as sellers, and [Respondent]
Yolanda Robles, for herself and representing the other minor [respondents], as
buyers.  As a consequence, Transfer Certificate of Title No. 201730 was issued on
June 10, 1991 in the name of [Respondent] Robles.
“Claiming not to have met any of the [respondents] nor having signed any sale over
the property in favor of anybody (her husband being abroad at the time), [petitioner]
assumed that the Deed of Absolute Sale dated May 9, 1991 is a forgery and,
therefore, could not validly transfer ownership of the lot to the [respondents].  Hence,
the case for the nullity thereof and its reconveyance.
“[Respondents] Robles responded alleging to be buyers in good faith and for value.
They narrate that the subject lot was offered to them by Flor Bacani, as the agent of
the owners; that after some time when they were already prepared to buy the lot,
Bacani introduced to them the supposed owners and agreed on the sale; then, on
May 9, 1991, Bacani and the introduced seller presented a Deed of Absolute Sale
already signed by Valentino and Norma Domingo needing only her (Robles’)
signature.  Presented likewise at that meeting, where she paid full purchase price,
was the original of the owner’s duplicate of Transfer Certificate of Title No. 53412.
“Then sometime later, [Respondents] Robles contracted to sell the lot in issue in
favor of spouses Danilo and Herminigilda Deza for P250,000.00.  [Respondent]
Yolanda Robles even had to secure a guardianship authority over the persons and
properties of her minor children from the Regional Trial Court of Pasig in JDRC No.
2614.  When only P20,000.00 remained unpaid of the total purchase price under the
contract to sell, payment was stopped because of the letter received by Yolanda
Robles that [petitioner] intends to sue her.
“After due proceedings, the [Regional Trial Court] rendered its Decision dated May
13, 1996, dismissing the complaint.”[7]
Ruling of the Court of Appeals
 
According to its findings, (a) the sale was admittedly made through petitioner’s
agent; (b) as Domingo’s agent, Bacani brought with him the original of the owner’s
duplicate Certificate of Title of the property and some receipts; (c) the reconstituted
title presented to the buyers was free from any liens, encumbrances or adverse
interests of other persons; and (d) the land was unoccupied.  Petitioner was not able
to present, against these established facts, any evidence to prove that respondents
had prior knowledge of any other person’s right to or interest over the property in
question.
Hence, this Petition.[8]
Issue
Petitioner submits this sole issue for our consideration:
“To determine whether or not the petitioner is entitled to her claims, the issue worthy
of consideration by the Honorable Court in the instant case is WHO IS A
PURCHASER IN GOOD FAITH?”[9]
The Court’s Ruling
The Petition has no merit.
Sole Issue:
Acquisition of Valid Title
It is a well-established principle that factual findings of the trial court, when
affirmed by the Court of Appeals, are binding on this Court.[10]  Petitioner has given
this Court no cogent reason to deviate from this rule; on the contrary, the findings of
the courts a quo are amply supported by the evidence on record.
Petitioner claims that her signature and that of her husband were forged in
the Deed of Absolute Sale transferring the property from the Domingo spouses to
respondent.  Relying on the general rule that a forged deed is void and conveys no
title,[11] she assails the validity of the sale.
It is a well-settled rule, however, that a notarized instrument enjoys a prima
facie presumption of authenticity and due execution.[12] Clear and convincing
evidence must be presented to overcome such legal presumption.  Forgery cannot
be presumed; hence, it was incumbent upon petitioner to prove it.[13] This, she
failed to do.  On this point, the CA observed:
“x x x. What surprises the Court is that a comparison of the signature of appellant
Norma Domingo in the Deed of Absolute Sale in favor of the appellees and the
signature in the verification of the complaint manifest a striking similarity to the point
that without any contrary proof, it would be safe to conclude that said signatures
were written by one and the same person.  Sadly, appellant left that matter that way
without introducing counteracting evidence. x x x”[14]
Petitioner also failed to convince the trial court that the person with whom
Respondent Yolanda Robles transacted was in fact not Valentino Domingo.  Except
for her insistence that her husband was out of the country, petitioner failed to
present any other clear and convincing evidence that Valentino was not present at
the time of the sale.  Bare allegations, unsubstantiated by evidence, are not
equivalent to proof.[15]
Petitioner now stresses the issue of good faith on the part of respondents.  In
the absence of a finding of fraud and a consequent finding of authenticity and due
execution of the Deed of Absolute Sale, a discussion of whether respondents were
purchasers in good faith is wholly unnecessary.  Without a clear and persuasive
substantiation of bad faith, a presumption of good faith in their favor stands.[16]
The sale was admittedly made with the aid of Bacani, petitioner’s agent, who
had with him the original of the owner’s duplicate Certificate of Title to the property,
free from any liens or encumbrances.  The signatures of Spouses Domingo, the
registered owners, appear on the Deed of Absolute Sale.  Petitioner’s husband met
with Respondent Yolanda Robles and received payment for the property.  The
Torrens Act requires, as a prerequisite to registration, the production of the owner’s
certificate of title and the instrument of conveyance.  The registered owner who
places in the hands of another an executed document of transfer of registered land
effectively represents to a third party that the holder of such document is authorized
to deal with the property.[17]
WHEREFORE, the Petition is DENIED and the assailed Decision
AFFIRMED.  Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.
SYLVIA H. BEDIA and HONTIVEROS & ASSOCIATED PRODUCERS PHILS.
YIELDS, INC., petitioners, vs. EMILY A. WHITE and HOLMAN T. WHITE,
respondents.
Ramon A. Gonzales for petitioner.
Renato S. Corpuz for private respondents.1991 Nov 211st DivisionG.R. No. 94050
CRUZ, J.:
The basic issue before us is the capacity in which petitioner Sylvia H. Bedia entered
into the subject contract with private respondent Emily A. White. Both the trial court
and the respondent court held she was acting in her own personal behalf. She faults
this finding as reversible error and insists that she was merely acting as an agent.
The case arose when Bedia and White entered into a Participation Contract 1
reading in full as follows:
THE STATE FAIR OF TEXAS '80
PARTICIPATION CONTRACT
PARTICIPANT (COMPANY NAME) EMILY WHITE ENTERPRISES.
I/We, the abovementioned company hereby agrees to participate in the 1980 Dallas
State Fair to be held in Dallas, Texas on October 3, to October 19, 1980. I/We
request for a 15 square meter booth space worth $2,250.00 U.S. Dollars.
I/We further understand that this participation contract shall be deemed non-
cancelable after payment of the said down payment, and that any intention on our
part to cancel the same shall render whatever amount we have paid forfeited in favor
of HONTIVEROS & ASSOCIATED PRODUCERS
PHILIPPINE YIELDS, INC.
FOR THE ABOVE CONSIDERATION, I/We understand the HONTIVEROS &
ASSOCIATED PRODUCERS PHIL. YIELDS, INC. shall: Reserve said booth for our
exclusive perusal; We also understand that the above cost includes overall exterior
booth decoration and materials but does not include interior designs which will be
per our specifications and expenses.
PARTICIPANT'S PARTICIPATION
AUTHORIZED SIGNATURE: ACCEPTED BY:
(SGD.) EMILY WHITE (SGD.) SYLVIA H. BEDIA
DATE: 8/13/80 DATE: Aug. 1, 1980.
On August 10, 1986, White and her husband filed a complaint in the Regional Trial
Court of Pasay City for damages against Bedia and Hontiveros & Associated
Producers Phil. Yields, Inc. for damages caused by their fraudulent violation of their
agreement. She averred that Bedia had approached her and persuaded her to
participate in the State of Texas Fair, and that she made a down payment of $500.00
to Bedia on the agreed display space. In due time, she enplaned for Dallas with her
merchandise but was dismayed to learn later that the defendants had not paid for or
registered any display space in her name, nor were they authorized by the state fair
director to recruit participants. She said she incurred losses as a result for which the
defendants should be held solidarily liable. 2
In their joint answer, the defendants denied the plaintiffs allegation that they had
deceived her and explained that no display space was registered in her name as she
was only supposed to share the space leased by Hontiveros in its name. She was
not allowed to display her goods in that space because she had not paid her balance
of $1,750.00, in violation of their contract. Bedia also made the particular averment
that she did not sign the Participation Contract on her own behalf but as an agent of
Hontiveros and that she had later returned the advance payment of $500.00 to the
plaintiff. The defendants filed their own counterclaim and complained of malice on
the part of the plaintiffs. 3
In the course of the trial, the complaint against Hontiveros was dismissed on motion
of the plaintiffs. 4
In his decision dated May 29, 1986, Judge Fermin Martin, Jr. found Bedia liable for
fraud and awarded the plaintiffs actual and moral damages plus attorney's fees and
the costs. The court said:
In claiming to be a mere agent of Hontiveros & Associated Producers Phil. Yields,
Inc., defendant Sylvia H. Bedia evidently attempted to escape liability for herself.
Unfortunately for her, the "Participation Contract" is not actually in representation or
in the name of said corporation. It is a covenant entered into by her in her personal
capacity, for no one may contract in the name of another without being authorized by
the latter, or unless she has by law a right to represent her. (Art. 1347, new Civil
Code)
Sustaining the trial court on this point, the respondent court 5 declared in its decision
dated March 30, 1990:
The evidence, on the whole, shows that the definitely acted on her own. She
represented herself as authorized by the State of Texas to solicit and assign booths
at the Texas fair; she assured the appellee that she could give her booth. Under
Article 1883 of the New Civil Code, if the agent acts in his own name, the principal
has no right of action against the persons with whom the agent had contracted.
We do not share these views.
It is noteworthy that in her letter to the Minister of Trade dated December 23, 1984,
Emily White began:
I am a local exporter who was recruited by Hontiveros & Associated Producers Phil.
Yields, Inc. to participate in the State Fair of Dallas, Texas which was held last Oct. 3
to 19, 1980. Hontiveros & Associates charged me US $150.00 per square meter for
display booth of said fair. I have paid an advance of US $500.00 as partial payment
for the total space of 15 square meter of which is $2,250.00 (Two Thousand Two
Hundred Fifty Dollars). 6

As the Participation Contract was signed by Bedia, the above statement was an
acknowledgment by White that Bedia was only acting for Hontiveros when it
recruited her as a participant in the Texas State Fair and charged her a partial
payment of $500.00. This amount was to be fortified to Hontiveros in case of
cancellation of her of the agreement. The fact that the contract was typewritten on
the letterhead stationery of Hontiveros bolsters this conclusion in the absence of any
showing that said stationery had been illegally used by Bedia.

Significantly, Hontiveros itself has not repudiated Bedia's agency as it would have if
she had really not signed in its name. In the answer it filed with Bedia, it did not deny
the latter's allegation in Paragraph 4 thereof that she was only acting as its agent
when she solicited White's participation. In fact, by filing the answer jointly with Bedia
through their common counsel, Hontiveros affirmed this allegation.

If the plaintiffs had any doubt about the capacity in which Bedia was acting, what
they should have done was verify the matter with Hontiveros. They did not. Instead,
they simply accepted Bedia's representation that she was an agent of Hontiveros
and dealt with her as such. Under Article 1910 of the Civil Code, "the principal must
comply with all the obligations which the agent may have contracted within the
scope of his authority." Hence, the private respondents cannot now hold Bedia liable
for the acts performed by her for, and imputable to, Hontiveros as her principal.

The plaintiffs' position became all the more untenable when they moved on June 5,
1984, for the dismissal of the complaint against Hontiveros, 7 leaving Bedia as the
sole defendant. Hontiveros had admitted as early as when it filed its answer that
Bedia was acting as its agent. The effect of the motion was to leave the plaintiffs
without a cause of action against Bedia for the obligation, if any, of Hontiveros.

Our conclusion is that since it has not been found that Bedia was acting beyond the
scope of her authority when she entered into the Participation Contract on behalf of
Hontiveros, it is the latter that should be held answerable for any obligation arising
from that agreement. By moving to dismiss the complaint against Hontiveros, the
plaintiffs virtually disarmed themselves and forfeited whatever claims they might
have proved against the latter under the contract signed for it by Bedia. It should be
obvious that having waived these claims against the principal, they cannot now
assert them against the agent.

WHEREFORE, the appealed decision dated March 30, 1990, of the respondent
court is REVERSED and a new judgment is rendered dismissing Civil Case No.
9246-P in the Regional Trial Court of Pasay City.

Narvasa (Chairman), Feliciano, Griño-Aquino and Medialdea, JJ., concur.

G.R. No. L-8169             January 29, 1957

THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner, vs.FIREMEN'S

INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL
CASUALTY INSURANCE CO., SALVADOR SISON, PORFIRIO DE LA FUENTE
and THE COURT OF APPEALS (First Division), respondents.
Ross, Selph, Carrascoso & Janda for petitioner.J. A. Wolfson and Manuel Y. Macias
for respondents.
PADILLA, J.:
Appeal by certiorari under Rule 46 to review a judgment of the Court of Appeals
which reversed that of the Court of First Instance of Manila and sentenced ". . . the
defendants-appellees to pay, jointly and severally, the plaintiffs-appellants the sum
of P1,651.38, with legal interest from December 6, 1947 (Gutierrez vs. Gutierrez, 56
Phil., 177, 180), and the costs in both instances."
The Court of Appeals found the following:
Inasmuch as both the Plaintiffs-Appellants and the Defendant-Appellee, the Shell
Company of the Philippine Islands, Ltd. accept the statement of facts made by the
trial court in its decision and appearing on pages 23 to 37 of the Record on Appeal,
we quote hereunder such statement:
This is an action for recovery of sum of money, based on alleged negligence of the
defendants.
It is a fact that a Plymounth car owned by Salvador R. Sison was brought, on
September 3, 1947 to the Shell Gasoline and Service Station, located at the corner
of Marques de Comillas and Isaac Peral Streets, Manila, for washing, greasing and
spraying. The operator of the station, having agreed to do service upon payment of
P8.00, the car was placed on a hydraulic lifter under the direction of the personnel of
the station.
What happened to the car is recounted by Perlito Sison, as follows:
Q. Will you please describe how they proceeded to do the work?
A. Yes, sir. The first thing that was done, as I saw, was to drive the car over the lifter.
Then by the aid of the two grease men they raised up my car up to six feet high, and
then washing was done. After washing, the next step was greasing. Before greasing
was finished, there is a part near the shelf of the right fender, right front fender, of
my car to be greased, but the the grease men cannot reached that part, so the next
thing to be done was to loosen the lifter just a few feet lower. Then upon releasing
the valve to make the car lower, a little bit lower . . .
Q. Who released the valve?
A. The greasemen, for the escape of the air. As the escape of the air is too strong
for my ear I faced backward. I faced toward Isaac Peral Street, and covered my ear.
After the escaped of the air has been finished, the air coming out from the valve, I
turned to face the car and I saw the car swaying at that time, and just for a few
second the car fell., (t.s.n. pp. 22-23.)
The case was immediately reported to the Manila Adjustor Company, the adjustor of
the firemen's Insurance Company and the Commercial Casualty Insurance
Company, as the car was insured with these insurance companies. After having
been inspected by one Mr. Baylon, representative of the Manila Adjustor Company,
the damaged car was taken to the shops of the Philippine Motors, Incorporated, for
repair upon order of the Firemen's Insurance Company and the Commercial
Casualty Company, with the consent of Salvador R. Sison. The car was restored to
running condition after repairs amounting to P1,651.38, and was delivered to
Salvador R. Sison, who, in turn made assignments of his rights to recover damages
in favor of the Firemen's Insurance Company and the Commercial Casualty
Insurance Company.
On the other hand, the fall of the car from the hydraulic lifter has been explained by
Alfonso M. Adriano, a greaseman in the Shell Gasoline and Service Station, as
follows:
Q. Were you able to lift the car on the hydraulic lifter on the occasion, September 3,
1947?
A. Yes, sir.
Q. To what height did you raise more or less?
A. More or less five feet, sir.
Q. After lifting that car that height, what did you do with the car?
A. I also washed it, sir.
Q. And after washing?
A. I greased it.
Q. On that occasion, have you been able to finish greasing and washing the car?
A. There is one point which I could not reach.
Q. And what did you do then?
A. I lowered the lifter in order to reach that point.
Q. After lowering it a little, what did you do then?
A. I pushed and pressed the valve in its gradual pressure.
Q. Were you able to reach the portion which you were not able to reach while it was
lower?
A. No more, sir.
Q. Why?
A. Because when I was lowering the lifter I saw that the car was swinging and it fell.
THE COURT. Why did the car swing and fall?
WITNESS: 'That is what I do not know, sir'. (t.s.n., p.67.)
The position of Defendant Porfirio de la Fuente is stated in his counter-statement of
facts which is hereunder also reproduced:
In the afternoon of September 3, 1947, an automobile belonging to the plaintiff
Salvador Sison was brought by his son, Perlito Sison, to the gasoline and service
station at the corner of Marques de Comillas and Isaac Peral Streets, City of Manila,
Philippines, owned by the defendant The Shell Company of the Philippine Islands,
Limited, but operated by the defendant Porfirio de la Fuente, for the purpose of
having said car washed and greased for a consideration of P8.00 (t.s.n., pp. 19-20.)
Said car was insured against loss or damage by Firemen's Insurance Company of
Newark, New Jersey, and Commercial Casualty Insurance Company jointly for the
sum of P10,000 (Exhibits "A', "B", and "D").
The job of washing and greasing was undertaken by defendant Porfirio de la Fuente
through his two employees, Alfonso M. Adriano, as greaseman and one surnamed
de los Reyes, a helper and washer (t.s.n., pp. 65-67). To perform the job the car was
carefully and centrally placed on the platform of the lifter in the gasoline and service
station aforementioned before raising up said platform to a height of about 5 feet and
then the servicing job was started. After more than one hour of washing and
greasing, the job was about to be completed except for an ungreased portion
underneath the vehicle which could not be reached by the greasemen. So, the lifter
was lowered a little by Alfonso M. Adriano and while doing so, the car for unknown
reason accidentally fell and suffered damage to the value of P1, 651.38 (t.s.n., pp.
65-67).
The insurance companies after paying the sum of P1,651.38 for the damage and
charging the balance of P100.00 to Salvador Sison in accordance with the terms of
the insurance contract, have filed this action together with said Salvador Sison for
the recovery of the total amount of the damage from the defendants on the ground of
negligence (Record on Appeal, pp. 1-6).
The defendant Porfirio de la Fuente denied negligence in the operation of the lifter in
his separate answer and contended further that the accidental fall of the car was
caused by unforseen event (Record on Appeal, pp. 17-19).
The owner of the car forthwith notified the insurers who ordered their adjustor, the
Manila Adjustor Company, to investigate the incident and after such investigation the
damaged car, upon order of the insures and with the consent of the owner, was
brought to the shop of the Philippine Motors, Inc. The car was restored to running
condition after thereon which amounted to P1,651.38 and returned to the owner who
assigned his right to collect the aforesaid amount to the Firemen's Insurance
Company and the Commercial Casualty Insurance Company.
On 6 December 1947 the insures and the owner of the car brought an action in the
Court of First Instance of Manila against the Shell Company of the Philippines, Ltd.
and Porfirio de la Fuente to recover from them, jointly and severally, the sum of
P1,651.38, interest thereon at the legal rate from the filing of the complaint until fully
paid, the costs. After trial the Court dismissed the complaint. The plaintiffs appealed.
The Court of Appeals reversed the judgment and sentenced the defendant to pay
the amount sought to be recovered, legal interest and costs, as stated at the
beginning of this opinion.
In arriving at the conclusion that on 3 September 1947 when the car was brought to
the station for servicing Profirio de la Fuente, the operator of the gasoline and
service station, was an agent of the Shell Company of the Philippines, Ltd., the
Court of Appeals found that —
. . . De la Fuente owned his position to the Shell Company which could remove him
terminate his services at any time from the said Company, and he undertook to sell
the Shell Company's products exculusively at the said Station. For this purpose, De
la Fuente was placed in possession of the gasoline and service station under
consideration, and was provided with all the equipments needed to operate it, by the
said Company, such as the tools and articles listed on Exhibit 2 which the hydraulic
lifter (hoist) and accessories, from which Sison's automobile fell on the date in
question (Exhibit 1 and 2). These equipments were delivered to De la Fuente on a
so-called loan basis. The Shell Company took charge of its care and maintenance
and rendered to the public or its customers at that station for the proper functioning
of the equipment. Witness Antonio Tiongson, who was sales superintendent of the
Shell Company, and witness Augusto Sawyer, foreman of the same Company,
supervised the operators and conducted periodic inspection of the Company's
gasoline and service station, the service station in question inclusive. Explaining his
duties and responsibilities and the reason for the loan, Tiongson said: "mainly of the
supervision of sales or (of) our dealers and rountinary inspection of the equipment
loaned by the Company" (t.s.n., 107); "we merely inquire about how the equipments
are, whether they have complaints, and whether if said equipments are in proper
order . . .", (t.s.n., 110); station equipments are "loaned for the exclusive use of the
dealer on condition that all supplies to be sold by said dealer should be exclusively
Shell, so as a concession we loan equipments for their use . . .," "for the proper
functioning of the equipments, we answer and see to it that the equipments are in
good running order usable condition . . .," "with respect to the public." (t.s.n., 111-
112). De la Fuente, as operator, was given special prices by the Company for the
gasoline products sold therein. Exhibit 1 — Shell, which was a receipt by Antonio
Tiongson and signed by the De la Fuente, acknowledging the delivery of equipments
of the gasoline and service station in question was subsequently replaced by Exhibit
2 — Shell, an official from of the inventory of the equipment which De la Fuente
signed above the words: "Agent's signature" And the service station in question had
been marked "SHELL", and all advertisements therein bore the same sign. . . .
. . . De la Fuente was the operator of the station "by grace" of the Defendant
Company which could and did remove him as it pleased; that all the equipments
needed to operate the station was owned by the Defendant Company which took
charge of their proper care and maintenance, despite the fact that they were loaned
to him; that the Defendant company did not leave the fixing of price for gasoline to
De la Fuente; on the other hand, the Defendant company had complete control
thereof; and that Tiongson, the sales representative of the Defendant Company, had
supervision over De la Fuente in the operation of the station, and in the sale of
Defendant Company's products therein. . . .
or functioning,
. . . the servicing job on Appellant Sison's automobile was accepted by De la Fuente
in the normal and ordinary conduct of his business as operator of his co-appellee's
service station, and that the jerking and swaying of the hydraulic lift which caused
the fall of the subject car were due to its defective condition, resulting in its faulty
operation. . . .
As the act of the agent or his employees acting within the scope of his authority is
the act of the principal, the breach of the undertaking by the agent is one for which
the principal is answerable. Moreover, the company undertook to "answer and see
to it that the equipments are in good running order and usable condition;" and the
Court of Appeals found that the Company's mechanic failed to make a thorough
check up of the hydraulic lifter and the check up made by its mechanic was "merely
routine" by raising "the lifter once or twice and after observing that the operator was
satisfactory, he (the mechanic) left the place." The latter was negligent and the
company must answer for the negligent act of its mechanic which was the cause of
the fall of the car from the hydraulic lifter.
The judgment under review is affirmed, with costs against the petitioner.

Taking into consideration the fact that the operator owed his position to the company Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador,
and the latter could remove him or terminate his services at will; that the service Concepcion, Reyes, J.B.L., Endencia and Felix, JJ., concur.
station belonged to the company and bore its tradename and the operator sold only
the products of the company; that the equipment used by the operator belonged to
the company and were just loaned to the operator and the company took charge of
their repair and maintenance; that an employee of the company supervised the
operator and conducted periodic inspection of the company's gasoline and service
station; that the price of the products sold by the operator was fixed by the company
and not by the operator; and that the receipt signed by the operator indicated that he
was a mere agent, the finding of the Court of Appeals that the operator was an agent
of the company and not an independent contractor should not be disturbed.

To determine the nature of a contract courts do not have or are not bound to rely
upon the name or title given it by the contracting parties, should there be a
controversy as to what they really had intended to enter into, but the way the
contracting parties do or perform their respective obligation stipulated or agreed
upon may be shown and inquired into, and should such performance conflict with the
name or title given the contract by the parties, the former must prevail over the latter.

