Manila Remnant Co., Inc. v.

Court of
Appeals
jurist

G.R. No. 82978, 22 November 1990

FACTS:

Manila Remnant Co. owns Capital Homes Subdivision with Artemio Valencia
as President. A.U. Valencia and Co., is the authorized agent of Manila
Remnant to develop the aforesaid subdivision with authority to manage the
sales thereof, execute contracts to sell to lot buyers and issue official
receipts. Artemio Valencia is also the president of this company.

Sometime in March 1970, Manila Remnant thru A.U. Valencia, executed

contracts to sell with Ventanilla covering two lots amounting to P66k to paid
monthly for 10 years. Ventanilla paid the downpayment. After 10 days,
Artemio Valencia sold the same lots without informing Ventanilla to
Crisostomo, his sales agent without any consideration. Artemio Valencia
then transmitted the fictitious Crisostomo contracts to Manila Remnant while
he kept in his files the contracts to sell in favor of the Ventanillas. All the
amounts paid by the Ventanillas were deposited in Valencia’s bank account
and this is remitted to Manila Remnant in favor of Crisostomo. Receipts
issued by Manila Remnant in favor of Crisostomo are kept by Valencia.
Ventanilla is not aware of Valencia’s scheme and thus continued paying their
monthly installments.

Sometime in May 1973, Manila Remnant terminated its collection agreement

with AU Valencia due to discrepancies and irregularities discovered in its
collections and remittances. Valencia was also removed as the President of
Manila Remnant. The Ventanilla couple unaware of the circumstances
happened continued paying their installments to Valencia. It is only in 1978
they learned the termination of Valencia, thus they went immediately to
Manila Remnant to pay their balance but to their shock they discovered from
Gloria Caballes, an accountant of Manila Remnant, that their names did not
appear in the records of A.U. Valencia and Co. as lot buyers. Thus, the
Ventanillas commenced an action for specific performance, annulment of
deeds and damages against Manila Remnant, A.U. Valencia and Co. and
Carlos Crisostomo.

Lower court’s rendered judgment in favor of Ventanilla, and in the decision,

the court ordered defendants A.U. Valencia and Co. Inc., Manila Remnant
and Carlos Crisostomo jointly and severally to pay the Ventanillas the
amount of P100,000.00 as moral damages, P100,000.00 as exemplary
damages, and P100,000.00 as attorney’s fees and in case the transfer of lots
cannot be effected for any legal reason, the defendants should reimburse
jointly and severally to the Ventanillas the total amount of P73,122.35
representing the total amount paid for the two lots plus legal interest thereon
from March 1970 plus damages. While petitioner Manila Remnant has not
refuted the legality of the award of damages per se, it believes that it cannot
be made jointly and severally liable with its agent A.U. Valencia and Co. since
it was not aware of the illegal acts perpetrated nor did it consent or ratify
said acts of its agent.

ISSUE:

Whether or not petitioner Manila Remnant should be held solidarily liable

together with A.U. Valencia and Co. and Carlos Crisostomo for the payment
of moral, exemplary damages and attorney’s fees in favor of the Ventanillas.

RULING:

Yes. Due to the following:

The unique relationship existing between the principal and the agent at the
time of the dual sale must be underscored. Bear in mind that the president
then of both firms was Artemio U. Valencia, the individual directly
responsible for the sale scam. Hence, despite the fact that the double sale
was beyond the power of the agent, Manila Remnant as principal was
chargeable with the knowledge or constructive notice of that fact and not
having done anything to correct such an irregularity was deemed to have
ratified the same.

The principle of estoppel, Manila Remnant is deemed to have allowed its

agent to act as though it had plenary powers. Article 1911 of the Civil Code
provides:

“Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had
full powers.”

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.

*Case digest by Benjie L. Sumalpong, JD – 4, Andres Bonifacio College, SY

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