It was admitted by the operator of the gasoline and service station that "the car was
carefully and centrally placed on the platform of the lifter . . ." and the Court of
Appeals found that —

. . . the fall of Appellant Sison's car from the hydraulic lift and the damage caused
therefor, were the result of the jerking and swaying of the lift when the valve was
released, and that the jerking was due to some accident and unforeseen G.R. No. 88539 October 26, 1993
shortcoming of the mechanism itself, which caused its faulty or defective operation
KUE CUISON, doing business under the firm name and style"KUE CUISON
PAPER SUPPLY," petitioner, vs.THE COURT OF APPEALS, VALIANT
INVESTMENT ASSOCIATES, respondents.
Leighton R. Siazon for petitioner.
Melanio L. Zoreta for private respondent.
BIDIN, J.:
This petition for review assails the decision of the respondent Court of Appeals
ordering petitioner to pay private respondent, among others, the sum of P297,482.30
with interest. Said decision reversed the appealed decision of the trial court rendered
in favor of petitioner.
The case involves an action for a sum of money filed by respondent against
petitioner anchored on the following antecedent facts:
Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of
newsprint, bond paper and scrap, with places of business at Baesa, Quezon City,
and Sto. Cristo, Binondo, Manila. Private respondent Valiant Investment Associates,
on the other hand, is a partnership duly organized and existing under the laws of the
Philippines with business address at Kalookan City.
From December 4, 1979 to February 15, 1980, private respondent delivered various
kinds of paper products amounting to P297,487.30 to a certain Lilian Tan of LT
Trading. The deliveries were made by respondent pursuant to orders allegedly
placed by Tiu Huy Tiac who was then employed in the Binondo office of petitioner. It
was likewise pursuant to Tiac's instructions that the merchandise was delivered to
Lilian Tan. Upon delivery, Lilian Tan paid for the merchandise by issuing several
checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac issued
nine (9) postdated checks to private respondent as payment for the paper products.
Unfortunately, sad checks were later dishonored by the drawee bank.
Thereafter, private respondent made several demands upon petitioner to pay for the
merchandise in question, claiming that Tiu Huy Tiac was duly authorized by
petitioner as the manager of his Binondo office, to enter into the questioned
transactions with private respondent and Lilian Tan. Petitioner denied any
involvement in the transaction entered into by Tiu Huy Tiac and refused to pay
private respondent the amount corresponding to the selling price of the subject
merchandise.
Left with no recourse, private respondent filed an action against petitioner for the
collection of P297,487.30 representing the price of the merchandise. After due
hearing, the trial court dismissed the complaint against petitioner for lack of merit.
On appeal, however, the decision of the trial court was modified, but was in effect
reversed by the Court of Appeals, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is MODIFIED in that defendant-appellant
Kue Cuison is hereby ordered to pay plaintiff-appellant Valiant Investment
Associates the sum of P297,487.30 with 12% interest from the filing of the complaint
until the amount is fully paid, plus the sum of 7% of the total amount due as
attorney's fees, and to pay the costs. In all other respects, the decision appealed
from is affirmed. (Rollo, p. 55)
In this petition, petitioner contends that:
THE HONORABLE COURT ERRED IN FINDING TIU HUY TIAC AGENT OF
DEFENDANT-APPELLANT CONTRARY TO THE UNDISPUTED/ESTABLISHED
FACTS AND CIRCUMSTANCES.
THE HONORABLE COURT ERRED IN FINDING DEFENDANT-APPELLANT
LIABLE FOR AN OBLIGATION UNDISPUTEDLY BELONGING TO TIU HUY TIAC.
THE HONORABLE COURT ERRED IN REVERSING THE WELL-FOUNDED
DECISION OF THE TRIAL COURT, (Rollo, p, 19)
The issue here is really quite simple — whether or not Tiu Huy Tiac possessed the
required authority from petitioner sufficient to hold the latter liable for the disputed
transaction.
This petition ought to have been denied outright, forin the final analysis, it raises a
factual issue. It is elementary that in petitions for review under Rule 45, this Court
only passes upon questions of law. An exception thereto occurs where the findings
of fact of the Court of Appeals are at variance with the trial court, in which case the
Court reviews the evidence in order to arrive at the correct findings based on the
records.
As to the merits of the case, it is a well-established rule that one who clothes another
with apparent authority as his agent and holds him out to the public as such cannot
be permitted to deny the authority of such person to act as his agent, to the
prejudice of innocent third parties dealing with such person in good faith and in the
honest belief that he is what he appears to be (Macke, et al, v. Camps, 7 Phil. 553
(1907]; Philippine National Bank. v Court of Appeals, 94 SCRA 357 [1979]). From
the facts and the evidence on record, there is no doubt that this rule obtains. The
petition must therefore fail.
It is evident from the records that by his own acts and admission, petitioner held out
Tiu Huy Tiac to the public as the manager of his store in Sto. Cristo, Binondo,
Manila. More particularly, petitioner explicitly introduced Tiu Huy Tiac to Bernardino
Villanueva, respondent's manager, as his (petitioner's) branch manager as testified
to by Bernardino Villanueva. Secondly, Lilian Tan, who has been doing business
with petitioner for quite a while, also testified that she knew Tiu Huy Tiac to be the
manager of petitioner's Sto. Cristo, Binondo branch. This general perception of Tiu
Huy Tiac as the manager of petitioner's Sto. Cristo store is even made manifest by
the fact that Tiu Huy Tiac is known in the community to be the "kinakapatid"
(godbrother) of petitioner. In fact, even petitioner admitted his close relationship with
Tiu Huy Tiac when he said that they are "like brothers" (Rollo, p. 54). There was thus
no reason for anybody especially those transacting business with petitioner to even
doubt the authority of Tiu Huy Tiac as his manager in the Sto. Cristo Binondo
branch.
In a futile attempt to discredit Villanueva, petitioner alleges that the former's
testimony is clearly self-serving inasmuch as Villanueva worked for private
respondent as its manager.
We disagree, The argument that Villanueva's testimony is self-serving and therefore
inadmissible on the lame excuse of his employment with private respondent utterly
misconstrues the nature of "'self-serving evidence" and the specific ground for its
exclusion. As pointed out by this Court in Co v. Court of Appeals et, al., (99 SCRA
321 [1980]):
Self-serving evidence is evidence made by a party out of court at one time; it does
not include a party's testimony as a witness in court. It is excluded on the same
ground as any hearsay evidence, that is the lack of opportunity for cross-
examination by the adverse party, and on the consideration that its admission would
open the door to fraud and to fabrication of testimony. On theother hand, a party's
testimony in court is sworn and affords the other party the opportunity for cross-
examination (emphasis supplied)
Petitioner cites Villanueva's failure, despite his commitment to do so on cross-
examination, to produce the very first invoice of the transaction between petitioner
and private respondent as another ground to discredit Villanueva's testimony. Such
failure, proves that Villanueva was not only bluffing when he pretended that he can
produce the invoice, but that Villanueva was likewise prevaricating when he insisted
that such prior transactions actually took place. Petitioner is mistaken. In fact, it was
petitioner's counsel himself who withdrew the reservation to have Villanueva
produce the document in court. As aptly observed by the Court of Appeals in its
decision:
. . . However, during the hearing on March 3, 1981, Villanueva failed to present the
document adverted to because defendant-appellant's counsel withdrew his
reservation to have the former (Villanueva) produce the document or invoice, thus
prompting plaintiff-appellant to rest its case that same day (t.s.n., pp. 39-40, Sess. of
March 3, 1981). Now, defendant-appellant assails the credibility of Villanueva for
having allegedly failed to produce even one single document to show that plaintiff-
appellant have had transactions before, when in fact said failure of Villanueva to
produce said document is a direct off-shoot of the action of defendant-appellant's
counsel who withdrew his reservation for the production of the document or invoice
and which led plaintiff-appellant to rest its case that very day. (Rollo, p.52)
In the same manner, petitioner assails the credibility of Lilian Tan by alleging that
Tan was part of an intricate plot to defraud him. However, petitioner failed to
substantiate or prove that the subject transaction was designed to defraud him.
Ironically, it was even the testimony of petitioner's daughter and assistant manager
Imelda Kue Cuison which confirmed the credibility of Tan as a witness. On the
witness stand, Imelda testified that she knew for a fact that prior to the transaction in
question, Tan regularly transacted business with her father (petitioner herein),
thereby corroborating Tan's testimony to the same effect. As correctly found by the
respondent court, there was no logical explanation for Tan to impute liability upon
petitioner. Rather, the testimony of Imelda Kue Cuison only served to add credence
to Tan's testimony as regards the transaction, the liability for which petitioner wishes
to be absolved.
But of even greater weight than any of these testimonies, is petitioner's categorical
admission on the witness stand that Tiu Huy Tiac was the manager of his store in
Sto. Cristo, Binondo, to wit:
Court:
xxx xxx xxx
Q And who was managing the store in Sto. Cristo?
A At first it was Mr. Ang, then later Mr. Tiu Huy Tiac but I cannot remember the exact
year.
Q So, Mr. Tiu Huy Tiac took over the management,.
A Not that was because every afternoon, I was there, sir.
Q But in the morning, who takes charge?
A Tiu Huy Tiac takes charge of management and if there (sic) orders for newsprint
or bond papers they are always referred to the compound in Baesa, sir. (t.s.n., p. 16,
Session of January 20, 1981, CA decision, Rollo, p. 50, emphasis supplied).
Such admission, spontaneous no doubt, and standing alone, is sufficient to negate
all the denials made by petitioner regarding the capacity of Tiu Huy Tiac to enter into
the transaction in question. Furthermore, consistent with and as an obvious
indication of the fact that Tiu Huy Tiac was the manager of the Sto. Cristo branch,
three (3) months after Tiu Huy Tiac left petitioner's employ, petitioner even sent,
communications to its customers notifying them that Tiu Huy Tiac is no longer
connected with petitioner's business. Such undertaking spoke unmistakenly of Tiu
Huy Tiac's valuable position as petitioner's manager than any uttered disclaimer.
More than anything else, this act taken together with the declaration of petitioner in
open court amount to admissions under Rule 130 Section 22 of the Rules of Court,
to wit : "The act, declaration or omission of a party as to a relevant fact may be given
in evidence against him." For well-settled is the rule that "a man's acts, conduct, and
declaration, wherever made, if voluntary, are admissible against him, for the reason
that it is fair to presume that they correspond with the truth, and it is his fault if they
do not. If a man's extrajudicial admissions are admissible against him, there seems
to be no reason why his admissions made in open court, under oath, should not be
accepted against him." (U.S. vs. Ching Po, 23 Phil. 578, 583 [1912];).
Moreover, petitioner's unexplained delay in disowning the transactions entered into
by Tiu Huy Tiac despite several attempts made by respondent to collect the amount
from him, proved all the more that petitioner was aware of the questioned
commission was tantamount to an admission by silence under Rule 130 Section 23
of the Rules of Court, thus: "Any act or declaration made in the presence of and
within the observation of a party who does or says nothing when the act or
declaration is such as naturally to call for action or comment if not true, may be given
in evidence against him."
All of these point to the fact that at the time of the transaction Tiu Huy Tiac was
admittedly the manager of petitioner's store in Sto. Cristo, Binondo. Consequently,
the transaction in question as well as the concomitant obligation is valid and binding
upon petitioner.
By his representations, petitioner is now estopped from disclaiming liability for the
transaction entered by Tiu Huy Tiac on his behalf. It matters not whether the
representations are intentional or merely negligent so long as innocent, third persons
relied upon such representations in good faith and for value As held in the case of
Manila Remnant Co. Inc. v. Court of Appeals, (191 SCRA 622 [1990]):
Taken in this light,. petitioner is liable for the transaction entered into by Tiu Huy Tiac
on his behalf. Thus, even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to fact as though he had
full powers (Article 1911 Civil Code), as in the case at bar.
Finally, although it may appear that Tiu Huy Tiac defrauded his principal (petitioner)
in not turning over the proceeds of the transaction to the latter, such fact cannot in
any way relieve nor exonerate petitioner of his liability to private respondent. For it is
an equitable maxim that as between two innocent parties, the one who made it
possible for the wrong to be done should be the one to bear the resulting loss
(Francisco vs. Government Service Insurance System, 7 SCRA 577 [1963]).
Inasmuch as the fundamental issue of the capacity or incapacity of the purported
agent Tiu Huy Tiac, has already been resolved, the Court deems it unnecessary to
resolve the other peripheral issues raised by petitioner.
WHEREFORE, the instant petition in hereby DENIED for lack of merit. Costs against
petitioner.
SO ORDERED.
Feliciano, Romero, Melo and Vitug, JJ., concur.

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 issolidarily 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 tortfeasors whose liability is joint and solidary.

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 theagent's misdeed is of no moment.

Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations,

became an agent of petitioner by estoppel, an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or disproved
Woodchild Holdings, Inc. v. Roxas Electric & Construction, Co.
as against the person relying thereon (Article 1431, Civil Code of the Philippines). A
party cannot be allowed to go back on his own acts and representations to the
CALLEJO, SR., J.:
prejudice of the other party who, in good faith, relied upon them (Philippine National
 
Bank v. Intermediate Appellate Court, et al., 189 SCRA 680 [1990]).
 
          This is a petition for review on certiorari of the Decision[1] of the Court of
Appeals in CA-G.R. CV No. 56125 reversing the Decision[2] of the Regional Trial
Court of Makati, Branch 57, which ruled in favor of the petitioner.
 
The Antecedents
          The respondent Roxas Electric and Construction Company, Inc. (RECCI),
formerly the Roxas Electric and Construction Company, was the owner of two
parcels of land, identified as Lot No. 491-A-3-B-1 covered by Transfer Certificate of
Title (TCT) No. 78085 and Lot No. 491-A-3-B-2 covered by TCT No. 78086.  A
portion of Lot No. 491-A-3-B-1 which abutted Lot No. 491-A-3-B-2 was a dirt road
accessing to the Sumulong Highway, Antipolo, Rizal.
 
At a special meeting on May 17, 1991, the respondent’s Board of
Directors approved a resolution authorizing the corporation, through its president,
Roberto B. Roxas, to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086, with an
area of 7,213 square meters, at a price and under such terms and conditions which
he deemed most reasonable and advantageous to the corporation; and to execute,
sign and deliver the pertinent sales documents and receive the proceeds of the sale
for and on behalf of the company.[3]
 
Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No. 491-A-
3-B-2 covered by TCT No. 78086 on which it planned to construct its warehouse
building, and a portion of the adjoining lot, Lot No. 491-A-3-B-1, so that its 45-foot
container van would be able to readily enter or leave the property.  In a Letter to
Roxas dated June 21, 1991, WHI President Jonathan Y. Dy offered to buy Lot No.
491-A-3-B-2 under stated terms and conditions for P1,000 per square meter or at
the price of P7,213,000.[4]  One of the terms incorporated in Dy’s offer was the
following provision:
 
5.    This Offer to Purchase is made on the representation
and warranty of the OWNER/SELLER, that he holds
a good and registrable title to the property, which
shall be conveyed CLEAR and FREE of all liens and
encumbrances, and that the area of 7,213 square
meters of the subject property already includes the
area on which the right of way traverses from the
main lot (area) towards the exit to the Sumulong
Highway as shown in the location plan furnished by
the Owner/Seller to the buyer.  Furthermore, in the
event that the right of way is insufficient for the
buyer’s purposes (example: entry of a 45-foot
container), the seller agrees to sell additional square
meter from his current adjacent property to allow the
buyer to full access and full use of the property.[5]
          Roxas indicated his acceptance of the offer on page 2 of the deed.  Less than
a month later or on July 1, 1991, Roxas, as President of RECCI, as vendor, and Dy,
as President of WHI, as vendee, executed a contract to sell in which RECCI bound
and obliged itself to sell to Dy Lot No. 491-A-3-B-2 covered by TCT No. 78086 for
P7,213,000.[6]  On September 5, 1991, a Deed of Absolute Sale[7] in favor of WHI
was issued, under which Lot No. 491-A-3-B-2 covered by TCT No. 78086 was sold
for P5,000,000, receipt of which was acknowledged by Roxas under the following
terms and conditions:
            The Vendor agree (sic), as it hereby agrees and
binds itself to give Vendee the beneficial use of and a right
of way from Sumulong Highway to the property herein
conveyed consists of 25 square meters wide to be used as
the latter’s egress from and ingress to and an additional 25
square meters in the corner of Lot No. 491-A-3-B-1, as
turning and/or maneuvering area for Vendee’s vehicles.
 
            The Vendor agrees that in the event that the right of
way is insufficient for the Vendee’s use (ex entry of a 45-foot
container) the Vendor agrees to sell additional square
meters from its current adjacent property to allow the
Vendee full access and full use of the property.
 
…
 
            The Vendor hereby undertakes and agrees, at its
account, to defend the title of the Vendee to the parcel of
land and improvements herein conveyed, against all claims
of any and all persons or entities, and that the Vendor
hereby warrants the right of the Vendee to possess and own
the said parcel of land and improvements thereon and will
defend the Vendee against all present and future claims
and/or action in relation thereto, judicial and/or
administrative.  In particular, the Vendor shall eject all
existing squatters and occupants of the premises within two
(2) weeks from the signing hereof.  In case of failure on the
part of the Vendor to eject all occupants and squatters within
the two-week period or breach of any of the stipulations,
covenants and terms and conditions herein provided and
that of contract to sell dated 1 July 1991, the Vendee shall
have the right to cancel the sale and demand
reimbursement for all payments made to the Vendor with
interest thereon at 36% per annum.[8]
 
          On September 10, 1991, the Wimbeco Builder’s, Inc. (WBI) submitted its
quotation for P8,649,000 to WHI for the construction of the warehouse building on a
portion of the property with an area of 5,088 square meters.[9]  WBI proposed to
start the project on October 1, 1991 and to turn over the building to WHI on February
29, 1992.[10]
In a Letter dated September 16, 1991, Ponderosa Leather Goods
Company, Inc. confirmed its lease agreement with WHI of a 5,000-square-meter
portion of the warehouse yet to be constructed at the rental rate of P65 per square
meter.  Ponderosa emphasized the need for the warehouse to be ready for
occupancy before April 1, 1992.[11]  WHI accepted the offer.  However, WBI failed
to commence the construction of the warehouse in October 1, 1991 as planned
because of the presence of squatters in the property and suggested a renegotiation
of the contract after the squatters shall have been evicted.[12]  Subsequently, the
squatters were evicted from the property.
 
On March 31, 1992, WHI and WBI executed a Letter-Contract for the
construction of the warehouse building for P11,804,160.[13]  The contractor started
construction in April 1992 even before the building officials of Antipolo City issued a
building permit on May 28, 1992.  After the warehouse was finished, WHI issued on
March 21, 1993 a certificate of occupancy by the building official.  Earlier, or on
March 18, 1993, WHI, as lessor, and Ponderosa, as lessee, executed a contract of
lease over a portion of the property for a monthly rental of P300,000 for a period of
three years from March 1, 1993 up to February 28, 1996.[14]
 
In the meantime, WHI complained to Roberto Roxas that the vehicles of
RECCI were parked on a portion of the property over which WHI had been granted a
right of way.  Roxas promised to look into the matter.  Dy and Roxas discussed the
need of the WHI to buy a 500-square-meter portion of Lot No. 491-A-3-B-1 covered
by TCT No. 78085 as provided for in the deed of absolute sale.  However, Roxas
died soon thereafter.  On April 15, 1992, the WHI wrote the RECCI, reiterating its
verbal requests to purchase a portion of the said lot as provided for in the deed of
absolute sale, and complained about the latter’s failure to eject the squatters within
the three-month period agreed upon in the said deed.
 
The WHI demanded that the RECCI sell a portion of Lot No. 491-A-3-B-
1 covered by TCT No. 78085 for its beneficial use within 72 hours from notice
thereof, otherwise the appropriate action would be filed against it.  RECCI rejected
the demand of WHI.  WHI reiterated its demand in a Letter dated May 29, 1992. 
There was no response from RECCI.
On June 17, 1992, the WHI filed a complaint against the RECCI with the
Regional Trial Court of Makati, for specific performance and damages, and alleged,
inter alia, the following in its complaint:
 
            5.         The “current adjacent property” referred to in the
aforequoted paragraph of the Deed of Absolute Sale pertains to the
property covered by Transfer Certificate of Title No. N-78085 of the
Registry of Deeds of Antipolo, Rizal, registered in the name of herein
defendant Roxas Electric.
 
            6.         Defendant Roxas Electric in patent violation of the
express and valid terms of the Deed of Absolute Sale unjustifiably
refused to deliver to Woodchild Holdings the stipulated beneficial use
and right of way consisting of 25 square meters and 55 square
meters to the prejudice of the plaintiff.
            7.         Similarly, in as much as the 25 square meters and 55
square meters alloted to Woodchild Holdings for its beneficial use is
inadequate as turning and/or maneuvering area of its 45-foot
container van, Woodchild Holdings manifested its intention pursuant
to para. 5 of the Deed of Sale to purchase additional square meters
from Roxas Electric to allow it full access and use of the purchased
property, however, Roxas Electric refused and failed to merit
Woodchild Holdings’ request contrary to defendant Roxas Electric’s
obligation under the Deed of Absolute Sale (Annex “A”).
 
            8.         Moreover, defendant, likewise, failed to eject all
existing squatters and occupants of the premises within the
stipulated time frame and as a consequence thereof, plaintiff’s
planned construction has been considerably delayed for seven (7)
months due to the squatters who continue to trespass and obstruct
the subject property, thereby Woodchild Holdings incurred
substantial losses amounting to P3,560,000.00 occasioned by the
increased cost of construction materials and labor.
 
            9.         Owing further to Roxas Electric’s deliberate refusal to
comply with its obligation under Annex “A,” Woodchild Holdings
suffered unrealized income of P300,000.00 a month or
P2,100,000.00 supposed income from rentals of the subject property
for seven (7) months.
 
            10.       On April 15, 1992, Woodchild Holdings made a final
demand to Roxas Electric to comply with its obligations and
warranties under the Deed of Absolute Sale but notwithstanding such
demand, defendant Roxas Electric refused and failed and continue to
refuse and fail to heed plaintiff’s demand for compliance.
 
            Copy of the demand letter dated April 15, 1992 is hereto
attached as Annex “B” and made an integral part hereof.
            11.       Finally, on 29 May 1991, Woodchild Holdings made a
letter request addressed to Roxas Electric to particularly annotate on
Transfer Certificate of Title No. N-78085 the agreement under Annex
“A” with respect to the beneficial use and right of way, however,
Roxas Electric unjustifiably ignored and disregarded the same.
 
            Copy of the letter request dated 29 May 1992 is hereto
attached as Annex “C” and made an integral part hereof.
 
            12.       By reason of Roxas Electric’s continuous refusal and
failure to comply with Woodchild Holdings’ valid demand for
compliance under Annex “A,” the latter was constrained to litigate,
thereby incurring damages as and by way of attorney’s fees in the
amount of P100,000.00 plus costs of suit and expenses of litigation.
[15]
 The WHI prayed that, after due proceedings, judgment be rendered in its
favor, thus:
 
            WHEREFORE, it is respectfully prayed that
judgment be rendered in favor of Woodchild Holdings and
ordering Roxas Electric the following:
 
a)    to deliver to Woodchild Holdings the beneficial use
of the stipulated 25 square meters and 55
square meters;
b)    to sell to Woodchild Holdings additional 25 and
100 square meters to allow it full access and
use of the purchased property pursuant to para.
5 of the Deed of Absolute Sale;
c)    to cause annotation on Transfer Certificate of Title
No. N-78085 the beneficial use and right of way
granted to Woodchild Holdings under the Deed
of Absolute Sale;
d)    to pay Woodchild Holdings the amount of
P5,660,000.00, representing actual damages
and unrealized income;
e)    to pay attorney’s fees in the amount of
P100,000.00; and
f)     to pay the costs of suit.
 
            Other reliefs just and equitable are prayed for.[16]
 
 
In its answer to the complaint, the RECCI alleged that it never
authorized its former president, Roberto Roxas, to grant the beneficial use of any
portion of Lot No. 491-A-3-B-1, nor agreed to sell any portion thereof or create a lien
or burden thereon.  It alleged that, under the Resolution approved on May 17, 1991,
it merely authorized Roxas to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086.  the complaint.  The CA ruled that, under the resolution of the Board of Directors of
As such, the grant of a right of way and the agreement to sell a portion of Lot No.
491-A-3-B-1 covered by TCT No. 78085 in the said deed are ultra vires.  The RECCI
further alleged that the provision therein that it would sell a portion of Lot No. 491-A-
3-B-1 to the WHI lacked the essential elements of a binding contract.[17]
 
In its amended answer to the complaint, the RECCI alleged that the
delay in the construction of its warehouse building was due to the failure of the
WHI’s contractor to secure a building permit thereon.[18]
 
During the trial, Dy testified that he told Roxas that the petitioner was
buying a portion of Lot No. 491-A-3-B-1 consisting of an area of 500 square meters,
for the price of P1,000 per square meter.
On November 11, 1996, the trial court rendered judgment in favor of the
WHI, the decretal portion of which reads:
 
WHEREFORE, judgment is hereby rendered directing
defendant:
 
            (1)        To allow plaintiff the beneficial use of the existing right
of way plus the stipulated 25 sq. m. and 55 sq. m.;
 
            (2)        To sell to plaintiff an additional area of 500 sq. m.
priced at P1,000 per sq. m. to allow said plaintiff full access and use of
the purchased property pursuant to Par. 5 of their Deed of Absolute
Sale;
 
            (3)        To cause annotation on TCT No. N-78085 the
beneficial use and right of way granted by their Deed of Absolute Sale;
 
            (4)        To pay plaintiff the amount of P5,568,000 representing
actual damages and plaintiff’s unrealized income;
 
            (5)        To pay plaintiff P100,000 representing attorney’s fees;
and
 
To pay the costs of suit.
 
SO ORDERED.[19]
 
The trial court ruled that the RECCI was estopped from disowning the
apparent authority of Roxas under the May 17, 1991 Resolution of its Board of
Directors.  The court reasoned that to do so would prejudice the WHI which
transacted with Roxas in good faith, believing that he had the authority to bind the
WHI relating to the easement of right of way, as well as the right to purchase a
portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085.
 
The RECCI appealed the decision to the CA, which rendered a decision
on November 9, 1999 reversing that of the trial court, and ordering the dismissal of
the RECCI, Roxas was merely authorized to sell Lot No. 491-A-3-B-2 covered by
TCT No. 78086, but not to grant right of way in favor of the WHI over a portion of Lot
No. 491-A-3-B-1, or to grant an option to the petitioner to buy a portion thereof.  The
appellate court also ruled that the grant of a right of way and an option to the
respondent were so lopsided in favor of the respondent because the latter was
authorized to fix the location as well as the price of the portion of its property to be
sold to the respondent.  Hence, such provisions contained in the deed of absolute
sale were not binding on the RECCI.  The appellate court ruled that the delay in the
construction of WHI’s warehouse was due to its fault.
 
The Present Petition
 
The petitioner now comes to this Court asserting that:
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF
ABSOLUTE SALE (EXH. “C”) IS ULTRA VIRES.
 II.
THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE
RULING OF THE COURT A QUO ALLOWING THE PLAINTIFF-
APPELLEE THE BENEFICIAL USE OF THE EXISTING RIGHT OF
WAY PLUS THE STIPULATED 25 SQUARE METERS AND 55
SQUARE METERS BECAUSE THESE ARE VALID STIPULATIONS
AGREED BY BOTH PARTIES TO THE DEED OF ABSOLUTE SALE
(EXH. “C”).
III.
THERE IS NO FACTUAL PROOF OR EVIDENCE FOR THE COURT
OF APPEALS TO RULE THAT THE STIPULATIONS OF THE DEED
OF ABSOLUTE SALE (EXH. “C”) WERE DISADVANTAGEOUS TO
THE APPELLEE, NOR WAS APPELLEE DEPRIVED OF ITS
PROPERTY WITHOUT DUE PROCESS.
IV.
IN FACT, IT WAS WOODCHILD WHO WAS DEPRIVED OF
PROPERTY WITHOUT DUE PROCESS BY THE ASSAILED
DECISION.
V.
THE DELAY IN THE CONSTRUCTION WAS DUE TO THE FAILURE
OF THE APPELLANT TO EVICT THE SQUATTERS ON THE LAND AS
AGREED IN THE DEED OF ABSOLUTE SALE (EXH. “C”).
VI.
THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE
RULING OF THE COURT A QUO DIRECTING THE DEFENDANT TO
PAY THE PLAINTIFF THE AMOUNT OF P5,568,000.00
REPRESENTING ACTUAL DAMAGES AND PLAINTIFF’S
UNREALIZED INCOME AS WELL AS ATTORNEY’S FEES.[20]
 
 
          The threshold issues for resolution are the following: (a) whether the
respondent is bound by the provisions in the deed of absolute sale granting to the
petitioner beneficial use and a right of way over a portion of Lot     No. 491-A-3-B-1
accessing to the Sumulong Highway and granting the option to the petitioner to buy
a portion thereof, and, if so, whether such agreement is enforceable against the
respondent; (b) whether the respondent failed to eject the squatters on its property
within two weeks from the execution of the deed of absolute sale; and, (c) whether
the respondent is liable to the petitioner for damages.
 
          On the first issue, the petitioner avers that, under its Resolution of May 17,
1991, the respondent authorized Roxas, then its president, to grant a right of way
over a portion of Lot No. 491-A-3-B-1 in favor of the petitioner, and an option for the
respondent to buy a portion of the said property.  The petitioner contends that when
the respondent sold Lot No. 491-A-3-B-2 covered by TCT No. 78086, it (respondent)
was well aware of its obligation to provide the petitioner with a means of ingress to
or egress from the property to the Sumulong Highway, since the latter had no
adequate outlet to the public highway.  The petitioner asserts that it agreed to buy
the property covered by TCT No. 78085 because of the grant by the respondent of a
right of way and an option in its favor to buy a portion of the property covered by
TCT No. 78085.  It contends that the respondent never objected to Roxas’
acceptance of its offer to purchase the property and the terms and conditions
therein; the respondent even allowed Roxas to execute the deed of absolute sale in
its behalf.  The petitioner asserts that the respondent even received the purchase
price of the property without any objection to the terms and conditions of the said
deed of sale.  The petitioner claims that it acted in good faith, and contends that after
having been benefited by the said sale, the respondent is estopped from assailing its
terms and conditions.  The petitioner notes that the respondent’s Board of Directors
never approved any resolution rejecting the deed of absolute sale executed by
Roxas for and in its behalf.  As such, the respondent is obliged to sell a portion of
Lot No. 491-A-3-B-1 covered by TCT No. 78085 with an area of 500 square meters
at the price of P1,000 per square meter, based on its evidence and Articles 649 and
651 of the New Civil Code.
 
          For its part, the respondent posits that Roxas was not so authorized under the
May 17, 1991 Resolution of its Board of Directors to impose a burden or to grant a
right of way in favor of the petitioner on Lot No. 491-A-3-B-1, much less convey a
portion thereof to the petitioner.  Hence, the respondent was not bound by such
provisions contained in the deed of absolute sale.  Besides, the respondent
contends, the petitioner cannot enforce its right to buy a portion of the said property
since there was no agreement in the deed of absolute sale on the price thereof as
well as the specific portion and area to be purchased by the petitioner.
 
          We agree with the respondent.
 
          In San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,[21] we
held that:
 
            A corporation is a juridical person separate and
distinct from its stockholders or members.  Accordingly, the
property of the corporation is not the property of its
stockholders or members and may not be sold by the
stockholders or members without express authorization from
the corporation’s board of directors.  Section 23 of BP 68,
otherwise known as the Corporation Code of the Philippines,
provides:
 
            “SEC. 23.  The Board of Directors or
Trustees. – Unless otherwise provided in this
Code, the corporate powers of all corporations
formed under this Code shall be exercised, all
business conducted and all property of such
corporations controlled and held by the board of
directors or trustees to be elected from among
the holders of stocks, or where there is no stock,
from among the members of the corporation, who
shall hold office for one (1) year and until their
successors are elected and qualified.”
 
Indubitably, a corporation may act only through
its board of directors or, when authorized either by its by-
 laws or by its board resolution, through its officers or agents
in the normal course of business.  The general principles of
agency govern the relation between the corporation and its
officers or agents, subject to the articles of incorporation, by-
laws, or relevant provisions of law. …[22]
 
          Generally, the acts of the corporate officers within the scope of their authority
are binding on the corporation.  However, under Article 1910 of the New Civil Code,
acts done by such officers beyond the scope of their authority cannot bind the
corporation unless it has ratified such acts expressly or tacitly, or is estopped from
denying them:
 
            Art. 1910.  The principal must comply with all the
obligations which the agent may have contracted within the
scope of his authority.
            As for any obligation wherein the agent has
exceeded his power, the principal is not bound except when
he ratifies it expressly or tacitly.
 
Thus, contracts entered into by corporate officers beyond the scope of
authority are unenforceable against the corporation unless ratified by the
corporation.[23]
 
In BA Finance Corporation v. Court of Appeals,[24] we also ruled that
persons dealing with an assumed agency, whether the assumed agency be a
general or special one, are bound at their peril, if they would hold the principal liable,
to ascertain not only the fact of agency but also the nature and extent of authority,
and in case either is controverted, the burden of proof is upon them to establish it.
 
          In this case, the respondent denied authorizing its then president Roberto B.
Roxas to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085, and to
create a lien or burden thereon.  The petitioner was thus burdened to prove that the
respondent so authorized Roxas to sell the same and to create a lien thereon.
 
          Central to the issue at hand is the May 17, 1991 Resolution of the Board of
Directors of the respondent, which is worded as follows:
 
            RESOLVED, as it is hereby resolved, that the
corporation, thru the President, sell to any interested buyer,
its 7,213-sq.-meter property at the Sumulong Highway,
Antipolo, Rizal, covered by Transfer Certificate of Title No.
N-78086, at a price and on terms and conditions which he
deems most reasonable and advantageous to the
corporation;
            FURTHER RESOLVED, that Mr. ROBERTO B.
ROXAS, President of the corporation, be, as he is hereby
authorized to execute, sign and deliver the pertinent sales
documents and receive the proceeds of sale for and on
behalf of the company.[25]
 
          Evidently, Roxas was not specifically authorized under the said resolution to
grant a right of way in favor of the petitioner on a portion of Lot No. 491-A-3-B-1 or to
agree to sell to the petitioner a portion thereof.  The authority of Roxas, under the
resolution, to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086 did not include the
authority to sell a portion of the adjacent lot, Lot No. 491-A-3-B-1, or to create or
convey real rights thereon.  Neither may such authority be implied from the authority
granted to Roxas to sell Lot No. 491-A-3-B-2 to the petitioner “on such terms and
conditions which he deems most reasonable and advantageous.”  Under paragraph
12, Article 1878 of the New Civil Code, a special power of attorney is required to
convey real rights over immovable property.[26]  Article 1358 of the New Civil Code
requires that contracts which have for their object the creation of real rights over
immovable property must appear in a public document.[27]  The petitioner cannot
feign ignorance of the need for Roxas to have been specifically authorized in writing
by the Board of Directors to be able to validly grant a right of way and agree to sell a
portion of Lot No. 491-A-3-B-1.  The rule is that if the act of the agent is one which
requires authority in writing, those dealing with him are charged with notice of that
fact.[28]
Powers of attorney are generally construed strictly and courts will not
infer or presume broad powers from deeds which do not sufficiently include property
or subject under which the agent is to deal.[29]  The general rule is that the power of
attorney must be pursued within legal strictures, and the agent can neither go
beyond it; nor beside it.  The act done must be legally identical with that authorized
to be done.[30]  In sum, then, the consent of the respondent to the assailed
provisions in the deed of absolute sale was not obtained; hence, the assailed
provisions are not binding on it.
 
We reject the petitioner’s submission that, in allowing Roxas to execute
the contract to sell and the deed of absolute sale and failing to reject or disapprove
the same, the respondent thereby gave him apparent authority to grant a right of
way over Lot No. 491-A-3-B-1 and to grant an option for the respondent to sell a
portion thereof to the petitioner.  Absent estoppel or ratification, apparent authority
cannot remedy the lack of the written power required under the statement of frauds.
[31]  In addition, the petitioner’s fallacy is its wrong assumption of the unproved
premise that the respondent had full knowledge of all the terms and conditions
contained in the deed of absolute sale when Roxas executed it.
 
It bears stressing that apparent authority is based on estoppel and can
arise from two instances: first, the principal may knowingly permit the agent to so
hold himself out as having such authority, and in this way, the principal becomes
estopped to claim that the agent does not have such authority; second, the principal
may so clothe the agent with the indicia of authority as to lead a reasonably prudent
person to believe that he actually has such authority.[32]  There can be no apparent
authority of an agent without acts or conduct on the part of the principal and such
acts or conduct of the principal must have been known and relied upon in good faith
and as a result of the exercise of reasonable prudence by a third person as claimant
and such must have produced a change of position to its detriment.  The apparent
power of an agent is to be determined by the acts of the principal and not by the acts
of the agent.[33]
 
For the principle of apparent authority to apply, the petitioner was
burdened to prove the following: (a) the acts of the respondent justifying belief in the
agency by the petitioner; (b) knowledge thereof by the respondent which is sought to
be held; and, (c) reliance thereon by the petitioner consistent with ordinary care and
prudence.[34]  In this case, there is no evidence on record of specific acts made by
the respondent[35] showing or indicating that it had full knowledge of any
representations made by Roxas to the petitioner that the respondent had authorized
him to grant to the respondent an option to buy a portion of Lot No. 491-A-3-B-1
covered by TCT No. 78085, or to create a burden or lien thereon, or that the
respondent allowed him to do so.
The petitioner’s contention that by receiving and retaining the
P5,000,000 purchase price of Lot No. 491-A-3-B-2, the respondent effectively and
impliedly ratified the grant of a right of way on the adjacent lot, Lot No. 491-A-3-B-1,
and to grant to the petitioner an option to sell a portion thereof, is barren of merit.  It
bears stressing that the respondent sold Lot No. 491-A-3-B-2 to the petitioner, and
the latter had taken possession of the property.  As such, the respondent had the
right to retain the P5,000,000, the purchase price of the property it had sold to the
petitioner.  For an act of the principal to be considered as an implied ratification of an
unauthorized act of an agent, such act must be inconsistent with any other
hypothesis than that he approved and intended to adopt what had been done in his
name.[36]  Ratification is based on waiver – the intentional relinquishment  of a
known right.  Ratification cannot be inferred from acts that a principal has a right to
do independently of the unauthorized act of the agent.  Moreover, if a writing is
required to grant an authority to do a particular act, ratification of that act must also
be in writing.[37]  Since the respondent had not ratified the unauthorized acts of
Roxas, the same are unenforceable.[38]  Hence, by the respondent’s retention of the
amount, it cannot thereby be implied that it had ratified the unauthorized acts of its
agent, Roberto Roxas.
 
On the last issue, the petitioner contends that the CA erred in dismissing
its complaint for damages against the respondent on its finding that the delay in the
construction of its warehouse was due to its (petitioner’s) fault.  The petitioner
asserts that the CA should have affirmed the ruling of the trial court that the
respondent failed to cause the eviction of the squatters from the property on or
before September 29, 1991; hence, was liable for P5,660,000.  The respondent, for
its part, asserts that the delay in the construction of the petitioner’s warehouse was
due to its late filing of an application for a building permit, only on May 28, 1992.
 
The petitioner’s contention is meritorious.  The respondent does not
deny that it failed to cause the eviction of the squatters on or before September 29,
1991.  Indeed, the respondent does not deny the fact that when the petitioner wrote
the respondent demanding that the latter cause the eviction of the squatters on April
15, 1992, the latter were still in the premises.  It was only after receiving the said
letter in April 1992 that the respondent caused the eviction of the squatters, which
thus cleared the way for the petitioner’s contractor to commence the construction of
its warehouse and secure the appropriate building permit therefor.
 
The petitioner could not be expected to file its application for a building
permit before April 1992 because the squatters were still occupying the property. 
Because of the respondent’s failure to cause their eviction as agreed upon, the
petitioner’s contractor failed to commence the construction of the warehouse in
October 1991 for the agreed price of P8,649,000.  In the meantime, costs of
construction materials spiraled.  Under the construction contract entered into
between the petitioner and the contractor, the petitioner was obliged to pay
P11,804,160,[39] including the additional work costing P1,441,500, or a net increase
of P1,712,980.[40]  The respondent is liable for the difference between the original
cost of construction and the increase thereon, conformably to Article 1170 of the
New Civil Code, which reads:
Art. 1170.  Those who in the performance of
their obligations are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof, are
liable for damages.
 
The petitioner, likewise, lost the amount of P3,900,000 by way of
unearned income from the lease of the property to the Ponderosa Leather Goods
Company.  The respondent is, thus, liable to the petitioner for the said amount,
under Articles 2200 and 2201 of the New Civil Code:
 
Art. 2200.  Indemnification for damages shall
comprehend not only the value of the loss suffered, but also
that of the profits which the obligee failed to obtain.
 
Art. 2201.  In contracts and quasi-contracts, the
damages for which the obligor who acted in good faith is
liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the
parties have foreseen or could have reasonably foreseen at
the time the obligation was constituted.
 
In case of fraud, bad faith, malice or wanton
attitude, the obligor shall be responsible for all damages
which may be reasonably attributed to the non-performance
of the obligation.
 
 
In sum, we affirm the trial court’s award of damages and attorney’s fees
to the petitioner.
 
IN LIGHT OF ALL THE FOREGOING, judgment is hereby rendered
AFFIRMING the assailed Decision of the Court of Appeals WITH MODIFICATION. 
The respondent is ordered to pay to the petitioner the amount of P5,612,980 by way
of actual damages and P100,000 by way of attorney’s fees.  No costs.
          SO ORDERED.
[G.R. No. 151319. November 22, 2004]
MANILA MEMORIAL PARK CEMETERY, INC., petitioner, vs. PEDRO L.
LINSANGAN, respondent.
DECISION
TINGA, J.:
For resolution in this case is a classic and interesting texbook question in the
law on agency.
This is a petition for review assailing the Decision[1] of the Court of Appeals
dated 22 June 2001, and its Resolution[2] dated 12 December 2001 in CA G.R. CV
No. 49802 entitled “Pedro L. Linsangan v. Manila Memorial Cemetery, Inc. et al.,”
finding Manila Memorial Park Cemetery, Inc.  (MMPCI) jointly and severally liable
with Florencia C. Baluyot to respondent Atty. Pedro L. Linsangan.
The facts of the case are as follows:
Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot
called Garden State at the Holy Cross Memorial Park owned by petitioner (MMPCI). 
According to Baluyot, a former owner of a memorial lot under Contract No. 25012
was no longer interested in acquiring the lot and had opted to sell his rights subject
to reimbursement of the amounts he already paid. The contract was for P95,000.00.
Baluyot reassured Atty. Linsangan that once reimbursement is made to the former
buyer, the contract would be transferred to him.  Atty. Linsangan agreed and gave
Baluyot P35,295.00 representing the amount to be reimbursed to the original buyer
and to complete the down payment to MMPCI.[3] Baluyot issued handwritten and
typewritten receipts for these payments.[4]
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be
issued Contract No. 28660, a new contract covering the subject lot in the name of
the latter instead of old Contract No. 25012. Atty. Linsangan protested, but Baluyot
assured him that he would still be paying the old price of P95,000.00 with
P19,838.00 credited as full down payment leaving a balance of about P75,000.00.[5]
Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No.
A11 (15), Block 83, Garden Estate I denominated as Contract No. 28660 and the
Official Receipt No. 118912 dated 6 April 1985 for the amount of P19,838.00.
Contract No. 28660 has a listed price of P132,250.00.  Atty. Linsangan objected to
the new contract price, as the same was not the amount previously agreed upon. To
convince Atty. Linsangan, Baluyot executed a document[6] confirming that while the
contract price is P132,250.00, Atty. Linsangan  would  pay only the original price of
P95,000.00.
The document reads in part:
The monthly installment will start April 6, 1985; the amount of P1,800.00 and the
difference will be issued as discounted to conform to the previous price as previously
agreed upon. --- P95,000.00
Prepared by:
(Signed)
(MRS.) FLORENCIA C. BALUYOT
Agency Manager
Holy Cross Memorial Park
4/18/85
Dear Atty. Linsangan:
This will confirm our agreement that while the offer to purchase under Contract No.
28660 states that the total price of P132,250.00 your undertaking is to pay only the
total sum of P95,000.00 under the old price.  Further the total sum of P19,838.00
already paid by you under O.R. # 118912 dated April 6, 1985 has been credited in
the total purchase price thereby leaving a balance of P75,162.00 on a monthly
installment of P1,800.00 including interests (sic) charges for a period of five (5)
years.
(Signed)
FLORENCIA C. BALUYOT
By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and
accepted Official Receipt No. 118912.  As requested by Baluyot, Atty. Linsangan
issued twelve (12) postdated checks of P1,800.00 each in favor of MMPCI.  The
next year, or on 29 April 1986, Atty. Linsangan again issued twelve (12) postdated
checks in favor of MMPCI.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No.
28660 was cancelled for reasons the latter could not explain, and presented to him
another proposal for the purchase of an equivalent property.  He refused the new
proposal and insisted that Baluyot and MMPCI honor their undertaking.
For the alleged failure of MMPCI and Baluyot to conform to their agreement,
Atty. Linsangan filed a Complaint[7] for Breach of Contract and Damages against the
former.
Baluyot did not present any evidence.  For its part, MMPCI alleged that
Contract No. 28660 was cancelled conformably with the terms of the contract[8]
because of non-payment of arrearages.[9] MMPCI stated that Baluyot was not an
agent but an independent contractor, and as such was not authorized to represent
MMPCI or to use its name except as to the extent expressly stated in the Agency
Manager Agreement.[10] Moreover, MMPCI was not aware of the arrangements
entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment
and monthly installments as indicated in the contract.[11] Official receipts showing
the application of payment were turned over to Baluyot whom Atty. Linsangan had
from the beginning allowed to receive the same in his behalf. Furthermore, whatever
misimpression that Atty. Linsangan may have had must have been rectified by the
Account Updating Arrangement signed by Atty. Linsangan which states that he
“expressly admits that Contract No. 28660 ‘on account of serious delinquency…is
now due for cancellation under its terms and conditions.’’’[12]
The trial court held MMPCI and Baluyot jointly and severally liable.[13] It
found that Baluyot was an agent of MMPCI and that the latter was estopped from
denying this agency, having received and enchased the checks issued by Atty.
Linsangan and given to it by Baluyot.  While MMPCI insisted that Baluyot was
authorized to receive only the down payment, it allowed her to continue to receive
postdated checks from Atty. Linsangan, which it in turn consistently encashed.[14]
The dispositive portion of the decision reads:
WHEREFORE, judgment by preponderance of evidence is hereby rendered in favor
of plaintiff declaring Contract No. 28660 as valid and subsisting and ordering
defendants to perform their undertakings thereof which covers burial lot No. A11
(15), Block 83, Section Garden I, Holy Cross Memorial Park located at Novaliches,
Quezon City. All payments made by plaintiff to defendants should be credited for his
accounts.  NO DAMAGES, NO ATTORNEY’S FEES but with costs against the
defendants.
The cross claim of defendant Manila Memorial Cemetery Incorporated as against
defendant Baluyot is GRANTED up to the extent of the costs.
SO ORDERED.[15]
MMPCI appealed the trial court’s decision to the Court of Appeals.[16] It
claimed that Atty. Linsangan is bound by the written contract with MMPCI, the terms
of which were clearly set forth therein and read, understood, and signed by the
former.[17] It also alleged that Atty. Linsangan, a practicing lawyer for over thirteen
(13) years at the time he entered into the contract, is presumed to know his
contractual obligations and is fully aware that he cannot belatedly and unilaterally
change the terms of the contract without the consent, much less the knowledge of
the other contracting party, which was MMPCI. And in this case, MMPCI did not
agree to a change in the contract and in fact implemented the same pursuant to its
clear terms. In view thereof, because of Atty. Linsangan’s delinquency, MMPCI
validly cancelled the contract.
MMPCI further alleged that it cannot be held jointly and solidarily liable with
Baluyot as the latter exceeded the terms of her agency, neither did MMPCI ratify
Baluyot’s acts.  It added that it cannot be charged with making any
misrepresentation, nor of having allowed Baluyot to act as though she had full
powers as the written contract expressly stated the terms and conditions which Atty.
Linsangan accepted and understood.  In canceling the contract, MMPCI merely
enforced the terms and conditions imposed therein.[18]
Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it
was the former’s obligation, as a party knowingly dealing with an alleged agent, to
determine the limitations of such agent’s authority, particularly when such alleged
agent’s actions were patently questionable. According to MMPCI, Atty. Linsangan
did not even bother to verify Baluyot’s authority or ask copies of official receipts for
his payments.[19]
The Court of Appeals affirmed the decision of the trial court.  It upheld the trial
court’s finding that Baluyot was an agent of MMPCI at the time the disputed contract
was entered into, having represented MMPCI’s interest and acting on its behalf in
the dealings with clients and customers. Hence, MMPCI is considered estopped
when it allowed Baluyot to act and represent MMPCI even beyond her authority.[20]
The appellate court likewise found that the acts of Baluyot bound MMPCI when the
latter allowed the former to act for and in its behalf and stead.  While Baluyot’s
authority “may not have been expressly conferred upon her, the same may have
been derived impliedly by habit or custom, which may have been an accepted
practice in the company for a long period of time.”[21] Thus, the Court of Appeals
noted, innocent third persons such as Atty. Linsangan should not be prejudiced
where the principal failed to adopt the needed measures to prevent
misrepresentation.  Furthermore, if an agent misrepresents to a purchaser and the
principal accepts the benefits of such misrepresentation, he cannot at the same time
deny responsibility for such misrepresentation.[22] Finally, the Court of Appeals
declared:
There being absolutely nothing on the record that would show that the court a quo
overlooked, disregarded, or misinterpreted facts of weight and significance, its
factual findings and conclusions must be given great weight and should not be
disturbed by this Court on appeal.
WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the
appealed decision in Civil Case No. 88-1253 of the Regional Trial Court, National
Capital Judicial Region, Branch 57 of Makati, is hereby AFFIRMED in toto.
SO ORDERED.[23]
MMPCI filed its Motion for Reconsideration,[24] but the same was denied for
lack of merit.[25]
In the instant Petition for Review, MMPCI claims that the Court of Appeals
seriously erred in disregarding the plain terms of the written contract and Atty.
Linsangan’s failure to abide by the terms thereof, which justified its cancellation. In
addition, even assuming that Baluyot was an agent of MMPCI, she clearly exceeded
her authority and Atty. Linsangan knew or should have known about this considering
his status as a long-practicing lawyer. MMPCI likewise claims that the Court of
Appeals erred in failing to consider that the facts and the applicable law do not
support a judgment against Baluyot only “up to the extent of costs.”[26]
Atty. Linsangan argues that he did not violate the terms and conditions of the
contract, and in fact faithfully performed his contractual obligations and complied
with them in good faith for at least two years.[27] He claims that contrary to MMPCI’s
position, his profession as a lawyer is immaterial to the validity of the subject
contract and the case at bar.[28] According to him, MMPCI had practically admitted
in its Petition that Baluyot was its agent, and thus, the only issue left to be resolved
is whether MMPCI allowed Baluyot to act as though she had full powers to be held
solidarily liable with the latter.[29]
We find for the petitioner MMPCI.
 The jurisdiction of the Supreme Court in a petition for review under Rule 45 of
the Rules of Court is limited to reviewing only errors of law, not fact, unless the
factual findings complained of are devoid of support by the evidence on record or the
assailed judgment is based on misapprehension of facts.[30] In BPI Investment
Corporation v. D.G. Carreon Commercial Corporation,[31] this Court ruled:
There are instances when the findings of fact of the trial court and/or Court of
Appeals may be reviewed by the Supreme Court, such as (1) when the conclusion is
a finding grounded entirely on speculation, surmises and conjectures; (2) when the
inference made is manifestly mistaken, absurd or impossible; (3) where there is a
grave abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in
making its findings, went beyond the issues of the case and the same is contrary to
the admissions of both appellant and appellee; (7) when the findings  are contrary to
those of the trial court; (8) when the findings  of fact are conclusions without citation
of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioners’ main and reply briefs are not disputed by the
respondents; and (10) the findings of fact of the Court of Appeals  are premised on
the supposed absence of evidence and contradicted by the evidence on record.[32]
In the case at bar, the Court of Appeals committed several errors in the
apprehension of the facts of the case, as well as made conclusions devoid of
evidentiary support, hence we review its findings of fact.
By the contract of agency, a person binds himself to render some service or
to do something in representation or on behalf of another, with the consent or
authority of the latter.[33] Thus, the elements of agency are (i) consent, express or
implied, of the parties to establish the relationship; (ii) the object is the execution of a
juridical act in relation to a third person; (iii) the agent acts as a representative and
not for himself; and (iv) the agent acts within the scope of his authority.[34]
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that
under its Agency Manager Agreement; an agency manager such as Baluyot is
considered an independent contractor and not an agent.[35] However, in the same
contract, Baluyot as agency manager was authorized to solicit and remit to MMPCI
offers to purchase interment spaces belonging to and sold by the latter.[36]
Notwithstanding the claim of MMPCI that Baluyot was an independent contractor,
the fact remains that she was authorized to solicit solely for and in behalf of MMPCI. 
As properly found both by the trial court and the Court of Appeals, Baluyot was an
agent of MMPCI, having represented the interest of the latter, and having been
allowed by MMPCI to represent it in her dealings with its clients/prospective buyers.
Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot
be bound by the contract procured by Atty. Linsangan and solicited by Baluyot.
Baluyot was authorized to solicit and remit to MMPCI offers to purchase
interment spaces obtained on forms provided by MMPCI.  The terms of the offer to
purchase, therefore, are contained in such forms and, when signed by the buyer and
an authorized officer of MMPCI, becomes binding on both parties.
The Offer to Purchase duly signed by Atty. Linsangan, and accepted and
validated by MMPCI showed a total list price of P132,250.00.  Likewise, it was
clearly stated therein that  “Purchaser agrees that he has read or has had read to
him this agreement, that he understands its terms and conditions, and that there
are no covenants, conditions, warranties or representations other than those
contained herein.”[37] By signing the Offer to Purchase, Atty. Linsangan signified
that he understood its contents.  That he and Baluyot had an agreement different
from that contained in the Offer to Purchase is of no moment, and should not affect
MMPCI, as it was obviously made outside Baluyot’s authority.  To repeat, Baluyot’s
authority was limited only to soliciting purchasers.  She had no authority to alter the
terms of the written contract provided by MMPCI.  The document/letter “confirming”
the agreement that Atty. Linsangan would have to pay the old price was executed by
Baluyot alone.  Nowhere is there any indication that the same came from MMPCI or
any of its officers.
It is a settled rule that persons dealing with an agent are bound at their peril,
if they would hold the principal liable, to ascertain not only the fact of agency but also
the nature and extent of authority, and in case either is controverted, the burden of
proof is upon them to establish it.[38] The basis for agency is representation and a
person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent.[39] If he does not make such an inquiry, he is chargeable with
knowledge of the agent’s authority and his ignorance of that authority will not be any
excuse.[40]
As noted by one author, the ignorance of a person dealing with an agent as
to the scope of the latter’s authority is no excuse to such person and the fault cannot
be thrown upon the principal.[41] A person dealing with an agent assumes the risk of
lack of authority in the agent.  He cannot charge the principal by relying upon the
agent’s assumption of authority that proves to be unfounded.  The principal, on the
other hand, may act on the presumption that third persons dealing with his agent will
not be negligent in failing to ascertain the extent of his authority as well as the
existence of his agency.[42]
In the instant case, it has not been established that Atty. Linsangan even
bothered to inquire whether Baluyot was authorized to agree to terms contrary to
those indicated in the written contract, much less bind MMPCI by her commitment
with respect to such agreements.  Even if Baluyot was Atty. Linsangan’s friend and
known to be an agent of MMPCI, her declarations and actions alone are not
sufficient to establish the fact or extent of her authority.[43] Atty. Linsangan as a
practicing lawyer for a relatively long period of time when he signed the contract
should have been put on guard when their agreement was not reflected in the
contract.  More importantly, Atty. Linsangan should have been alerted by the fact
that Baluyot failed to effect the transfer of rights earlier promised, and was unable to
make good her written commitment, nor convince MMPCI to assent thereto, as
evidenced by several attempts to induce him to enter into other contracts for a
higher consideration.  As properly pointed out by MMPCI, as a lawyer, a greater
degree of caution should be expected of Atty. Linsangan especially in dealings
involving legal documents. He did not even bother to ask for official receipts of his
payments, nor inquire from MMPCI directly to ascertain the real status of the
contract, blindly relying on the representations of Baluyot.  A lawyer by profession,
he knew what he was doing when he signed the written contract, knew the meaning
and value of every word or phrase used in the contract, and more importantly, knew
the legal effects which said document produced. He is bound to accept responsibility
for his negligence.
The trial and appellate courts found MMPCI liable based on ratification and
estoppel. For the trial court, MMPCI’s acts of accepting and encashing the checks
issued by Atty. Linsangan as well as allowing Baluyot to receive checks drawn in the
name of MMPCI confirm and ratify the contract of agency.  On the other hand, the
Court of Appeals faulted MMPCI in failing to adopt measures to prevent
misrepresentation, and declared that in view of MMPCI’s acceptance of the benefits
of Baluyot’s misrepresentation, it can no longer deny responsibility therefor.
The Court does not agree.  Pertinent to this case are the following provisions
of the Civil Code:
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of
his authority, and the principal does not ratify the contract, it shall be void if the party
with whom the agent contracted is aware of the limits of the powers granted by the
principal. In this case, however, the agent is liable if he undertook to secure the
principal’s ratification.
Art. 1910.  The principal must comply with all the obligations that the agent may
have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly.
Art. 1911.  Even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to act as though he had
full powers.
Thus, the acts of an agent beyond the scope of his authority do not bind the
principal, unless he ratifies them, expressly or impliedly.  Only the principal can
ratify; the agent cannot ratify his own unauthorized acts.  Moreover, the principal
must have knowledge of the acts he is to ratify.[44]
Ratification in agency is the adoption or confirmation by one person of an act
performed on his behalf by another without authority.  The substance of the doctrine
is confirmation after conduct, amounting to a substitute for a prior authority.
Ordinarily, the principal must have full knowledge at the time of ratification of all the
material facts and circumstances relating to the unauthorized act of the person who
assumed to act as agent.  Thus, if material facts were suppressed or unknown, there
can be no valid ratification and this regardless of the purpose or lack thereof in
concealing such facts and regardless of the parties between whom the question of
ratification may arise.[45] Nevertheless, this principle does not apply if the principal’s
ignorance of the material facts and circumstances was willful, or that the principal
chooses to act in ignorance of the facts.[46] However, in the absence of
circumstances putting a reasonably prudent man on inquiry, ratification cannot be
implied as against the principal who is ignorant of the facts.[47]
No ratification can be implied in the instant case.
A perusal of Baluyot’s Answer[48] reveals that the real arrangement between
her and Atty. Linsangan was for the latter to pay a monthly installment of P1,800.00
whereas Baluyot was to shoulder the counterpart amount of P1,455.00 to meet the
P3,255.00 monthly installments as indicated in the contract.  Thus, every time an
installment falls due, payment was to be made through a check from Atty. Linsangan
for P1,800.00 and a cash component of P1,455.00 from Baluyot.[49] However, it
appears that while Atty. Linsangan issued the post-dated checks, Baluyot failed to
come up with her part of the bargain.  This was supported by Baluyot’s statements in
her letter[50] to Mr. Clyde Williams, Jr., Sales Manager of MMPCI, two days after
she received the copy of the Complaint.  In the letter, she admitted that she was
remiss in her duties when she consented to Atty. Linsangan’s proposal that he will
pay the old price while the difference will be shouldered by her.  She likewise
admitted that the contract suffered arrearages because while Atty. Linsangan issued
the agreed checks, she was unable to give her share of P1,455.00 due to her own
financial difficulties. Baluyot even asked for compassion from MMPCI for the error
she committed.
Atty. Linsangan failed to show that MMPCI had knowledge of the
arrangement. As far as MMPCI is concerned, the contract price was P132,250.00,
as stated in the Offer to Purchase signed by Atty. Linsangan and MMPCI’s
authorized officer. The down payment of P19,838.00 given by Atty. Linsangan was
in accordance with the contract as well.  Payments of P3,235.00 for at least two
installments were likewise in accord with the contract, albeit made through a check
and partly in cash.  In view of Baluyot’s failure to give her share in the payment,
MMPCI received only P1,800.00 checks, which were clearly insufficient payment. In
fact, Atty. Linsangan would have incurred arrearages that could have caused the
earlier cancellation of the contract, if not for MMPCI’s application of some of the
checks to his account.  However, the checks alone were not sufficient to cover his
obligations.
If MMPCI was aware of the arrangement, it would have refused the latter’s
check payments for being insufficient.  It would not have applied to his account the
P1,800.00 checks.  Moreover, the fact that Baluyot had to practically explain to
MMPCI’s Sales Manager the details of her “arrangement” with Atty. Linsangan and
admit to having made an error in entering such arrangement confirm that MMCPI
had no knowledge of the said agreement.  It was only when Baluyot filed her Answer
that she claimed that MMCPI was fully aware of the agreement.
Neither is there estoppel in the instant case.  The essential elements of
estoppel are (i) conduct of a party amounting to false representation or concealment
of material facts or at least calculated to convey the impression that the facts are
otherwise than, and inconsistent with, those which the party subsequently attempts
to assert; (ii) intent, or at least expectation, that this conduct shall be acted upon by,
or at least influence, the other party; and (iii) knowledge, actual or constructive, of
the real facts.[51]
While there is no more question as to the agency relationship between
Baluyot and MMPCI, there is no indication that MMPCI let the public, or specifically,
Atty. Linsangan to believe that Baluyot had the authority to alter the standard
contracts of the company. Neither is there any showing that prior to signing Contract
No. 28660, MMPCI had any knowledge of Baluyot’s commitment to Atty. Linsangan.  had in fact received several payments in accordance with the same contract. If the
One who claims the benefit of an estoppel on the ground that he has been misled by
the representations of another must not have been misled through his own want of
reasonable care and circumspection.[52] Even assuming that Atty. Linsangan was
misled by MMPCI’s actuations, he still cannot invoke the principle of estoppel, as he
was clearly negligent in his dealings with Baluyot, and could have easily determined,
had he only been cautious and prudent, whether said agent was clothed with the
authority to change the terms of the principal’s written contract. Estoppel must be
intentional and unequivocal, for when misapplied, it can easily become a most
convenient and effective means of injustice.[53] In view of the lack of sufficient proof
showing estoppel, we refuse to hold MMPCI liable on this score.
Likewise, this Court does not find favor in the Court of Appeals’ findings that
“the authority of defendant Baluyot may not have been expressly conferred upon
her; however, the same may have been derived impliedly by habit or custom which
may have been an accepted practice in their company in a long period of time.”   A
perusal of the records of the case fails to show any indication that there was such a
habit or custom in MMPCI that allows its agents to enter into agreements for lower
prices of its interment spaces, nor to assume a portion of the purchase price of the
interment spaces sold at such lower price.  No evidence was ever presented to this
effect.
As the Court sees it, there are two obligations in the instant case. One is the
Contract No. 28660 between MMPCI and by Atty. Linsangan for the purchase of an
interment space in the former’s cemetery.  The other is the agreement between
Baluyot and Atty. Linsangan for the former to shoulder the amount P1,455.00, or the
difference between P95,000.00, the original price, and P132,250.00, the actual
contract price.
To repeat, the acts of the agent beyond the scope of his authority do not bind
the principal unless the latter ratifies the same.  It also bears emphasis that when the
third person knows that the agent was acting beyond his power or authority, the
principal cannot be held liable for the acts of the agent.  If the said third person was
aware of such limits of authority, he is to blame and is not entitled to recover
damages from the agent, unless the latter undertook to secure the principal’s
ratification.[54]
This Court finds that Contract No. 28660 was validly entered into both by
MMPCI and Atty. Linsangan.  By affixing his signature in the contract, Atty.
Linsangan assented to the terms and conditions thereof.  When Atty. Linsangan
incurred delinquencies in payment, MMCPI merely enforced its rights under the said
contract by canceling the same.
Being aware of the limits of Baluyot’s authority, Atty. Linsangan cannot insist
on what he claims to be the terms of Contract No. 28660.  The agreement, insofar
as the P95,000.00 contract price is concerned, is void and cannot be enforced as
against MMPCI. Neither can he hold Baluyot liable for damages under the same
contract, since there is no evidence showing that Baluyot undertook to secure
MMPCI’s ratification.  At best, the “agreement” between Baluyot and Atty. Linsangan
bound only the two of them.  As far as MMPCI is concerned, it bound itself to sell its
interment space to Atty. Linsangan for P132,250.00 under Contract No. 28660, and
contract was cancelled due to arrearages, Atty. Linsangan’s recourse should only be
against Baluyot who personally undertook to pay the difference between the true
contract price of P132,250.00 and the original proposed price of P95,000.00. To
surmise that Baluyot was acting on behalf of MMPCI when she promised to shoulder
the said difference would be to conclude that MMPCI undertook to pay itself the
difference, a conclusion that is very illogical, if not antithetical to its business
interests.
However, this does not preclude Atty. Linsangan from instituting a separate
action to recover damages from Baluyot, not as an agent of MMPCI, but in view of
the latter’s breach of their separate agreement.  To review, Baluyot obligated herself
to pay P1,455.00 in addition to Atty. Linsangan’s P1,800.00 to complete the monthly
installment payment under the contract, which, by her own admission, she was
unable to do due to personal financial difficulties.  It is undisputed that Atty.
Linsangan issued the P1,800.00 as agreed upon, and were it not for Baluyot’s failure
to provide the balance, Contract No. 28660 would not have been cancelled.  Thus,
Atty. Linsangan has a cause of action against Baluyot, which he can pursue in
another case.
WHEREFORE, the instant petition is GRANTED.  The Decision of the Court
of Appeals dated 22 June 2001 and its Resolution dated 12 December 2001 in CA-
G.R. CV No. 49802, as well as the Decision in Civil Case No. 88-1253 of the
Regional Trial Court, Makati City Branch 57, are hereby REVERSED and SET
ASIDE. The Complaint in Civil Case No. 88-1253 is DISMISSED for lack of cause of
action. No pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
Country Bankers v. Keppel Cebu Shipyard
LEONARDO-DE CASTRO, J.:
 
This is a petition for review on certiorari[1] to reverse and set aside the
January 29, 2004 Decision[2] and October 28, 2004 Resolution[3] of the Court of
Appeals in CA-G.R. CV No. 58001, wherein the Court of Appeals affirmed with
modification the February 10, 1997 Decision[4] of the Regional Trial Court (RTC) of
Cebu City, Branch 7, in Civil Case No. CBB-13447.
          Hereunder are the undisputed facts as culled from the records of the case.
On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a
corporation engaged in the shipping industry, contracted the services of Keppel
Cebu Shipyard, formerly known as Cebu Shipyard and Engineering Works, Inc.
(Cebu Shipyard), for dry docking and ship repair works on its vessel, the M/V Pacific
Fortune.[5] 
 
On February 14, 1992, Cebu Shipyard issued Bill No. 26035 to
Unimarine in consideration for its services, which amounted to P4,486,052.00.[6]  CEBU SHIPYARD & ENG’G WORKS, INC         Conforme:
Negotiations between Cebu Shipyard and Unimarine led to the reduction of this
amount to P3,850,000.00.  The terms of this agreement were embodied in Cebu
Shipyard’s February 18, 1992 letter to the President/General Manager of Unimarine,
Paul Rodriguez, who signed his conformity to said letter, quoted in full below:
 
18 February 1992
Ref No.:   LL92/0383
 
UNIMARINE SHIPPING LINES, INC.
C/O Autographics, Inc.
Gorordo Avenue, Lahug, Cebu City
 
Attention:        Mr. Paul Rodriguez
                        President/General Manager
 
This is to confirm our agreement on the shiprepair bills
charged for the repair of MV Pacific Fortune, our invoice no.
26035.
The shiprepair bill (Bill No. 26035) is agreed at a negotiated
amount of P3,850,000.00 excluding VAT.
Unimarine Shipping Lines, Inc. (“Unimarine”) will pay the
above amount of [P3,850,000.00] in US Dollars to be fixed
at the prevailing USDollar to Philippine Peso exchange rate
at the time of payment.  The payment terms to be extended
to Unimarine is as follows:  the vessel specified in part A of the Schedule (“name of
Installments Amount Due Date
st
1 Installment P2,350,000.00 30 May 1992
2nd Installment P1,500,000.00 30 Jun 1992
 
Unimarine will deposit post-dated checks equivalent to the
above amounts in Philippine Peso and an additional check
amount of P385,000.00, representing 10% [Value Added
Tax] VAT on the above bill of P3,850,000.00.  In the event
that Unimarine fails to make full payment on the above due
dates in US Dollars, the post-dated checks will be deposited
by CSEW in payment of the amounts owned by Unimarine
and Unimarine agree that the 10% VAT (P385,000.00) shall
also become payable to CSEW.
Unimarine in consideration of the credit terms extended by
CSEW and the release of the vessel before full payment of
the above debt, agree to present CSEW surety bonds equal
to 120% of the value of the credit extended.  The total bond
amount shall be P4,620,000.00.
 
Yours faithfully,
 
 
       
(SGD)                                           (SGD)______                  
SEET KENG TAT                    PAUL RODRIGUEZ
Treasurer/VP-Admin.          Unimarine Shipping Lines, Inc.
 
 
In compliance with the agreement, Unimarine, through Paul Rodriguez,
secured from Country Bankers Insurance Corp. (CBIC), through the latter’s agent,
Bethoven Quinain (Quinain), CBIC Surety Bond No. G (16) 29419[8] (the surety
bond) on January 15, 1992 in the amount of P3,000,000.00.  The expiration of this
surety bond was extended to January 15, 1993, through Endorsement No. 33152[9]
(the endorsement), which was later on attached to and formed part of the surety
bond.  In addition to this, Unimarine, on February 19, 1992, obtained another bond
from Plaridel Surety and Insurance Co. (Plaridel), PSIC Bond No. G (16)-00365[10]
in the amount of P1,620,000.00. 
 
On February 17, 1992, Unimarine executed a Contract of Undertaking in
favor of Cebu Shipyard.  The pertinent portions of the contract read as follows:
 
Messrs, Uni-Marine Shipping Lines, Inc. (“the Debtor”) of
Gorordo Avenue, Cebu City hereby acknowledges that in
consideration of Cebu Shipyard & Engineering Works,
Inc. (“Cebu Shipyard”) at our request agreeing to release
vessel”) prior to the receipt of the sum specified in part B of
the Schedule (“Moneys Payable”) payable in respect of
certain works performed or to be performed by Cebu
Shipyard and/or its subcontractors and/or material and
equipment supplied or to be supplied by Cebu Shipyard
and/or its subcontractors in connection with the vessel for
the party specified in part C of the Schedule (“the Debtor”),
we hereby unconditionally, irrevocably undertake to make
punctual payment  to Cebu Shipyard of the Moneys Payable
on the terms and conditions as set out in part B of the
Schedule.  We likewise hereby expressly waive whatever
 right of excussion we may have under the law and equity.
 
This contract shall be binding upon Uni-Marine Shipping
Lines, Inc., its heirs, executors, administrators, successors,
and assigns and shall not be discharged until all obligation
of this contract shall have been faithfully and fully performed
by the Debtor.[11]
 
          Because Unimarine failed to remit the first installment when it became due on
May 30, 1992, Cebu Shipyard was constrained to deposit the peso check
corresponding to the initial installment of P2,350,000.00.  The check, however, was
dishonored by the bank due to insufficient funds.[12]  Cebu Shipyard faxed a
message to Unimarine, informing it of the situation, and reminding it to settle its
account immediately.[13]
         
On June 24, 1992, Cebu Shipyard again faxed a message[14] to
Unimarine, to confirm Paul Rodriguez’s promise that Unimarine will pay in full the
P3,850,000.00, in US Dollars on July 1, 1992.
 
Since Unimarine failed to deliver on the above promise, Cebu Shipyard,
on July 2, 1992, through a faxed letter, asked Unimarine if the payment could be
picked up the next day.  This was followed by another faxed message on July 6,
1992, wherein Cebu Shipyard reminded Unimarine of its promise to pay in full on
July 28, 1992.  On August 24, 1992, Cebu Shipyard again faxed[15] Unimarine, to
inform it that interest charges will have to be imposed on their outstanding debt, and
if it still fails to pay before August 28, 1992, Cebu Shipyard will have to enforce
payment against the sureties and take legal action.
 
On November 18, 1992, Cebu Shipyard, through its counsel, sent
Unimarine a letter,[16] demanding payment, within seven days from receipt of the
letter, the amount of P4,859,458.00, broken down as follows:
 
B#26035   MV PACIFIC FORTUNE                                
4,486,052.00
LESS: ADJUSTMENT:
CN#00515-03/19/92                                                  (636,05
2.00)
3,850,000.00
Add:
VAT on repair bill no. 26035                       385,000.00
4,235,000.00
Add: Interest/penalty charges:
      Debit Note No. 02381                            189,888.00
Debit Note No. 02382                            434,570.00
                                                                                   4,859,458.00
 
 
          Due to Unimarine’s failure to heed Cebu Shipyard’s repeated demands, Cebu
Shipyard, through counsel, wrote the sureties CBIC[18] on November 18, 1992, and
Plaridel,[19] on November 19, 1992, to inform them of Unimarine’s nonpayment, and
to ask them to fulfill their obligations as sureties, and to respond within seven days
from receipt of the demand.
 
          However, even the sureties failed to discharge their obligations, and so Cebu
Shipyard filed a Complaint dated January 8, 1993, before the RTC, Branch 18 of
Cebu City, against Unimarine, CBIC, and Plaridel.  This was docketed as Civil Case
No. CBB-13447.   
          CBIC, in its Answer,[20] said that Cebu Shipyard’s complaint states no cause
of action.  CBIC alleged that the surety bond was issued by its agent, Quinain, in
excess of his authority.  CBIC claimed that Cebu Shipyard should have doubted the
authority of Quinain to issue the surety bond based on the following:
 
1.     The nature of the bond undertaking (guarantee payment), and the
amount involved.
2.     The surety bond could only be issued in favor of the Department of
Public Works and Highways, as stamped on the upper right
portion of the face of the bond.[21]  This stamp was covered by
documentary stamps.
3.     The issuance of the surety bond was not reported, and the
corresponding premiums were not remitted to CBIC.[22]
 
CBIC added that its liability was extinguished when, without its
knowledge and consent, Cebu Shipyard and Unimarine novated their agreement
several times.  Furthermore, CBIC stated that Cebu Shipyard’s claim had already
been paid or extinguished when Unimarine executed an Assignment of Claims[23] of
the proceeds of the sale of its vessel M/V Headline in favor of Cebu Shipyard.  CBIC
also averred that Cebu Shipyard’s claim had already prescribed as the endorsement
that extended the surety bond’s expiry date, was not reported to CBIC.  Finally,
CBIC asseverated that if it were held to be liable, its liability should be limited to the
face value of the bond and not for exemplary damages, attorney’s fees, and costs of
litigation.[24] 
 
Subsequently, CBIC filed a Motion to Admit Cross and Third Party
Complaint[25] against Unimarine, as cross defendant; Paul Rodriguez, Albert
Hontanosas, and Peter Rodriguez, as signatories to the Indemnity Agreement they
executed in favor of CBIC; and Bethoven Quinain, as the agent who issued the
surety bond and endorsement in excess of his authority, as third party defendants.
[26]
 
CBIC claimed that Paul Rodriguez, Albert Hontanosas, and Peter
Rodriguez executed an Indemnity Agreement, wherein they bound themselves,
jointly and severally, to indemnify CBIC for any amount it may sustain or incur in
connection with the issuance of the surety bond and the endorsement.[27]  As for
Quinain, CBIC alleged that he exceeded his authority as stated in the Special Power
of Attorney, wherein he was authorized to solicit business and issue surety bonds
not exceeding P500,000.00 but only in favor of the Department of Public Works and
Highways, National Power Corporation, and other government agencies.[28]
 
 On August 23, 1993, third party defendant Hontanosas filed his Answer
with Counterclaim, to the Cross and Third Party Complaint.  Hontanosas claimed
that he had no financial interest in Unimarine and was neither a stockholder, director
nor an officer of Unimarine.  He asseverated that his relationship to Unimarine was
limited to his capacity as a lawyer, being its retained counsel.  He further denied
having any participation in the Indemnity Agreement executed in favor of CBIC, and
alleged that his signature therein was forged, as he neither signed it nor appeared
before the Notary Public who acknowledged such undertaking.[29]
 
Various witnesses were presented by the parties during the course of
the trial of the case.  Myrna Obrinaga testified for Cebu Shipyard.  She was the Chief
Accountant in charge of the custody of the documents of the company.  She
corroborated Cebu Shipyard’s allegations and produced in court the documents to
support Cebu Shipyard’s claim.  She also testified that while it was true that the
proceeds of the sale of Unimarine’s vessel, M/V Headline, were assigned to Cebu
Shipyard, nothing was turned over to them.[30]
 
Paul Rodriguez admitted that Unimarine failed to pay Cebu Shipyard for
the repairs it did on M/V Pacific Fortune, despite the extensions granted to
Unimarine.  He claimed that he signed the Indemnity Agreement because he trusted
Quinain that it was a mere pre-requisite for the issuance of the surety bond.  He
added that he did not bother to read the documents and he was not aware of the
consequences of signing an Indemnity Agreement.  Paul Rodriguez also alleged to
not having noticed the limitation “Valid only in favor of DPWH” stamped on the surety
bond.[31]  However, Paul Rodriguez did not contradict the fact that Unimarine failed
to pay Cebu Shipyard its obligation.[32]
 
CBIC presented Dakila Rianzares, the Senior Manager of its Bonding
Department.  Her duties included the evaluation and approval of all applications for
and reviews of bonds issued by their agents, as authorized under the Special Power
of Attorney and General Agency Contract of CBIC.  Rianzares testified that she only
learned of the existence of CBIC Surety Bond No. G (16) 29419 when she received
the summons for this case.  Upon investigation, she found out that the surety bond
was not reported to CBIC by Quinain, the issuing agent, in violation of their General
Agency Contract, which provides that all bonds issued by the agent be reported to
CBIC’s office within one week from the date of issuance.  She further stated that the
surety bond issued in favor of Unimarine was issued beyond Quinain’s authority. 
Rianzares added that she was not aware that an endorsement pertaining to the
surety bond was also issued by Quinain.[33]
 
After the trial, the RTC was faced with the lone issue of whether or not
CBIC was liable to Cebu Shipyard based on Surety Bond No. G (16) 29419.[34]
On February 10, 1997, the RTC rendered its Decision, the fallo of which
reads:
 
            WHEREFORE, judgment is hereby rendered in favor
of the plaintiff Cebu Shipyard & Engineering Works,
Incorporated and against the defendants:
1.      Ordering the defendants Unimarine
Shipping Lines, Incorporated, Country Bankers Insurance
Corporation and Plaridel Surety and Insurance Corporation
to pay plaintiff jointly and severally the amount of
P4,620,000.00 equivalent to the value of the surety bonds;
 
2.      Ordering further defendant Unimarine to
pay plaintiff the amount of P259,458.00 to complete its
entire obligation of P4,859,458.00;
 
3.      To pay plaintiff jointly and severally the
amount of P100,000.00 in attorney’s fees and litigation
expenses;
 
4.      For Cross defendant Unimarine Shipping
Lines, Incorporated and Third party defendants Paul
Rodriguez, Peter Rodriguez and Alber[t] Hontanosas: To
indemnify jointly and severally, cross plaintiff and third party
plaintiff Country Bankers Insurance Corporation whatever
amount the latter is made to pay to plaintiff.[35]
 
 
The RTC held that CBIC, “in its capacity as surety is bound with its
principal jointly and severally to the extent of the surety bond it issued in favor of
[Cebu Shipyard]” because “although the contract of surety is in essence secondary
only to a valid principal obligation, his liability to [the] creditor is said to be direct,
primary[,] and absolute, in other words, he is bound by the principal.”[36]  The RTC
added:
 
Solidary obligations on the part of Unimarine
and CBIC having been established and expressly stated in
the Surety Bond No. 29419 (Exh. “C”), [Cebu Shipyard],
therefore, is entitled to collect and enforce said obligation
against any and or both of them, and if and when CBIC
pays, it can compel its co-defendant Unimarine to reimburse
to it the amount it has paid.[37]
 
 
The RTC found CBIC’s contention that Quinain acted in excess of his
authority in issuing the surety bond untenable.  The RTC held that CBIC is bound by
the surety bond issued by its agent who acted within the apparent scope of his
authority.  The RTC said:
[A]s far as third persons are concerned, an act is deemed to
have been performed within the scope of the agent’s
authority, if such act is within the terms of the powers of
attorney as written, even if the agent has in fact exceeded
the limits of his authority according to an understanding
between the principal and the agent.[38]
  
All the defendants appealed this Decision to the Court of Appeals. 
 
Unimarine, Paul Rodriguez, Peter Rodriguez, and Albert Hontanosas
argued that Unimarine’s obligation under Bill No. 26035 had been extinguished by
novation, as Cebu Shipyard had agreed to accept the proceeds of the sale of the
M/V Headline as payment for the ship repair works it did on M/V Pacific Fortune.  Indemnity Agreement executed between them and Cross
Paul Rodriguez and Peter Rodriguez added that such novation also freed them from
their liability under the Indemnity Agreement they signed in favor of CBIC.  Albert
Hontanosas in turn reiterated that he did not sign the Indemnity Agreement.[39]
[SC1]  entitled to the award of P100,000.00 in attorney’s fees and
 
CBIC, in its Appellant’s Brief,[40] claimed that the RTC erred in
enforcing its liability on the surety bond as it was issued in excess of Quinain’s
authority.  Moreover, CBIC averred, its liability under such surety had been
extinguished by reasons of novation, payment, and prescription.  CBIC also
questioned the RTC’s order, holding it jointly and severally liable with Unimarine and
Plaridel for the amount of P4,620,000.00, a sum larger than the face value of CBIC
Surety Bond No. G (16) 29419, and why the RTC did not hold Quinain liable to
indemnify CBIC for whatever amount it was ordered to pay Cebu Shipyard.
 
On January 29, 2004, the Court of Appeals promulgated its decision,
with the following dispositive portion:
            WHEREFORE, in view of the foregoing, the
respective appeal[s] filed by Defendants-Appellants
Unimarine Shipping Lines, Inc. and Country Bankers
Insurance Corporation; Cross-Defendant-Appellant
Unimarine Shipping Lines, Inc. and; Third-Party Defendants-
Appellants Paul Rodriguez, Peter Rodriguez and Albert
Hontanosas are hereby DENIED.  The decision of the RTC
in Civil Case No. CEB-13447 dated February 10, 1997 is
AFFIRMED with modification that Mr. Bethoven Quinain,
CBIC’s agent is hereby held jointly and severally liable with
CBIC by virtue of Surety Bond No. 29419 executed in favor
of plaintiff-appellee CSEW.[41]
 
 
          In its decision, the Court of Appeals resolved the following issues, as it had
summarized from the parties’ pleadings:
 
I.             Whether or not UNIMARINE is liable to [Cebu
Shipyard] for a sum of money arising from the ship-repair
contract;
 
II.          Whether or not the obligation of UNIMARINE  to
[Cebu Shipyard] has been extinguished by novation;
 
III.       Whether or not Defendant-Appellant CBIC, allegedly
being the Surety of UNIMARINE is liable under Surety Bond
No. 29419[;]
 
IV.       Whether or not Cross Defendant-Appellant
UNIMARINE and Third-Party Defendants-Appellants Paul
Rodriguez, Peter Rodriguez, Albert Hontanosas and Third-
Party Defendant Bethoven Quinain are liable by virtue of the
and Third Party Plaintiff CBIC;
 
V.          Whether or not Plaintiff-Appellee [Cebu Shipyard] is
litigation expenses.[42]
 
 
The Court of Appeals held that it was duly proven that Unimarine was
liable to Cebu Shipyard for the ship repair works it did on the former’s M/V Pacific
Fortune.  The Court of Appeals dismissed CBIC’s contention of novation for lack of
merit.[43]  CBIC was held liable under the surety bond as there was no novation on
the agreement between Unimarine and Cebu Shipyard that would discharge CBIC
from its obligation.  The Court of Appeals also did not allow CBIC to disclaim liability
on the ground that Quinain exceeded his authority because third persons had relied
upon Quinain’s representation, as CBIC’s agent.[44]  Quinain was, however, held
solidarily liable with CBIC under Article 1911 of the Civil Code.[45]
Anent the liability of the signatories to the Indemnity Agreement, the
Court of Appeals held Paul Rodriguez, Peter Rodriguez, and Albert Hontanosas
jointly and severally liable thereunder.  The Court of Appeals rejected Hontanosas’s
claim that his signature in the Indemnity Agreement was forged, as he was not able
to prove it.[46]
 
          The Court of Appeals affirmed the award of attorney’s fees and litigation
expenses to Cebu Shipyard since it was able to clearly establish the defendants’
liability, which they tried to dodge by setting up defenses to release themselves from
their obligation.[47]
 
          CBIC[48]and Unimarine, together with third party defendants-appellants[49]
filed their respective Motions for Reconsideration.  This was, however, denied by the
Court of Appeals in its October 28, 2004 Resolution for lack of merit.
 
          Unimarine elevated its case to this Court via a petition for review on certiorari,
docketed as G.R. No. 166023, which was denied in a Resolution dated January 19,
2005.[50]
 
The lone petitioner in this case, CBIC, is now before this Court, seeking
the reversal of the Court of Appeals’ decision and resolution on the following
grounds:
 
A.
 
THE HONORABLE COURT OF APPEALS SERIOUSLY
 ERRED IN APPLYING THE PROVISIONS OF ARTICLE
1911 OF THE CIVIL CODE TO HOLD PETITIONER
LIABLE FOR THE ACTS DONE BY ITS AGENT IN
EXCESS OF AUTHORITY.
B.
THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN HOLDING THAT AN EXTENSION OF THE
PERIOD FOR THE PERFORMANCE OF AN OBLIGATION
GRANTED BY THE CREDITOR TO THE PRINCIPAL
DEBTOR IS NOT SUFFICIENT TO RELEASE THE
SURETY.
C.  to perform due diligence investigations.”[55]
ASSUMING THAT PETITIONER IS LIABLE UNDER THE
BOND, THE HONORABLE COURT OF APPEALS
NONETHELESS SERIOUSLY ERRED IN AFFIRMING THE
SOLIDARY LIABILITY OF PETITIONER BEYOND THE
VALUE OF THE BOND.
D. 
THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING PETITIONER JOINTLY AND SEVERALLY
LIABLE FOR ATTORNEY’S FEES IN THE AMOUNT OF
P100,000.00.[51]
 
 
Issue
 
The crux of the controversy lies in CBIC’s liability on the surety bond
Quinain issued to Unimarine, in favor of Cebu Shipyard.
 
          CBIC avers that the Court of Appeals erred in interpreting and applying the
rules governing the contract of agency.  It argued that the Special Power of Attorney
granted to Quinain clearly set forth the extent and limits of his authority with regard
to businesses he can transact for and in behalf of CBIC.  CBIC added that it was
incumbent upon Cebu Shipyard to inquire and look into the power of authority
conferred to Quinain.  CBIC said:
 
The authority to bind a principal as a guarantor or surety is
one of those powers which requires a Special Power of
Attorney pursuant to Article 1878 of the Civil Code.  Such
power could not be simply assumed or inferred from the
mere existence of an agency.  A person who enters into a
contract of suretyship with an agent without confirming the
extent of the latter’s authority does so at his peril. x x x.[52]
 
CBIC claims that the foregoing is true even if Quinain was granted the
authority to transact in the business of insurance in general, as “the authority to
bind the principal in a contract of suretyship could nonetheless never be
presumed.”[53]  Thus, CBIC claims, that:
 
[T]hird persons seeking to hold the principal liable for
transactions entered into by an agent should establish the
following, in case the same is controverted:
 
            6.6.1.  The fact or existence of the agency.
            6.6.2.  The nature and extent of authority.[54]
 
 
To go a little further, CBIC said that the correct Civil Code provision to
apply in this case is Article 1898.  CBIC asserts that “Cebu Shipyard was charged
with knowledge of the extent of the authority conferred on Mr. Quinain by its failure
         
Cebu Shipyard, in its Comment[56] first assailed the propriety of the
petition for raising factual issues.  In support, Cebu Shipyard claimed that the Court
of Appeals’ application of Article 1911 of the Civil Code was founded on findings of
facts that CBIC now disputes.  Thus, the question is not purely of law.
         
Discussion
 
          The fact that Quinain was an agent of CBIC was never put in issue.  What has
always been debated by the parties is the extent of authority or, at the very least,
apparent authority, extended to Quinain by CBIC to transact insurance business for
and in its behalf.
 
In a contract of agency, a person, the agent, binds himself to represent
another, the principal, with the latter’s consent or authority.[57]  Thus, agency is
based on representation, where the agent acts for and in behalf of the principal on
matters within the scope of the authority conferred upon him.[58]  Such “acts have
the same legal effect as if they were personally done by the principal.  By this legal
fiction of representation, the actual or legal absence of the principal is converted into
his legal or juridical presence.”[59] 
 
The RTC applied Articles 1900 and 1911 of the Civil Code in holding
CBIC liable for the surety bond.  It held that CBIC could not be allowed to disclaim
liability because Quinain’s actions were within the terms of the special power of
attorney given to him.[60]  The Court of Appeals agreed that CBIC could not be
permitted to abandon its obligation especially since third persons had relied on
Quinain’s representations.  It based its decision on Article 1911 of the Civil Code and
found CBIC to have been negligent and less than prudent in conducting its
insurance business for its failure to supervise and monitor the acts of its agents, to
regulate the distribution of its insurance forms, and to devise schemes to prevent
fraudulent misrepresentations of its agents.[61]  
This Court does not agree.  Pertinent to this case are the following
provisions of the Civil Code:
 
Art. 1898. If the agent contracts in the name of
the principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the
 party with whom the agent contracted is aware of the limits wit:
of the powers granted by the principal.  In this case,  
however, the agent is liable if he undertook to secure the SPECIAL POWER OF ATTORNEY
principal’s ratification.  
  KNOW ALL MEN BY THESE PRESENTS:
Art. 1900.  So far as third persons are  
concerned, an act is deemed to have been performed within             That, COUNTRY BANKERS INSURANCE
the scope of the agent’s authority, if such act is within the CORPORATION, a corporation duly organized and existing
terms of the power of attorney, as written, even if the agent under and by virtue of the laws of the Philippines, with head
has in fact exceeded the limits of his authority according to offices at 8th Floor, G.F. Antonino Building, T.M. Kalaw
an understanding between the principal and the agent. Street, Ermita, Manila, now and hereinafter referred to as
  “the Company” hereby appoints BETHOVEN B. QUINAIN
Art. 1902.  A third person with whom the agent with address at x x x to be its General Agent and Attorney-
wishes to contract on behalf of the principal may require the in-Fact, for and in its place, name and stead, and for its own
presentation of the power of attorney, or the instructions as use and benefit, to do and perform the following acts and
regards the agency.  Private or secret orders and things:
instructions of the principal do not prejudice third persons  
who have relied upon the power of attorney or instructions 1.      To conduct, manage, carry on and
shown to them. transact insurance business as usually pertains to a General
  Agency of Fire, Personal Accident, Bond, Marine, Motor Car
Art. 1910.  The principal must comply with all (Except Lancer).
the obligations which the agent may have contracted within  
the scope of his authority. 2.      To accept, underwrite and subscribe
  policies of insurance for and in behalf of the Company under
As for any obligation wherein the agent has the terms and conditions specified in the General Agency
exceeded his power, the principal is not bound except when Contract executed and entered into by and between it and
he ratifies it expressly or tacitly. its said Attorney-in-Fact subject to the following Schedule of
  Limits:
Art. 1911.  Even when the agent has exceeded  
his authority, the principal is solidarily liable with the agent if  
the former allowed the latter to act as though he had full -          SCHEDULE OF LIMITS    -
powers.  
  a.       FIRE: 
  xxxx
Our law mandates an agent to act within the scope of his authority.[62]  b.      PERSONAL ACCIDENT:
The scope of an agent’s authority is what appears in the written terms of the power x x x x 
of attorney granted upon him.[63]  Under Article 1878(11) of the Civil Code, a c.       MOTOR CAR: 
special power of attorney is necessary to obligate the principal as a guarantor or x x x x 
surety. d.      MARINE:
  xxxx
In the case at bar, CBIC could be held liable even if Quinain exceeded e.       BONDS:
the scope of his authority only if Quinain’s act of issuing Surety Bond No. G (16) x x x x 
29419 is deemed to have been performed within the written terms of the power of Surety Bond   (in favor of Dept. of Pub. Works and
attorney he was granted.[64]                          Highways, Nat’l. Power Corp. &
  other….     500,000.00  
However, contrary to what the RTC held, the Special Power of Attorney                         Government agencies)
accorded to Quinain clearly states the limits of his authority and particularly provides  
that in case of surety bonds, it can only be issued in favor of the Department of  
Public Works and Highways, the National Power Corporation, and other government CBIC does not anchor its defense on a secret agreement, mutual
agencies; furthermore, the amount of the surety bond is limited to P500,000.00, to understanding, or any verbal instruction to Quinain.  CBIC’s stance is grounded on
its contract with Quinain, and the clear, written terms therein.  This Court finds that
the terms of the foregoing contract specifically provided for the extent and scope of
Quinain’s authority, and Quinain has indeed exceeded them.
 
Under Articles 1898 and 1910, an agent’s act, even if done beyond the
scope of his authority, may bind the principal if he ratifies them, whether expressly or
tacitly.  It must be stressed though that only the principal, and not the agent, can
ratify the unauthorized acts, which the principal must have knowledge of.[66]  This Court cannot agree with the Court of Appeals’ pronouncement of
Expounding on the concept and doctrine of ratification in agency, this Court said:
 
Ratification in agency is the adoption or
confirmation by one person of an act performed on his
behalf by another without authority.  The substance of the
doctrine is confirmation after conduct, amounting to a
substitute for a prior authority.  Ordinarily, the principal must
have full knowledge at the time of ratification of all the
material facts and circumstances relating to the
unauthorized act of the person who assumed to act as
agent.  Thus, if material facts were suppressed or
unknown, there can be no valid ratification and this
regardless of the purpose or lack thereof in concealing
such facts and regardless of the parties between whom
the question of ratification may arise.  Nevertheless, this
principle does not apply if the principal’s ignorance of the
material facts and circumstances was willful, or that the
principal chooses to act in ignorance of the facts.  However,
in the absence of circumstances putting a reasonably
prudent man on inquiry, ratification cannot be implied
as against the principal who is ignorant of the facts.[67]
(Emphases supplied.)
 
 
Neither Unimarine nor Cebu Shipyard was able to repudiate CBIC’s
testimony that it was unaware of the existence of Surety Bond No. G (16) 29419 and
Endorsement No. 33152.  There were no allegations either that CBIC should have
been put on alert with regard to Quinain’s business transactions done on its behalf.  it.  The basis for agency is representation and a person
It is clear, and undisputed therefore, that there can be no ratification in this case,
whether express or implied.
 
Article 1911, on the other hand, is based on the principle of estoppel,
which is necessary for the protection of third persons.  It states that the principal is
solidarily liable with the agent even when the latter has exceeded his authority, if the
principal allowed him to act as though he had full powers.  However, for an agency
by estoppel to exist, the following must be established:
1.     The principal manifested a representation of the agent’s authority
or knowingly allowed the agent to assume such authority;
2.     The third person, in good faith, relied upon such representation;
and
3.     Relying upon such representation, such third person has changed
his position to his detriment.[68]
 
In Litonjua, Jr. v. Eternit Corp.,[69] this Court said that “[a]n 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.”[70] 
 
negligence on CBIC’s part.  CBIC not only clearly stated the limits of its agents’
powers in their contracts, it even stamped its surety bonds with the restrictions, in
order to alert the concerned parties.  Moreover, its company procedures, such as
reporting requirements, show that it has designed a system to monitor the insurance
contracts issued by its agents.  CBIC cannot be faulted for Quinain’s deliberate
failure to notify it of his transactions with Unimarine.  In fact, CBIC did not even
receive the premiums paid by Unimarine to Quinain.
 
Furthermore, nowhere in the decisions of the lower courts was it stated
that CBIC let the public, or specifically Unimarine, believe that Quinain had the
authority to issue a surety bond in favor of companies other than the Department of
Public Works and Highways, the National Power Corporation, and other government
agencies.  Neither was it shown that CBIC knew of the existence of the surety bond
before the endorsement extending the life of the bond, was issued to Unimarine. 
For one to successfully claim the benefit of estoppel on the ground that he has been
misled by the representations of another, he must show that he was not misled
through his own want of reasonable care and circumspection.[71]
 
It is apparent that Unimarine had been negligent or less than prudent in
its dealings with Quinain.  In Manila Memorial Park Cemetery, Inc. v. Linsangan,[72]
this Court held:
 
It is a settled rule that persons dealing with an
agent are bound at their peril, if they would hold the principal
liable, to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish
dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent.  If he does not
make such an inquiry, he is chargeable with knowledge of
the agent’s authority and his ignorance of that authority will
not be any excuse.
 
 
In the same case, this Court added:
[T]he ignorance of a person dealing with an agent as to the
scope of the latter’s authority is no excuse to such person
and the fault cannot be thrown upon the principal.  A person
dealing with an agent assumes the risk of lack of authority in
the agent.  He cannot charge the principal by relying upon
 the agent’s assumption of authority that proves to be
unfounded.  The principal, on the other hand, may act on the
presumption that third persons dealing with his agent will not
be negligent in failing to ascertain the extent of his authority
as well as the existence of his agency.[73]
 
 
Unimarine undoubtedly failed to establish that it even bothered to inquire
if Quinain was authorized to agree to terms beyond the limits indicated in his special
power of attorney.  While Paul Rodriguez stated that he has done business with
Quinain more than once, he was not able to show that he was misled by CBIC as to
the extent of authority it granted Quinain.  Paul Rodriguez did not even allege that he
asked for documents to prove Quinain’s authority to contract business for CBIC,
such as their contract of agency and power of attorney.  It is also worthy to note that
even with the Indemnity Agreement, Paul Rodriguez signed it on Quinain’s mere
assurance and without truly understanding the consequences of the terms of the
said agreement.  Moreover, both Unimarine and Paul Rodriguez could have inquired
directly from CBIC to verify the validity and effectivity of the surety bond and
endorsement; but, instead, they blindly relied on the representations of Quinain.  As
this Court held in Litonjua, Jr. v. Eternit Corp.[74]:
 
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.  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.  In this case, the petitioners
failed to discharge their burden; hence, petitioners are not
entitled to damages from respondent EC.[75]
 
 
          In light of the foregoing, this Court is constrained to release CBIC from its
liability on Surety Bond No. G (16) 29419 and Endorsement No. 33152.  This Court
sees no need to dwell on the other grounds propounded by CBIC in support of its
prayer.
 
          WHEREFORE, this petition is hereby GRANTED and the complaint against
CBIC is DISMISSED for lack of merit.  The January 29, 2004 Decision and October
28, 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 58001 is MODIFIED
insofar as it affirmed CBIC’s liability on Surety Bond No. G (16) 29419 and
Endorsement No. 33152. 
  G.R. No. L-27832 May 28, 1970
SO ORDERED.
TESTATE ESTATE OF AMADEO MATUTE OLAVE, Deceased, CARLOS V.
MATUTE, general administrator-appellant, MATIAS S. MATUTE, co-administrative-
appellant, PATERNO R. CANLAS, appellant, vs.JOSE S. MATUTE,
ANUNCIACION CANDELARIO, ELENA MATUTE Y CANDELARIO and AMADEO
MATUTE Y CANDELARIO, JR., appellees.
Paterno R. Canlas in his own behalf and for all other appellants.
Antonio Enrile Inton, Jose W. Diokno and Ledesma & Associates for appellees.
REYES, J.B.L., J.:
Perfected prior to the effectivity of Republic Act No. 5440, this appeal by Carlos V.
Matute and Matias V. Matute, co-administrators of the Testate Estate of the late
Amadeo Matute Olave (Special Proceedings No. 25876 of the Court of First Instance
of Manila), and by their attorney-at-law, Paterno Canlas, was interposed to seek
reversal, on points of law, of the probate court's order of 22 April 1967 requiring
these appellants to surrender seventeen (17) titles to diverse properties of the estate
to the assistant clerk of court for safekeeping.
The incident originated in a motion filed by respondents Jose S. Matute, Anunciacion
Candelario, and Elena and Amadeo, both surnamed Matute y Candelario, praying
that the former administrator, Matias S. Matute, be ordered to surrender 17 titles to
various properties of the Estate to the assistant clerk of court, from whom said
Matias had received them on 28 September 1966. The motion was vigorously
resisted by the co-administrators Matias and Carlos Matute and several other heirs
(through counsel Paterno Canlas), who pleaded that the removal of Matias as
administrator and his replacement by Jose S. Matute were still under appeal; that
the titles aforesaid had been delivered to both Matias and Carlos Matute; that the
latter "is at present and from time to time in possession of the said seventeen (17)
titles", and "the co-administrator Matias S. Matute is no longer in possession of said
titles" (Record on Appeal, page 6); that Attorney Paterno Canlas had a pending
claim for P261,000.00, on account of legal services rendered to the estate for the
study, preparation, drafting, due execution and probate of the 1952 testament of the
deceased; that the claim was later compromised for P2,000,000.00; that —
the undersigned who is from time to time also in possession of the seventeen (17)
titles belonging to the Estate in his capacity as counsel for the Estate is also
retaining said titles in the exercise of his retention lien for services rendered to the
estate (not to the Administrators) ...; (Record on Appeal, pages 7-8)
and invoked Rule 138, Section 37, of the Rules of Court.
As aforesaid, the probate court granted the motion to surrender the documents to
the clerk of court for safekeeping, "in order to prevent any possible controversy
regarding any transaction involving the remaining properties of the estate" (Record
on Appeal, page 18).
Reconsideration of the order was sought and denied 29 May 1967, the Court
ordering Attorney Paterno S. Canlas to surrender said documents "immediately ...
upon receipt hereof."
Wherefore, the oppositors duly perfected the present appeal, insisting that it was
error for the court below to have granted the motion to surrender the titles in
question in view of Rule 138, Section 37, of the Rules of Court, specifically
prescribing that —
SEC. 37. Attorneys' liens. — An attorney shall have a lien upon the funds,
documents and papers of his client which have lawfully come into his possession
and may retain the same until his lawful fees and disbursements have been paid,
and may apply such funds to the satisfaction thereof. ...
The explicit terms of this section afford no alternative but to uphold the claim of
appellant Paterno Canlas with respect to the seventeen documents in his
possession. His right, as counsel for the deceased and his estate, "to retain the
same until his lawful fees and disbursements have been paid "is incontestable, and
under the rule and section aforesaid, the attorney can not be compelled to surrender
the muniments of title mentioned without prior proof that his fees have been duly
satisfied. 1 The courts, in the exercise of their supervisory authority over attorneys as
officers of the court, are bound to respect and protect the attorney's lien as a
necessary means to preserve the decorum and respectability of the profession. 2
But if it be entirely indispensable for the court to gain possession of the documents
that have come to the attorney and are held by him in the course of his employment
as counsel, it can require surrender thereof by requiring the client or claimant to first
file proper and adequate security for the lawyers' compensation (Rustia vs. Abeto 72
Phil. 139).
We are aware of the inconvenience that may accrue to the client because of the
retention of important papers by an attorney claiming fees for services rendered, but
this is the reason and essence of the lien. Withal, the courts may require the
attorney to deliver up the papers in his possession which may serve to embarrass
his client, provided the client files proper security for the attorney's compensation.
This proceeds from the power of the courts to control its own officers and to compel
attorneys to act equitably and fairly towards their clients. (Chitton v. Pardon, Turner
& Russel's Reports, 301; Richards v. Platel Craig & Philipps Report, 79; Matter of
Jewitt, 34 Beav. 22; Matter of Galland, 31 Chancery Division, 296; Robinson v.
Rogers, 237 N. Y. 467, 472- 473.)
In so far as the court below required surrender of the documents here in question
without first providing for satisfaction of his fees or, at least, proper security for their
payment, the appealed order is plainly in error.
Whatever doubt may have arisen on account of the lawyer's ambiguous expression
that he "is from time to time also in possession of the seventeen (17) titles belonging
to the Estate" (Record on Appeal, page 7) is set at rest by the finding of the probate
court, in its order of 29 May 1967, that Attorney Paterno Canlas "has admitted the
fact that he is in possession of the 17 titles of the properties of the estate" (Record
on Appeal, page 30). In the light of this order, it is patent that the stated possession
"from time to time" of the documents in question should be construed to mean that
the attorney came into possession thereof at different times, a circumstance that
does not impair his right of retention until payment.

Our ruling in Inton vs. Matute, L-21283, 31 August 1966, 17 SCRA 1010, is not in
conflict with the present decision. In that case, the retention of documents belonging
to the estate was denied because the counsel had served not the estate but the
administrator in his individual capacity.

IN VIEW OF THE FOREGOING, the orders of the probate court dated 22 April 1967
and 29 May 1967, in so far as denying appellant Attorney Paterno Canlas' right to
retain the seventeen (17) documents in his hands, as counsel for the estate, and
requiring him to surrender the same without his claim for fees being first satisfied,
are hereby reversed and set aside. Costs against appellees.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Barredo and

Villamor, JJ., concur.

Castro, J., took no part.

G.R. No. L-27394 July 31, 1970

ARMANDO V. AMPIL, petitioner, vs.THE HONORABLE JUDGE CORAZON

JULIANO-AGRAVA, ANTONIO M. PEREZ and BENIGNO PEREZ Y TUASON,
respondents.
Antonio P. Coronel for petitioner.
Alfonso Felix, Jr. for respondent Antonio M. Perez.
Leonardo Abolo for respondent, Benigno Perez y Tuason.
 
TEEHANKEE, J.:
An original action of certiorari to annul the lower court's questioned order requiring
petitioner to surrender three certificates of title, notwithstanding his assertion of his
right of an attorney's retaining lien over them.
Petitioner, for a considerable period of time, was the counsel for Angela Tuason de
Perez in several cases, The principal cases so handled successfully by petitioner for
Angela were the following:
Civil Case No. 34626 of the Court of First Instance of Manila filed against Angela by
herein respondents Antonio M. Perez and Benigno Perez y Tuason, her husband
and son, respectively, asking principally that Angela be placed under guardianship
because of her alleged prodigality and that a suitable person be appointed to
administer her properties. On May 2, 1958, the parties submitted to the said court a
compromise agreement, of the same date, which shortly afterwards was denounced
by Angela. On September 30, 1958, without passing on the validity of the
compromise agreement, the said court dismissed the action for lack of jurisdiction. 1
Case G.R. No. L-14874 was the appeal to the Supreme Court taken by respondents
Perezes from the court of first instance's dismissal of their action. This Court in its
decision handed down on September 30, 1960, affirmed the dismissal holding that
jurisdiction properly pertained to the Juvenile and Domestic Relations Court of
Manila.
Special Proceedings No. 03123 of the domestic court of Manila was then filed on
November 10, 1960 by respondents Perezes, whose objective was limited to
seeking the said court's approval of the above compromise agreement submitted on
May 2, 1958 to the Manila court of first instance. Upon motion on behalf of Angela,
the domestic relations court dismissed the proceeding on the ground of lack of
jurisdiction over the subject matter, holding that "(T)he compromise agreement
herein sought to be approved was allegedly entered into during the pendency of Civil
Case No. 34626 of the Court of First Instance of Manila presumably to settle it
amicably. But the said case was dismiss by that Court for lack of jurisdiction, and as
its decision was affirmed by the Supreme Court, there was no more case to be
settled by compromise because the three causes of action involved therein had not
been refiled in this Court." 2
G.R. No. L-19711, the appeal to the Supreme Court taken in turn by respondents
Perezes from the domestic court's dismissal of their second action.
Petitioner asserts and it is not disputed, that sometime in November, 1966, Angela,
acting through a new attorney-in-fact in the person of her daughter, Angela Perez y
Tuason de Stanley, terminated his services as counsel without just and lawful cause
and without paying him for his professional services, for which he presented his bill
in due course, as well as asserted his retaining lien over ,the three titles entrusted to
him by Angela in the course of his professional employment in his letter of February
16, 1967 to respondents' counsel. 3
After petitioner's discharge as counsel, developments ensued which gave rise to the
present action. In Case No. L-19711, the pending appeal from the domestic court's
order of dismissal of respondents Perezes' action, the very same compromise
agreement of May 2, 1958 was submitted anew to this Court which approved the
same in its Resolution of November 17, 1966 as follows:
In L-19711 (Antonio M. Perez, et al. vs. Angela Tuason de Perez), the appearance
of A. Pison Jr. as counsel for respondent-appellee in substitution of Attys. C. S.
Tanjuatco & Associates and Atty. Armando V. Ampil, is NOTED; and considering the
motion filed by respondent Angela Tuason de Perez by and through her daughter
and attorney-in-fact Angela Perez y Tuason de Staley and assisted by new counsel
for said respondent, manifesting (1) that said daughter is her duly authorized
attorney-in-fact; (2) that said respondent now confirms the compromise agreement
entered into by her husband and her son on May 2, 1958, copy of which is attached
to the motion as Annex 'B'; and (3) that said respondent affirms that this compromise
agreement was right and proper, THE COURT RESOLVED to approve said
compromise agreement. 4
In the said compromise agreement, 5 Angela inter alia, ceded in full ownership to her
son, respondent Benigno Perez, the Sampaloc, Manila property covered by T.C.T.
No. 34769 and to her husband, respondent Antonio M. Perez, seven other
properties 6 all situated in Sampaloc, Manila covered by seven separate titles,
among them, T.C.T. Nos. 24927 and 24928 — which three titles are the ones
involved herein. Angela likewise agreed to pay her husband the sum of P63,000.00
in full settlement of his claim for damages. In turn, respondents Perezes, (with
Antonio signing on behalf of his son Benigno as guardian ad litem renounced any
and all claims against Angela and acknowledged that "defendant (Angela) owns in
full ownership the interests and properties presently in her name in J. M. Tuason and
Co. and Gregorio Araneta, Inc., acknowledge that she is fully entitled to administer
and/or encumber and/or alienate the said interests and properties as well as such
other properties that she may acquire with the proceeds of the sale, exchange or
encumbrance of the same."
Thereafter, respondents Perezes having failed to obtain from petitioner the three
titles to the properties ceded to them as above stated in the compromise agreement,
as petitioner asserted his retaining lien over them, filed on February 22, 1967 with
respondent domestic court a so-called motion for partial execution disputing
petitioner's asserted lien of retention and asking the court to order petitioner to
surrender the three titles to them.
Overruling petitioner's opposition asking the court to respect his right to retain the
titles until the value of the professional services rendered by him to Angela shall
have been paid in full by the latter, respondent court ordered under date of March 8,
1967 petitioner to surrender the titles to respondents Perezes within five days from
notice, holding that "(A)s the Compromise Agreement has already been approved, it
is believed that the Court can have it enforced and, in connection therewith, can
compel Atty. Ampil to deliver the owners duplicates of T.C.T.'s Nos. 24927, 24928
and 34769 to the Perezes ... Any attorney's lien in favor Of Mr. Ampil, as attorney of
Tuason should be enforced against his client, and not against the Perezes." 7
Petitioner thereupon, sought the present recourse and the Court in a resolution of
April 13, 1967 issued a writ of preliminary injunction against the enforcement of
respondent court's questioned order. Petitioner urges that respondent court acted
with grave abuse of discretion in having granted the motion to surrender the titles in
his possession, notwithstanding the provisions of the first part of Rule 138, section
37 of the Rules of Court, expressly recognizing his right of retaining lien:
SEC. 37. Attorneys' liens. — An attorney shall have a lien upon the funds,
documents and papers of his client which have lawfully come into his possession
and may retain the same until his lawful fees and disbursements have been paid,
and may apply such funds to the satisfaction thereof. ...
Petitioner must prevail.
1. Full recognition of an attorney's retaining lien, present the elements of lawyer-
client relationship, lawful possession of the client's funds, documents and papers
and unsatisfied claim for attorney's fees, has invariably been extended by the Court
in view of the categorical term of the cited Rule. 8 In the latest case of Matute vs.
Matute, 9 the Court again emphasized, speaking through Mr. Justice J.B.L. Reyes,
that a counsel's right to retain muniments of title in his possession until payment of
his lawful fees and disbursements is effected "is incontestable, and under the rule
and section aforesaid, the attorney can not be compelled to surrender the
muniments of title mentioned without prior proof that his fees have been duly
satisfied. The courts, in the exercise of their supervisory authority over attorneys as
officers of the court, are bound to respect and protect the attorneys' lien as a
necessary means to preserve the decorum and respectability of the profession."
2. The Court cited therein the late Justice Laurel's opinion in Rustia vs. Abetolo, 1 0
with regard to the inconvenience that may accrue to the client, and to the client's
adversary for that matter as in the case at bar, because of the retaining lien thus
exercised by an attorney, that such inconvenience "is the reason and essence of the
lien." But as in Rustia, we pointed out that "if it be entirely indispensable for the court
to gain possession of the documents that have come to the attorney and are held by
him in the course of his employment as counsel, it can require the surrender thereof
by requiring the client or claimant to first file proper and adequate security for the
lawyers' compensation." 1 1 This alternative was in fact availed of by respondent
Antonio M. Perez, who, upon motion filed on August 10, 1967 alleging that "the
properties in question awarded to Antonio Perez have a market value of easily a
quarter of a million pesos and the property awarded to Benigno Perez easily has an
equal value secured from the Court its resolution of October 13, 1967 lifting the
preliminary injunction as to Titles Nos. 24927 and 24928 of Manila upon his filing
and the approval of bond in the sum of P25,000.00 answerable for whatever
damages may be suffered by petitioner.
3. It should be underscored that the retaining lien of an attorney is only a passive
right and cannot be actively enforced. It amounts to a mere right to retain the
documents and papers as against the client, until the attorney is fully paid, the
exception being that funds of the client in the attorney's possession may be applied
to the satisfaction of his fees. An attorney's retaining or possessory lien is
distinguished from his charging or special lien which is an attorney's specific lien for
compensation oil the fund or judgment which he has recovered by means of his
professional services for his client in a particular case and is provided in the second
part of Rule 138, section 37. 1 2 Such charging lien covers only the services
rendered by an attorney in the action in which the judgment was obtained and takes
effect under the cited rule after the attorney shall have caused statement of his claim
of such lien to be entered upon the records of the particular action with written notice
thereof to his client and to the adverse party. It presupposes that the attorney has
secured a favorable money judgment for his client and grants the attorney "the same
right and power over such judgments and executions as his client would have to
enforce his lien and secure the payment of his just fees and disbursements." On the
other hand, the attorney's retaininng lien is a general lien for the balance of the
account between the attorney and his client, and applies to the documents and
funds of the client which may come into the attorney's possession in the course of
his employment. 1 3 The attorney's retaining lien attaches to the client's documents
and funds in the attorney's possession regardless of the outcome, favorable or
adverse, of any cases he may have handled for his client. Called upon at all times to
exert utmost zeal with unstinted fidelity in upholding his client's cause and subject to
appropriate disciplinary action if he should fail to live up to such exacting standard,
the attorney in return is given the assurance through his liens — retaining and
charging — that collection of his lawful fees and disbursements is not rendered
difficult, if not altogether thwarted, by an unappreciative client. He is thereby given
an effective hold on his client to assure payment of his services in keeping with his
dignity as an officer of the Court.
4. The fact that the client Angela, in the compromise agreement, undertook to
transfer her properties covered by the titles in question to respondents Perezes
would not defeat petitioner's retaining lien over the same. Petitioner's position is
similar to that of a creditor who holds an attachment lien over the properties and the
client-debtor must discharge the lien before he can dispose the properties to a third
person free of such lien. In enforcing his retaining lien over the titles, petitioner was
enforcing the same against Angela as his former client who was admittedly the
owner of the properties and not against her adversaries to whom the client had
undertaken to transfer the same under the compromise agreement, without first
discharging the attorney's lien by payment of the fees due to petitioner. What
obviously was lost sight of by respondent court in ruling that petitioner's lien "should
be enforced against his client and not against the Perezes" was that petitioner
obtained possession of the titles when they did appertain to his then client, Angela.
As of that time, petitioner's retaining lien was fastened to the titles and respondent
court was bound to respect and protect the same.
The situation would be different where title to the properties is the very subject in
dispute in the case and the court adjudges the client's adversary to be rightfully
entitled thereto. In such a case, the titles to the property could not be said to be
properties of the client, over which the attorney may claim a retaining lien. The
attorney may enforce his lien only over properties of his client and not against those
of his client's adversary. 1 4 And the adversary's right as prevailing party to enforce
the judgment for the property adjudged to him should not depend on or be
prejudiced by the client's ability or refusal to pay the attorney. The Court, however,
has seen no need to make any pronouncement on such a hypothetical situation that
is not involved in the issues of the present case.
5. The fact that the properties involved were exclusively paraphernal properties of
Angela is undisputed. This fact is admitted in respondents' very petition in the
proceedings below, (Annex A, petition) where they alleged that Angela was
squandering and liquidating her properties for the benefit of a third party with whom
she had fallen in love and that the fruits of these properties belong to her conjugal
partnership of gains with respondent Antonio M. Perez and are the main source of
income of said partnership.
6. It is error for respondents to contend that petitioner has no right to assert a lien
over properties that no longer belong to his client Angela but to them. By virtue of
the transfers as seemingly agreed to by Angela in November, 1966, after petitioner's
discharge as counsel, the properties thenceforth may be deemed to have been
validly transferred to respondents, as stipulated by the contracting parties. And
petitioner is in no way interfering with their taking possession of the properties so
transferred to them nor with their enjoyment of the fruits thereof. All that petitioner
asserts and exercises is his passive lien of retaining the muniments of title thereto.
Such retention impedes the corresponding registration and transfer of the titles to
respondents, it is true. But rather than enforcing execution of the compromise
agreement against petitioner, who is in no way respondents' adversary and
disregarding petitioner's valid retaining lien, respondent court is vested with due
authority to enforce the same against Angela as the actual adverse party in interest,
by requiring her to produce the titles to effect registration of the covenanted transfers
and thereby compelling her to satisfy petitioner's just fees or to file proper and
adequate security for their payment. (Matute, supra).
7. Respondents' argument that the compromise agreement was executed since May
2, 1958, over eight years before petitioner's discharge as Angela's counsel and that
petitioner as Angela's counsel pursued interests adverse to them and "sought to
obtain the discharge of the compromise agreement" 1 5 (which, in fact, petitioner
successfully blocked until his discharge as counsel) — implying thereby that
petitioner should be held bound by said compromise agreement — does not change
the legal picture. It should be remembered that the said compromise agreement was
executed by one Roberto Della Rosa as Angela's attorney-in-fact to settle Civil Case
34626 in the Manila court of first instance; 1 6 that one of Angela's grounds in
denouncing the same was that it was not freely or validly entered into by her
representative 1 7 and that this Court, speaking through Mr. Justice Reyes, rejected
respondents' contention that the Manila court should have held that Angela was in
estoppel, by the execution and submittal of the compromise agreement, to question
the jurisdiction of said court. 1 8
Subsequently, when the same compromise agreement was sought to be submitted
by respondents in the proceedings below for the limited objective of seeking
respondent court's approval thereof, said court dismissed the proceedings on the
ground of lack of jurisdiction over the subject-matter, since Civil Case No. 34626 of
the Manila court which was presumably to be settled amicably by the compromise
agreement was dismissed by final decision of that court as affirmed by this Court
and "there was no more case to be settled by compromise." (supra.)
The only question then appealed to this Court in the second case, No. 19711, was
the correctness of respondent court's order of dismissal; if the same was set aside,
the case would be remanded to respondent court for trial and hearing on the myriad
built-in issues. When pending said appeal and after petitioner's discharge, the same
compromise agreement (of dismissed Civil Case No. 34626) was submitted anew in
November, 1966, to this Court by her new attorney-in-fact, assisted by new counsel,
manifesting inter alia that Angela "now confirms the (said) compromise agreement,"
the picture that clearly emerges is that in legal contemplation, Angela and
respondents Perezes had then executed a new agreement for the transfer of her
said properties to respondents. The transfer of said properties to respondents could
in no way be deemed to retroact to over 8 years back on May 2, 1958, when the
compromise agreement was originally executed. presumably to settle Case No.
34626 which was eventually dismissed in 1960 for lack of jurisdiction of the Manila
court. The transfer of the said properties as provided in the compromise agreement
as now confirmed in November, 1966 by Angela and approved by this Court in its
Resolution of November 17, 1966 was effective only as of this much later date.
There can be no question, then, that these properties were exclusively Angela's prior
to November, 1966 and that respondents could lay no claim thereto by virtue of the
transfers provided in the compromise agreement until after its confirmation by
Angela and approval in November 1966; and that respondents' contention that
petitioner could not exercise his retaining lien over the titles which had properly
come into his possession during his engagement as Angela's counsel long before
November, 1966 is untenable.
Even respondent court so understood it correctly, when in its questioned order, it
related that "(T)he case has been returned to this Court with a resolution of the
appellate tribunal approving the Compromise Agreement. That is now the law of the
case. It is as if, after the petition herein had been filed, this Court, acceding to the
prayer of the Perezes, had by final order adjudged Tuason to be an incompetent,
had decided to dispense with the appointment of a guardian by directly assuming the
functions of one, and lastly had approved the Compromise Agreement on behalf of
the ward. Questions of procedural propriety, or of jurisdiction are no longer open
because of the final action taken in the premises by the highest tribunal of the land."
1
9

ACCORDINGLY, the writ of certiorari is granted and the order of respondent court of
March 8, 1967 is hereby declared null and void and set aside. With costs against
private respondents. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando and
Villamor, JJ., concur.

Barredo, J., reserves the filing of his separate dissenting opinion.

Miranda v. Atty. Macario D. Carpio, A.C. No. 6281, September 26, 2011
PERALTA, J.:
 
          This is a disbarment case against Atty. Macario D. Carpio filed by Valentin C.
Miranda.[1]
          The facts, as culled from the records, are as follows:
          Complainant Valentin C. Miranda is one of the owners of a parcel of land
consisting of 1,890 square meters located at Barangay Lupang Uno, Las Piñas,
Metro Manila.  In 1994, complainant initiated Land Registration Commission (LRC)
Case No. M-226 for the registration of the aforesaid property.  The case was filed
before the Regional Trial Court of Las Piñas City, Branch 275.  During the course of
the proceedings, complainant engaged the services of respondent Atty. Carpio as
counsel in the said case when his original counsel, Atty. Samuel Marquez, figured in
a vehicular accident.
         
          In complainant's Affidavit,[2] complainant and respondent agreed that
complainant was to pay respondent Twenty Thousand Pesos (PhP20,000.00) as
acceptance fee and Two Thousand Pesos (PhP2,000.00) as appearance fee.
Complainant paid respondent the amounts due him, as evidenced by receipts duly
signed by the latter.  During the last hearing of the case, respondent demanded the
additional amount of Ten Thousand Pesos (PhP10,000.00) for the preparation of a
memorandum, which he said would further strengthen complainant's position in the
case, plus twenty percent (20%) of the total area of the subject property as
additional fees for his services.
 
          Complainant did not accede to respondent's demand for it was contrary to
their agreement. Moreover, complainant co-owned the subject property with his
siblings, and he could not have agreed to the amount being demanded by
respondent without the knowledge and approval of his co-heirs.  As a result of
complainant's refusal to satisfy respondent's demands, the latter became furious and
their relationship became sore.
         
          On January 12, 1998, a Decision was rendered in LRC Case No. M-226,
granting the petition for registration, which Decision was declared final and
executory in an Order dated June 5, 1998.  On March 24, 2000, the Land
Registration Authority (LRA) sent complainant a copy of the letter addressed to the
Register of Deeds (RD) of Las Piñas City, which transmitted the decree of
registration and the original and owner's duplicate of the title of the property.
          On April 3, 2000, complainant went to the RD to get the owner's duplicate of
the Original Certificate of Title (OCT) bearing No. 0-94.  He was surprised to
discover that the same had already been claimed by and released to respondent on
March 29, 2000.  On May 4, 2000, complainant talked to respondent on the phone
and asked him to turn over the owner's duplicate of the OCT, which he had claimed
without complainant's knowledge, consent and authority.  Respondent insisted that
complainant first pay him the PhP10,000.00 and the 20% share in the property
equivalent to 378 square meters, in exchange for which, respondent would deliver
the owner's duplicate of the OCT.  Once again, complainant refused the demand, for
not having been agreed upon.
         
          In a letter[3] dated May 24, 2000, complainant reiterated his demand for the
return of the owner's duplicate of the OCT. On June 11, 2000, complainant made the
same demand on respondent over the telephone. Respondent reiterated his
previous demand and angrily told complainant to comply, and threatened to have the
OCT cancelled if the latter refused to pay him.
          On June 26, 2000, complainant learned that on April 6, 2000, respondent
registered an adverse claim on the subject OCT wherein he claimed that the
agreement on the payment of his legal services was 20% of the property and/or
actual market value.  To date, respondent has not returned the owner's duplicate of
OCT No. 0-94 to complainant and his co-heirs despite repeated demands to effect
the same.
                  
          In seeking the disbarment or the imposition of the appropriate penalty upon
respondent, complainant invokes the following provisions of the Code of
Professional Responsibility:
         
Canon 20. A lawyer shall charge only fair and reasonable
fees.
Canon 16. A lawyer shall hold in trust all moneys and
properties of             his client that may come into his
possession.
Canon 16.03. A lawyer shall deliver the funds and properties
of his             client when due or upon demand. x x x
         
          In defense of his actions, respondent relied on his alleged retaining lien over
the owner's duplicate of OCT No. 0-94.  Respondent admitted that he did not turn
over to complainant the owner's duplicate of OCT No. 0-94 because of
complainant's refusal, notwithstanding repeated demands, to complete payment of
his agreed professional fee consisting of 20% of the total area of the property
covered by the title, i.e., 378 square meters out of 1,890 square meters, or its
equivalent market value at the rate of PhP7,000.00 per square meter, thus, yielding
a sum of PhP2,646,000.00 for the entire 378-square-meter portion and that he was
ready and willing to turn over the owner's duplicate of OCT No. 0-94, should
complainant pay him completely the aforesaid professional fee.
 
          Respondent admitted the receipt of the amount of PhP32,000.00, however, he
alleged that the amount earlier paid to him will be deducted from the 20% of the
current value of the subject lot.  He alleged that the agreement was not reduced into
writing, because the parties believed each other based on their mutual trust.  He
denied that he demanded the payment of PhP10,000.00 for the preparation of a
memorandum, since he considered the same unnecessary.
 
          In addition to the alleged agreement between him and complainant for the
payment of the 20% professional fees, respondent invoked the principle of “quantum
meruit” to justify the amount being demanded by him.
 
In its Report and Recommendation[4] dated June 9, 2005, the Integrated
Bar of the Philippines-Commission on Bar Discipline (IBP-CBD) recommended that
respondent be suspended from the practice of law for a period of six (6) months for
unjustly withholding from complainant the owner's duplicate of OCT No. 0-94 in the
exercise of his so-called attorney's lien.  In Resolution No. XVII-2005-173,[5] dated
December 17, 2005, the IBP Board of Governors adopted and approved the Report
and Recommendation of the IBP-CBD.
          Respondent filed a motion for reconsideration of the resolution of the IBP
Board of Governors adopting the report and recommendation of the IBP-CBD.
Pending the resolution of his motion for reconsideration, respondent filed a petition
for review[6] with this Court. The Court, in a Resolution[7] dated August 16, 2006,
directed that the case be remanded to the IBP for proper disposition, pursuant to this
Court's resolution in Noriel J. Ramientas v. Atty. Jocelyn P. Reyala.[8]
 
          In Notice of Resolution No. XVIII-2008-672, dated December 11, 2008, the
IBP Board of Governors affirmed Resolution No. XVII-2005-173, dated December
17, 2005, with modification that respondent is ordered to return the complainant's
owner's duplicate of OCT No. 0-94 within fifteen days from receipt of notice.  Hence,
the present petition.
         
          The Court sustains the resolution of the IBP Board of Governors, which
affirmed with modification the findings and recommendations of the IBP-CBD.
Respondent's claim for his unpaid professional fees that would legally give him the
right to retain the property of his client until he receives what is allegedly due him
has been paid has no basis and, thus, is invalid.
 
          Section 37, Rule 138 of the Rules of Court specifically provides:
 
            Section 37. Attorney’s liens. – An attorney shall have
a lien upon the funds, documents and papers of his client,
which have lawfully come into his possession and may
retain the same until his lawful fees and disbursements have
been paid, and may apply such funds to the satisfaction
thereof. He shall also have a lien to the same extent upon all
judgments for the payment of money, and executions issued
in pursuance of such judgments, which he has secured in a
litigation of his client, from and after the time when he shall
have caused a statement of his claim of such lien to be
entered upon the records of the court rendering such
judgment, or issuing such execution, and shall have caused
written notice thereof to be delivered to his client and to the
adverse party; and he shall have the same right and power
over such judgments and executions as his client would
have to enforce his lien and secure the payment of his just
fees and disbursements.
 
 
          An attorney's retaining lien is fully recognized if the presence of the following
elements concur: (1) lawyer-client relationship; (2) lawful possession of the client's
funds, documents and papers; and (3) unsatisfied claim for attorney's fees.[9]            Further, in collecting from complainant exorbitant fees, respondent violated
Further, the attorney's retaining lien is a general lien for the balance of the account
between the attorney and his client, and applies to the documents and funds of the
client which may come into the attorney's possession in the course of his
employment.[10]
 
          In the present case, complainant claims that there is no such agreement for
the payment of professional fee consisting of 20% of the total area of the subject
property and submits that their agreement was only for the payment of the
acceptance fee and the appearance fees.
         
          As correctly found by the IBP-CBD, there was no proof of any agreement
between the complainant and the respondent that the latter is entitled to an
additional professional fee consisting of 20% of the total area covered by OCT  No.
0-94.  The agreement between the parties only shows that respondent will be paid
the acceptance fee and the appearance fees, which the respondent has duly
received.  Clearly, there is no unsatisfied claim for attorney's fees that would entitle
respondent to retain his client's property.  Hence, respondent could not validly
withhold the title of his client absence a clear and justifiable claim.
 
          Respondent's unjustified act of holding on to complainant's title with the
obvious aim of forcing complainant to agree to the amount of attorney's fees sought
is an alarming abuse by respondent of the exercise of an attorney's retaining lien,
which by no means is an absolute right, and cannot at all justify inordinate delay in
the delivery of money and property to his client when due or upon demand.[11]
 
          Atty. Carpio failed to live up to his duties as a lawyer by unlawfully withholding
and failing to deliver the title of the complainant, despite repeated demands, in the
guise of an alleged entitlement to additional professional fees.  He has breached
Rule 1.01 of Canon 1 and Rule 16.03 of Canon 16 of the Code of Professional
Responsibility, which read:
 
CANON 1 - A LAWYER SHALL UPHOLD THE
CONSTITUTION, OBEY THE LAWS OF THE LAND AND
PROMOTE RESPECT FOR LAW AND LEGAL PROCESS.
Rule 1.01 - A lawyer shall not engage in unlawful, dishonest,
immoral or deceitful conduct.
 
CANON 16 - A LAWYER SHALL HOLD IN TRUST ALL
MONEYS AND PROPERTIES OF HIS CLIENT THAT MAY
COME INTO HIS POSSESSION.
Rule 16.03 - A lawyer shall deliver the funds and property of
his client when due or upon demand. However, he shall
have a lien over the funds and may apply so much thereof
as may be necessary to satisfy his lawful fees and
disbursements, giving notice promptly thereafter to his
client. He shall also have a lien to the same extent on all
judgments and executions he has secured for his client as
provided for in the Rules of Court.
 
 
Canon 20 of the Code of Professional Responsibility, which mandates that “a lawyer
shall charge only fair and reasonable fees.”  It is highly improper for a lawyer to
impose additional professional fees upon his client which were never mentioned nor
agreed upon at the time of the engagement of his services.  At the outset, be appended to the personal record of Atty. Macario D. Carpio as a member of the
respondent should have informed the complainant of all the fees or possible fees Bar; the Integrated Bar of the Philippines; and the Office of the Court Administrator
that he would charge before handling the case and not towards the near conclusion for circulation to all courts in the country for their information and guidance.
of the case.  This is essential in order for the complainant to determine if he has the           SO ORDERED.
financial capacity to pay respondent before engaging his services.
         
          Respondent's further submission that he is entitled to the payment of
additional professional fees on the basis of the principle of quantum meruit has no
merit.  "Quantum meruit, meaning `as much as he deserved' is used as a basis for
determining the lawyer's professional fees in the absence of a contract but
recoverable by him from his client."[12]  The principle of quantum meruit applies if a
lawyer is employed without a price agreed upon for his services.  In such a case, he
would be entitled to receive what he merits for his services, as much as he has
earned.[13]  In the present case, the parties had already entered into an agreement
as to the attorney's fees of the respondent, and thus, the principle of quantum meruit
does not fully find application because the respondent is already compensated by
such agreement.
 
          The Court notes that respondent did not inform complainant that he will be the
one to secure the owner's duplicate of the OCT from the RD and failed to
immediately inform complainant that the title was already in his possession. 
Complainant, on April 3, 2000, went to the RD of Las Piñas City to get the owner's
duplicate of OCT No. 0-94, only to be surprised that the said title had already been
claimed by, and released to, respondent on March 29, 2000.  A lawyer must conduct
himself, especially in his dealings with his clients, with integrity in a manner that is
beyond reproach.  His relationship with his clients should be characterized by the
highest degree of good faith and fairness.[14]  By keeping secret with the client his
acquisition of the title, respondent was not fair in his dealing with his client.
Respondent could have easily informed the complainant immediately of his receipt
of the owner's duplicate of the OCT on March 29, 2000, in order to save his client
the time and effort in going to the RD to get the title.
                  
          Respondent's inexcusable act of withholding the property belonging to his
client and imposing unwarranted fees in exchange for the release of said title
deserve the imposition of disciplinary sanction.  Hence, the ruling of the IBP Board of
Governors, adopting and approving with modification the report and
recommendation of the IBP-CBD that respondent be suspended from the practice of
law for a period of six (6) months and that respondent be ordered to return the
complainant's owner's duplicate of OCT No. 0-94 is hereby affirmed.  However, the
fifteen-day period from notice given to  respondent within which to return the title
should be modified and, instead, respondent should return the same immediately
upon receipt of the Court's decision.
 
          WHEREFORE, Atty. Macario D. Carpio is SUSPENDED from the practice of
law for a period of six (6) months, effective upon receipt of this Decision. He is
ordered to RETURN to the complainant the owner's duplicate of OCT No. 0-94
immediately upon receipt of this decision.  He is WARNED that a repetition of the
same or similar act shall be dealt with more severely.
 
          Let a copy of this Decision be furnished to the Office of the Bar Confidant, to
G.R. No. 86100-03 January 23, 1990
METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs.THE
HONORABLE COURT OF APPEALS and ARTURO ALAFRIZ and ASSOCIATES,
respondents.
Bautista, Picazo, Buyco, Tan & Fider for petitioner.
Arturo A. Alafriz & Associates for and in their own behalf.
REGALADO, J.:
This petition for review on certiorari impugns the decision of the Court of Appeals in
CA-G.R. Nos. 08265-08268 1 affirming the order of Branch 168, Regional Trial
Court, National Capital Judicial Region, in Civil Cases Nos. 19123-28, 19136 and
19144, fixing attorney's fees and directing herein petitioner Metropolitan Bank and
Trust Company (Metrobank, for brevity), as defendant in said civil cases, to pay its
attorneys, herein private respondent Arturo Alafriz and Associates, movant therein,
the amount of P936,000.00 as attorney's fees on a quantum meruit basis.
The records show that from March, 1974 to September, 1983, private respondent
handled the above-mentioned civil cases before the then Court of First Instance of
Pasig (Branches I, II, VI, X, XIII, XIX, XX AND XXIV) in behalf of petitioner. 2 The
civil cases were all for the declaration of nullity of certain deeds of sale, with
damages.
The antecedental facts 3 which spawned the filing of said actions are undisputed and
are hereinunder set forth as found by the trial court and adopted substantially in the
decision of respondent court. A certain Celedonio Javier bought seven (7) parcels of
land owned by Eustaquio Alejandro, et al., with a total area of about ten (10)
hectares. These properties were thereafter mortgaged by Javier with the petitioner to
secure a loan obligation of one Felix Angelo Bautista and/or International Hotel
Corporation. The obligors having defaulted, petitioner foreclosed the mortgages after
which certificates of sale were issued by the provincial sheriff in its favor as
purchaser thereof Subsequently, Alejandro, alleging deceit, fraud and
misrepresentation committed against him by Javier in the sale of the parcels of land,
brought suits against Javier et al., and included petitioner as defendant therein.
It was during the pendency of these suits that these parcels of land were sold by
petitioner to its sister corporation, Service Leasing Corporation on March 23, 1983
for the purported price of P600,000.00. On the same day, the properties were resold
by the latter to Herby Commercial and Construction Corporation for the purported
price of P2,500,000.00. Three months later, or on June 7, 1983, Herby mortgaged
the same properties with Banco de Oro for P9,200,000.00. The lower court found
that private respondent, did not have knowledge of these transfers and transactions.
As a consequence of the transfer of said parcels of land to Service Leasing
Corporation, petitioner filed an urgent motion for substitution of party on July 28,
1983. Private respondent, on its part, filed on August 16, 1983 a verified motion to
enter in the records of the aforesaid civil cases its charging lien, pursuant to Section
37, Rule 138 of the Rules of Court, equivalent to twenty-five percent (25%) of the
actual and current market values of the litigated properties as its attorney's fees.
Despite due notice, petitioner failed to appear and oppose said motion, as a result of
which the lower court granted the same and ordered the, Register of Deeds of Rizal
to annotate the attorney's liens on the certificates of title of the parcels of land.
Meanwhile, the plaintiffs Alejandro, et al. in the aforesaid civil cases, which had been
consolidated and were pending before the Regional Trial Court of Pasig, filed a
motion to dismiss their complaints therein, which motion the lower court granted with
prejudice in its order dated September 5, 1983. On December 29, 1983, the same
court ordered the Register of Deeds to annotate the attorney's liens of private
respondent on the derivative titles which cancelled Transfer Certificates of Title Nos.
453093 to 453099 of the original seven (7) parcels of land hereinbefore adverted to.
On May 28,1984, private respondent filed a motion to fix its attorney's fees, based
on quantum meruit, which motion precipitated an exchange of arguments between
the parties. On May 30, 1984, petitioner manifested that it had fully paid private
respondent; the latter, in turn, countered that the amount of P50,000.00 given by
petitioner could not be considered as full payment but merely a cash advance,
including the amount of P14,000.00 paid to it on December 15, 1980. It further
appears that private respondent attempted to arrange a compromise with petitioner
in order to avoid suit, offering a compromise amount of P600,000.00 but the
negotiations were unsuccessful.
Finally, on October 15,1984, the court a quo issued the order assailed on appeal
before respondent court, granting payment of attorney's fees to private respondent,
under the following dispositive portion:
PREMISES CONSIDERED, the motion is hereby granted and the Metropolitan Bank
and Trust Company (METROBANK) and Herby Commercial and Construction
Corporation 4 are hereby ordered to pay the movant Arturo Alafriz and Associates
the amount of P936,000.00 as its proper, just and reasonable attorney's fees in
these cases. 5
On appeal, respondent court affirmed the order of the trial court in its decision
promulgated on February 11, 1988. A motion for reconsideration, dated March 3,
1988, was filed by petitioner but the same was denied in a resolution promulgated
on November 19, 1988, hence the present recourse.
The issues raised and submitted for determination in the present petition may be
formulated thus: (1) whether or not private respondent is entitled to the enforcement
of its charging lien for payment of its attorney's fees; (2) whether or not a separate
civil suit is necessary for the enforcement of such lien and (3) whether or not private
respondent is entitled to twenty-five (25%) of the actual and current market values of
the litigated properties on a quantum meruit basis.
On the first issue, petitioner avers that private respondent has no enforceable
attorney's charging lien in the civil cases before the court below because the
dismissal of the complaints therein were not, in the words of Section 37, Rule 138,
judgments for the payment of money or executions issued in pursuance of such
judgments. 6
We agree with petitioner.
On the matter of attorney's liens Section 37, Rule 138 provides:
. . . He shall also have a lien to the same extent upon all judgments for the payment
of money, and executions issued in pursuance of such judgments, which he has
secured in a litigation of his client, from and after the time when he shall have
caused a statement of his claim of such lien to be entered upon the records of the
court rendering such judgment, or issuing such execution, and shall have caused
written notice thereof to be delivered to his client and to the adverse party; and he
shall have the same right and power over such judgments and executions as his
client would have to enforce his lien and secure the payment of his just fees and
disbursements.
Consequent to such provision, a charging lien, to be enforceable as security for the
payment of attorney's fees, requires as a condition sine qua non a judgment for
money and execution in pursuance of such judgment secured in the main action by
the attorney in favor of his client. A lawyer may enforce his right to fees by filing the
necessary petition as an incident in the main action in which his services were
rendered when something is due his client in the action from which the fee is to be
paid. 7
In the case at bar, the civil cases below were dismissed upon the initiative of the
plaintiffs "in view of the frill satisfaction of their claims." 8 The dismissal order neither
provided for any money judgment nor made any monetary award to any litigant,
much less in favor of petitioner who was a defendant therein. This being so, private
respondent's supposed charging lien is, under our rule, without any legal basis. It is
flawed by the fact that there is nothing to generate it and to which it can attach in the
same manner as an ordinary lien arises and attaches to real or personal property.
In point is Morente vs. Firmalino, 9 cited by petitioner in support of its position. In that
case, movant-appellant attorney sought the payment of his fees from his client who
was the defendant in a complaint for injunction which was dismissed by the trial
court after the approval of an agreement entered into by the litigants. This Court
held:
. . . The defendant having suffered no actual damage by virtue of the issuance of a
preliminary injunction, it follows that no sum can be awarded the defendant for
damages. It becomes apparent, too, that no amount having been awarded the
defendant, herein appellant's lien could not be enforced. The appellant, could, by
appropriate action, collect his fees as attorney.
Private respondent would nevertheless insist that the lien attaches to the "proceeds
of a judgment of whatever nature," 10 relying on the case of Bacolod-Murcia Milling
Co. Inc. vs. Henares 11 and some American cases holding that the lien attaches to
the judgment recovered by an attorney and the proceeds in whatever form they may
be. 12
The contention is without merit just as its reliance is misplaced. It is true that there
are some American cases holding that the lien attaches even to properties in
litigation. However, the statutory rules on which they are based and the factual
situations involved therein are neither explained nor may it be said that they are of
continuing validity as to be applicable in this jurisdiction. It cannot be gainsaid that
legal concepts of foreign origin undergo a number of variegations or nuances upon
adoption by other jurisdictions, especially those with variant legal systems.
In fact, the same source from which private respondent culled the American cases it
cited expressly declares that "in the absence of a statute or of a special agreement
providing otherwise, the general rule is that an attorney has no lien on the land of his
client, notwithstanding such attorney has, with respect to the land in question,
successfully prosecuted a suit to establish the title of his client thereto, recovered
title or possession in a suit prosecuted by such client, or defended successfully such
client's right and title against an unjust claim or an unwarranted attack," 13 as is the
situation in the case at bar. This is an inescapable recognition that a contrary rule
obtains in other jurisdictions thereby resulting in doctrinal rulings of converse or
modulated import.
To repeat, since in our jurisdiction the applicable rule provides that a charging lien
attaches only to judgments for money and executions in pursuance of such
judgment, then it must be taken in haec verba. The language of the law is clear and
unequivocal and, therefore, it must be taken to mean exactly what it says, barring
any necessity for elaborate interpretation. 14
Notably, the interpretation, literal as it may appear to be, is not without support in
Philippine case law despite the dearth of cases on all fours with the present case. In
Caina et al. vs. Victoriano, et al., 15 the Court had the occasion to rule that "the lien of
respondent is not of a nature which attaches to the property in litigation but is at
most a personal claim enforceable by a writ of execution." In Ampil vs. Juliano-
Agrava, et al., 16 the Court once again declared that a charging lien "presupposes
that the attorney has secured a favorable money judgment for his client . . ." Further,
in Director of Lands vs. Ababa, et al., 17 we held that "(a) charging lien under Section
37, Rule 138 of the Revised Rules of Court is limited only to money judgments and
not to judgments for the annulment of a contract or for delivery of real property as in
the instant case."
Even in the Bacolod-Murcia Milling case, which we previously noted as cited by
private respondent, there was an express declaration that "in this jurisdiction, the lien
does not attach to the property in litigation."
Indeed, an attorney may acquire a lien for his compensation upon money due his
client from the adverse party in any action or proceeding in which the attorney is
employed, but such lien does not extend to land which is the subject matter of the
litigation. 18 More specifically, an attorney merely defeating recovery against his
client as a defendant is not entitled to a lien on the property involved in litigation for
fees and the court has no power to fix the fee of an attorney defending the client's
title to property already in the client'spossession. 19
While a client cannot defeat an attorney's right to his charging lien by dismissing the
case, terminating the services of his counsel, waiving his cause or interest in favor of
the adverse party or compromising his action, 20 this rule cannot find application here
as the termination of the cases below was not at the instance of private respondent's
client but of the opposing party.
The resolution of the second issue is accordingly subsumed in the preceding
discussion which amply demonstrates that private respondent is not entitled to the
enforcement of its charging lien.
Nonetheless, it bears mention at this juncture that an enforceable charging lien, duly
recorded, is within the jurisdiction of the court trying the main case and this
jurisdiction subsists until the lien is settled. 21 There is certainly no valid reason why
the trial court cannot pass upon a petition to determine attorney's fees if the rule
against multiplicity of suits is to be activated. 22 These decisional rules, however,
apply only where the charging lien is valid and enforceable under the rules.
proper legal remedy should be availed of and the procedural rules duly observed to
forestall and obviate the possibility of abuse or prejudice, or what may be
misunderstood to be such, often to the undeserved discredit of the legal profession.
Law advocacy, it has been stressed, is not capital that yields profits. The returns it
births are simple rewards for a job done or service rendered. It is a calling that,
unlike mercantile pursuits which enjoy a greater deal of freedom from government
interference, is impressed with public interest, for which it is subject to State
regulation. 26
ACCORDINGLY, the instant petition for review is hereby GRANTED and the
decision of respondent Court of Appeals of February 11, 1988 affirming the order of
the trial court is hereby REVERSED and SET ASIDE, without prejudice to such
appropriate proceedings as may be brought by private respondent to establish its
right to attorney's fees and the amount thereof.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

On the last issue, the Court refrains from resolving the same so as not to preempt or
interfere with the authority and adjudicative facility of the proper court to hear and
decide the controversy in a proper proceeding which may be brought by private
respondent.

A petition for recovery of attorney's fees, either as a separate civil suit or as an

incident in the main action, has to be prosecuted and the allegations therein
established as any other money claim. The persons who are entitled to or who must
pay attorney's fees have the right to be heard upon the question of their propriety or
amount. 23 Hence, the obvious necessity of a hearing is beyond cavil.

Besides, in fixing a reasonable compensation for the services rendered by a lawyer

on the basis of quantum meruit, the elements to be considered are generally (1) the
importance of the subject matter in controversy, (2) the extent of the services
rendered, and (3) the professional standing of the lawyer. 24 These are aside from
the several other considerations laid down by this Court in a number of decisions as
pointed out by respondent court. 25 A determination of all these factors would
indispensably require nothing less than a full-blown trial where private respondent
can adduce evidence to establish its right to lawful attorney's fees and for petitioner
to oppose or refute the same.

Nothing in this decision should, however, be misconstrued as imposing an

unnecessary burden on private respondent in collecting the fees to which it may
rightfully be entitled. But, as in the exercise of any other right conferred by law, the
 [G.R. No. 115838.  July 18, 2002]
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO,
petitioners, vs. COURT OF APPEALS and FRANCISCO ARTIGO,
respondents.
DECISION
CARPIO, J.:
The Case
Before us is a Petition for Review on Certiorari[1] seeking to annul the
Decision of the Court of Appeals[2] dated May 4, 1994 in CA-G.R. CV No. 37996,
which affirmed in toto  the decision[3] of the Regional Trial Court of Quezon City,
Branch 80, in Civil Case No. Q-89-2631.  The trial court disposed as follows:
“WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro
jointly and solidarily liable to plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorney’s fees;
d) To pay the cost of this suit.
Quezon City, Metro Manila, December 20, 1991.”
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo (“Artigo” for brevity)
sued petitioners Constante A. De Castro (“Constante” for brevity) and Corazon A.  agent in the sale of two lots in Cubao, Quezon City.  The handwritten authorization
De Castro (“Corazon” for brevity) to collect the unpaid balance of his broker’s
commission from the De Castros.[4] The Court of Appeals summarized the facts in
this wise:
“x x x.  Appellants[5] were co-owners of four (4) lots located at EDSA corner New
York and Denver Streets in Cubao, Quezon City.  In a letter dated January 24, 1984
(Exhibit “A-1, p. 144, Records), appellee[6] was authorized by appellants to act as
real estate broker in the sale of these properties for the amount of P23,000,000.00,
five percent (5%) of which will be given to the agent as commission.  It was appellee
who first found Times Transit Corporation, represented by its president Mr.
Rondaris, as prospective buyer which desired to buy two (2) lots  only, specifically
lots 14 and 15.  Eventually, sometime in  May of 1985, the sale of lots 14 and 15
was consummated. Appellee received from appellants P48,893.76 as commission.
It was then that the rift between the contending parties soon emerged. Appellee
apparently felt short changed because according to him, his total commission should
be P352,500.00 which is five percent (5%) of the agreed price of P7,050,000.00 paid
by Times Transit Corporation to appellants for the two (2) lots, and that it was he
who introduced the buyer to appellants and unceasingly facilitated the negotiation
which ultimately led to the consummation of the sale.  Hence, he sued below to
collect the balance of P303,606.24 after having received P48,893.76 in advance.
On the other hand, appellants completely traverse appellee’s claims and essentially
argue that appellee is selfishly asking for more than what he truly deserved as
commission to the prejudice of other agents who were more instrumental in the
consummation of the sale.  Although appellants readily concede that it was appellee
who first introduced Times Transit Corp. to them, appellee was not designated by
them as their exclusive real estate agent but that in fact there were more or less
eighteen (18) others whose collective efforts in the long run dwarfed those of
appellee’s, considering that the first negotiation for the sale where appellee took
active participation failed and it was these other agents who successfully brokered in
the second negotiation.  But despite this and out of appellants’ “pure liberality,
beneficence and magnanimity”, appellee nevertheless was given the largest cut in
the commission (P48,893.76), although on the principle of quantum meruit he would
have certainly been entitled to less. So appellee should not have been heard to
complain of getting only a pittance when he actually got the lion’s share of the
commission and worse, he should not have been allowed to get the entire
commission. Furthermore, the purchase price for the two lots was only P3.6 million
as appearing in the deed of sale and not P7.05 million as alleged by appellee. Thus,
even assuming that appellee is entitled to the entire commission, he would only be
getting 5% of the P3.6 million, or P180,000.00.”
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial court.
First.  The Court of Appeals found that Constante authorized Artigo to act as
letter signed by Constante clearly established a contract of agency between
Constante and Artigo. Thus, Artigo sought prospective buyers and found Times
Transit Corporation (“Times Transit” for brevity).  Artigo facilitated the negotiations
which eventually led to the sale of the two lots.  Therefore, the Court of Appeals
decided that Artigo is entitled to the 5% commission on the purchase price as
provided in the contract of agency.
Second.  The Court of Appeals ruled that Artigo’s complaint is not dismissible
for failure to implead as indispensable parties the other co-owners of the two lots. 
The Court of Appeals explained that it is not necessary to implead the other co-
owners since the action is exclusively based on a contract of agency between Artigo
and Constante.
Third.  The Court of Appeals likewise declared that the trial court did not err in
admitting parol evidence to prove the true amount paid by Times Transit to the De
Castros for the two lots.  The Court of Appeals ruled that evidence aliunde could be
presented to prove that the actual purchase price was P7.05 million and not P3.6
million as appearing in the deed of sale.   Evidence aliunde is admissible considering
that Artigo is not a party, but a mere witness in the deed of sale between the De
Castros and Times Transit.  The Court of Appeals explained that, “the rule that oral
evidence is inadmissible to vary the terms of written instruments is generally applied
only in suits between parties to the instrument and strangers to the contract are not
bound by it.” Besides, Artigo was not suing under the deed of sale, but solely under
the contract of agency.  Thus, the Court of Appeals upheld the trial court’s finding
that the purchase price was P7.05 million and not P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -  dated January 24, 1984 to sell the properties of the De Castros for P23 million at a 5
I.   NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR
FAILURE TO IMPLEAD INDISPENSABLE PARTIES-IN-
INTEREST;
II.  NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON
THE GROUND THAT ARTIGO’S CLAIM HAS BEEN
EXTINGUISHED BY FULL PAYMENT, WAIVER, OR
ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES AND   5% commission as agent’s fee.
ATTORNEY’S FEES;
VI. NOT AWARDING THE DE CASTRO’S MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEY’S FEES.  owner & representing
The Court’s Ruling
The petition is bereft of merit.
First Issue:  whether the complaint merits dismissal for failure to implead
other co-owners as indispensable parties
The De Castros argue that Artigo’s complaint should have been dismissed for
failure to implead all the co-owners of the two lots.   The De Castros claim that Artigo
always knew that the two lots were co-owned by Constante and Corazon with their
other siblings Jose and Carmela whom Constante merely represented.  The De
Castros contend that failure to implead such indispensable parties is fatal to the
complaint since Artigo, as agent of all the four co-owners, would be paid with funds
co-owned by the four co-owners.
The De Castros’ contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by the court’s
action in the litigation, and without whom no final determination of the case can be
had.[7] The joinder of indispensable parties is mandatory and courts cannot proceed
without their presence.[8] Whenever it appears to the court in the course of a
proceeding that an indispensable party has not been joined, it is the duty of the court
to stop the trial and order the inclusion of such party.[9]
However, the rule on mandatory joinder of indispensable parties is not
applicable to the instant case.
There is no dispute that Constante appointed Artigo in a handwritten note
percent commission.  The authority was on a first come, first serve basis.  The
authority reads in full:
“24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is authorized as our real estate broker in
connection with the sale of our property located at Edsa Corner New York & Denver,
Cubao, Quezon City.
Asking price P23,000,000.00 with
C.C. de Castro
co-owners
This authority is on a first-come
First serve basis –CAC”
Constante signed the note as owner and as representative of the other co-
owners.  Under this note, a contract of agency was clearly constituted between
Constante and Artigo.  Whether Constante appointed Artigo as agent, in Constante’s
individual or representative capacity, or both, the De Castros cannot seek the
dismissal of the case for failure to implead the other co-owners as indispensable
parties.  The De Castros admit that the other co-owners are solidarily liable
under the contract of agency,[10] citing Article 1915 of the Civil Code, which
reads:
Art. 1915.  If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for all the
consequences of the agency.
The solidary liability of the four co-owners, however, militates against the De
Castros’ theory that the other co-owners should be impleaded as indispensable
parties.  A noted commentator explained Article 1915 thus –
“The rule in this article applies even when the appointments were made by the
principals in separate acts, provided that they are for the same transaction.  The
solidarity arises from the common interest of the principals, and not from the
act of constituting the agency.  By virtue of this solidarity, the agent can
recover from any principal the whole compensation and indemnity owing to
him by the others.  The parties, however, may, by express agreement, negate this
solidary responsibility.  The solidarity does not disappear by the mere partition
effected by the principals after the accomplishment of the agency.
If the undertaking is one in which several are interested, but only some create the
agency, only the latter are solidarily liable, without prejudice to the effects of
negotiorum gestio with respect to the others.  And if the power granted includes
various transactions some of which are common and others are not, only those
interested in each transaction shall be liable for it.”[11]
When the law expressly provides for solidarity of the obligation, as in the
liability of co-principals in a contract of agency, each obligor may be compelled to
pay the entire obligation.[12] The agent may recover the whole compensation from
any one of the co-principals, as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of
the solidary debtors.  This article reads:
Art. 1216.  The creditor may proceed against any one of the solidary debtors or
some or all of them simultaneously.  The demand made against one of them shall
not be an obstacle to those which may subsequently be directed against the others,
so long as the debt has not been fully collected.
Thus, the Court has ruled in Operators Incorporated vs. American Biscuit
Co., Inc.[13] that –
“x x x solidarity does not make a solidary obligor an indispensable party in a
suit filed by the creditor.  Article 1216 of the Civil Code says that the creditor `may
proceed against anyone of the solidary debtors or some or all of them
simultaneously’.” (Emphasis supplied)
Second Issue:  whether Artigo’s claim has been extinguished by full payment,
waiver or abandonment
The De Castros claim that Artigo was fully paid on June 14, 1985, that is,
Artigo was given “his proportionate share and no longer entitled to any balance.” 
According to them, Artigo was just one of the agents involved in the sale and entitled
to a “proportionate share” in the commission.  They assert that Artigo did absolutely
nothing during the second negotiation but to sign as a witness in the deed of sale. 
He did not even prepare the documents for the transaction as an active real estate
broker usually does.
The De Castros’ arguments are flimsy.
A contract of agency which is not contrary to law, public order, public policy,
morals or good custom is a valid contract, and constitutes the law between the
parties.[14] The contract of agency entered into by Constante with Artigo is the law
between them and both are bound to comply with its terms and conditions in good
faith.
The mere fact that “other agents” intervened in the consummation of the sale
and were paid their respective commissions cannot vary the terms of the contract of
agency granting Artigo a 5 percent commission based on the selling price.  These
“other agents” turned out to be employees of Times Transit, the buyer Artigo
introduced to the De Castros.   This prompted the trial court to observe:
“The alleged `second group’ of agents came into the picture only during the so-
called `second negotiation’ and it is amusing to note that these (sic) second group,
prominent among whom are Atty. Del Castillo and Ms. Prudencio, happened to be
employees of Times Transit, the buyer of the properties. And their efforts were
limited to convincing Constante to ‘part away’ with the properties because the
redemption period of the foreclosed properties is around the corner, so to speak.
(tsn. June 6, 1991).
xxx
To accept Constante’s version of the story is to open the floodgates of fraud and
deceit. A seller could always pretend rejection of the offer and wait for sometime for
others to renew it who are much willing to accept a commission far less than the
original broker.  The immorality in the instant case easily presents itself if one
has to consider that the alleged `second group’ are the employees of the
buyer, Times Transit and they have not bettered the offer secured by Mr.
Artigo for P7 million.
It is to be noted also that while Constante was too particular about the unrenewed
real estate broker’s license of Mr. Artigo, he did not bother at all to inquire as to the
licenses of Prudencio and Castillo. (tsn, April 11, 1991, pp. 39-40).”[15] (Emphasis
supplied)
In any event, we find that the 5 percent real estate broker’s commission is
reasonable and within the standard practice in the real estate industry for
transactions of this nature.
 The De Castros also contend that Artigo’s inaction as well as failure to protest
estops him from recovering more than what was actually paid him.  The De Castros
cite Article 1235 of the Civil Code which reads:
Art. 1235.  When the obligee accepts the performance, knowing its incompleteness
and irregularity, and without expressing any protest or objection, the obligation is
deemed fully complied with.
The De Castros’ reliance on Article 1235 of the Civil Code is misplaced.  Artigo’s
acceptance of partial payment of his commission neither amounts to a waiver of the
balance nor puts him in estoppel.  This is the import of Article 1235 which was
explained in this wise:
“The word accept, as used in Article 1235 of the Civil Code, means to take as
satisfactory or sufficient, or agree to an incomplete or irregular performance.  jurisprudence.
Hence, the mere receipt of a partial payment is not equivalent to the required
acceptance of performance as would extinguish the whole obligation.”[16]
(Emphasis supplied)
There is thus a clear distinction between acceptance and mere receipt.  In
this case, it is evident that Artigo merely received the partial payment without
waiving the balance.  Thus, there is no estoppel to speak of.
The De Castros further argue that laches should apply because Artigo did not
file his complaint in court until May 29, 1989, or almost four years later. Hence,
Artigo’s claim for the balance of his commission is barred by laches.
Laches means the failure or neglect, for an unreasonable and unexplained
length of time, to do that which by exercising due diligence could or should have
been done earlier. It is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it.[17]
Artigo disputes the claim that he neglected to assert his rights. He was
appointed as agent on January 24, 1984.  The two lots were finally sold in June
1985.  As found by the trial court, Artigo demanded in April and July of 1985 the
payment of his commission by Constante on the basis of the selling price of P7.05
million but there was no response from Constante.[18] After it became clear that his
demands for payment have fallen on deaf ears, Artigo decided to sue on May 29,
1989.
Actions upon a written contract, such as a contract of agency, must be
brought within ten years from the time the right of action accrues.[19] The right of
action accrues from the moment the breach of right or duty occurs. From this
moment, the creditor can institute the action even as the ten-year prescriptive period
begins to run.[20]
The De Castros admit that Artigo’s claim was filed within the ten-year
prescriptive period.  The De Castros, however, still maintain that Artigo’s cause of
action is barred by laches.  Laches does not apply because only four years had
lapsed from the time of the sale in June 1985.  Artigo made a demand in July 1985
and filed the action in court on May 29, 1989, well within the ten-year prescriptive
period.  This does not constitute an unreasonable delay in asserting one’s right. The
Court has ruled, “a delay within the prescriptive period is sanctioned by law
and is not considered to be a delay that would bar relief.”[21] In explaining that
laches applies only in the absence of a statutory prescriptive period, the Court has
stated -
“Laches is recourse in equity.  Equity, however, is applied only in the absence,
never in contravention, of statutory law.  Thus, laches, cannot, as a rule, be
used to abate a collection suit filed within the prescriptive period mandated by
the Civil Code.”[22]
Clearly, the De Castros’ defense of laches finds no support in law, equity or
Third issue: whether the determination of the purchase price was made in
violation of the Rules on Evidence
The De Castros want the Court to re-examine the probative value of the
evidence adduced in the trial court to determine whether the actual selling price of
the two lots was P7.05 million and not P3.6 million.  The De Castros contend that it
is erroneous to base the 5 percent commission on a purchase price of P7.05 million
as ordered by the trial court and the appellate court.  The De Castros insist that the
purchase price is P3.6 million as expressly stated in the deed of sale, the due
execution and authenticity of which was admitted during the trial.
The De Castros believe that the trial and appellate courts committed a
mistake in considering incompetent evidence and disregarding the best evidence
and parole evidence rules.  They claim that the Court of Appeals erroneously
affirmed sub silentio the trial court’s reliance on the various correspondences
between Constante and Times Transit which were mere photocopies that do not
satisfy the best evidence rule.  Further, these letters covered only the first
negotiations between Constante and Times Transit which failed; hence, these are
immaterial in determining the final purchase price.
The De Castros further argue that if there was an undervaluation, Artigo who
signed as witness benefited therefrom, and being equally guilty, should be left where
he presently stands.  They likewise claim that the Court of Appeals erred in relying
on evidence which  were not offered for the purpose considered by the trial court.
Specifically, Exhibits “B”, “C”, “D” and “E” were not offered to prove that the
purchase price was P7.05 Million.  Finally, they argue that the courts a quo erred in
giving credence to the perjured testimony of Artigo.  They want the entire testimony
of Artigo rejected as a falsehood because he was lying when he claimed at the
outset that he was a licensed real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as found by the trial
court and affirmed by the Court of Appeals, or P3.6 Million as claimed by the De
Castros, is a question of fact and not of law.  Inevitably, this calls for an inquiry into
the facts and evidence on record.  This we can not do.
It is not the function of this Court to re-examine the evidence submitted by the
parties, or analyze or weigh the evidence again.[23] This Court is not the proper
venue to consider a factual issue as it is not a trier of facts.  In petitions for review on
certiorari as a mode of appeal under Rule 45, a petitioner can only raise questions of
law.  Our pronouncement in the case of Cormero vs. Court of Appeals[24] bears
reiteration:
treatment of the plaintiff in refusing to give his due commission deserve censure.”
This warrants the award of P25,000.00 in moral damages and P45,000.00 in
attorney’s fees.  The amounts are, in our view, fair and reasonable.  Having found a
buyer for the two lots, Artigo had already performed his part of the bargain under the
contract of agency.  The De Castros should have exercised fairness and good
judgment in dealing with Artigo by fulfilling their own part of the bargain - paying
Artigo his 5 percent broker’s commission based on the actual purchase price of the
two lots.

“At the outset, it is evident from the errors assigned that the petition is anchored on a WHEREFORE, the petition is denied for lack of merit.  The Decision of the
plea to review the factual conclusion reached by the respondent court.  Such task Court of Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.
however is foreclosed by the rule that in petitions for certiorari as a mode of appeal,
like this one, only questions of law distinctly set forth may be raised.  These SO ORDERED.
questions have been defined as those that do not call for any examination of the
probative value of the evidence presented by the parties.  (Uniland Resources vs. Puno, (Chairman), and Panganiban, JJ., concur.
Development Bank of the Philippines, 200 SCRA 751 [1991] citing Goduco vs. Court Sandoval-Gutierrez, J., no part due to close family relation with a party.
of appeals, et al., 119 Phil. 531; Hernandez vs. Court of Appeals, 149 SCRA 67). 
And when this court is asked to go over the proof presented by the parties, and
analyze, assess and weigh them to ascertain if the trial court and the appellate court
were correct in according superior credit to this or that piece of evidence and
eventually, to the totality of the evidence of one party or the other, the court cannot
and will not do the same.  (Elayda vs. Court of Appeals, 199 SCRA 349 [1991]). 
Thus, in the absence of any showing that the findings complained of are totally
devoid of support in the record, or that they are so glaringly erroneous as to
constitute serious abuse of discretion, such findings must stand, for this court is not
expected or required to examine or contrast the oral and documentary evidence
submitted by the parties.  (Morales vs. Court of Appeals, 197 SCRA 391 [1991]
citing Santa Ana vs. Hernandez, 18 SCRA 973 [1966]).”

We find no reason to depart from this principle.  The trial and appellate courts
are in a much better position to evaluate properly the evidence. Hence, we find no
other recourse but to affirm their finding on the actual purchase price.

Fourth Issue:  whether award of moral damages and attorney’s fees is proper

The De Castros claim that Artigo failed to prove that he is entitled to moral
damages and attorney’s fees.  The De Castros, however, cite no concrete reason
except to say that they are the ones entitled to damages since the case was filed to
harass and extort money from them.

Law and jurisprudence support the award of moral damages and attorney’s
fees in favor of Artigo.  The award of damages and attorney’s fees is left to the
sound discretion of the court, and if such discretion is well exercised, as in this case,
it will not be disturbed on appeal.[25] Moral damages may be awarded when in a
breach of contract the defendant acted in bad faith, or in wanton disregard of his
contractual obligation.[26] On the other hand, attorney’s fees are awarded in
instances where “the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiff’s plainly valid, just and demandable claim.”[27] There is no reason
to disturb the trial court’s finding that “the defendants’ lack of good faith and unkind
 [G. R. No. 129919.  February 6, 2002]
DOMINION INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS,
RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA, respondents.
DECISION
PARDO, J.:
The Case
This is an appeal via certiorari[1] from the decision of the Court of Appeals[2]
affirming the decision[3] of the Regional Trial Court, Branch 44, San Fernando,
Pampanga, which ordered petitioner Dominion Insurance Corporation (Dominion) to
pay Rodolfo S. Guevarra (Guevarra) the sum of P156,473.90 representing the total
amount advanced by Guevarra in the payment of the claims of Dominion’s clients.
The Facts
The facts, as found by the Court of Appeals, are as follows:
“On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case No. 8855
for sum of money against defendant Dominion Insurance Corporation. Plaintiff
sought to recover thereunder the sum of P156,473.90 which he claimed to have
advanced in his capacity as manager of defendant to satisfy certain claims filed by
defendant’s clients.
“In its traverse, defendant denied any liability to plaintiff and asserted a counterclaim
for P249,672.53, representing premiums that plaintiff allegedly failed to remit.
“On August 8, 1991, defendant filed a third-party complaint against Fernando
Austria, who, at the time relevant to the case, was its Regional Manager for Central
Luzon area.
“In due time, third-party defendant Austria filed his answer.
“Thereafter the pre-trial conference was set on the following dates: October 18,
1991, November 12, 1991, March 29, 1991, December 12, 1991, January 17, 1992,
January 29, 1992, February 28, 1992, March 17, 1992 and April 6, 1992, in all of
which dates no pre-trial conference was held. The record shows that except for the
settings on October 18, 1991, January 17, 1992 and March 17, 1992 which were
cancelled at the instance of defendant, third-party defendant and plaintiff,
respectively, the rest were postponed upon joint request of the parties.
“On May 22, 1992 the case was again called for pre-trial conference. Only plaintiff
and counsel were present. Despite due notice, defendant and counsel did not
appear, although a messenger, Roy Gamboa, submitted to the trial court a
handwritten note sent to him by defendant’s counsel which instructed him to request
for postponement. Plaintiff’s counsel objected to the desired postponement and
moved to have defendant declared as in default. This was granted by the trial court
in the following order:
“ORDER
“When this case was called for pre-trial this afternoon only plaintiff and his counsel
Atty. Romeo Maglalang appeared. When shown a note dated May 21, 1992
addressed to a certain Roy who was requested to ask for postponement, Atty.
Maglalang vigorously objected to any postponement on the ground that the note is
but a mere scrap of paper and moved that the defendant corporation be declared as
in default for its failure to appear in court despite due notice.
“Finding the verbal motion of plaintiff’s counsel to be meritorious and considering
that the pre-trial conference has been repeatedly postponed on motion of the
defendant Corporation, the defendant Dominion Insurance Corporation is hereby
declared (as) in default and plaintiff is allowed to present his evidence on June 16,
1992 at 9:00 o’clock in the morning.
“The plaintiff and his counsel are notified of this order in open court.
“SO ORDERED.
“Plaintiff presented his evidence on June 16, 1992. This was followed by a written
offer of documentary exhibits on July 8 and a supplemental offer of additional
exhibits on July 13, 1992. The exhibits were admitted in evidence in an order dated
July 17, 1992.
“On August 7, 1992 defendant corporation filed a ‘MOTION TO LIFT ORDER OF
DEFAULT.’ It alleged therein that the failure of counsel to attend the pre-trial
conference was ‘due to an unavoidable circumstance’ and that counsel had sent his
representative on that date to inform the trial court of his inability to appear. The
Motion was vehemently opposed by plaintiff.
“On August 25, 1992 the trial court denied defendant’s motion for reasons, among
others, that it was neither verified nor supported by an affidavit of merit and that it
further failed to allege or specify the facts constituting his meritorious defense.
“On September 28, 1992 defendant moved for reconsideration of the aforesaid
order. For the first time counsel revealed to the trial court that the reason for his
nonappearance at the pre-trial conference was his illness. An Affidavit of Merit
executed by its Executive Vice-President purporting to explain its meritorious
defense was attached to the said Motion. Just the same, in an Order dated
November 13, 1992, the trial court denied said Motion.
“On November 18, 1992, the court a quo rendered judgment as follows:
“WHEREFORE, premises considered, judgment is hereby rendered ordering:
“1. The defendant Dominion Insurance Corporation to pay plaintiff the sum of
P156,473.90 representing the total amount advanced by plaintiff in the payment of
the claims of defendant’s clients;
“2. The defendant to pay plaintiff P10,000.00 as and by way of attorney’s fees;
“3. The dismissal of the counter-claim of the defendant and the third-party complaint;
“4. The defendant to pay the costs of suit.”[4]
On December 14, 1992, Dominion appealed the decision to the Court of
Appeals.[5]
On July 19, 1996, the Court of Appeals promulgated a decision affirming that
of the trial court.[6] On September 3, 1996, Dominion filed with the Court of Appeals
a motion for reconsideration.[7] On July 16, 1997, the Court of Appeals denied the
motion.[8]
Hence, this appeal.[9]
The Issues
The issues raised are: (1) whether respondent Guevarra acted within his
authority as agent for petitioner, and (2) whether respondent Guevarra is entitled to
reimbursement of amounts he paid out of his personal money in settling the claims
of several insured.
The Court's Ruling
The petition is without merit.
By the contract of agency, a person binds himself to render some service or
to do something in representation or on behalf of another, with the consent or
authority of the latter.[10] The basis for agency is representation.[11] On the part of
the principal, there must be an actual intention to appoint[12] or an intention naturally
inferrable from his words or actions;[13] and on the part of the agent, there must be
an intention to accept the appointment and act on it,[14] and in the absence of such
intent, there is generally no agency.[15]
A perusal of the Special Power of Attorney[16] would show that petitioner
(represented by third-party defendant Austria) and respondent Guevarra intended to
enter into a principal-agent relationship. Despite the word “special” in the title of the
document, the contents reveal that what was constituted was actually a general
agency. The terms of the agreement read:
“That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC.,[17] a corporation
duly organized and existing under and by virtue of the laws of the Republic of the
Philippines, xxx represented by the undersigned as Regional Manager, xxx do
hereby appoint RSG Guevarra Insurance Services represented by Mr. Rodolfo
Guevarra xxx to be our Agency Manager in San Fdo., for our place and stead, to do
and perform the following acts and things:
“1. To conduct, sign, manager (sic), carry on and transact Bonding
and Insurance business as usually pertain to a Agency Office, or
FIRE, MARINE, MOTOR CAR, PERSONAL ACCIDENT, and
BONDING with the right, upon our prior written consent, to
appoint agents and sub-agents.
“2. To accept, underwrite and subscribed (sic) cover notes or Policies
of Insurance and Bonds for and on our behalf.
“3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver
and transfer for and receive and give effectual receipts and
discharge for all money to which the FIRST CONTINENTAL
ASSURANCE COMPANY, INC.,[18] may hereafter become due,
owing payable or transferable to said Corporation by reason of or
in connection with the above-mentioned appointment.
“4. To receive notices, summons, and legal processes for and in
behalf of the FIRST CONTINENTAL ASSURANCE COMPANY,
INC., in connection with actions and all legal proceedings against
the said Corporation.”[19] [Emphasis supplied]
The agency comprises all the business of the principal,[20] but, couched in
general terms, it is limited only to acts of administration.[21]
A general power permits the agent to do all acts for which the law does not
require a special power.[22] Thus, the acts enumerated in or similar to those
enumerated in the Special Power of Attorney do not require a special power of
attorney.
Article 1878, Civil Code, enumerates the instances when a special power of
attorney is required. The pertinent portion that applies to this case provides that:
“Article 1878. Special powers of attorney are necessary in the following  cases:
 “(1) To make such payments as are not usually considered as acts of
administration;
“xxx xxx xxx
“(15) Any other act of strict dominion.”
The payment of claims is not an act of administration. The settlement of
claims is not included among the acts enumerated in the Special Power of Attorney,
neither is it of a character similar to the acts enumerated therein. A special power of
attorney is required before respondent Guevarra could settle the insurance claims of
the insured.
Respondent Guevarra’s authority to settle claims is embodied in the
Memorandum of Management Agreement[23] dated February 18, 1987 which
enumerates the scope of respondent Guevarra’s duties and responsibilities as
agency manager for San Fernando, Pampanga, as follows:
“xxx xxx xxx
“1. You are hereby given authority to settle and dispose of all motor car claims in the
amount of P5,000.00 with prior approval of the Regional Office.
“2. Full authority is given you on TPPI claims settlement.
“xxx xxx xxx”[24]
In settling the claims mentioned above, respondent Guevarra’s authority is
further limited by the written standard authority to pay,[25] which states that the
payment shall come from respondent Guevarra’s revolving fund or collection. The
authority to pay is worded as follows:
“This is to authorize you to withdraw from your revolving fund/collection the amount
of PESOS __________________ (P   ) representing the payment on the
_________________ claim of assured _______________ under Policy No. ______
in that accident of ___________ at ____________.
“It is further expected, release papers will be signed and authorized by the
concerned and attached to the corresponding claim folder after effecting payment of
the claim.
“(sgd.) FERNANDO C. AUSTRIA
Regional Manager”[26]
[Emphasis supplied]
The instruction of petitioner as the principal could not be any clearer.
Respondent Guevarra was authorized to pay the claim of the insured, but the
payment shall come from the revolving fund or collection in his possession.
Having deviated from the instructions of the principal, the expenses that
respondent Guevarra incurred in the settlement of the claims of the insured may not
be reimbursed from petitioner Dominion. This conclusion is in accord with Article
1918, Civil Code, which states that:
“The principal is not liable for the expenses incurred by the agent in the following
cases:
“(1) If the agent acted in contravention of the principal’s instructions, unless the latter
should wish to avail himself of the benefits derived from the contract;
“xxx xxx xxx”
However, while the law on agency prohibits respondent Guevarra from
obtaining reimbursement, his right to recover may still be justified under the general
law on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides:
“Whoever pays for another may demand from the debtor what he has paid, except
that if he paid without the knowledge or against the will of the debtor, he can recover
only insofar as the payment has been beneficial to the debtor.”
In this case, when the risk insured against occurred, petitioner’s liability as
insurer arose. This obligation was extinguished when respondent Guevarra paid the
claims and obtained Release of Claim Loss and Subrogation Receipts from the
insured who were paid.
Thus, to the extent that the obligation of the petitioner has been extinguished,
respondent Guevarra may demand for reimbursement from his principal. To rule
otherwise would result in unjust enrichment of petitioner.
The extent to which petitioner was benefited by the settlement of the
insurance claims could best be proven by the Release of Claim Loss and
Subrogation Receipts[27] which were attached to the original complaint as Annexes
C-2, D-1, E-1, F-1, G-1, H-1, I-1 and J-l, in the total amount of P116,276.95.
However, the amount of the revolving fund/collection that was then in the
possession of respondent Guevarra as reflected in the statement of account dated
July 11, 1990 would be deducted from the above amount.
The outstanding balance and the production/remittance for the period
corresponding to the claims was P3,604.84. Deducting this from P116,276.95, we
get P112,672.11. This is the amount that may be reimbursed to respondent
Guevarra.
The Fallo
 IN VIEW WHEREOF, we DENY the Petition. However, we MODIFY the
decision of the Court of Appeals[28] and that of the Regional Trial Court, Branch 44,
San Fernando, Pampanga,[29] in that petitioner is ordered to pay respondent
Guevarra the amount of P112,672.11 representing the total amount advanced by the
latter in the payment of the claims of petitioner’s clients.

No costs in this instance.

SO ORDERED.

Davide, Jr., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.